<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[<p>Falling gas output and a rising subsidy burden are expected to weigh on the respective outlooks of energy major Reliance Industries and explorer Oil and Natural Gas Corp, taking the shine off their likely strong fourth-quarter earnings.<br><br>Crude oil prices rose 16.8 per cent in the March quarter, which should help Reliance, India's largest-listed firm, significantly expand refining and petrochemicals margins.<br><br>Rising crude prices are also likely to boost profits at state-run ONGC.<br><br>"Crude oil prices continue to be on an upward trend and that is good news for both companies," said Ambareesh Baliga, chief operating officer at Way2Wealth Securities.<br><br>"But concerns remain for both -- gas output in case of Reliance and subsidy burden for ONGC, which is why the stocks have been under pressure," he said.<br><br><strong>Record Profit</strong><br>Reliance is expected to report 17 per cent growth and its highest-ever quarterly net profit, with gross margins at its flagship refining business expected to touch $10 a barrel for the March quarter, analysts said.<br><br>The company posted a refining margin of $7.5 per barrel a year ago, and $9 a barrel in the December quarter. The refining segment contributes nearly 70 percent of the company's revenues.<br><br>Near-term prospects for the petrochemicals-to-retail conglomerate are likely to depend on its gas production, which currently accounts for just 6-7 percent of revenues but had been expected to contribute significantly in the financial year that began on April 1.<br><br>The Directorate General of Hydrocarbons said in March Reliance was pumping 53 million standard cubic metres per day (mscmd) from the D6 block off India's east coast -- already less than the 60 mscmd it produced last year, and far off peak capacity of 80 mscmd.<br><br>Last month, Reliance warned the upstream regulator that gas output from key fields in its main producing block may further drop 12 percent next year, a source told Reuters.<br><br>The concerns over Reliance's gas production have for months dampened growth outlook for the Indian energy giant and kept its shares under pressure.<br><br>Shares in the company, valued by the market at $75.1 billion, have declined nearly 5 percent so far in 2011, contributing significantly to the comparative 7 percent fall in the main index, in which the stock has the heaviest weight.<br><br>In February, Reliance agreed to sell a stake in 23 oil and gas blocks in the KG basin to BP PLC in a $7.2 billion deal, and is expected to benefit from BP's deepwater exploration expertise in the medium term.<br><br>The company, controlled by Mukesh Ambani, the world's ninth-richest man according to Forbes magazine, is also looking to widen beyond its existing businesses into telecom, retail, power and financial services.<br><br><strong>Subsidy Weighs On ONGC</strong><br>ONGC is expected to report a 34 percent jump in quarterly net profit, helped by higher prices of crude oil and gas. Net average realisations could rise to $58 a barrel from $51 a year ago, analysts said.<br><br>However, the company will not be able to reap the full rewards of high world oil prices as it has to share the subsidy burden in the form of discounts to state-run refiners.<br><br>India granted autonomy to state-run refiners in June to fix retail prices for petrol, but the government continues to control prices of diesel, cooking gas and kerosene.<br><br>ONGC's subsidy burden for the quarter could nearly double to 97 billion rupees from 50 billion rupees a year ago, said Jagdish Meghnani, sector analyst at Alchemy Share and Stock Brokers. The subsidy is expected to rise further in the current year.<br><br>The following table includes net profit forecasts from a Reuters poll of brokerages and the year-to-date performance of the companies' shares:<br><br>Poll contributors: Angel Broking, Alchemy, Edelweiss Capital, Macquarie, Prabhudas Lilladher, Indiainfoline, Motilal Oswal, IDFC, Bank of America-Merrill Lynch, Elara Capital.<br><br>(Reuters)</p>