Shares digital

BG (BG.) – Finals PTP: £3,039m (£3,285m) Divi: 9.36p (7.2p)

The numbers for 2007 were ahead of market expectations – which was particularly pleasing given that both BP (BP.) and Royal Dutch Shell (RDSB) underwhelmed. Much of the interest will be reserved for Brazil where the company tripled its production estimate for the massive Tupi oil field. It is now expected to produce between 12 and 30 million barrels of oil or equivalent (boe) compared with an earlier figure of 1.7 to 10 million boe.

Elsewhere in the country there is the substantial Carioca discovery and considerable potential is ascribed to the remainder of the licences as well. CEO Frank Chapman acknowledges the importance of the acreage, explaining that the asset potential in Brazil matches the rest of the portfolio put together. He adds that Tupi is capable of pumping a million boepd when the field has been fully developed. That will cost money and BG is committed to spending £6.3 billion over the next two years, and more than £3 billion a year for the foreseeable future.

The dividend increased 30% in what management described as a rebasing of the payout. The only notable cloud on the horizon was a narrowing in the production growth range to 6-8% a year from 6-10% a year. Chapman ascribes this to likely progress being slowed at its Margherita, and Gaza Marine development projects. In response to the announcement the stock was up around 3% to trade above the £11 mark. Merrill Lynch reiterated its ‘buy’ recommendation and set a price target of £12.50 citing the firm’s ‘outstanding portfolio of growth opportunities’.

Shares says: In terms of production growth this compares favourably with BP and Shell, and exploration prospects in Brazil offer the potential for considerable upside.

by: Tom Sieber