Production slows at BG as earnings level off

Production volumes fell three per cent during the first quarter at oil and gas conglomerate BG Group, but investors were cheered by a one per cent rise in revenue and other operating income.

With production costs rising in its upstream segment, earnings dipped 3.0% to $1.2bn in the three months to March 31st, although this was less acute than the 13% underlying fall in the fourth quarter of 2012.

Thanks to higher realised gas prices, partially offset by the decrease in production volumes and fewer LNG cargo deliveries, revenue and other operating income increased 1.0% to $4.9bn, with total operating profit falling 5.0% to $2.15bn, hit by higher operating costs and upstream depreciation.

Cash flow from operations advanced 3.0% to $2.7bn, helping gearing fall to 23.5% from 24.2% at the end of the last full year.

Chief Executive Chris Finlayson said first quarter results were consistent with the group's expectations and guidance and that BG had delivered the three key milestones for the first quarter: "In Brazil, the second FPSO [floating production, storage and offloading system] began operations on time and on budget, while in the UK, Elgin/Franklin resumed production from three wells and our Everest East expansion project was brought onstream. and made progress with our project execution programme for the year."

The share price rose 2.02% to 1,111.5p by 08:46.

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