BG posts fall in profits

Brent crude01 May 2014, News Wires – UK giant BG Group has posted a fall in first quarter profit despite a rise in revenue as higher operating costs hit the company’s bottom line.

Total earnings for the three months to 31 March came in at $1.1 billion, down 3% on the $1.2 billion booked during the same period last year.

The fall in profits came despite a 3% jump in revenue to nearly $5.1 billion, up from $4.9 billion generated in the first quarter of 2013.

Hitting the company’s earnings were higher operating costs in its liquefied natural gas shipping and marketing segment and a 60% increase in net finance costs, to $56 million, which included foreign exchange losses of $13 million.

Operating profit of the company’s upstream business was also down year-on-year, falling 7% to $1.3 billion.

This came as output slipped 4%, from 59.3 million barrels of oil equivalent in the first quarter of 2013 to 57 million boe in the recent quarter.

The reasoning behind the increased revenue was a boost in oil production, from 8 million boe to nearly 11.6 million boe, which helped offset a fall in gas production which dragged down overall volumes.

Hitting production was a 35% drop in output from Egypt, to 66,000 boe per day, as a result of deteriorating reservoir performance and the continuing high level of diversions to the domestic market where BG is entitled to a lower share of production.

As result, the company said no Egypt LNG cargoes were lifted during the recent quarter, adding only one cargo was expected to be lifted during the current quarter.

BG warned that the future commercial operation of Egyptian LNG was “increasingly at risk” with the strong likelihood of continued diversions to the domestic market, combined with further reservoir deterioration and “the absence of concerted action from the Egyptian government”.

BG said it expected limited cargoes to be lifted from Egyptian LNG for the foreseeable future.

Output from the company’s operations in the US were also down which it said reflected continued low levels of drilling activity and underlying decline.

The lower output in Egypt and the US offset the additional production from the ramp-up of new developments in Brazil, the UK and Bolivia.

“Group production volumes for the first quarter were consistent with our anticipated seasonal phasing, although production entitlement from Egypt was lower than expected as domestic offtake remains well above contractual commitments and reservoir performance deteriorates,” BG’s interim executive chairman Andrew Gould said.

“As a result of the challenges in Egypt, the group’s 2014 production is now expected to be at the lower end of the guidance range.”

BG maintained its 2014 production guidance of between 590,000 and 630,000 boepd, adding there was a significant amount of maintenance activity including planned shutdowns scheduled for the second and third quarters, particularly in the UK, which will lead to substantially lower production in those quarters.

However it expects output to increase in the fourth quarter as maintenance programmes wrap up and new developments come on stream.


– Upstream

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