RIL takes Rs3,261 crore impairment on shale gas business in US

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Mumbai: Reliance Industries Ltd (RIL) took Rs.3,261 crore impairment charge related to its shale gas assets in the US, which include three production ventures with Chevron Corp., Pioneer Natural Resources and Carrizo Oil & Gas Inc.

Currently, zero rigs are in operation across its joint ventures, RIL said in its fourth quarter earnings report released on Friday.

So far, RIL has invested $8.2 billion in these three entities. Last June, however, it sold its EFS Midstream LLC joint venture with Pioneer Natural Resource, realizing Rs.3,684 crore.

“We have been scaling down our capex for the shale gas business. Looking at the energy prices, we would be further scaling down investments to $125 million for this year,” said Srikanth Venkatachari, joint chief financial officer at RIL, at a press briefing on Friday.

RIL has been pruning investments in its shale gas business over the past few quarters.

While the company invested over $1.2 billion in the shale gas business in FY 2015, it was brought down to $781 million in FY16.

“Capex for the quarter was sequentially 31% lower at $113 million, a drop of 53% year-on-year,” RIL said in its quarterly statement.

For the year 2015, revenue from the shale gas segment dropped 43% to Rs.734 crore, from Rs.1,286 crore in 2014. Segment Ebit (Earnings before interest and taxes) was down 65.2% at Rs.117 crore for 2015 against Rs.336 crore for 2014.

On a consolidated basis, revenue from the oil & gas segment decreased by 34.7% y-o-y to Rs.7,527 crore, reflecting the low commodity price environment. The segment Ebit for the year declined sharply by 88.1% to Rs.378 crore.

For the fourth quarter, revenues from the oil & gas segment fell 34.8% year-on-year to Rs.1,638 crore. Segment Ebit was atRs.14 crore, down 97.1% year-on-year.

“The decline in revenue was led by lower upstream production in domestic blocks coupled with sharply lower oil and gas prices in both the domestic and US shale segments,” RIL said.

RIL added that though business environment remains challenging, it is focused on lowering activity levels to conserve cash while retaining optionality and preparedness for ramp-up, when prices improve.