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BG: Q1 2005
BG the oil and gas exploration group, reported a 28% increase in turnover and a 44% increase in operating profits for the first quarter of 2005. BG reported an operating profit of £483m slightly ahead of the consensus of £476m.
BG was a part of British Gas unit 1997, when the exploration and production was spun off to form BG. The remaining part of British Gas (the bulk of the retail distribution business) was renamed Centrica.
Higher production volumes (up 7% to 43.7 mmboe) and better prices were responsible for the increase in profits. The bulk of the growth came from exploration and production where operating profits increased by 47% to £387m. The smaller business units also reported strong growth, although their contribution to overall operating profits was small. Operating profits for liquefied natural gas were up 80% to £27m, and while transmission and distribution reported a 53% increase to £46m.
Cash generated by operations was strong, increasing by £175m to £549m.
The share trades at 420p, on a prospective PE of 14.6x (2005 earnings) which is at the upper end of the sector range but growth prospects still look unimpaired. The yield is a negligible 1%.
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