BG Group suffered the biggest one-day share price fall in its history on Wednesday, wiping about £6bn off the value of the company, after warning it would see no growth in its oil and gas production next year.
Analysts had been expecting growth of more than 10pc in 2013, building on anticipated growth of 5pc in 2012.
But, in third-quarter results rushed out a day early, BG Group said its growth this year would be just 3pc - taking it to an average of 660,000 barrels of oil equivalent per day (bpd) - and output would then remain at that level for 2013.
Shares fell as much as 20pc at one stage before recovering to close down 182p - 13.69pc - at £11.47. BG Group’s longstanding chief executive, Sir Frank Chapman, who plans to retire next year, admitted the news had been “disappointing” but insisted that several of the causes of the lower production levels had been signalled to the market earlier this year.
The only two bits of “new news”, he said, were that a project to maximise production from a reservoir in Egypt had not gone as well as hoped, and that connecting up two wells in Brazil to production vessels would take longer than expected.
Together these accounted for about 50,000bpd of a 100,000bpd shortfall against analysts’ expectations.
The other causes were the shutdown at the Total-operated Elgin-Franklin field in the North Sea following a gas leak, the delay to another North Sea field, Jasmine, operated by ConocoPhillips, and BG Group scaling back production from shale gas fields in the US owing to lower gas prices.
In July, BG Group had cut its forecast of production for the end of 2012, citing these factors.
Sir Frank said BG Group had been “mindful” that the market appeared not to have assimilated “changes already communicated” and denied there had been a failure of communications by the company.
“What has surprised the market has been that we have put all these numbers together for the first time,” he said. He conceded it could, however, take the market “a while to regain confidence”.
BG Group also stressed that the majority of the 100,000bpd shortfall in 2013 was production that had been delayed rather than permanently lost, and insisted its longer-term production growth plans remained unchanged.
BG Group had been due to report third-quarter results on Thursday but pushed them out on Wednesday to coincide with the announcement that it had signed a $1.93bn, 20-year agreement to supply China’s CNOOC with liquefied natural gas from its $20.4bn Queensland Curtis project in Australia.
The company saw third-quarter pre-tax profits rise 21pc to $2.3bn, with underlying earnings up 16pc to $1.19bn (£740m), just beating a consensus forecast of $1.1bn.
Fred Lucas, an analyst at JP Morgan, said the 2013 production guidance had been a “bombshell” that would lead to 2013 earnings downgrades, but that the CNOOC deal was “welcome news” because it eradicated funding concerns over the project, reduced exposure and proved a buyer could be found.
Oswald Clint, analyst at Bernstein, said the production guidance cut was “shocking and disappointing”. However, he said share price fall had been “an over-reaction” because it came closer to “writing off” the assets affected by production delays, rather than pushing back the production further into the future.
telegraph.co.uk
Analysts had been expecting growth of more than 10pc in 2013, building on anticipated growth of 5pc in 2012.
But, in third-quarter results rushed out a day early, BG Group said its growth this year would be just 3pc - taking it to an average of 660,000 barrels of oil equivalent per day (bpd) - and output would then remain at that level for 2013.
Shares fell as much as 20pc at one stage before recovering to close down 182p - 13.69pc - at £11.47. BG Group’s longstanding chief executive, Sir Frank Chapman, who plans to retire next year, admitted the news had been “disappointing” but insisted that several of the causes of the lower production levels had been signalled to the market earlier this year.
The only two bits of “new news”, he said, were that a project to maximise production from a reservoir in Egypt had not gone as well as hoped, and that connecting up two wells in Brazil to production vessels would take longer than expected.
Together these accounted for about 50,000bpd of a 100,000bpd shortfall against analysts’ expectations.
The other causes were the shutdown at the Total-operated Elgin-Franklin field in the North Sea following a gas leak, the delay to another North Sea field, Jasmine, operated by ConocoPhillips, and BG Group scaling back production from shale gas fields in the US owing to lower gas prices.
In July, BG Group had cut its forecast of production for the end of 2012, citing these factors.
Sir Frank said BG Group had been “mindful” that the market appeared not to have assimilated “changes already communicated” and denied there had been a failure of communications by the company.
“What has surprised the market has been that we have put all these numbers together for the first time,” he said. He conceded it could, however, take the market “a while to regain confidence”.
BG Group also stressed that the majority of the 100,000bpd shortfall in 2013 was production that had been delayed rather than permanently lost, and insisted its longer-term production growth plans remained unchanged.
BG Group had been due to report third-quarter results on Thursday but pushed them out on Wednesday to coincide with the announcement that it had signed a $1.93bn, 20-year agreement to supply China’s CNOOC with liquefied natural gas from its $20.4bn Queensland Curtis project in Australia.
The company saw third-quarter pre-tax profits rise 21pc to $2.3bn, with underlying earnings up 16pc to $1.19bn (£740m), just beating a consensus forecast of $1.1bn.
Fred Lucas, an analyst at JP Morgan, said the 2013 production guidance had been a “bombshell” that would lead to 2013 earnings downgrades, but that the CNOOC deal was “welcome news” because it eradicated funding concerns over the project, reduced exposure and proved a buyer could be found.
Oswald Clint, analyst at Bernstein, said the production guidance cut was “shocking and disappointing”. However, he said share price fall had been “an over-reaction” because it came closer to “writing off” the assets affected by production delays, rather than pushing back the production further into the future.
telegraph.co.uk
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