Gas producer BG Group delivered improved quarterly output and underlying profits yesterday even though weak gas prices took a toll on its bottom line.
The British group reported a five per cent fall in first-quarter net profit to $960m (£626.7m) as a glut in the global gas market hit gas prices, but underlying profits rose, beating expectations, thanks in part to output growth. The sluggish economic recovery and a surge in domestic gas production in the US, due to the increased exploitation of shale gas, has weighed on the gas market and especially demand for cargos of liquefied natural gas (LNG).
Shale gas is natural gas extracted from rock structures with low permeability. Nonetheless, analysts said BG had performed well operationally.
BG said underlying profits, after stripping out mark-to-market impacts on long-term fixed price contracts and one-off items, rose 13 per cent in the first three months of 2010 compared to the same period of 2009, to $1.12bn, beating an average forecast of $972m from a company poll of analysts. “A solid quarter for BG”, analysts at Morgan Stanley said in a research note.
BG said production rose six per cent in the quarter compared to the first three months of 2009, to 61.3m barrels of oil equivalent, helped by cold weather in Europe. “This is a very good number,” one dealer said.
The company said it was sticking to its target of only slight growth in output this year. Around 25 per cent of BG’s output is oil, and a near doubling of crude prices also helped the bottom line.