BG Group Plc, the U.K.’s third- largest natural-gas producer, posted a 44 percent drop in profit because of lower demand as production fell short of its expectations following a delay in Tunisia.

Net income in the third quarter declined to 484 million pounds ($791
million) from 857 million pounds a year earlier, the Reading,
England-based company said in a statement today. BG fell the most in
almost three months in London trading after saying operations at
Hasdrubal in Tunisia won’t start until the end of November.

BG “reported positive business performance earnings this morning,” said
Jason Kenney, an analyst at ING Wholesale Banking in Edinburgh. “ING
prefers to remain conservative given the still likely possibility of
weak gas demand effects and assuming a slower ramp up of Tunisia
Hasdrubal.”

LNG spot prices in Asia slumped to $8 a million British thermal units
from about $18 at the end of last year as the global recession reduced
demand from utilities in Japan and South Korea, the world’s biggest
buyers of the fuel, according to Sanford C. Bernstein & Co.

Excluding disposals and other one-time items, profit was 474 million
pounds, beating the 444 million-pound median estimate of six analysts
surveyed by Bloomberg News.

BP Plc yesterday said third-quarter net income dropped 34 percent to
$5.34 billion as crude oil prices plunged. Earnings excluding one-time
items and inventory changes beat analyst forecasts. Royal Dutch Shell
Plc will report tomorrow.

Stock Performance

BG slipped as much as 3.8 percent and traded down 26.5 pence at 1,106
pence as of 10:52 a.m. The stock has risen 16 percent this year,
outperforming BP’s 11 percent gain and Shell’s 5.7 percent increase.

Third-quarter production increased 5 percent to 56.6 million barrels of
oil equivalent, or 615,000 barrels a day, from last year.

Output was 2 million barrels below the company’s expectations,
“predominantly due to a delay in the start-up of the Hasdrubal facility
in Tunisia.” The project is expected to start at the end of November.

BG is currently pumping 700,000 barrels of oil equivalent a day, up 12
percent from a year ago, Chief Executive Officer Frank Chapman said.

In July, BG delayed its 680,000-barrel-a-day production target for this
year into the first quarter of 2010 because of lower demand for fuels.

Guara Plan

BG, Repsol YPF SA and Petroleo Brasileiro SA are advancing with
projects in Brazil and now plan to secure a floating oil production
facility for the Guara field. The unit will have a 120,000 barrel-a-day
capacity and is expected to start production in 2012.

The U.K. explorer, Petrobras and Galp Energia SGPS SA are also
developing the Tupi field offshore Brazil, which is on plan to start
pumping at the end of 2010.

BG and Petrobras have completed testing operations at the Corcovado-1
well. The well flowed “very light crude condensate and gas,” Chapman
said.

The drilling of both the Corcovado-1 and Corcovado-2 wells “has
extended the partners’ understanding of the Corcovado structure” and
the venture is evaluating the test results “to determine future
drilling plans,” BG said.

BG, which is vying to become the third-largest producer of LNG, said it
needs to start its Queensland Curtis LNG project in Australia by early
2014 as rival projects threaten to saturate the Pacific Basin. It plans
to start the first unit, or train, to produce fuel from coal-seam
methane in late 2013. A second unit will be ready 12 months later.

In August, BG, Petroliam Nasional Bhd. and Edison SpA started gas production from the Sequoia field offshore Egypt.

Source: Bloomberg

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