BG Surprises With Brazil Profit Boost as CEO Post Unfilled

By Eduard Gismatullin and Nidaa Bakhsh

July 31 (Bloomberg) — BG Group Plc, the U.K. oil and gas explorer seeking a chief executive officer, posted a 23 percent jump in earnings after income from liquefied natural gas surged and production in Brazil increased.

Profit excluding disposals and one-time items climbed to $1.2 billion from $986 million a year earlier, it said today in a statement. That beat the $878.7 million average estimate of nine analysts surveyed by Bloomberg.

“The beat came from the LNG Shipping & Marketing division thanks to higher delivery volumes and better realized prices but also rising contribution from high margin Brazil barrels,” Sanford C. Bernstein & Co. wrote in a note to investors.

LNG operating profit rose 44 percent, BG said.

The shares fell 0.7 percent to 1,172 pence at the close in London trading, valuing the Reading, England-based company at 40 billion pounds ($67.5 billion).

Chris Finlayson resigned in April as CEO of the U.K.’s third-largest natural gas producer in “a dispute over the speed” of the company’s creation of value for shareholders, Executive Chairman Andrew Gould said on May 1. The company has since then accelerated asset sales, including a $953 million North Sea deal last month.

In the hunt for a new CEO, Gould said today he’s impressed by the quality of external candidates.

BG and partners are ramping up oil extraction off Brazil, where the company may sell holdings in local projects for $10 billion or more, according to Banco Santander SA’s estimates.

Flow Rates

“We have delivered a good set of results for the second quarter,” Gould said in the statement. “Performance reflects the growing proportion of oil in the portfolio, principally from Brazil, and the deferral of maintenance shutdown activity in the U.K. to later in the year.”

While total production declined 10 percent to 591,000 barrels of oil equivalent a day because of operations in Egypt and the U.S., flow rates from the Santos Basin in Brazil exceeded expectations, the company said. It agreed to buy a 30 percent stake in an exploration block in Aruba, subject to approval by the national oil company.

The explorer expects “very limited cargoes to be lifted from Egyptian LNG for the foreseeable future” because of declining upstream output and minimal gas supplies to the venture between the local government and foreign shareholders including BG. “The future commercial operation of Egyptian LNG remains at risk” without action by the government, it said.

Further spending for the West Delta Deep Marine Phase 9b depends on “a material improvement in the investment climate.”

Australian LNG

In Australia, BG plans to start its Queensland Curtis LNG project as planned in the fourth quarter, helping it to counter the decline from Egypt after gas was diverted to the local market from exports. Bechtel Group Inc., the contractor building more than $60 billion of LNG plants in the country, faces a dispute with unions that may lead to strike action.

“We remain on track for first LNG by the end of the year,” said Gould, who is acting CEO until a permanent successor is found.

BG reiterated it expects total output to be at least 590,000 barrels of oil equivalent a day this year.

It’s “a decent set of second-quarter results from BG, which should provide some relief,” analysts at Investec Ltd. said in a note.

Copyright 2014 Bloomberg.