BG Group Plc, the U.K.’s third- largest natural-gas producer, said profit fell 38 percent in the fourth quarter because of lower prices for the fuel.

Net income declined to 465 million pounds ($731 million) from 756
million pounds a year earlier, the Reading, England- based company said
today in a statement distributed by the Regulatory News Service.
Excluding disposals and other one-time items, earnings were in line
with analyst estimates.

In Asia, average spot prices for liquefied natural gas dropped 50
percent last year, according to government data from Japan, South Korea
and Taiwan. Prices still beat equivalent rates in North America, where
surplus supplies reduced returns for gas producers, forcing BG to
divert some LNG cargoes to Europe and Asia.

There are “concerns over market conditions in LNG, coupled with
disappointments on 2009 exploration and production volumes,” Gordon
Gray, a London-based analyst at Collins Stewart Plc, said before the
earnings were released. Investors are “rightly prepared to give the
company more credit for its contingent resource base.”

BG, like other gas producers, suffered from a slump in fuel use last
year as the global recession curbed consumer spending. Production
volumes rose 8 percent in the quarter from a year ago. Full-year output
volumes were up 4 percent.

U.S. Production

The U.S. last year overtook Russia as the world’s largest producer of
natural gas. U.S. gas futures fell 23 percent in the fourth quarter
from a year earlier.

BG has shifted its LNG marketing from spot trading to term contracts as
the global economic turmoil reduces gas use. The company plans to
deliver 75 percent of its LNG under supply contracts this year. LNG is
natural gas chilled to a liquid for transport by ship rather than by
pipeline.

BG, seeking to maintain output growth, said in November it had drilled
its most productive well in Brazil, alongside Petroleo Brasileiro SA.
Rio de Janeiro-based Petrobras and BG have agreed to develop a floating
LNG vessel in the Santos Basin off Brazil’s coast, with capacity to
process as much as 14 million cubic meters of gas a day from offshore
fields.

BG is also active in Central Asia, where the Kazakh government is
seeking a stake in the company’s Karachaganak field. BG and project
partners including Eni SpA postponed a decision on the third phase of
Karachaganak’s development last year until 2010 in anticipation of
lower drilling costs.

BG will host a Webcast presentation at 2 p.m. London time. It will start reporting earnings in U.S. dollars on April 29.

Source: Bloomberg

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