Tom Bawden: BG worth bagging as it gets a handle on the problems

Investment View: Some apparent disadvantages are actually advantages in the longer term

BP, Shell and BG may all have just reported tumbling profits, but the similarities for the big three FTSE 100 oil and gas producers end there. For BP, the bottom line continues to be battered from the fallout of the Gulf of Mexico oil spill in April 2010. Profits for 2012 tumbled by 50 per cent to $12bn (£7.6bn), hit by the ongoing costs of the incident and a 7 per cent decline in production after the mass-sale of assets to finance them.

Over at Shell, full-year profits fell by 6 per cent to $27bn, as the group's US business suffered from a cocktail of rising costs and falling prices as rivals stampeded into the booming US shale-gas industry.

At BG, the incoming chief executive Chris Finlayson, got off to a bad start on Tuesday, unveiling a 12 per cent fall in annual profits to $6.4bn, on the back of lengthy shutdowns in key North Sea fields, waterlogged wells in Egypt and, like Shell, too much competition in US shale gas.

On the surface, BG seems in dire straits, but delve a little deeper and the investment case for the former exploration arm of British Gas seems to be the strongest of the three hydrocarbon heavyweights. True, BG warned not only that production could fall this year but would also miss its 2015 target of more than 1 million barrels of oil and oil equivalent a day. As recently as September, BG had forecast 10 per cent production growth for 2013, which it revised down to "flat" in October following delays to projects in the North Sea and Brazil, difficulties in Egypt and a scaling back of its US shale-gas unit.

But while some projects may be taking longer than expected, BG is getting a handle on its problems. Moreover, some apparent short-term disadvantages are actually advantages in the longer term.

For example, the Santos Basin prospect, off the coast of Brazil, is behind schedule. But only because the "flow rate" on test wells was stronger than expected, meaning that the bendy, plastic pipes that they were going to use to transport the oil from the seabed wouldn't be able to cope with the pressure. So fixed steel pipes, which take longer to source and install, will be used instead. So the end result will be more oil. Yet BG's shares are still 14 per cent below their level just before October's first production downgrade, prompting Sanford C Bernstein's analyst Iain Pyle to declare: "BG's barrels in the ground are valued very cheaply" and make us recommend them as a buy.

A question mark still hangs over Shell's Arctic programme, where it has spent $5bn in the past seven years and is yet to locate commercially viable quantities of oil. Furthermore, its exploratory drilling campaign in the region could be put on hold this year, pending two government investigations and repairs relating to the grounding of its oil rig – the Kulluk – near the coast of Alaska on New Year's Eve.

There are also concerns about Shell's so-called reserve replacement ratio. This figure measures the amount of proven oil and gas reserves Shell added to its books relative to the amount it extracted and came in at just 44 per cent last year. To grow, the number needs to be more than 100.

However, management expect to improve the ratio and is investing heavily in projects such as deepwater exploration. In fact, some think it's investing too heavily, with capital spending set to increase by $3bn to $33bn this year as Shell seeks to hit its ambitious target of raising daily production from about 3.3 million barrels a day now to 4 million barrels in five years' time.

Shell sought to appease shareholders, promising to hike the dividend in the first quarter of 2013 by 4.7 per cent to 45 cents.

In the longer term, it has good exposure to assets such as oil sands, shale oil and liquefied natural gas, which have big reserve bases and can produce at a stable rate for the next 30 years. Hold.

BP is the great unknown. It recently agreed to sell its half of the troubled TNK-BP Russian joint venture to Rosneft, in a deal that simultaneously severs ties with the unpredictable AAR consortium of billionaires and paves the way for BP to tap the vast reserves of Russia and Venezuela in partnership with Rosneft.

But the cost of the oil spill is perhaps more uncertain than ever. Last week, $34bn of new legal claims emerged from US local and state governments, meaning BP could potentially be liable for $50bn more than it has budgeted for. It's very unlikely the company will have to stump up anything like that extra amount, but the prospect of debilitating additional costs cannot be entirely swept under the carpet. Hold.