Though the shares are unchanged at £10.28, the UK’s third largest listed oil company BG (BG.) is demonstrating why its larger peer Royal Dutch Shell (RDSB) is in the process of buying it, reporting a strong production number in the third quarter.

Net income of $280 million, though down materially year-on-year thanks to lower commodity prices, is ahead of the consensus forecast of $197 million and output of 716,000 barrels of oil equivalent per day (boepd) also beats expectations for 685,000 with full year guidance lifted.


Shell, which yesterday reported a paper loss of $7.4 billion in the third quarter (29 Oct) due to impairments taken on a number of its projects, is acquiring BG in part to address the difficulties it faces in growing its reserves organically.

The necessary regulatory approvals from China and Australia are the main remaining impediment to completion of the £47 billion cash and paper deal which should go through in early 2016 according to Shell.

Deutsche Bank, which has a buy recommendation and £13.55 price target on BG, comments: ‘Overall, we see these results as indicative of a business that is seeing very strong production momentum and operating well albeit with the financials from those operations undermined by the current low oil price.

‘Given our view that, in line with management guidance, the combination with Shell is expected to complete in Q1 2016 BG remains a preferred sector name and source of discounted price entry into Shell.’

Issue Date: 30 Oct 2015