Despite higher operating costs, BG Group (BG.) turned in half-year numbers ahead of market expectations, with adjusted operating profits up 4 per cent to $3.8bn (£2.2bn). Revenues rose on the back of increased volumes of liquefied natural gas delivered to customers, together with higher realised prices in Asia and South America. Receipts were also helped by a marked increase in the proportion of crude oil in BG’s production mix. This was partly attributable to the ramp up in production at the giant Sapinhoa field in Brazil, which is nearing capacity at 120,000 barrels of oil equivalent per day (boepd).
But all is not well. In particular, the continuing political and economic strife in Egypt casts a pall over prospects for the group. BG relies on its Egyptian assets for roughly a fifth of its natural gas production, but it was forced to declare force majeure on its operations in the country after local authorities diverted its gas for use in Egypt’s domestic market. And, if anything, matters appear to be deteriorating. Production from Egypt has contracted by more than half from the 2013 interim stage, and by 14 per cent between the first and second quarters of this year.
As a result of the Egyptian problems, together with declining output in the US, BG’s total output for the second quarter fell by 10 per cent to 591,000 boepd. That decline would have been more pronounced, had not planned maintenance at the group's North Sea assets been delayed to the fourth quarter. With this work shunted to the second half, BG expects volumes to be slightly below the second-quarter average for the remainder of the year.
BG managed to pare back its free cash flow deficit significantly during the period. And that could accelerate in the second half, when BG is due to receive £562m in exchange for its stake in a North Sea gas pipeline system. The group is also flogging its Queensland gas pipeline infrastructure assets, which are thought to be worth over $2.5bn.
Investec expects 2014 EPS of 104¢ on adjusted net profits of $3.55bn.
| BG GROUP (BG.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,170p | MARKET VALUE: | £40bn | |
| TOUCH: | 1,169-1,170p | 12-MONTH HIGH: | 1,356p | LOW: 1,006p |
| DIVIDEND YIELD: | 1.5% | PE RATIO: | 26 | |
| NET ASSET VALUE: | 1,015¢ | NET DEBT: | 30% | |
| Half-year to 30 Jun | Turnover ($bn) | Pre-tax profit ($bn) | Earnings per share (¢) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 9.4 | 3.6 | 60.0 | 8.51 |
| 2014 | 10.6 | 4.0 | 72.5 | 8.47 |
| % change | +12 | +13 | +21 | -0.5 |
Ex-div: 13 Aug Payment: 12 Sep £1 = $1.69 | ||||
