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By James Herron
Of DOW JONES NEWSWIRES
LONDON -(Dow Jones)- BG Group PLC (BG.LN) Wednesday posted a 43.5% fall in net profit for the third quarter due mainly to weaker natural gas prices and lower than expected output following a gas project delay.
Total oil and gas production was 615,000 barrels of oil equivalent a day, a rise of 4.8% on the year, but below analysts' expectations of an output increase of 8.2%. This was predominantly due to a delay in the startup of the Hasdrubal gas project in Tunisia, BG said in a statement.
Nevertheless, BG Chief Executive Frank Chapman gave a confident outlook for the company, saying output in the fourth quarter will average 700,000 boe a day, up 12% year-on-year. "We are now entering a period where we can look forward to these projects driving exceptional growth to the end of the next decade," he said.
"Another miss of market expectations may have irked buy and sell side analysts...(but we) totally believe in the long term prospects for truly exceptional growth that BG offers," said HansonWesthouse analyst Malcolm Graham-Wood. There are few companies in the sector that offer growth prospects like offshore Brazil or LNG from Australian coal seam gas, he added.
BG said net profit for the three months ended Sept. 30 totaled GBP484 million, compared with GBP857million for the third quarter of 2008.
Upstream earnings and oil and gas output were below expectations, but were offset by a better-than-expected performance at its liquefied natural gas division and the favorable impact of moves in the dollar, said ING analyst Jason Kenney.
Profit adjusted for exceptional items of GBP474 million actually came in above a forecast of GBP450 million in a Dow Jones Newswires poll of five analysts.
Upstream operating profit, largely from gas production, was down 53% year-on-year, whereas LNG profit was down just 17%. LNG profits were so resilient to tough market conditions because BG signed up much of its production on five-year contracts when prices were much higher late last year, said Chief Financial Officer Ashley Almanza.
Overall, Kenney expected a fairly neutral market reaction to the numbers. The exchange rate effect should be neutralized next year because the company just announced it will report in dollars starting in 2010, he added.
Total revenue for the quarter was down 31.9% to GBP2.25billion from GBP3.30 billion in 2008. Diluted earnings per share were 14.3 pence compared with 25.3 pence the previous year.
At 0947 GMT BG shares were down 2.0%, or 23 pence, at 1,110p in a broadly weaker market.
Company Web site: http://www.bg-group.com
-By James Herron, Dow Jones Newswires; +44 (0)20 7842 9317; james.herron@dowjones.com