BG beats profit estimates, raises output forecast as Shell nears acquisition

By RAKTEEM KATAKEY
Bloomberg

BG Group raised it’s output forecast in a boost for Royal Dutch Shell, which agreed to buy the UK’s third-biggest oil and gas company in a deal scheduled to be completed early next year.

The company increased its oil and natural gas production target to 680,000 to 700,000 bpd this year from an earlier estimate of as much as 690,000. Third-quarter adjusted net income fell 63% to $280 million from $759 million a year earlier, Reading, England-based BG said Friday in a statement.

That beat the $200.5 million average estimate of 11 analysts surveyed by Bloomberg, as output rose 26 percent.

“BG is at the very beginning of big ramp-ups in production, especially from Australia and Brazil,” said Jason Gammel, a London-based analyst with Jefferies International. “Shell decided to buy BG at just the right time of it’s operations cycle.”

The slump in crude has hit energy producers hard, driving Shell to its biggest loss in more than a decade, curbing profit at BP and forcing companies to prepare for a prolonged downturn by cutting spending and delaying projects. BG is one of the few that’s increasing its output guidance for the year as projects in Australia and Brazil start up.

Cash Charge

BG took a non-cash charge of $344 million because of the impact of currency movements on deferred and current tax balances in Brazil and Australia, resulting in net loss of $101 million, according to the statement.

“We are on track to deliver our promised operating and capital cost savings for 2015 and are adding new low cash-cost volumes through Australia and Brazil,” CEO Helge Lund said in the statement. “These actions will help mitigate the impact of lower commodity prices on our financial results.”

Brent crude in London trading averaged $51.30/bbl in the third quarter, 50% lower than a year earlier and the least since 2009.

Australian Output

Production in Australia almost trebled to 98,000 bpd of oil equivalent in the quarter and rose 95% to 158,000 in Brazil, the company said. It was partly offset by a 22% drop in Egypt and 11% in the US.

The company delivered 75 liquefied natural gas (LNG) cargoes, or 4.8 million metric tons, in the third quarter, 31 cargoes more than the same period a year earlier.

Shell reported a third-quarter net loss of $7.42 billion, compared with a profit of $4.46 billion a year earlier. Adjusted for one-time items and inventory changes, profit dropped 70% to $1.77 billion, The Hague-based Shell said Thursday. That missed the $2.92 billion average estimate of 17 analysts surveyed by Bloomberg.

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