BG Group Plc became the second oil and gas producer to issue a profit warning this month. The company, which operates as an integrated natural gas company and explores, develops, produces liquefies and markets hydrocarbons with a focus on natural gas, officially announced that its earnings for 2013 would be lower than the initially expected on reduced liquefied natural gas shipments from Egypt and U.S. forward gas prices. The largest oil and gas company in Europe – Royal Dutch Shell Plc – also announced in January 2014 that its fourth-quarter profit is expected to lower.
The company revealed today that total earnings for the last year are expected to be 2.2. billion dollars, which makes about 65 cents a share. The production this year is forecast to be between 590,000 and 630,000 barrels a day, which is lower than the 633,000 barrels a day in 2013.
The profit warning posted by the company emphasizes on the difficulties, which the Chief Executive Officer of the company – Chris Finlayson – is currently facing. Mr. Finlayson became Chief Executive Officer of BG Group in 2013. Since then he has been trying to restore the value of the company, because earlier reductions in output targets in 2012 influenced on its shares.
He made a statement, saying: “Despite the good progress we have made in 2013, we face short term issues which are reflected in our revised 2014 guidance. This is very disappointing.” Mr. Finlayson made a warning of the higher operating costs of the company this year. He explained in a statement, which was cited by the Wall Street Journal: “Our long-term strategy remains unchanged, our capital expenditure level will decline and we continue to expect to be free cash flow positive in 2015.”
One of the analysts of Banco Santander SA – Jason Kenney – said in a telephone interview today and was cited by Bloomberg: “There is a lack of confidence in 2014 and 2015.” He also explained that earnings will be restrained by 15% in the next two years thanks to the situation in Egypt and the U.S., as well as to the constantly increasing costs.
The company also announced today that its lower output is due to reduced volumes in Egypt and the U.S. The companys projects located in Brazil and Australia are “on budget and schedule”, no matter that the costs are increasing in 2014.
According to Bloomberg, the current share price of BG Group Plc is 15.42% down, and its one-year return rate is 7.39% down.
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