BG Group Profits up but Egypt Woes Weigh

BG Group (BG.L) on Thursday reported a rise in profits driven by stronger gas prices and sales but warned of dipping production later this year and risks to its operations in Egypt.

BG, which counts on Egypt for about a fifth of its production, warned the future of its liquefied natural gas (LNG) production in the country was at risk as it continues to encounter difficulties in expanding and selling volumes.

“In the absence of concerted action from the Egyptian government, the future commercial operation of Egyptian LNG remains at risk,” it said in a statement.

Production in Egypt declined by more than half from a year earlier to 57,000 boed as a result of the depletion of the reservoir and as the local Egyptian market takes more supplies for which BG received lower payments.

Egypt has undergone a period of political and civil unrest since President Hosni Mubarak was ousted in 2011.

BG’s shares were trading 2.88 percent higher at 1.214 pence per share on the London stock exchange at 0715 GMT (8.15 a.m. BST).

BG’s largest gas project, Australia’s Queensland Curtis LNG production facility, remained within budget and on track to deliver first LNG in the fourth quarter of 2014.

“In Australia, commissioning of the gas turbine generators at the QCLNG liquefaction plant has begun and, subject to the current risk of industrial action on Curtis Island, we remain on track for first LNG by the end of the year,” interim executive chairman Andrew Gould said in a statement.

BG was thrown into turmoil in April after losing its chief executive Chris Finlayson after just 16 months in the job. He was replaced temporarily by Gould, who has vowed to review assets due to declining production and revenues.

BG reported an 11 percent rise in second-quarter operating profit to $1.99 billion (1.17 billion pounds), driven by higher LNG volumes and higher realised prices in Asia and South America as well as increased oil production in Brazil, which reached 300,000 boed in July.

BG’s second quarter production was down 10 percent at 591,000 barrels of oil equivalent per day (boed) due to declining output in Egypt and the United States.

The decline in production was offset by the delaying of planned maintenance at the company’s North Sea assets from the second and third quarters to the fourth quarter of 2014.

The group said its 2014 production guidance remained at the lower end of its target of 590,000-630,000 barrels of oil equivalent per day due to production issues in Egypt and Kazakhstan.

Source: Reuters