By Tom Bergin
LONDON (Reuters UK) - Gas producer BG Group (BG) missed forecasts for third-quarter output due to a delayed project and weak demand while resilience in its natural gas (LNG) business helped it to post a lower-than-expected fall in profits.
BG said on Wednesday that production grew 5 percent in the quarter to 615,000 barrels of oil equivalent per day (boepd), against analysts' expectations of a rise of over 7 percent.
The miss of expectations on production is largely due to a delay in the startup of a Tunisian gas project, which has been delayed to November from August, although weak demand for gas due the economic slump has also been a drag.
Analysts at Morgan Stanley said the delay at the Hasdrubal facility meant 2009 volumes would undershoot an earlier target.
BG shares traded down 2.6 percent at 1,104 pence at 11:24 a.m. British time, lagging a 1.6 percent drop in the DJ Stoxx European oil and gas sector index .
David Thomas at Citigroup said the miss could undermine investor confidence in future output goals, while analysts at Evolution Securities and Morgan Stanley said it was not a matter for concern.
Chief Executive Frank Chapman emphasised BG's capacity for strong production growth by predicting output of 700,000 boepd in the fourth quarter, up 12 percent on the fourth quarter of 2008, and outlined plans to bring big new finds onstream in coming years.
BG, with a market capitalisation of around $60 billion (38 billion pounds), is the only big European oil and gas company in recent years to strongly lift output.
PROFITS DOWN BUT BEAT FORECASTS
The company said net profit in the quarter fell 44 percent to 484 million pounds as gas prices fell 65 percent and Brent crude was down 40 percent.
Excluding one-off items, the result was 474 million pounds against an average forecast of 444 million pounds in a Reuters poll of seven analysts.
The company got a boost from its LNG unit, which was resilient in the face of a considerable weakening in the global LNG market. Operating profits in the unit fell just 17 percent, helped by the fact BG concluded contracts before LNG prices weakened.
Many industry executives in recent months have predicted weak gas prices and demand in the coming 18 months or more due to spare capacity created by the global economic crisis.
However, Chief Financial Officer Ashley Almanza said there were signs of recovery in Asia and Latin America.
"Large buyers are still showing good appetite for big volumes," he told reporters on a conference call.
BG said it had sold around 60 percent of its North Sea gas production at an average price of approximately 40 pence per therm for the gas year commencing October 2009 up from 34 pence in the previous year.
BG's shares have been lifted in the past year by big oil finds in Brazil and the company gave an upbeat assessment of developments there, including testing on the Tupi Sul field which it said had "exceeded expectations."
The company is now targeting production startup on its Guar field in 2012 and said it expected to make a final investment decision on its Queensland liquefied natural gas (LNG) project in 2010.
BG shares trade at a premium, on a price-earnings basis, to rivals such as BP and Exxon Mobil (XOM) due to expectations it will deliver higher growth in coming years.
BG said that from 2010 it would shift to reporting in U.S. dollars and not British pounds as most of its revenue and costs were denominated in dollars and because key competitors such as BP (BP) and Royal Dutch Shell (RDSa) also report in dollars.
(Reporting by Tom Bergin; editing by Karen Foster and Simon Jessop)
