BG Says Earnings to Rise Faster Than Production on LNG SalesEduard Gismatullin
BG Group Plc, the U.K.’s third-largest natural-gas producer, said earnings growth will outpace output as it expands trading in liquefied natural gas.
The company plans to market an annual 10.5 million to 12 million tons of LNG until 2015, and then 17 million to 20 million tons a year with new supplies from Australia and the U.S., the Reading, England-based company said today in a filing.
“Global demand for gas is expected to grow strongly at 2.6 percent per annum” through 2025, Chief Executive Officer Chris Finlayson said in London. To meet consumption, about $2.5 trillion in investment will be required to supply the fuel.
Finlayson presented his first strategic development plan for BG today after succeeding Frank Chapman in January. He’s tasked with reviving output at the oil and gas producer after project delays from Egypt to the U.S. led the company to scrap its 2015 production outlook in February.
“We will manage our portfolio more actively,” Finlayson said. Spending on exploration will increase to $1.8 billion from $1.6 billion a year in the next three years, focusing on Australia, Tanzania, Kenya, Uruguay and Honduras, he said.
BG is assessing three new LNG supply projects in Tanzania, the U.S. and Canada and an expansion of an LNG venture in Australia to add an annual 40 million tons in combined gross capacity. It’s also studying expanding oilfields off Brazil as it seeks to add as much as 1 billion barrels of oil and gas resources a year worldwide through exploration, Finlayson said.
BG, the largest U.K.-listed gas producer after Royal Dutch Shell Plc and BP Plc, rose 3.5 percent to close at 1,227 pence in London, a six-month high. Trading volumes were more than twice the three-month daily average.
The company expects to generate free cash flow from 2015 following the start of new projects mostly in Brazil and Australia. Expansion in both countries has helped BG shares outpace gains in the Stoxx 600 Oil & Gas Index this year, rising 21 percent since Jan. 1.
The company, which expects to pump 630,000 to 660,000 barrels of oil equivalent a day this year and as much as 825,000 barrels a day in 2015, plans to invest $12 billion in projects next year and $8 billion to $10 billion a year in 2015 and 2016.
BG “will see free cash flow move positive a year earlier than anticipated,” said Jason Kenney, an analyst at Banco Santander SA in Edinburgh, citing “capital spend falling considerably to a disciplined level 2015 onward.”
BG is a partner in Brazil’s Lula oilfield, the nation’s biggest. The company, which has boosted output from the country with the start of the Sapinhoa field this year, has estimated its Brazilian deposits hold about 6 billion barrels of oil equivalent, with potential for as much as 8 billion barrels.
BG and its partners are examining plans to add extra production units at Lula and expand the “giant” Iara field, which has “similar oil in place to Lula, but with slightly poorer reservoir properties,” Finlayson said. Full development of Brazilian fields “could result in peak BG Group net production well in excess of 600,000 barrels of oil equivalent per day at current equity levels,” he said.
In Australia, BG plans to ship its first LNG from the $20 billion Curtis Island LNG project in Queensland next year. The plant, set to produce 8 million tons a year by 2016, will be fed mainly by BG’s own Australian gas fields, it said today.
BG and its partners will need to pump 250,000 barrels of oil equivalent a day to feed the plant, topping up where needed with third-party supply, Finlayson said.