With oil prices and output fuelling
the share price, BG Group is worth exploring: "...given
the company's relatively small size, the shares are
often boosted by the possibility of a takeover by the
likes of BP or Shell.": Tuesday 20 December 2005
Edited by Philip Aldrick
BG Group issued a trading statement
yesterday -nothing extraordinary in that you might
think. But the oil and gas exploration company does not
normally issue trading statements.
The short missive revealed
everything was going swimmingly for the BG in the fourth
quarter. Upstream production has "increased
significantly" amid "favourable trading conditions" at
the former exploration arm of British Gas.
The previous quarter saw output of
41.2m barrels of oil equivalent (mmboe). For October and
November only it was 35 mmboe which puts it on track to
beat the last quarter by a hefty margin.
High energy prices have also helped
BG. The company has been selling its oil for $59 a
barrel and gas for 36p a therm in the UK. High prices
and high output led to BG's share price rising 6 to
The company has previously flagged
it is considering spending up to £1billion on a buyback
programme after pulling in £800m from selling its
interest in an oil field in the Caspian Sea.
Plus, given the company's relatively
small size, the shares are often boosted by the
possibility of a takeover by the likes of BP or Shell.
However, there are negatives. The
company will take a knock from the 10pc tax increase on
North Sea oil and gas producers announced earlier this
BG's dividend yield is low at around
0.7pc and trades at a premium. Numis Securities values
the business at 8.5 times debt adjusted cash flow
compared with 7.8 times for BP. Despite this, with
production levels and energy prices set to remain high
this stock is worth a look. A tentative buy.