Feb. 22: As expected, Reliance Industries was amongst the better performing stocks in the markets on Tuesday. The share price of RIL was up almost 3 per cent on the Bombay Stock Exchange on a day when broader markets were down.

The fall in stock markets would have been much worse otherwise. Following the $7.2 billion sale to BP, the street is wondering whether this is enough to pull the stock out of its slump. RIL, which is India’s largest listed firm, has underperformed the Sensex over the past three years.

In a note on the deal, Citi says that “partially addresses concerns on RIL’s reserves, reflected in continued stock underperformance”.

During the December quarter, natural gas production from RIL’s KG-D6 find had fallen to 55 million cubic meters per day — from the earlier level of 60 million cubic meters per day, and well below the original projection of 80 million cubic meters per day.

The lower production had caused some concerns about the firm amongst investors. In an alert to investors, Niko Resources, the Canadian partner of RIL in D6, had said that production from the field is expected to remain flat at the current levels upto March 2012.

Earlier, Niko had projected that the production will increase to 79 million cubic meters per day. “The partnership with BP will address concerns on potential production ramp-up/reservoir quality issues,”JP Morgan said, in a note to its clients.

Another possible advantage, highlighted by JP Morgan, is that BP’s involvement may result in internationalising the gas price issue, which has become a hot potato in 0recent years. Gas price will become more important in the coming years as newer discoveries are likely to be more expensive to develop compared to D1/D3 discoveries, says RBS, another research house.

These were amongst the earlier discoveries of the firm, and are in relatively shallower waters. Cost of developing a reserve increases sharply as depth increases.

However, a major issue with RIL right now is absence of major growth opportunities. That hasn’t been changed by the deal at all.