Today I am detailing why revenues at BG Group (LSE: BG) (NASDAQOTH: BRGYY.US) are ready to explode in coming years.
Black gold production set to burst
BG Group disappointed investors in October with another poor quarterly production report, by no means the first time the firm has disappointed on this front. But for patient investors, BG Group’s world-class assets could deliver stunning returns from next year onwards, and Liberum Capital expect group production to surge to 797,000 barrels of oil equivalent per day (boepd) in 2015.
The oil producer’s October update showed that a confluence of reduced activity in the US, planned shutdowns in the UK North Sea and operational difficulties in Egypt pushed production 10% lower in quarter three.
Problems in North America and Africa look set to continue, and, critically, the firm said that it may shelve development of its Egyptian assets should assurances on both gas for LNG exports and repayment of its $1.4bn receivable balance not be met.
Still, the firm’s long-term production outlook remains compelling, primarily due to the strength of its asset base in Australia and Brazil. Its massive Queensland Curtis LNG project is running on budget and set to commence maiden output during the latter half of 2014. And in Brazil offshore drilling continues to surpass expectations, and the hook-up of new floating vessels are ready to boost production further from the first quarter next year.
Elsewhere, BG Group announced in recent weeks that production at its Jasmine project in the North Sea had commenced, meeting one of the firm’s key targets for 2013 and a great precursor for future growth, and that maintenance in the area had now finished. The next phase of development at its Bolivian Itaú asset is the only other 2013 milestone, expected to be met in coming weeks.
Liberum Capital expects BG Group’s current production profile of 643,000 boepd to edge 4.7% higher in 2014, to 673,000 boepd, before taking off to 797,000 boepd in 2015, an 18.4% on-year increase.
Following an expected 2% decline in earnings this year, these are expected to snap 16% higher next year as production rises, the broker notes. And rocketing output should propel earnings per share a meaty 29% higher in 2015, according to Liberum Capital. These projections leave the company dealing on a P/E rating of 15.6 for this year, although this drops to 13.4 for next year and 10.4 for 2015, just above the value benchmark of 10 times forward earnings.
Drill for riches with the Fool
So for the more patient investor, in my opinion BG Group offers a fantastic way of tapping into of appetising earnings growth at attractive prices, although of course this depends on the firm’s ability to get its reserve-rich assets motoring this year and next.
