The stock of Reliance Industries Ltd (RIL) continued its downward movement on Monday following reports that the company was in the race for acquiring London-based oil and gas firm Addax Petroleum.
Last week RIL shares faced selling pressure after the Bombay High Court verdict in the RIL vs Reliance Natural Resources Ltd (RNRL) case went in favour of RNRL.
“Today’s fall in RIL shares could be because RIL may be in the race for Addax Petroleum,” Mr Maulik Patel, an analyst tracking the oil and gas sector at K R Choksey Shares & Securities Pvt Ltd, said.
Reports said that ONGC was also among the bidders for Addax, which has oil and gas fields in Kurdistan (Iraq) and Nigeria. Addax is said to have been valued at approximately $8.26 billion. ONGC fell 1.62 per cent on BSE, closing at Rs. 993.70.
RIL shares were down also because of lower refining margins in June as compared to April, Mr Patel said. The economic environment is also not conducive to the petroleum refining companies with supply outstripping demand in the international markets, he said.
Singapore refining margins are down to $3 a barrel in June as compared to $5.1 a barrel in April. “If global oil demand falls by 2.5 million barrels per day, as forecast by International Energy Agency, Singapore, refining margins may remain weaker for longer than assumed,” a Bank of America-Merrill Lynch report said.
On Monday, RIL shares closed more than 4 per cent lower at Rs 1,952 on the BSE.
Since the court verdict on June 15, RIL shares have fallen by over 17 per cent.
The court ruled that RNRL is entitled to receive 28 million metric standard cubic meters a day of gas from the RIL-operated KG D-6 block at $2.34/million metric British thermal units (mmbtu) for 17 years. This is against the government fixed price of $4.2/mmbtu.
“The selling pressure on RIL shares has continued. Even the company’s treasury has stopped buying support. Their participation is not that active,” said a broker.
Meanwhile, RNRL stock shed more of its recent gains on Monday to close down 4.7 per cent at Rs 88.15 on the BSE. RNRL had shot up around 25 per cent after the verdict and touched a high of Rs 112. But selling pressure set in during trading sessions last week.
“Since the gas agreement mentions D-6 gas cannot be traded, we believe RNRL is unlikely to be able to charge these margins as of now. Inability to trade in gas implies RNRL cannot benefit from the verdict,” a Goldman Sachs report said.
Source: The Hindu Businessline