Technology access key strategic benefit to RIL in Atlas deal: Analysts

Reliance's successful tie-up with US-based Atlas Energy is a major positive for the company after its failed attempt to take over bankrupt Dutch perochemical  giant LyondellBasel in Europe. However, given the size of the deal, analysts say the potential for joint ventures on similar lines remains high.

The Atlas Energy deal would require RIL take up a 40-per cent stake at $339 million followed by $1.36 billion out of Atlas' share of exploration expenditure over a seven-and-a-half year period.

Additionally for its own share of exploration expenses it would fork out $3.4 billion over ten years. Analysts say given the company had generated cash profit of $4.4 billion in the first nine months of FY10, and was carrying $3.4 billion as of 31 December, 2009, the investments would hardly strain the company.

They point out the since the initial payout under the deal can be funded through RIL's existing cash balances, debt for raising finances for the deal would not be required.

Also payment towards future exploration efforts too can be met through recurring cash flows from its existing assets. According to Goldman Sachs, RIL could have generated $25 billion over its committed capex in the four years, which would leave the company cash surplus and debt-free by as early as FY13.

According to analysts though RIL signed the deal at a fair valuation, the shale gas technology that it would gain access and exposure to would be strategic benefit to the company. RIL has retained the option to be present in certain project areas even though Atlas will serve as the development operator for the joint venture.