Tip Update BG Group PLC (uk:BG.)
Our previous tip
- We said Buy
- When 5 Jan 2012
- Price 1,394p
- Tip performance to date -10%
A $1.3bn (£839m) write-down on its US shale gas interests due to a weaker outlook for US natural gas prices dented
Apart from the US setback, BG benefited from a strengthening price environment, particularly in Asia. This was reflected by strong revenue growth and a one-third increase in operating cashflows to $5.7bn. Adjusted operating profits, though 6 per cent up at $4.35bn, were held in check by rising production and depreciation costs.
Daily production was up by 4 per cent on the first half of 2011 to 671,000 barrels of oil equivalent (BOE), but the prolonged shutdown of the North Sea Elgin-Franklin gas field and deferral of the Jasmine field start-up are expected to reduce daily production by around 30,000 BOE to around 720,000 at the year-end.
The LNG business is booming, though; the division is expected to contribute operating profits at the upper end of the current $2.6-$2.8bn guidance. Prior to these figures, JPMorgan Cazenove anticipated group adjusted full-year 2012 EPS of 86.1p (2011: 83.5p).
|BG GROUP (BG.)|
|ORD PRICE:||1,255p||MARKET VALUE:||£42.6bn|
|TOUCH:||1,254-1,255p||12-MONTH HIGH:||1,554p||LOW: 1,105p|
|DIVIDEND YIELD:||0.8%||PE RATIO:||18|
|NET ASSET VALUE:||884¢*||NET DEBT:||34%|
|Half-year to 30 Jun||Turnover ($bn)||Pre-tax profit ($bn)||Earnings per share (¢)||Dividend per share (p)|
£1 = $1.55 *Includes intanglible assets of $4.57bn, or 135¢ a share
SHARE TIP UPDATE:
BG's future growth projects in Brazil and Australia remain firmly on track, but the shares are 10 per cent adrift of our tip of the year call (1,394p, 5 Jan 2012) due to the sector wide pull-back which provides another us with buying opportunity. Buy.
Last Ic view: Buy, 1,487p, 10 Feb 2012