LNG surge buoys BG

BG enjoyed a favourable pricing environment, with average realised unit prices up by 15 per cent. This enabled the group to drive-up operating profits by a third to $7.36bn (£4.63bn). This was achieved despite a 1 per cent decrease in production volumes brought about by elective rig shutdowns in the North Sea. Once these are discounted, volumes for the group actually increased by 5 per cent year-on-year. Output was also hampered by disruptions brought about by unrest in North Africa and the residual effects of flooding in Queensland.

The North Sea shutdowns were also partially responsible for a 20 per cent rise in unit operating costs to $8.77 per barrel of oil equivalent (boe). BG’s unit cost has risen by $2.80 since 2009, which gives some idea of the cost pressures facing the energy industry.

The importance of Liquefied Natural Gas (LNG) to BG’s future business mix was underlined by a 51 per cent increase in fourth-quarter operating profits from the division to $830m. The LNG segment will constitute an increasingly larger proportion of group revenues as capital investments come on-stream, allowing the group to tap into burgeoning Asian energy demand. Prospects have also been buoyed by BG’s recent finds off the coast of Tanzania, which contain up to three trillion cubic feet of resources. BG’s chief executive, Sir Frank Chapman, believes that "not only is our LNG supply set to exceed our 2015 target of 20 million tonnes per annum (mtpa), but we believe that a BG Group supply portfolio of 30 mtpa by 2020 is now within reach”.

Morgan Stanley is predicting 2012 EPS of $1.52 (from $1.22 in 2011).