BG Group Raises Dividend 10% but Lowers Guidance

LONDON -- BG Group  (LSE: BG  ) (NASDAQOTH: BRGYY  ) didn't have the best 2012 -- with the shares plummeting 18% following disappointing production forecasts in the third quarter -- and 2013 isn't starting out much better. Today, BG said it achieved the 3% production increase it targeted in the third-quarter release, although this is half the growth rate the company expects to achieve through 2020.

Even more disappointing for investors was the announcement that production is expected to slip next year, as new production out of Brazil, Bolivia, and the North Sea isn't expected to make an impact until the fourth quarter of next year. Oh, and production costs are expected to rise.

Add to this limited growth from the company's newly designated LNG Shipping & Marketing division (previously answering to the LNG segment) -- providing impressive 14% growth in operating profits, which surpassed management's guidance at $2.9 billion this year -- and shareholders don't have much to smile about.

Taking a longer-term view, there was some consolation. Commercial production started in the Sapinhoa field in January, and BG expects to see its Brazilian production capacity (though not actual production) triple by year-end as its third floating production, storage, and offloading (FPSO) vessel is put into place.

Australia's Queensland Curtis Liquid Natural Gas (QCLNG) operations are also progressing. Despite cost overruns of over $5 billion, BG now has 94% of the project contracted for and feels confident in the restated budget of $20.4 billion. QCLNG is expected to start contributing to BG's bottom line in 2014.

BG's new CEO, Chris Finlayson, will have his work cut out for him as he presents his vision for the company's long-term strategy in May, as the market has clearly expressed displeasure with what is becoming a recurring theme of disappointments from this promising gas giant.

On a price-to-earnings ratio of 13 (including the earnings generated by the company's discontinued transmission operations), the shares are trading at a bit of a premium to the market despite the recent disappointments. Given the heavy investment needed to bring the company's admittedly large prospects in Brazil and Australia into production, and the demonstrated inability of management to deliver as promised, it may take a while for these shares to regain the market's favor.

If BG Group's risks aren't what you're looking for in an investment, you might try looking at the more predictable blue chips favored by legendary investor Neil Woodford in The Motley Fool's free report "8 Dividend Shares Held by Britain's Super-Investor". Just click here to download the report now.


Read/Post Comments (1) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 05, 2013, at 8:23 PM, cmbourne wrote:

    Nate,

    I was initially confused by this article. You are talking about BG group, an oil and gas company.

    BG is stock symbol for Bunge , a food company,on the NYSE

    Cecil

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2237509, ~/Articles/ArticleHandler.aspx, 11/24/2014 10:26:47 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement