Sharp declines in the value of its Egyptian gas and US shale businesses have led to full-year earnings at BG Group falling by a third.
Writedowns of $2.4bn, flagged last week in a surprise profits and production warning, pushed the FTSE 100 oil and gas producer into a fourth-quarter post-tax loss of $1.1bn.
BG Group signalled last week that it would take a $1.3bn impairment on its Egyptian business as diversions of gas from export to domestic consumption forced it to declare force majeure in the country.
A glut in US shale gas also prompted it to trim planned production and book a further $1.1bn impairment charge.
Chris Finlayson, chief executive, said he hoped BG Group would have “sufficient flexibility to honour customer contracts” for the supply of liquefied natural gas cargoes. He pointed to a downturn in capital expenditure in the next two years as projects in Australia and Brazil came on stream.
The company would continue to consider a range of asset sales in a disposal programme that has already raised more than $8bn, he said. “Nothing is sacred in that process.”
Mr Finlayson reiterated guidance for production in 2015 to be in the range of 710,000 to 750,000 barrels of oil equivalent a day, buoyed by contributions from its $20.4bn LNG project in Queensland, Australia, where production is expected to begin by the end of the year.
Last week BG Group conceded that production could fall as low as 590,000 barrels, below last year’s total of 633,000, because of expected declines in Egypt and the US. That production warning prompted shares to fall 14 per cent to £10.82 on the day. By mid-morning trading on Tuesday they were up 1.4 per cent to £10.40.
In spite of the expected production fall this year, Mr Finlayson said BG Group was on track to deliver positive cash flow by 2015 as capital expenditure across projects fell to the $8bn-$10bn range. Capital expenditure was $11.2bn, undershooting expectations of $12bn for 2013, and the company pointed to a further decline this year.
The writedowns on assets led to net earnings for the full year falling from $3.3bn to $2.2bn on revenues that edged up from $19bn to $19.1bn. A 10 per cent rise in total dividend for the year to 28.75 cents is payable from earnings per share of 64.8 cents.
The financial Times