BG Says 2013 Profit Cut by Egypt LNG Diversions, U.S. Gas
BG Group Plc (BG/), the second U.K. oil and gas producer to issue a profit warning this month, said 2013 earnings would be lower than expected on reduced liquefied natural gas shipments from Egypt and U.S. forward gas prices. The shares plunged.
Total earnings for 2013 are expected to be $2.2 billion, or about 65 cents a share, BG said today in a statement. Production this year is expected to be 590,000 to 630,000 barrels a day, lower than 2013’s 633,000 barrels a day.
Today’s profit warning shows the difficulties faced by Chief Executive Officer Chris Finlayson, who took the helm a year ago, to restore value after earlier reductions in output targets in 2012 weighed on shares. Royal Dutch Shell Plc (RDSA), Europe’s biggest oil and gas company, also said this month that fourth-quarter profit will be lower as production slumps.
The shares fell as much as 12 percent to 1,100.5 pence in London trading, the biggest decline since October 2012. They traded at 1,107 pence at 8:16 a.m. local time.
“There is a lack of confidence in 2014 and 2015,” Jason Kenney, an analyst at Banco Santander SA in Edinburgh, said today by telephone. Egypt and the U.S. combined with rising costs will curb earnings about 15 percent in the next two years, he said.
Political unrest has affected output in Egypt, which accounts for about 18 percent of production, as gas is diverted away from export terminals to the domestic market. BG said today it will declare force majeure, meaning it won’t deliver on contracts to provide LNG.
‘Disappointing’ Guidance
“Despite the good progress we have made in 2013, we face short term issues which are reflected in our revised 2014 guidance,” Finlayson said in the statement. “This is very disappointing.”
Reduced volumes in Egypt and the U.S. are the main drivers of lower output, BG said today. Projects in Brazil and Australia are “on budget and schedule,” though costs are rising this year. Still, spending will start to decline.
In the third quarter of 2013, production dropped to 53.4 million barrels of oil equivalent (about 580,000 barrels a day) from 59.4 million barrels a year earlier. That was the lowest daily output since the third quarter of 2007. Unadjusted net income fell 5 percent in the quarter.
Bloomberg