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.
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