Net income climbed to 471 million pounds ($962 million) from 418 million pounds a year earlier, the Reading, U.K.-based company said today in a statement. That's higher than the median estimate of 389.5 million pounds from six analysts surveyed by Bloomberg.
BG, the largest supplier of liquefied natural gas to the U.S., expanded its LNG division to take advantage of increased demand for energy. It delivered its first gas cargo from Equatorial Guinea to the U.S. last month and also signed an agreement to build and supply Chile's first LNG import terminal.
``They had good results in all their divisions except for exploration and production,'' said Richard Griffith, an analyst at Evolution Securities Ltd. in London. ``They've achieved higher volumes and prices, and because of market conditions were able to divert 27 spot LNG cargos to the U.S.''
BG shares rose 6.5 pence, or 0.9 percent, to 775.5 pence as of 1:14 p.m. in London. The stock has risen 12 percent this year, while the U.K.'s FTSE 100 Index is little changed.
Operating profit at BG's exploration and production division, its biggest earner, fell 13 percent to 565 million pounds. The division was constrained by lower oil prices and offshore maintenance, even as a new North Sea field, Buzzard, increased output.
Profit at the LNG division more than doubled to 88 million pounds, as the number of cargoes delivered rose to 71, from 49 in the same quarter last year.
Another companywide profit measure, known as ``business performance'' which excludes disposals and some other one-time items, rose 26 percent to 409 million pounds, BG said.
U.S. gas futures averaged $7.655 per million British thermal units in the second quarter, 15 percent higher than a year earlier, which allowed BG to send an additional 27 spot cargoes to the U.S. BG said more than offset a lack of opportunities to divert cargoes to other high-priced markets. U.K. gas prices were 39 percent down.
Production of oil and gas at BG slid about 3 percent to 590,000 barrels a day, amid maintenance at fields in the U.K. and Egypt, which was partly offset by new output from the Buzzard and Atlantic-Cromarty fields in the U.K.
CATS Pipeline Loss
BG is currently losing gas and condensate production equivalent to about 80,000 barrels a day in the North Sea because of a shutdown of the BP Plc-operated CATS pipeline, BG Chief Financial Officer Ashley Almanza told reporters on a conference call today.
The outage -- equal to about 14 percent of recent production rates -- could last ``several weeks,'' and will cost BG 20 million pounds a month in uninsured losses, Almanza said.
Chief Executive Officer Frank Chapman today reaffirmed a goal to raise output 5 to 7 percent a year through 2009. BG has stuck to that goal since the start of 2006 and has expanded production faster than its larger competitors.
BG's production surged 19 percent in 2006, while output declined 1 percent at Royal Dutch Shell Plc and 2.2 percent at BP, Europe's two largest oil companies.
The industry is feeling the effect of high, ``challenging'' costs for drilling rigs and other oil services, Chapman told analysts on a call. He speculated cost inflation may soon start to slow because major oil companies have put off large projects.
Citigroup Inc. analyst James Neale said in a July 18 note that he was ``cautious'' about BG's ability to expand production at its stated pace and downgraded the shares to ``sell.''
``Although the company is producing exceptional growth compared with the other integrated majors, we believe this is already more than priced into the shares,'' Kepler Teathers & Greenwood Merrion analysts including Peter Hitchens in London said in a note today.
Earlier this week, Exxon Mobil Corp. reported declining net income. BP and Shell both reported higher profit by that measure.
Since it split from the U.K.'s main domestic gas supplier in 1997, BG has invested in the business of producing and trading LNG, which is gas chilled to liquid form for transportation by ship.
A new U.K. import terminal, Dragon LNG, will be ready to start by the yearend, while another planned import terminal in Brindisi, Italy, remains delayed and is ``not gone'' entirely, Chapman said. Still, any decision by Italian officials on whether to allow construction to resume is unlikely before the end of the summer, he said.
by Stephen Voss
Blogalaxia : Citigroup,BG