Brokerage houses CLSA and Credit Suisse have divergent views on Reliance Industries and British Petroleum's latest plans to revive gas output from offshore and expanding their partnership to sell transport fuels.
While Credit Suisse maintained its ‘Neutral' stance on lack of details on the size and scope of joint venture projects, CLSA reiterated its ‘Buy' rating on the stock, calling it a clear long-term positive.
We believe the stock is already pricing in good execution (and on-time ramp-up) for the petchem expansion, as well as the telco business, leading to our neutral stance on the stock.Credit Suisse Research Note.
CLSA said pending legal reasons as a possible reason behind the two energy majors' not indulging in specifics.
The Big Plans
RIL-BP will invest around Rs 40,000 crore to develop about 3 trillion cubic feet of resources that will result in production of an additional 30 million to 35 million cubic meters a day of gas from the D6 block in the Krishna Godavari basin between 2020 and 2022, Bob Dudley, chief executive officer of BP, said in New Delhi Thursday.
While the management has not provided for a specific timeline on the investment part, analysts expect most of it to come in after FY18. “The investment will start coming in after the government comes out with new pricing as it may not be commercially viable to develop these fields at current prices,” Abhijeet Bora, senior research analyst at Sharekhan told BloombergQuint by phone.
Currently, gas prices are administered and fixed at $5.56 per million British thermal units by the Indian government.
CLSA said the partnership will lay emphasis on aviation turbine fuel marketing and new technology initiatives to deliver value to customers. “BP Plc. having licensing rights to market ATF and set up 3,500 fuel stations across India will be an added advantage.” Reliance on its part has license for around 5,000 fuel stations, the broking firm said.
RIL management suggested exploring 1,400 new markets for retail expansion in coming years, Credit Suisse said. Besides that, they noted that capex numbers for KG-D6 project timelines and output ranges were in sync with prior guidance, resulting in no broad changes in the model.
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