Reliance Industries' US shale gas arm EBIT turns negative

Reliance's US shale gas arm's EBIT margin tumbled into negative category in the first quarter of 2015 at -5.7% compared to 34.6% recorded in the same period last year. 

The US shale arm came under pressure in the first quarter of the year due to weak benchmark prices and high differencials, the company said while announcing the financial results. The NGL to WTI ratio fell from 36.5% in Q4 FY15 to 30.0% in Q1 FY16, due to sharp fall in propane prices on overwhelming inventories. 

In Q1 2015, Reliance's shale gas unit had clocked Rs 854 crore in revenue, down to nearly half from Rs 1,617 crore reported in the same period last year. Revenue in absolute terms was down 47.2%.

EBIT also tumbled into the negative category, down 108.8% from Rs 559 crore recorded in the same period last year. 

Reliance Industries has said that "volumes growth moderated as activity levels remained low and curtailments continued at Carrizo JV due to weak prices. Average gross production and net sales volume (Reliance share) were nearly flat at 1,211 Mcfe/day and 41.7 Bcfe respectively. Consequently, growth in revenues and EBITDA was muted despite stable volumes."

Reliance also has completed the sale of its entire 49.9% holding in EFS Midstream LLC (EFS). "The transaction was closed on July 8, 2015 and is effective July 1, 2015. EFS monetization has enabled Reliance to unlock significant value for its shareholders", the release said.