"Reliance Industries' operating performance was largely stable, with improved contributions from its upstream oil and gas segment offsetting weaker petrochemical results," said Vikas Halan, Moody's Vice President and Senior Credit Officer.
Halan was speaking on Moody's just-released report "Reliance Industries' Stable Q1 Results Continue to Support Credit Profile".
According to the report, RIL's leverage will increase over the next 12-18 months as it continues to execute its Rs 180,000 crore capex plan.
Reliance is in the midst of a large three-year capital investment plan across its businesses in refining and petrochemical, upstream oil & gas, retail and telecom.
"We expect the resultant leverage increase plan will remain within our tolerance level, and for RIL's credit metrics to improve on completion of the planned capex," Halan was quoted as saying in a statement by Moody's.
Specifically, RIL's projects in its refining segment will enhance its margin by about USD 1.5-2 per barrel, while the petrochemical projects will add to its current capacity and will enhance EBITDA.
The firm's upstream oil & gas segment recorded a large improvement in earnings, mainly due to robust growth in its US shale production, as well as higher oil/condensate sales from domestic operations.
On the domestic front, RIL's earnings were supported by the higher crude price environment and additional volumes at the Panna-Mukta field.
"Earnings in the upstream segment is unlikely to improve substantially over the next six to 12 months as the US shale gas contributions and domestic gas production plateau," the statement said.
Near doubling of the domestic gas prices to USD 8-8.4 per million BTU, which would have increased RIL's revenues by another USD 400 million, have been delayed by the government by another three months, to end-September 2013, is credit negative, Moody's said.
"Additionally, the new government has also announced that it will review the gas pricing formula, which increases the likelihood that the revised price may not be as high as the one approved by the previous administration," it said.
Moody's report further notes that RIL's downstream refining business continued to be stable despite weak regional refining margins and a planned turnaround in its refinery.