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What’s Telling Me To Buy BG Group Plc Today

Today, I am looking at BG Group (LSE: BG) (NASDAQOTH: BRGYY.US), and deciding whether to add a few barrels of the stock to my personal investment portfolio.

Future looking up as milestones smashed

BG Group announced in last month’s half-yearly report that exploration and production volumes slipped 2% in the second quarter, a result which contributed to a 6% fall in operating profit to $1.79bn.

However, the slight output slip came in as expected, and the oil giant completed its two planned production milestones during quarter two, developments which bode well for future growth.

Production started at its third floating production, storage and offloading (FPSO) offshore vessel in Brazil. And the maintenance closure and re-start of its gigantic Karachaganak field in Kazakhstan also went off without a hitch. The company has therefore hit all five of the major targets scheduled for the first half of the year.

Significant oil projects primed to step up the pace

Most promisingly, BG Group announced in July that it has successfully drilled three-quarters of the wells needed to service the two trains at its Queensland Curtis LNG project in Australia. The project is on track for maiden production in 2014, and is running on budget at $20.4bn.

And at its other major projects in South America, a fourth appraisal well at the Iara field off the coast of Brazil have yielded excellent results. Further testing work there has revealed potential recoverable reserves and resources similar to that of the gargantuan Lula area. The company also boosted its exploration portfolio by securing 10 offshore blocks in the Barreirinhas oil basin.

Earnings set to rocket from next year

Broker Investec expects BG Group to report a 6% earnings per share fall in earnings per share in 2013, to 121 US cents, before planned production ramp-ups prompt a sudden turnaround. Earnings are expected to rise 14% and 13% in 2014 and 2015 correspondingly, to 137 cents and 156 cents per share.

BG Group was recently changing hands on a P/E rating of 15.3 for 2013 — which compares extremely favourably with an average of 23.4 for the rest of the UK’s listed oil and gas producers — and which falls to 13.6 and 12 for 2014 and 2015 respectively. This represents stunning value which is too good to pass up, in my opinion.

Drill for riches with the Fool

I believe that, under the guidance of CEO and oil industry veteran Chris Finlayson, BG Group is in great shape to hit its production targets in coming years and drive earnings skywards.

But BG Group — like all natural resources plays — comes attached with a heightened risk profile. Drilling for oil and minerals mining is often a ‘hit and miss’ business where the timing, and indeed quantities, of potential payloads are extremely unpredictable.

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> Royston does not own shares in BG Group.