RPT-UPDATE 2-Reliance shares hit as partner says gas well dry
(Repeats story issued late on Friday)
* Hardy Oil says to abandon well in D9 block in KG basin
* Reliance Ind shares slide 4 percent; Hardy plunges 35 pct
* Reliance share fall an overreaction - analysts
* Hardy Oil says may cut reserves estimates (Adds analyst and Hardy CEO comment, details, background, updates share movement)
MUMBAI, Oct 23 (Reuters) - Shares in Reliance Industries (RELI.BO) slid 4 percent to their lowest close in almost seven weeks after partner Hardy Oil and Gas (HAOG.L) said a well the companies drilled in a block off India's east coast was dry.
Investors had hoped that a four-well drilling programme would prove the block contained many billions of cubic feet of gas.
"The failure to find either significant amounts of gas or high reservoir quality sands is likely to significantly increase the risks associated with the other prospects," Nick Copeman, oil analyst at Oriel Securities.
Reliance Industries, India's top conglomerate, holds a 90 percent interest in the D9 block, which is situated in the vast Krishna Godavari (KG) basin where the company made India's biggest gas find in another block.
Analysts said the decline in shares may be an overreaction, and Reliance's business, which spans oil and gas exploration, refining, petrochemicals and retail, is sufficiently diversified to be significantly hurt by the abandoning of a single well.
However, the block is material for smaller Hardy.
"This is not bread and butter for Reliance, but it is for Hardy," said Arun Kejriwal, a strategist at research firm KRIS.
Shares in Hardy Oil, which on Thursday's closing price was valued at $620 million and which holds a 10 percent stake in the D9 block, plunged more than 35 percent to 353 pence in London.
Hardy had previously given a recoverable reserves estimate of over 6.8 trillion cubic feet of gas for the structure.
"I would expect that to change," Chief Executive Sastry Karra told Reuters in a telephone interview.
DRILLING PROGRAMME TO PROCEED
Finance Director Dinesh Dattani said the company was optimistic the reservoir did contain oil and gas and that it would press ahead with its plan to drill another three wells.
Reliance Industries declined to comment.
Analysts said the large amount of gas Reliance has discovered and is pumping from the adjacent D6 block in the KG basin would help the company tide over the prospect of a less attractive yield from the D9 block.
"Everybody is looking at the company's exploration and production prospects," Deven Choksey, chief executive of K.R. Choksey Shares and Securities, said.
"But we feel the impact on the company due to the abandoning of this one block would not be much," he said.
Hardy Oil has previously said potential reserves in the D9 block are estimated at 10.8 trillion cubic feet (TCF) of natural gas and 143 million barrels of oil.
In Reliance's D6 block, two fields are expected to hold reserves of 10.03 TCF, and the project has the potential to generate $42 billion in revenue over its life of 11 years.
Reliance has a 90 percent stake in the D6 block, while Canada's Niko Resources (NKO.TO) holds the rest.
Billionaire Mukesh Ambani-controlled Reliance Industries and Reliance Natural Resources (RENR.BO), led by younger brother Anil Ambani, are fighting a legal battle over terms of a deal to sell gas from the KG basin to Reliance Natural at below the price set by the government. [ID:nBOM222788]
Reliance Industries, with a market value of about $72.5 billion, ended down 4 percent to 2,047.30 rupees, its lowest close since Sept. 8. It fell to as low as 2,037.20 rupees during trade. The benchmark BSE index .BSESN edged up 0.1 percent. (Additional reporting by Tom Bergin and Sharon Lindores in London) (Editing by Jarshad Kakkrakandy and Rupert Winchester)
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