Reliance Industries (RIL IN, INR 719, Buy)
Niko Resources announced a 5.3 tcf cut in reserves primarily attributed to KG-D6. Niko includes only fields with FDP approval in reserves. Thus, it includes only D1/D3 main channel and MA field of KG-D6 as part of 2P reserves. Other discoveries in KG-D6 (R-Series and 7 satellites), are in 2C resources. We now estimate KG-D6 to have 2P reserves of 3.0 tcf and 2C resources of 2.4 tcf. Niko anticipates no further drilling in D1/D3. The plan is to submit Integrated Plan for R-Series and 7 satellites, and production from this is likely from FY15. The cut in reserves has surprised us negatively. We estimate most of the cut to be in laminated portion of D1/D3, and will have an impact on NPV of INR17/share. Maintain ‘BUY’.