The stock of Reliance Industries fell by three percent to Rs 716 per share after Canada's Niko Resources sharply cut the reserves estimate at the KG D6 gas blocks, off India's east coast, where the two companies are partners.
The Canadian oil and gas producer said that the total proved plus probable reserves at the KG D6 block, as of March 31, had decreased to 1.93 trillion cubic feet. The block had been estimated to hold more than 9 trillion cubic feet (tcf) of gas.
Niko, which co-owns the KG D6 block in India with BP and Reliance Industries, has been grappling with lower natural gas reserves at the block. While Niko holds a 10 percent stake in the D6 block, Reliance holds 60 percent and BP Plc has a 30 percent stake.
Reliance last month cut its India gas reserves by 7 percent and the Indian government rejected its plan to recover $1.2 billion in costs at the gas field.
The company has off late been in news because of its huge cash pile up and declining gas production/ reserves. Ambit Capital in their research report has a sell call on the company.
"RIL's significant under performance over the last 2 years has been driven by declining gas production/reserves in the KG-D6 block, delays in regulatory approvals, subdued downstream margins, lack of progress on new businesses and limited clarity on the company's strategy for cash deployment", said Ambit in a research report.
It further added that it does not expect these concerns to go away as RIL is finding it difficult to identify the 'next big project' that can drive earnings growth.
Reliance Industries (RIL) is India's largest private sector enterprise, with business activities spanning across exploration and production (E&P) of oil and gas, petroleum refining and marketing, petrochemicals, textiles, retail, telecom and special economic zones (SEZ).
(With inputs from Reuters)
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Updated Date: Dec 20, 2014 18:13:05 IST