Reliance Q1 Profit Surpasses Estimates

Bolstered by revenue growth in its oil and gas business and higher margins in its core refining business, the quarterly net profit of Reliance Industries Ltd (RIL) surpassed market expectations.

Reliance said average gross refining margin increased to $8.7 per barrel for the April-June quarter of FY2014-15 from $8.4 per barrel in the same period a last year.

A 27% increase in sales at its oil and gas exploration and production business helped the Mukesh Ambani-led company register a 13.7% rise in the net profit.

Investors have been fretting about Reliance's oil and gas exploration business, which has been suffering a sharp decline in gas output from the Krishna Godavari D6 block for more than two years.

According to Reliance, unexpected geology was the reason behind the decline in output, but this has been rejected by the Oil Ministry, which believes output has fallen due to non-drilling of the promised number of wells.

Reliance and its partners in the block - BP Plc and Niko Resource - are in arbitration with the government over the issue.

Alok Agarwal, the chief financial officer of Reliance, said the company had not made any provisions related to the matter. "We have said that a better gas price is a prerequisite for investment and nothing has changed," Agarwal said.