BG Group 4Q Net Profit Up 25% Despite Lower Output

LONDON (Dow Jones Newswires), Feb. 8, 2011

BG Group Tuesday beat expectations to post a 25% rise in net profit for the fourth quarter, as higher energy prices more than offset a surprise drop in the company's oil and gas production.

The U.K.-based energy company gave a bullish outlook for its future growth, which it underlined with a 10% increase to its full-year dividend and upgraded production targets in Brazil and the U.S.

"2010 was a pivotal year for BG Group as the largest growth opportunities in our history began to crystallize amid a positive outlook for global gas markets," said BG Group Chief Executive Frank Chapman.

Chapman dismissed concerns that the global natural gas market could become oversupplied in the coming years, saying he expected rapid demand growth of 3% a year this decade. "The increase in demand by 2020 will be equivalent to more or less the entire current North American gas market," and BG will be well placed to profit from that growth, he said.

In the face of this significant upgrade to BG's long-term outlook, the miss on fourth quarter production is not a big deal, said ING analyst Jason Kenney. BG's commitment to raise the dividend shows its confidence, he said.

BG said net profit for the three months ended Dec. 31, 2010, totaled $940 million, compared with $754 million for the fourth quarter of 2009.

Adjusted for non-operating items, mostly a write-down on a long-term commodity contract, and removing discontinued operations, BG's profit was $1.06 billion in the fourth quarter, up 13% on the previous year and above expectations of $962 million in a Dow Jones Newswires poll of seven analysts.

Total oil and gas production was 660,000 barrels of oil equivalent a day, a decline of 1.9% on the year due to lower production in the U.K., Egypt, India and Kazakhstan. Analysts were expecting a rise of 0.6%.

BG raised its 2020 net production estimate for oil discoveries in Brazil's Santos Basin to 550,000 boe a day, from 400,000 boe a day previously. Brazil should be highly profitable for BG. The company said it will cost just $18 a barrel to produce oil from Santos Basin fields and transport them to markets where the price of oil is currently close to $100 a barrel.

BG also raised its 2015 net production target for its U.S. shale gas operations to 190,000 boe a day from 100,000 boe a day.

The company reaffirmed its target to grow annual liquefied natural gas production at least 50% by 2020 and increased its profit guidance for the LNG division to be in the range of $1.9 billion to $2.2 billion a year for 2011 and 2012.

BG Group can grow its production by an average of 7% a year to 2020 from existing discoveries alone, it said.

Total revenue for the quarter was up 2.3% to $4.32 billion from $4.22 billion in 2009.

Diluted earnings per share from continuing operations were 26.6 cents compared with 23.8 cents the previous year.

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