October 31, 2013 / 7:52 AM / 4 years ago

UPDATE 2-Buoyant BG Group signals return to output growth in Q4

* UK oil and gas firm’s Q3 earnings $1.1 bln, beating consensus

* Q3 output down 10 pct but sees production recovering in Q4

* Shares up 1.6 pct

By Sarah Young

LONDON, Oct 31 (Reuters) - British oil and gas firm BG Group reported earnings comfortably above forecasts on Thursday and said production would rise for the first time in five quarters, reassuring markets after a tough 12 months.

Production, in focus after a series of unexpected cuts over the past year, will rise in the fourth quarter, the firm said, turning a corner after output fell 10 percent to a six-year daily low in the three months to September.

BG’s third quarter earnings were $1.1 billion, beating a consensus analyst forecast by 13 percent and helped by a low tax rate and a shift in output mix to more lucrative oil from gas.

“We will see production recover in the fourth quarter with the completion of our North Sea maintenance shutdowns and new projects coming on stream, most notably (the) Jasmine (field),” Chief Executive Chris Finlayson said in a statement on Thursday.

Shares in BG climbed 1.6 percent to be one of Britain’s biggest blue-chip risers, though the stock price has yet to regain the level it traded at before the first output downgrade knocked a fifth off its value in one day last October.

“The market’s taken it well that there’s no new bad news on production or profitability. It’s steady as it goes,” Nomura analyst Theepan Jothilingam said.

It would be the first quarterly rise in production under Finlayson, who took over from long-serving Frank Chapman at the end of 2012.


BG’s earnings were 4 percent lower than in the same period last year, driven partly by its decision to cut production in the U.S. where gas prices have been low, and after it sold fewer liquefied natural gas (LNG) cargoes due to disruptions in Egypt and Nigeria.

The company said difficulties linked to civil unrest and leadership change in Egypt, which accounts for about a fifth of its output, continued in the quarter with higher volumes of gas being siphoned off to Egypt’s domestic market, meaning less available to sell as LNG cargoes.

Finlayson said the company would be seeking assurances from the Egyptian government before making any new investment there, something on the cards with its “Phase 9b” drilling programme.

A huge new project in Australia, QCLNG, is on track to start flowing gas around the end of the year, BG said, adding that QCLNG remained within its $20.4 billion budget.

Big oil companies are all facing shareholder pressure to keep a lid on costs as the oil price cycle threatens to turn down.

BG’s consensus-beating result contrasted with larger rival Royal Dutch Shell, which undershot analyst expectations as higher production costs and output stoppages weighed on its bottom line.

World number one Exxon Mobil reported an 18 percent drop in quarterly profit on weak refining margins.

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