What’s Next For BG Group plc?

How much further upside is there to BG Group plc (LON:BG)?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Energy company BG Group (LSE: BG) (NASDAQOTH: BRGYY.US) explores for and extracts natural gas and oil and also produces liquefied natural gas. It is one of the country’s leading energy companies, and it has oil and gas wells in countries such as Brazil, Egypt, Tunisia and Thailand, as well as in the North Sea.

Its share price has had a very good run, rocketing in the past decade. The question is how much further upside there is.

A rapidly evolving industry

The energy industry globally is evolving very rapidly. Companies are gradually moving from conventional oil to ‘out of the box’ routes such as oil sands and shale oil. To supplement conventional gas supplies, more and more gas is being produced through shale gas.

BG Group is also looking to the future through its investments in liquefied natural gas (LNG). In 2010 it invested in the world’s first project to liquefy and ship gas from coal deposits. This is the first of a series of projects in easrtern Australia, and will be producing LNG from next year.

In 2011 BG signed a deal with Louisiana-based Cheniere Energy to export liquefied natural gas from the United States.

A pioneer in liquefied natural gas

As conventional sources of energy peak and then decline, human ingenuity has found other, less obvious ways of producing energy. I am a firm believer that investors in energy companies should look to invest in unconventional sources of energy, whether this be shale oil and gas, oil sands or LNG.

BG has been a pioneer in the commercialisation of LNG, whether produced from coal, shale gas or conventional gas. Thus I see it as a strong investment.

What are the numbers like? Well the company is on a forward P/E ratio of 16, which is predicted to fall to 13 the following year, as its investments in LNG start to bear fruit.

This is a growth company, and growth is expensive. My view is that the company is reasonably priced. I would say it is definitely worth adding to your watch list, ready to buy on any dips.

However, my preferred pick in the gas sector is Centrica, whose share price has recently fallen; this company is on a P/E ratio of just 10.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Prabhat owns shares in none of the companies mentioned.

More on Investing Articles

Investing Articles

Here’s how I’d aim for a ton of passive income from £20k in an ISA

To get the best passive income from an ISA, I think we need to balance risk with the potential rewards.…

Read more »

Abstract bull climbing indicators on stock chart
Investing Articles

2 FTSE 100 stocks I’d buy as the blue-chip index hits record highs

This Fool takes a look at a pair of quality FTSE 100 stocks that appear well-positioned for future gains, despite…

Read more »

Satellite on planet background
Small-Cap Shares

Here’s why AIM stock Filtronic is up 44% today

The share price of AIM stock Filtronic has surged on the back of some big news in relation to its…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

At a record high, there can still be bargain FTSE 100 shares to buy!

The FTSE 100 closed at a new all-time high this week. Our writer explains why there might still be bargain…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

After profits plunge 28%, should investors consider buying Lloyds shares?

Lloyds has seen its shares wobble following the release of its latest results. But is this a chance for investors…

Read more »

Abstract bull climbing indicators on stock chart
Investing Articles

Something’s changed in a good way for Reckitt in Q1, and the share price may be about to take off

With the Reckitt share price near 4,475p, is this a no-brainer stock? This long-time Fool takes a closer look at…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

This new boost in assets might just get the abrdn share price moving again

The abrdn share price has lost half its value in the past five years. But with investor confidence returning, are…

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

As revenues rise 8%, is the Croda International share price set to bounce back?

The latest update from Croda International indicates that sales are starting to recover from the end of 2023, so is…

Read more »