BG's second-quarter income drops but beats expectations

BG Group posted a 65% slump in second-quarter net income on the back of declining oil prices, although the figures still came in ahead of analysts' expectations.

The company, which has agreed to be bought by Royal Dutch Shell, posted net income of $429m, down from £1.21bn a year ago, on revenue of $3.98bn, down 28% from $5.50bn.

The drop in revenue reflects a significant fall in realised sales prices, impacting both the Upstream and LNG Shipping & Marketing segments. However, the impact of lower prices was partly offset by higher volumes in both segments, with E&P production volumes up 19% and LNG volumes up 17%.

Net cash flow from operating activities decreased 56% to $926m.

For the half year, group earnings fell 58% to $994m and the company maintained its interim dividend of 14.38 cents per share.

It was a brighter picture in terms of production, however, which rose to record levels. Exploration and production rose 19% to 703,000 barrels of oil equivalent per day and the company said it now expects output for the year to be in the upper half of its forecast range of 650,000 to 690,000 barrels of oil equivalent per day.

Chief executive Helge Lund said: “We achieved a number of key milestones during the quarter while continuing to deliver on our cost and efficiency programmes."

RBC Capital Markets said the results revealed a “solid operational performance” with earnings ahead of both its and consensus forecasts, which were around $317m, adding that progress at key projects continues to be positive.

Killik & Co said: “These were a strong set of results at an operational level from BG, and again point to how undervalued the company was prior to its acquisition. Shares will continue to trade in-line with Shell’s, with the takeover likely to be completed in early 2016."

At 15:46, BG shares were up 1.1% at 1,091.50p.