BG Group warned that production could fall this year as protracted shutdowns, maintenance and depletions on fields in the UK and Egypt threaten to drag on output growth from new projects.
The FTSE 100 oil and gas group said on Tuesday that production last year was 658,000 barrels of oil equivalent a day – close to revised guidance given in October that it would achieve just a 3 per cent rise to 660,000 boe/d for the full year.
That revision, which followed an earlier downgrade in anticipated production from 750,000 to 720,000 boe/d in July, prompted BG Group shares to fall by a fifth on the day, as the company also predicted that output would be flat for 2013 before resuming an upward path from 2014.
Chris Finlayson, chief executive, warned that output for this year could undershoot October’s prediction of a standstill. It was his first presentation since succeeding Sir Frank Chapman, who in December brought forward his planned retirement because of ill health.
Mr Finlayson said production for this year could be as low as 630,000 boe/d and extended the time the BG expects to reach its ambition of producing 1m boe/d to beyond its previous target of 2015.
“I believe that 630,000 to 660,000 boe/d is an appropriate range for our 2013 production outlook, given the risks and opportunities we face,” he said.
BG Group expects year-on-year production to be slightly down in the first half and lower in the third quarter – when the company performs most of its maintenance work – before growing strongly in the fourth quarter as more production at fields off the coast of Brazil comes on stream.
The company said the timing of a resumption of production at the Elgin/Franklin platform complex off Scotland, which has been out of action since a leak of gas condensate forced an emergency evacuation last March, “remains a key uncertainty”.
Mr Finlayson said some of the shortfall in anticipated production had been on fields where BG does not control operations such as the Elgin, which is operated by Total of France. But he added: “We need to rebuild trust in our ability to execute.”
Previous guidance of long-term production growth would be trimmed through the dilutive affect of a $1.93bn sale of a stake in its Curtis Island liquefied natural gas project in Queensland to Cnooc of China, added Mr Finlayson.
Group revenues for the year rose from $17.7bn to $18.9bn but pre-tax profit, hit by writedowns of $1.4bn, fell from $7.2bn to $6.3bn. However, the contribution of profits made from discontinued operations allowed the company to report a rise in net profit from $4.3bn to $4.6bn. The company ended the year with net debt of $10.6bn.
The full-year dividend was increased 10 per cent to 26.14 cents, payable from earnings per share of 97.5 cents (120.8 cents).
Shares in BG Group fell 3 per cent in early trade then rose 7 per cent amid rumours of traders closing short positions on the stock before finally closing up 3 per cent on the day at £11.41.
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