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BG Profit Declines 3% on Lower Output From Kazakhstan, Egypt

While operations off Egypt haven't been affected by recent civil unrest, the crisis remains a
While operations off Egypt haven't been affected by recent civil unrest, the crisis remains a "primary concern and will continue to be so as the political, social and business environment evolves," Chief Executive Officer Chris Finlayson said in a statement. Photographer: F. Carter Smith/Bloomberg

July 26 (Bloomberg) -- BG Group Plc, the U.K.’s third-largest natural-gas producer, said earnings dropped 3 percent in the second quarter as output declined in Kazakhstan and Egypt.

Profit excluding disposals and one-time items slipped to $986 million from $1 billion a year earlier, the Reading, England-based company said today. That beat the $968.4 million average estimate of eight analysts surveyed by Bloomberg.

In Kazakhstan, production was hurt by a planned shutdown of the Karachaganak field for maintenance. In Egypt, BG saw gas-export volumes drop as reservoirs depleted and more supply was diverted to the domestic market to meet demand.

While operations off Egypt haven’t been affected by recent civil unrest, the crisis remains a “primary concern and will continue to be so as the political, social and business environment evolves,” Chief Executive Officer Chris Finlayson said in a statement.

BG production fell 2.4 percent to 59.8 million barrels of oil equivalent (657,000 barrels a day) in the quarter. Liquefied natural gas deliveries shrank 17 percent to 2.4 million tons, it said, citing declines in Egypt and lost cargoes in Nigeria amid shipment disruptions. In Tanzania, BG and partner Ophir Energy Plc raised gas resource estimates to 13 trillion cubic feet.

Share Performance

BG rose 0.4 percent to 1,190 pence in London trading. The shares have gained 18 percent this year, following a record drop at the end of October when BG warned of slower 2013 growth.

Finlayson presented BG’s new strategy on May 14, saying profit will outpace production growth in the years ahead as LNG trading expands. Today the CEO said that operating costs in 2013 will be about 50 cents a barrel higher than originally forecast.

“We expect near-term consensus earnings estimates to be revised down to account for increased costs,” Brendan Warn, an analyst at Jefferies International Ltd. in London, said in an e-mailed note. “We continue to like BG on a medium to longer term, with a cautious eye on the unfolding situation in Egypt.”

Net income rose to $1.1 billion in the second quarter from $280 million a year earlier, when the company took a $1.3 billion impairment on its U.S. shale-gas assets after prices for the commodity sank to a decade-low.

BG, the biggest U.K.-listed gas producer after Royal Dutch Shell Plc and BP Plc, this month appointed Simon Lowth of AstraZeneca Plc as chief financial officer, replacing Fabio Barbosa. Lowth will start in November.

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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