It seems that BG Group Plc is ready to once again to concentrate on exploration and liquefied natural gas (LNG) as it wants to regain its investors’ favor. The company, which is the UK third largest natural gas producer, aims to engage its partners into investment as it will try to expand its operations.
BG’s strategy
BG Group Plc faced an unenviable situation as it lost the investors’ favor and trust due to a string of misfortunes, including substantial overruns it recorded in the past. But it seems that the fortune one more time gives the UK third largest natural gas producer a chance.
On the 14th of May, BG Group Plc released its new strategy, underlining that according to its estimates, earnings would increase at faster rate than production. That would mean that shareholders might expect handsome dividends after all that time.
According to details, BG Group Plc will increase its spending on exploration to staggering $1.8 billion per year in the next three years. In 2012, the UK third largest natural gas producer spent only about $1.2 billion, thus the announced increase is indeed significant. The investment strategy, which was presented by BG Group Plc, indicated that capital expenditure for the ongoing investment program would slump significantly to between $8 billion to $10 billion per year starting from 2015. As of yet, capital expenditure amounts to around $12 billion per year, according to the figures.
While presenting its new strategy, the company underlined that it was fully focused on meeting its 2013 targets. Chris Finlayson, chief executive officer at BG Group Plc, noted: “BG Group is a great company with a strong pipeline of projects and deep-set skills and expertise that differentiate us, particularly in exploration and LNG,” adding that the size of the company was its main strength which would lead to the future success.
In addition, the company also informed that it would boost its 2015 output as it aims to produce between 775,000 and 825,000 barrels of oil equivalent per day. As for 2013, the company estimates that its output target will range from modest 630,000 to approximately 660,000 barrels of oil equivalent per day.
Unquiet waters
Analysts note that BG Group Plc is entering unquiet waters as it aims to focus more on its oil and gas projects located in Brazil and Australia. The task is even more difficult as the UK third largest natural gas producer is currently witnessing a hard switch-over at the high level of management.
Indeed, these two projects look very lucrative. In Brazil, the UK company co-owns the Luna field which is estimated to be one of the richest deposits in the country. It is worth reminding that BG Group Plc is the owner of other oil deposits in Brazil, just to mention the Sapinhoa field.
Interestingly, when it comes to BG’s plan for Australia, the company intends to start operating at its new facility starting from 2014. BG CEO Chris Finlayson, who has been at helm for about a year, underlined that the successful completion of the preparation stage might be regarded as a landmark in the company’s history.
With its high ambitions, BG Group Plc should be careful as it enters unquiet waters. Simply, the company has more modest means to handle critical situations, compared to its rivals – BP Plc or Royal Dutch Shell Plc. But the company is very positive about the future, highlighting that it is ready to face the music as it believes it would mange better its portfolio, including finding essential partners to bring better results.
