Company of the week: BG Group

Gas and oil giant BG (LSE: BG) has very quickly gone from stock-market darling to virtual pariah. That’s what happens when you don’t make as much money as the City expected you to.

A profit warning this week from the company has been blamed on the fact that a lot of its Egyptian gas is being sold domestically at lower prices, rather than exported for higher ones. A further blow is that BG is not going to produce as much oil and gas as people had thought it might this year.

For years investors were prepared to pay high prices for BG’s shares because they thought it had the potential to grow very quickly. It still might, as it has some very good, large assets in Australia and Brazil that could deliver a lot higher profits five years from now.

The trouble for bargain hunters is that the shares do not look particularly cheap or distressed, despite its profit setback.

The company may not be popular now, but it does have some quality assets that other oil companies would love to get their hands on, and that’s why the shares are unlikely to be a steal any time soon.

The long-term outlook is still good for BG. Patient investors could be well rewarded by paying up now.

Verdict: buy

Merryn

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