Tunisia hold-up hits BG Group's targets

BG Group’s 44 per cent drop in third-quarter profits beat analyst expectations, but production fell short because of delays at a gas operation in Tunisia.

Challenging trading conditions and depressed oil and gas prices pushed profits down to £484m, from £857m in 2008. “It has been quite a difficult year,” Frank Chapman, the chief executive said today. “We have seen quite weak demand for oil and gas, and lower prices as a consequence of that.”

But the company remains confident about the sector’s growth prospects and has signed long term supply contracts for up to 8.3 million tonnes per annum over the last 18 months alone.

BG’s production levels rose by 5 per cent in the quarter to hit 56.6 million barrels of oil equivalent (boe) per day. But the Tunisian Hasdrubal project will not reach full capacity until the end of November, leaving production levels around 2 million boe short of BG’s target. Fourth-quarter production levels are still expected to come in 12 per cent ahead of last year as planned, although the year as a whole, leaving the growth rate at around 5 per cent rather than between 6 and 7 per cent as planned. The news pushed down the group’s share price by nearly 4 per cent in afternoon trading.

But many analysts share the company’s bullish outlook, buoyed by both global demand predictions and the company’s string of successes in the ultra-deep water Santos Basin off the coast of Brazil. Malcolm Graham-Wood, a director at HansonWesthouse, said: “Although disappointed that BG has slipped in its formerly excellent handling of market relationships we are not going to join the short term nature of the criticism and still totally believe in the long term prospects for truly exceptional growth that BG offers.”