BG abandons 2015 output target

LONDON Tue Feb 5, 2013 10:13am GMT

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LONDON (Reuters) - BG Group (BG.L) abandoned its ambitions to become a 1-million-barrels-a-day oil and gas producer by 2015 on Tuesday as it took further stock of setbacks that have hammered its share price in the past three months.

The company has been struggling to bring huge new developments in Australia and Brazil onstream and shocked the market on October 31 last year when it forecast no output growth in 2013 due to project delays and a scaling back in U.S. shale gas activities as prices there fell.

On Tuesday new chief executive Chris Finlayson, announcing the first set of results under his stewardship, said BG would not reach its goal of producing more than 1 million barrels of oil equivalent per day (boed) by 2015.

He also said production in 2013 would be in the range of 630,000 boed to 660,000 boed this year, raising the possibility it could be lower than 2012's 658,000 boed level. On October 31, the company predicted output would be flat this year.

Also in the October 31 statement, BG announced it would sell a 40 percent stake in part of its Queensland Curtis LNG project to China's CNOOC (0883.HK) in October as it runs short of funds for development of other projects.

Its stock has fallen by almost a fifth since then. The company's broader strategy is also under review, and an update is due in May.

The downgraded forecast highlights the scale of the task facing Finlayson, who joined BG from oil major Shell (RDSa.L) in 2010 and replaced long-standing CEO Frank Chapman at the beginning of this year.

"I think there's an element of 'kitchen-sinking' with the new chief executive in play. A more conservative management style tempering all of the estimates as he starts out," Santander analyst Jason Kenny said.

Finlayson said the company planned to give further details on its strategy in May but flagged that a reshaping of the portfolio could be possible as he stressed BG's "commercial agility".

BG topped Britain's bluechip fallers in early trading and its shares were down 2 percent at 1,081.25 pence at 08:40 a.m., underperforming the European oil and gas sector .SXEP which was 0.5 percent higher.

EARNINGS LOWER

BG also posted a 29 percent drop in fourth-quarter earnings, which it said were hit by the loss of a one-off $277 million tax credit from which it benefited in 2011.

The company's earnings of $1.03 billion in the last three months of the year beat a company-supplied consensus forecast of $994 million, with Bernstein analyst Oswald Clint citing reduced taxes in the fourth quarter as the reason for the beat.

Excluding the impact of the 2011 tax credit, earnings were 13 percent lower, BG said, putting the earnings fall down to lower volumes which offset higher realised prices in the fourth quarter, and a weaker performance in its LNG business.

Earnings in the LNG business, which sells the transportable form of gas primarily to countries in Asia, were 16 percent lower due to fewer LNG cargoes being delivered combined with lower prices on a spot, that is non-long term contract, basis.

BG's partner in Brazil, state-run Petrobras (PETR4.SA), on Monday posted a 53 percent rise in fourth-quarter net profit, helped by unexpected financial gains, and like BG guided that production will be flat in 2013.

BP also published fourth quarter results on Tuesday, beating analysts' expectations thanks to a record performance from its refining division.

(Reporting by Sarah Young; Editing by Andrew Callus)

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