BG joins oil price casualties as profits slide 65 per cent

BG Group, the FTSE 100 giant being taken over by rival Royal Dutch Shell, became the latest casualty of tumbling oil prices, reporting a 65 per cent dive in profits in its second quarter despite record levels of production.

Capping a week in which BP and Shell reported dramatic slumps in their financial fortunes, BG revealed a $429m (£273m) second-quarter profit – down from $1.2bn a year earlier. This came despite a doubling of production in both Brazil and Australia, taking group output to its highest-ever level.

Both countries are areas in which Shell is interested, and the takeover will strengthen its position as the largest supplier of liquified natural gas in the world after Qatar.

BG, formerly the exploration arm of British Gas, also revealed that it had cut costs by 34 per cent to $3.1bn in the first half of the year.

“Our costs are lower, our production is higher. This [the fall in profit] is more or less only driven by the lower oil price in the market,” said the chief executive Helge Lund, adding that he was “not disappointed” with the result given the tough operating environment in the oil industry.

The oil price has tumbled over the past year after the US shale boom created a glut in supply. Hopes that the price was beginning to rebound have been dashed in recent weeks following an international agreement to relax restrictions on Iranian oil exports in return for curbing its nuclear programme.

The benchmark Brent crude oil index averaged $62 a barrel in the second quarter, down from $110 a year earlier.

BG’s results come a day after Shell announced a 38 per cent drop in second-quarter profits to $3.25bn and said it was cutting 6,500 jobs this year.

On Tuesday, BP slumped to a $6.3bn second-quarter loss as the company was hit by a further multibillion-dollar charge relating to the Gulf of Mexico oil spill in 2010, as well as falling oil prices.

Meanwhile Exxon Mobil, the world’s largest publicly traded oil company, reported a 52 per cent slide in second-quarter profit as, again, tumbling crude prices weighed on its results.

Exxon, based in Irving, Texas, said its profit in the quarter was $4.2bn, compared with $8.8bn a year earlier.

Oil and gas output rose by 3.6 per cent to 4 million barrels oil equivalent per day. While profits at its refining operations more than doubled to $1.5bn, earnings at its oil and gas exploration business dived 74 per cent to $2bn.

Exxon’s US rival Chevron also saw its profits plunge 90 per cent in the second quarter – to $571m from $5.7bn a year ago – after nearly $2bn worth of writedowns.