BG, the gas pipelines and international exploration group, recorded a 42 per cent increase in pre-tax profits to £844m for the first three months of this year, in the last set of results before the business is split in two.
Pre-tax profit for the group was boosted by the £305m sale of its 25 per cent stake in Dynegy, a US power and generation pipeline conglomerate.
But analysts said the results, which showed a £17m rise in operating profit to £694m, exceeded expectations. BG shares closed up 23.25p at 410.25p.
BG, the former British Gas, is splitting off Transco, its UK pipeline provider network, from BG International, its overseas exploration business, in the autumn. BG was created in 1997 when British Gas itself split into BG and Centrica, a gas marketer in the UK.
BG International benefited from high oil prices, which rose from $10.96 to $27.88 a barrel in 12 months. BG International, which makes 30 per cent of its profit from oil, doubled operating profit to £184m.
In contrast, Transco, which owns the pipes connected to nine out of 10 British homes, saw a £65m drop in operating profit to £485m.
The company said it was hit by unusually warm weather and by two enforced price cuts. The energy regulator made BG cut its prices by 7 per cent last year. Transco volume was up 9 per cent.
Analysts said the results signalled that shareholder value in both International and Transco would increase when they are demerged. Liz Butler, an analyst at WestLB Panmure, said: "Transco is an income stock and International is a growth one. Separating the two will unlock value as they are pulling in different directions."
Transco is diversifying into telecommunications. This week it unveiled plans to invest £235m in a fibreoptics telecoms network along its gas pipelines. It said earlier this year that it would develop its national network of towers to create aerials for mobile phones.
Philip Hampton, finance director, said: "Due to the regulatory pressure we are reducing prices faster than increasing profits. The telecoms developments will be a way for Transco to grow in profits." He said that the next stage will be to negotiate deals with mobile phone providers to use the new networks.
One analyst said the development could see Transco's share price rise to £6 a share.
International will work exclusively on exploration and production in the North Sea, Central Asia and South America, Egypt and Tunisia.
Mr Hampton acknowledged that this quarter's results had been buoyed by high oil prices but said: "We expect continuing growth from the projects we have lined up."
The results will fuel speculation that International may become the subject of a take-over bid after the demerger, possibly by Shell. Mr Hampton said BG "never talks about talks" but analysts predicted that possible suitors will be watching closely. One said: "It depends on whether the company's value is reflected in the share price, but it is likely that they will receive a bid."
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