BG Group share price down, performance hurt by $8.9 billion write-down

BG Group Plc announced on Tuesday it has written down the value of its oil and gas business by nearly $9 billion as lower oil prices claim another victim.

The natural gas producer stated a net loss of $5 billion during the three months ended December, significantly higher than the $1.08 billion loss the company reported for the fourth quarter of 2013.

BG also said it will further reduce its workforce in 2015, following the 15% trim last year. However, the company did not disclose any specific number of positions poised to be cut.

The company also projected oil prices to remain at low levels for a prolonged period of time, therefore it reduced its capital expenditure for 2015 to between $6 billion and $7 billion, compared to the $9.8 billion it spent last year.

BG also said that around $6.8 billion of the overall impairment charge was related to its $20.4 billion bet in Queensland, Australia. The company recently started a big project there, which is aimed at exporting liquefied natural gas to China and Japan. The company contributed $4.1 billion of the charge in its Australian operations to its error to correctly project future commodity prices.

“In the last six months the world has changed,” said BG Executive Chairman Andrew Gould on a conference call. “After four years of prices above $100 we’re now operating above $50 a barrel.”

Production also fell during the recent quarter, reporting a 0.8% decrease to 630 000 barrels of oil equivalent per day, driven by lower volumes from the companys operations in Egypt, Kazakhstan and the UK.

However, BG made an upbeat projection of future output, estimating production for 2015 to land between 650 000 and 690 000 barrels of oil equivalent per day, boosted by higher volumes in Brazil and Australia.

All-in-all BG reported a net loss of $1 billion for the full-year of 2014, compared to a profit of $2.2 billion a year earlier. However, the company said it would not reduce or remove its dividend payments and they remained at 28.75 cents a share.

“In the new environment we are well placed to manage the downturn as we are reaching the end of a high capital expenditure cycle and will continue to add further production in 2015,” Mr. Gould said.

Mr. Cloud, former chief executive of Statoil, is poised to take the leading role in BG in March, after Chris Finlayson left the company last April. Since then BG has been operating without a CEO.

BG Group gained 5.33% on Monday and closed at GBX 934.20 in London. The stock climbed 0.80% on Tuesday to GBX 941.70 at 15:30 GMT, marking a one-year decrease of 8.02%. The company is valued at £31.96 billion.