BG to Sell $5 Billion in Assets as Net Gains on LNG Demand

BG Group Plc (BG/), the U.K.’s third- largest natural-gas producer, plans to sell $5 billion of assets in the next two years to maintain investment and production growth, and meet stronger demand for liquefied natural gas.

BG expects output to increase by 15 percent to 750,000 barrels of oil and gas equivalent a day in 2012, it said in a statement today. The company plans to invest $22 billion in projects this year and next, after debt rose by 63 percent to $11.3 billion in 2011 on new loans and bonds.

“The outlook for global gas and LNG demand is strong,” Chief Executive Officer Frank Chapman said in the statement. BG expects to earn $2.6 billion to $2.8 billion from LNG this year.

The company, based in Reading, England is investing in Brazil, the North Sea and Australia. BG cut its projection for U.S. shale gas output in 2015 by 58 percent because of lower prices. The explorer expects oil and gas extraction to rise to 1.4 million barrels a day in 2020, in the middle of the 1.2 million to 1.6 million barrel range it previously forecast.

BG sees 2015 revenue of $35 billion, Chapman said.

The company advanced 3.2 percent to 1,491.5 pence by the close of London trading, the highest level since May 3.

The company plans to complete the sale of power operations, an Indian gas distributor and some re-gasification assets this year, Chief Financial Officer Fabio Barbosa said today. BG wouldn’t say whether it plans to sell some Brazilian assets.

Japan LNG Sales

BG reported a $2.6 billion profit from LNG last year, above its $2.4 billion October goal. The company, which hedged as much as 80 percent of LNG sales in 2009, won’t extend the practice and will be “substantially” unhedged from 2013, Barbosa said.

Shipments to Asia rose last year after Japan, the largest importer of the fuel, increased use of gas-fired power plants to compensate for nuclear reactors idled after the March earthquake and tsunami. The company is developing plans to export LNG from the U.S. and is also looking into an opportunity to ship the fuel from Canada, Chapman told reporters on a conference call.

“We are moving into LNG liquids” in the U.S., he said. “Canada is a new project that we are working on.”

Net income in the fourth quarter increased to $1.3 billion from $940 million a year earlier, the company said in a separate statement. Excluding disposals and one-time items, earnings totaled $1.5 billion, beating the $1.1 billion average of 14 analyst estimates compiled by Bloomberg.

“BG was again able to benefit from an increased number of global diversions due to strong demand from Asia.,” said Oswald Clint, an analyst at Sanford C. Bernstein & Co. in London. “LNG earnings once again steal the show.”

Output Slips

Output last year was cut by field maintenance in the North Sea, civil unrest in North Africa and Australian floods. It fell about 1 percent to 641,000 barrels of oil equivalent a day.

The company expects the share of oil in its production to rise with volumes increasing in Brazil. The gas portion will fall from about 70 percent “more towards the 50:50 level,” Chapman said. BG today raised its Brazilian output forecast to 600,000 barrels of oil equivalent a day, up from last year’s guidance of 550,000 barrels a day.

In Kazakhstan, BG and its partners plan to further expand the Karachaganak oil and gas field project after KazMunaiGaz National Co., the state energy company, secured 10 percent.

BG last month began gas output at the second phase of the West Delta Deep Marine project in Egypt. It made the Jordbaer West discovery in Norway in November located about 4 kilometers (2.5 miles) southwest of the Knarr field, it said today. In Australia, BG raised its gas resource estimate to 25 trillion cubic feet, from the earlier forecast of 21 trillion.

BG plans to invest about $1.5 billion in exploration this year and will shift away from Brazil to frontiers, Chapman said.

Royal Dutch Shell Plc and BP Plc are the U.K.’s biggest gas producers.

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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