BG Looks to Long Term after Quarterly Setbacks
British oil firm BG Group said its key long-term projects were on track as it reported a series of short-term setbacks, including weaker-than-expected quarterly earnings, a cut in its 2012 production exit rate forecast and a big impairment charge.
BG said on Thursday it was making good progress with plans to bring huge projects in Australia and Brazil onstream which will ramp up production sharply from 2015, allaying fears about possible delays and cost overruns with such ambitious plans.
However, difficulties in the North Sea and maintenance at a liquefied natural gas (LNG) plant affected its quarterly performance.
The group posted underlying earnings of $1.07 billion in the three months to the end of June, behind a consensus forecast of $1.1 billion according to a company survey of analysts, who had mostly expected profits from the LNG division to be higher.
BG also downgraded its year-end production rate forecast to 720,000 barrels of oil equivalent per day (boed) from 750,000 boed, due to an ongoing shut-down of a field in the North Sea, a delay to another UK project coming onstream and the scaling back of shale gas drilling in the United States -- three issues already flagged in recent months.
"The 2012 exit rate production (was) downgraded but major projects in Australia and Brazil remain on track ... and so we maintain our "buy" recommendation," said Oriel Securities analyst Richard Griffith.
BG said it would also take a $1.3 billion impairment charge against its shale gas business in the United States, having warned in February it would cut back on shale drilling due to a weak gas price.
"There was no good news but there was nothing that breaks the thesis. Everything they announced in terms of impairments to their shale assets, their exit rate reduction to production, really all of them were known bad news," Jefferies analyst Brendan Warn said.
Analysts at JP Morgan said they believed the U.S. impairment charge was no surprise to the market and called BG's LNG business, which ships liquefied gas around the world, "a forecasting conundrum".
A lower oil price in the quarter relative to last year plus a higher exploration charge due to a write-off of a licence in Brazil meant profit in the quarter was 4% lower than the same period last year, despite production rising 4%.
Weaker prices for oil worldwide and for gas in North America also took their toll on Royal Dutch Shell's profit in the second quarter - it fell 26%, pushing down shares in the company by 3.5%.
BG said it was increasing its interim dividend by 10% to 11.88 cents per share.
