By Rakteem Katakey Jan. 23 (Bloomberg) -- Reliance Industries Ltd., India’s biggest company by market value, reported its first profit increase in more than a year as higher natural gas sales outweighed lower earnings from processing oil. Net income in the three months ended Dec. 31 rose 16 percent to 40.08 billion rupees ($868 million) from a year earlier, the Mumbai-based energy explorer and refiner said in an e-mailed statement yesterday. The first increase in profit in five quarters beat the 39.14 billion-rupee median estimate of nine analysts surveyed by Bloomberg News. Reliance increased output at India’s biggest gas field after starting production in April and higher earnings may help fund the company’s bid to acquire bankrupt chemicals and fuels maker LyondellBasell Industries AF. The Indian company, controlled by billionaire Mukesh Ambani, plans to expand globally and has said it may buy oil fields in the Gulf of Mexico and Brazil. “Gas is the primary driver for the profits and will continue to be,” Maulik Patel, head of research at K.R. Choksey Shares & Securities Pvt., said by telephone from Mumbai. “We can expect more positive surprises on the exploration and production side.” Reliance, which has the biggest weighting in the benchmark Sensitive Index, was little changed at 1,053.85 rupees at the close in Mumbai trading yesterday. The stock has advanced 85 percent in the past year, trailing the 91 percent increase in the Sensitive Index. Gas Profits Pretax profit from oil and gas sales exceeded gains from refining for the first time, according to the statement. Earnings from oil and gas more than doubled to 14.77 billion rupees while those from refining declined 27 percent to 13.79 billion rupees. Reliance earned $5.90 on every barrel of crude it turned to fuels in the quarter compared with $10 a barrel a year earlier, the company said. Global refining margins, or earnings from processing oil into fuel, fell to $1.49 a barrel in the three months ended Dec. 31 from $6.2 a barrel in the quarter ended March 31, according to BP Plc data. Net sales in the quarter rose 92 percent to 568.6 billion rupees, Reliance said in the statement. Reliance, which also operates chemical plants and a nationwide, 950-store retail business, said in November it made a non-binding bid to buy LyondellBasell in an all-cash deal. The company raised about $2 billion selling shares since September, Alok Agarwal, chief financial officer, said in Mumbai yesterday. The money “will increase our ability to make large capital expenditure decisions and look for international growth opportunities,” Agarwal told reporters. Debt, Cash Reliance had outstanding debt of 700 billion rupees and cash and cash equivalent of 159.6 billion rupees as of Dec. 31, according to yesterday’s statement. Buying the Netherlands-based chemicals maker, which may be valued at as much as $14.5 billion, would create a company with more than $80 billion in revenue and give Reliance chemical plants and two crude oil refineries in the U.S. and Europe. Acquiring assets overseas may help Reliance hedge the risk of investing in India. Reliance is awaiting the verdict of India’s Supreme Court in a lawsuit over the sale of gas from the KG-D6 field in the Bay of Bengal. Anil Ambani, Mukesh Ambani’s estranged brother, wants Reliance Industries to supply gas to his company at a rate agreed when the family business was split. Reliance says it can’t sell the fuel at less than the rate set later by the government. The court reserved judgment after arguments concluded last month. Fertilizer, Power Producers The field currently produces 60 million cubic meters a day of gas that is sold to customers including fertilizer and power producers selected by the government. The company didn’t produce any gas from the KG-D6 field a year earlier. Peak output of 80 million cubic meters a day may be reached by mid-2010, the government said last month. That will double the availability of gas in India and make Reliance the biggest producer of the fuel in the South Asian nation. Reliance completed the world’s largest oil-processing complex in December 2008 in Jamnagar in western India, where two adjacent refineries have a combined capacity to process 1.24 million barrels of oil a day. Reliance processed 44.25 million metric tons of crude oil in the nine months ended Dec. 31, according to the statement. The refiner exported 23.6 million tons of oil products in the period compared with 16.2 million tons a year earlier. Oil in New York has gained 63 percent in the past year. Prices climbed 12 percent in the quarter compared with a 56 percent decline a year earlier. To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net.

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