UPDATE 2-BG announces more bad news for production; shares fall

Mon Sep 9, 2013 5:23am EDT

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By Sarah Young

LONDON, Sept 9 (Reuters) - Oil and gas firm BG Group cut its production outlook for the third time in a year on Monday, announcing delays in getting new projects under way in Egypt and Norway that it said would reduce next year's output, and sending its shares lower.

While the news about BG's Egypt project was widely expected following unrest in the region, it followed disappointments in February, when BG abandoned plans to become a 1 million barrels a day oil and gas producer by 2015, and last October, when BG told investors to expect no output growth in 2013 due to project delays and a scaling back in U.S. shale gas activities.

Shares in BG fell 4 percent to 1,230.5 pence in morning trading, topping Britain's bluechip index losers and lagging the European oil and gas index which was down 0.9 percent.

BG said output would be reduced by about 30,000 barrels of oil equivalent per day (boed) next year, equivalent to around 5 percent of this year's expected output, but added that it was on track to meet its 2013 targets.

The company, whose main growth assets are in Australia and Brazil, has an output target for 2015 but has not said what it expects to produce in 2014. It said in February that it expected to produce between 630,000 boed and 660,000 boed this year.

BG also said that 2014 production would be lower as it planned to reduce output from the United States by 17,000 boed due to low natural gas prices there.

"The group's 775,000 to 825,000 boed 2015 production guidance remains unchanged, but this is subject to a recovery in natural gas prices in the U.S. and future events in Egypt," the company said in a statement ahead of a capital markets day on Monday.

Analysts are on average expecting BG to produce around 720,000 boed in 2014, which even given a reduction of around 47,000 boed due to the Egypt and Norway delays and U.S. cuts, would still mean the company posts significant production growth compared to this year.

Bernstein analyst Rob West shrugged off the impact of the delays, saying that it was a "small slip", and more importantly the company's major LNG project in Australia, QCLNG, remained on track for first gas into the plant around the end of the year.

"In the context of that, this little deferral doesn't change our view on the stock at all," he said. The broker has an "outperform" rating on BG.

At BG's Egypt project, where there has been political turmoil for around two and a half years, a new part of the West Delta Deep Marine would start production later than expected next year provided there was no further disruption, BG said.

In Norway it said that the Knarr project would now come onstream in the second half of 2014.

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