BG Group Sees Profits Slip

LONDON -- BG Group  (LSE: BG  ) (NASDAQOTH: BRGYY  ) benefited from higher gas prices in the first quarter of 2013, but lower production levels saw its profits fall by 3% to $1.2 billion.

Away from the headline figures, there was somewhat better news with the company's three project milestones for the period all being delivered.

Milestones met
Brazil is a key growth area for BG Group, and its second production facility started on schedule and on budget. BG said a third platform will start production during the second quarter, while work on the fourth and fifth is about 60% complete.

In the North Sea, a gas leak at the Total-operated Elgin-Franklin field disrupted operations for a year, but three wells came back on steam in March. BG warned that pre-closure production levels were unlikely to be achieved until 2015, and would require further wells to be drilled.

Lastly, also in March and in the North Sea, production began from two new wells at Everest East.

Long-term growth plans
Looking further ahead, heavy rain has partially disrupted the Queensland Curtis LNG project, which is due to move into production next year. However, BG appears confident it can catch up with the planned development schedule. BG has also finalized the agreement for the long-term sale of up to 2.5 million tonnes per annum of LNG to India.

As reported yesterday, BG has now successfully appraised two offshore fields in Tanzania and seems optimistic that this could make a material contribution to its expansion plans over the long term.

Although profits were down slightly, BG was able to report a 3% increase to $2.7 billion in the cash generated by its operations. This was just ahead of the $2.6 billion cash invested in capital operations. Its total net debt is $10.6 billion, but the average maturity of its borrowings is 17 years. Quite a few governments would like that sort of payment profile!

BG's production guidance for the year was between 630,000 and 660,000 barrels of oil a day equivalent. With this quarter coming in at 659,000, the full-year target looks to be well within reach, although some further shutdowns are planned for later this year.

Shares of BG rose 3% in early trading to 1,124 pence. Although profits did fall for this latest quarter, the decrease was actually less than analysts had expected. BG trades on a forward P/E of about 13 times, with a projected yield of 1.7%.

BG is one of two shares featured in this special free report from The Motley Fool. In it, we set out the factors you need to consider before buying into this sector and what to look out for when picking individual shares.

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8/20/2014 11:37 AM
BG $1184.50 Down -5.50 -0.46%
BG Group CAPS Rating: No stars
BRGYY $19.86 Down -0.08 -0.40%
BG Group plc (ADR) CAPS Rating: ***

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