>RELIANCE CAPITAL LIMITED (MERRILL LYNCH)

■ KG D9 prospective gas resources may be cut; Underperform
Hardy Oil is a partner of Reliance Industries (RIL) in KG D9, KG D3 and GS-01 blocks. Hardy Oil’s 2009 preliminary results report published on March 4 included updates on the exploration of these blocks, in which it has 10% interest. 3 exploration wells each are scheduled to be drilled in KG D9 and D3 by 3Q 2011.
1-2 wells are also planned in KG D3 by February 2011 to appraise the 2 gas discoveries made in 2008. Hardy Oil also intends to publish an evaluation report on all its assets by end of 1H 2010. In this report risked prospective resources in KG D9 may be cut from the earlier estimate of 10.8tcf due to the first dry well in the block. This may mean downside to RIL’s E&P valuation. We are still valuing 10.8tcf of risked prospective resources in KG D9 at US$5.2bn. We retain an Underperform on RIL.

■ KG D9: first well dry but 3 more wells by 3Q 2011
In May 2009, independent expert GCA had estimated risked prospective gas resources of 10.8tcf (unrisked 54.8tcf). However, the first well drilled in KG D9 was dry. Therefore, in the evaluation report expected by end of 1H 2010, prospective resource estimates may be cut. Next exploration well in KG D9 is likely in 3Q 2010. It will be followed by one well each in 1Q 2011 and 3Q 2011.

■ KG D3: 3 gas discoveries already made; more upside
Three exploration wells have been drilled in KG D3 with gas discoveries being made in all the wells. 1-2 appraisal wells are planned in KG D3 by February 2010, to appraise the 2 gas discoveries made in 2008. There are several other leads and prospects in KG D3 with GCA estimating gross risked prospective resources at 2.5tcf. Three more exploration wells are planned in KG D3 in Q2-Q4 2010 to appraise some of these prospects and complete committed drilling of 6 wells.

To read the full report: RIL