BRITAIN’S third-biggest oil and gas group cocked a snook at its rivals yesterday by revealing a surge in production and a strong addition to its hydrocarbon reserves.
Soaring exports of oil from Kazakhstan and gas from Egypt helped to lift BG’s earnings by more than a third in the fourth quarter to £249 million. Higher oil and gas prices helped the company to raise its upstream exploration and production earnings by 45 per cent. BG also raised its output by 9 per cent.
For each barrel of oil or gas that BG produced last year, it added more than 1¼ barrels to its reserves. While Shell and BP both admitted that they had failed to maintain the level of their proven reserves, according to US Securities and Exchange Commission rules, BG replaced its output by 248 per cent over a three-year period.
Frank Chapman, BG’s chief executive, said that the company was looking even better a year after its promise to deliver exceptional returns to the end of the decade. “We have improved the outlook for 2009 and identified more options for the longer term beyond 2009,” he said. The oil and gas group is increasing its target output of 530,000 barrels a day of oil and gas to 580,000. Last year it averaged 456,000 barrels a day.
Key projects include the expansion of BG’s liquefied natural gas (LNG) projects in Trinidad and Egypt, assets that the group hopes to use to enhance its position as a major trader in gas across the Atlantic. Reserves at the Dolphin field in Trinidad have increased from 1.1 trillion cubic feet (tcf) in 1997 to 2.9 tcf.
Advertisement
Meanwhile, BG is building a pipeline connecting its Gulf of Mexico LNG terminal at Elba Island to Georgia and Florida. The company plans to raise its LNG capacity from 21 to 25 million tonnes a year by the middle of the next decade.
BG’s focus on its gas chain means that the group needs to spend even more heavily. Gas requires pipelines, LNG plants and LNG ships. BG is increasing its capital budget for this year and 2006 by 20 per cent to £3.6 billion.
BG is also drilling 24 exploration wells across the world, including six exploration prospects in the North Sea — an area where its major rivals have cut back new spending.
BG has extensive unexplored acreage in Norway — close to the median line with the UK continental shelf, where it hopes to link any gas discoveries with existing infrastructure. The stock market greeted BG’s promise of more growth warmly and the share price rose 7½p to 395p.
The company raised its dividend by 10 per cent but the payout of 25.6p per share was a yield of less than 1 per cent on yesterday’s closing share price.
Advertisement
Mr Chapman was unapologetic yesterday about BG’s high-spend, low-yield strategy. “This is not a yield stock . . . This is a growth stock,” he said.