Margins of Reliance Industries’ US shale business in Q1 FY18 improved year-on-year on better prices and stable cost structure, even as margins from the domestic oil and gas business continued their decline. The margins from the US shale business for the period under review narrowed to (-19%) from the (-63.7%) a year ago and (-62.9%) in the preceding quarter.
The revenue from the US shale business rose 33.5% on year to Rs 742 crore, while segment EBIT or the earnings before interest and taxes narrowed to negative Rs 141 crore compared with negative Rs 354 crore a year ago. The performance improved in the first quarter despite lower volumes, mainly on the strength of better prices, the company said in its earnings statement.
The company said that US Shale gas industry has been resilient in recent past and have leveraged the downturn to improve operational efficiencies and reduce services costs.
“With improved cost structure, activity has picked up and rig counts have increased in selected shale plays including Eagle Ford and Marcellus,” the company said.
“Current focus remains on maintaining cost leadership that has been achieved in the recent quarters and on closely monitoring performance of new pads that utilize new well designs. The resilience in cost structure and the time out on drilling and completion activities enabled detailed technical studies that has now resulted in more robust forward plan,” the company said.
In contrast margins from the domestic oil and gas business in Q1FY18 fell to negative 39.7% from 6.1% a year ago, and 78% in sequential quarter.
Revenues from the domestic business also fell 25.7% on year to `582 crore due to lower gas price realisation and declining volumes that lead to negative segment earnings before interest and taxes of `231 crore compared with a positive Rs 48 crore a year ago.
Production of crude oil and gas from KG D6 field fell 20% and 27% respectively to 0.23 million barrels and 20.4 billion cubic feet. “Currently eight wells in D1 D3 and three wells in MA discovery are under production. Focus is on sustaining well life and network management to optimise recovery,” the company said.