BG Group Quarterly Profit Rises 25% on Higher Energy Prices

BG Group Plc (BG/), the U.K.’s third- largest natural-gas producer, said third-quarter earnings rose 25 percent as energy-price gains countered output constraints.

Net income climbed to $1.06 billion from $849 million a year earlier, the Reading, England-based company said today in a statement. Earnings excluding disposals and one-time items were $1.02 billion, beating the $973 million mean estimate from a Bloomberg survey of 13 analysts.

Increases in energy prices drove up profit even as output was curtailed by works at Trinidad & Tobago’s Atlantic LNG Co. and at the North Sea Buzzard field. Earnings also weathered project delays in Egypt and Tunisia after anti-government protests broke out in the two North African countries.

While 2011 isn’t expected to be “high-growth” because of the unrest in Africa and North Sea maintenance, “these areas have recovered and BG is making progress on its key growth projects in the U.S., Brazil and Australia,” said Richard Griffith, a London-based analyst at Evolution Securities Ltd.

BG is exploring for shale gas in the U.S. with partner Exco Resources Inc. (XCO) and in July said it would extend the search to Australia as global demand grows for the fuel. In Brazil, the company is focusing on deepwater ventures and plans to invest $30 billion in the next decade.

Sales Gain

Total production climbed 1 percent in the third quarter to 56.8 million barrels of oil equivalent (617,000 barrels a day), BG said in the statement. Sales rose 22 percent to $5.4 billion, pushed higher by a 33 percent gain in U.K. gas futures and a 46 percent increase in Brent oil.

BG gained 3.8 percent to 1,378 pence in London trading today, the highest closing price since Aug. 2.

In Brazil, BG and its partners have agreed to build all 13 floating production, storage and offloading vessels for the first phase of output at the Santos Basin’s BM-S-9 and BM-S-11 blocks, according to the statement. The FPSOs will have a combined production capacity of about 2.3 million barrels of oil equivalent a day by 2017, it said.

The company, which previously suffered mechanical faults at wells in Brazil’s Lula field, formerly known as Tupi, plans to complete three producing wells at the deposit by the end of the year and three next year, Chief Executive Officer Frank Chapman said on a conference call. The first well is already pumping 35,000 barrels of oil equivalent a day, the statement shows.

Brazil Assets

BG may sell some Brazilian assets to reduce costs, analysts at Investec Securities said today. Chapman declined to comment, saying only that “we keep all of our assets in our portfolio under review.”

In the U.S., the Department of Energy in July approved exports of liquefied natural gas from the Lake Charles terminal in Louisiana for 25 years, BG said in the statement. The company may start shipping in 2018 at the earliest, Elizabeth Spomer, senior vice president for business development, said Oct. 4.

BG expects to earn $2.4 billion from its LNG operations this year, raising its outlook from a February forecast of as much as $2.2 billion. It diverted 89 percent of cargoes to markets outside the U.S. in the third quarter to benefit from higher prices.

In Egypt, BG started gas production from the $1 billion Phase 8a at the West Delta Deep Marine project this month. It expects to begin output from Phase 7 by the end of the year and from Phase 8b next year, Chapman said on the call.

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

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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