‘Bloodbath’ as BG cuts production forecasts

BG said in a surprise statement that production this year would be as much as 11 per cent lower than analysts were expecting, and potentially seven per cent behind its 2013 output.

It also cut its 2015 production forecast by as much as 14 per cent.

“It’s a bloodbath,” said Santander analyst Jason Kenney. “I think we’re looking at a 15 per cent cut in earnings for 2015.”

The group is not the only energy company struggling to grow.

Larger rival Shell earlier this month issued a profit warning, while Chevron Corp, the second-largest US oil company, has also warned it will likely miss forecasts.

BG also warned costs per unit will rise due to investment in new projects in Australia and Brazil, while a project off the British coast would ramp up more slowly than expected and its entitlement to output in Trinidad and Tobago would decline.

The developments add up to the latest in a series of disappointments from BG and heap pressure on a mostly new management team.

Chief executive Chris Finlayson took over a year ago and financial director Simon Lowth joined in December.

“If it was just Egypt, I wouldn’t worry. They haven’t really delivered anywhere else. That’s the problem,” said a top investor in BG.

“These guys seem permanently over-optimistic,” the investor said. “We thought the new chief executive would be prudent in what he said and he has been found wanting a bit. That can be only described as disappointing.”

Over the past 18 months, BG has cut its output forecasts three times.

BG, which counts on Egypt for about a fifth of its production, said the government there had not honoured agreements covering BG’s share of gas from fields.