Daily Telegraph (UK): Demand for gas pushes BG Group to £1.5bn: “BG's reserve replacement ratio – a key measure of how fast a group is replacing existing output with new finds – was 149pc last year (based on constant prices) compared with 45pc to 55pc at best for Shell.” (ShellNews.net) 16 Feb 05

By Tessa Thorniley (Filed: 16/02/2005)

BG Group, the oil and gas company, achieved a 25pc leap in fourth-quarter profits that helped lift the full-year figure to £1.5 billion as it tapped into rising gas demand and higher commodity prices.

The rise in pre-tax profits to £432m in the three months to December and a 36pc climb in net profits (before exceptional items) to £249m, were slightly ahead of analysts expectations. The 20pc improvement in full-year profits came on the back of a near 14pc rise turnover to £4.08 billion.

Frank Chapman, chief executive, said: "Our earnings outlook is even better than when we reported in February. This is down to improvements across the business and acquisitions over the past 12 months." He promised "exceptional earnings growth" to 2010.

The shares, which were trading at a five-year high, closed up 7¼ to 395p as BG increased its 2006 production target by almost 10pc to 580,000 barrels of oil equivalent per day after improvements at fields in the North Sea and India and new projects in Canada and Egypt. A cut in North Sea production has been stalled until 2007. Production in 2004 averaged 457,000 of barrels of oil equivalent per day, or 500,000 on average in the fourth quarter.

Several analysts were expecting the group to make a one-off distribution to shareholders in 2005, but BG ruled out such a move. A 2.08p final dividend, payable on May 13, takes the full-year dividend up 10pc to 3.81p. Tony Shepard, analyst at Charles Stanley, said the rise was "slightly mean". But Mr Chapman said: "We've promised a progressive dividend policy and that's what you are seeing. This is not a yield stock, it's a high growth stock, we retain our earnings to invest and we have a very strong portfolio and plenty of opportunities."

BG's reserve replacement ratio – a key measure of how fast a group is replacing existing output with new finds – was 149pc last year (based on constant prices) compared with 45pc to 55pc at best for Shell. "The company has 13 years of proved reserves and 22 years of probable reserves and 27 years if we include the discoveries – that we have yet to book," Mr Chapman said.

BG is proposing to spend £3.6 billion, against an earlier plan of £3 billion. Ashley Almanza, BG's chief financial officer stressed the spending reflected higher activity rather than higher costs.

With the UK set to become a net importer of gas next year, Mr Chapman said supplies from North Africa and Russia will ensure long-run marginal costs for gas will increase, "but the UK will deliver competitive prices".

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