THE SUNDAY TELEGRAPH (UK): Market miscellany: BG Group: “…Britain's largest independent energy group…”: “BG revealed that it had replaced 126 per cent of the gas and oil reserves it pulled from the ground, a figure that comfortably beat those of larger rivals BP, with 89 per cent, and Royal Dutch/Shell, on a lowly 31-41 per cent” (ShellNews.net) 20 Feb 05
Edited by Grant Ringshaw (Filed: 20/02/2005)
Shares in BG Group (398p), Britain's largest independent energy group, which was part of British Gas until 1997, have had a strong run. Last week the shares hit a five-year high as investors bought into the continuing growth story. BG's chief executive, Frank Chapman, unveiled some pretty impressive full-year figures – sales up by 14 per cent to £4.1bn, a 22 per cent rise in operating profits to £1.5bn and a 10 per cent hike in the dividend.
Meanwhile, BG revealed that it had replaced 126 per cent of the gas and oil reserves it pulled from the ground, a figure that comfortably beat those of larger rivals BP, with 89 per cent, and Royal Dutch/Shell, on a lowly 31-41 per cent.
BG also cheered investors by raising its production targets – it expects to produce about 580,000 barrels of oil equivalent in 2006, up from its previous target of 530,000 barrels. At the same time, BG held out the promise of further growth beyond 2009, arguing it would come from exploiting existing resources and more exploration.
BG's leading position in the rapidly expanding liquefied natural gas market should also stand it in good stead, while the group is confident that it can become a "partner of choice" for state-controlled energy companies.
The problem for investors is whether the shares, which have surged by 74 per cent since hitting a low in January 2003, have become too expensive. Given BG's record, its outlook looks good.
However, the shares are trading on just over 16 times earnings for next year (a premium to its larger rivals) and a yield of just over 1 per cent. Investors should bank some profits.