31 October 2013, News Wires – Production cuts due to a drop in gas drilling activity in the US as well as a reduction in LNG exports chopped BG Group’s operating profit significantly in the third quarter.
The UK-based company reported quarterly operating profit, including its share of earnings from joint ventures as well as asset disposals and impairments, of $1.87 billion, down 16% compared with $2.2 billion a year earlier, while cash generated by operations dropped 25% to just over $2 billion.
Group revenue sank 5% year on year to $4.4 billion, leaving it with a net profit of $1.1 billion, down 4% on a year earlier though still beating analyst forecasts of $944 million.
BG’s oil and gas production dropped 10% year on year, as had been expected, mainly due to a reduction in the US rig count in response to lower North American gas prices as the company prioritises value over volume.
It continued to suffer from higher domestic gas offtake in Egypt, after earlier warning its 2014 production would be hit by instability in the Middle East country that is stalling its West Delta Deep Marine project.
Chief executive Chris Finlayson said “the business environment [in Egypt] remains difficult” with the Cairo government stating domestic gas offtake is set to remain at around the current level of 700 million to 750 million cubic feet per day for the rest of the year, having reached an average of 1 billion cubic feet per day in the latest quarter.
“Further assurances regarding future domestic offtake levels and a material improvement in the outstanding debt position are required before releasing funds for the next phase of development,” he said.
BG, which currently has net debt of $13 billion, has been selling off assets to raise cash and is set to generate $400 million from the disposal of its stake in the Quintero LNG project in Chile, while also cutting its US midstream exposure and selling its entire 50% interest in US shale player TGGT.
The company has a hefty capital investment programme, having ploughed nearly $2.8 billion into major projects in Australina, Brazil, Egypt and the UK in the last quarter, while also pursuing a joint liquefied natural gas development with Statoil off Tanzania.
The huge Queensland Curtis LNG project in Australia remains on track to start flowing gas around the end of the year, the company said.
BG stated though it expects production to recover in the fourth quarter as some North Sea projects that have been shut for maintenance are brought back online and the new Jasmine field in the UK sector is brought on stream.
Shares in the London-listed company were up 1% in early trading on Thursday to around £12.60 ($20.20)