BG Group's Profit Declines 21% After U.S.-Bound LNG Cargoes Are Diverted

BG Group Plc, the U.K.’s third- largest energy company, said profit fell 21 percent after higher production in the U.S. reduced the need for shipments of liquefied natural gas.

Net income in the second quarter dropped to $602 million from $761 million a year earlier, the Reading, England-based company said today in a statement released by the Regulatory News Service.

“For both upstream and LNG, we expect a sequential drop in segment earnings due to the seasonality factor,” Oswald Clint, an analyst at Sanford C. Bernstein & Co., said before the release. BG possibly sent 50 percent less LNG to the U.S. and “sold more into oil-linked regions where prices” were higher, he said.

China, the world’s biggest energy user, boosted LNG purchases in June by 58 percent from a year earlier on increased demand from power plants. Nevertheless, LNG production capacity increases forced countries, such as Qatar, to curtail supply amid a global glut. The U.S. became the world’s largest natural gas producer ahead of Russia last year after developing so- called shale deposits.

“It’s not going to be the same BG you knew before” because of lower natural gas prices, said Christine Tiscareno, an analyst at Standard & Poor’s in London. “The company has reached a more mature phase.”

BG, which is competing for the leadership of the world’s LNG production market, expects “modest” growth in 2010, according to a forecast earlier this year by Chief Financial Officer Ashley Almanza.

Expansion Focus

BG is focusing on projects in Brazil, the U.S. and Australia and in May it agreed to join an exploration project in Tanzania. The company in June won approval for an A$15 billion ($13.6 billion) LNG project in Australia from Queensland government on which it plans to make the final investment decision this year. The Queensland Curtis LNG venture may initially produce about 8.5 million metric tons a year.

Last month, BG said it may join Exco Resources Inc.’s acquisition of U.S. shale gas assets from Southwestern Energy Co. The company agreed in May to expand in the Appalachian basin a month after buying Common Resources LLC with Exco.

BG this month agreed to sell its interest in Premier Power Ltd. to AES Corp. and in April divested its 50 percent stake in Seabank Power Ltd. for about $320 million to Cheung Kong Infrastructure Holdings Ltd.

Reading, England-based BG will host a Webcast presentation at 12 p.m.

To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

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