BG Group shares drop after warning on Egypt output

Shares of the UK’s oil and gas giant BG Group have tumbled almost 15% after the company warned that continuing problems in Egypt would hit production in 2014 and 2015.

In 2014, the company expects to produce 590,000 to 630,000 barrels of oil equivalent per day (boepd), which is at least 5% below forecast. Production volumes for 2013 came in at 633,000 boepd, in line with forecasts.

According to the company, Egypt was using more gas for its domestic market than had been agreed and there was continued uncertainty over the level of future diversions.

BG Group faces short-term issues reflected in its revised 2014 guidance, as it counts on Egypt for about one-fifth of its production. In order to seek a long-term solution, the company will continue to carry on negotiations with the Egyptian authorities and other stakeholders.

BG reduced its guidance for 2015 to between 710,000 and 750,000 barrels of oil equivalent per day, lower than the target issued in September.

The company’s guidance had also been hit by gas prices in the US, which are lower than expected.

Total group earnings declined in 2013 by 33% to $2.2bn, due to lower production and a $2.4bn post-tax impairment charge related to problems in Egypt and lower gas prices in the US.

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Image: BG Group, North American headquarters. Photo: courtesy of Hourick.