Global gas producer BG Group plc said net profits for the second quarter were hobbled by a $1.3 billion post-tax charge against its shale assets in the United States and it would reduce drilling activity in response to continuing low natural gas prices.
BG said it would reduce the number of drilling rigs operating in the Haynesville Shale to five and in the Marcellus Shale to one.
"As a result of the lower long-term Henry Hub price premise, we further reduced our rig count to six," CEO Frank Chapman said during last Thursday's earnings conference call. "Our efforts in the U.S. are now focused on progressing our significant opportunities for the export of LNG from North America to BG Group's global customers."
Meanwhile, the UK-based company said its liquefied natural gas (LNG) business was performing well, with total operating profit expected to be at the upper end of a $2.6-2.8 billion range.
Net profits fell from $1.27 billion in 2Q2011 to $297 million in 2Q2012, a decrease of 76.7%, as the company lowered its outlook on U.S. natural gas prices to $4.25/MMBtu, down from $5/MMBtu.
The company said LNG production increased 4% (from 58.9 MMboe to 61.3 MMboe) from 2Q2011 to 2Q2012, and also went up 4% for the corresponding half years (from 117.1 MMboe to 122.2 MMboe). During the first half of the year, profits from the sale of LNG grew 7% (from $553 million to $594 million) from 2Q2011 to 2Q2012, and 25% (from $1.12 billion to $1.41 billion) for the corresponding half years.
BG said the increase in LNG production came from improved performance in the UK, a continuing ramp-up in production in Brazil and Australia, and new developments in Bolivia, Norway and Thailand.
Last year, BG Group's BG Gulf Coast LNG LLC agreed to purchase 3.5 million metric tons per year of LNG from Cheniere Energy Partners LP's Sabine Pass Liquefaction LLC (see NGI, Oct. 31, 2011). It was Cheniere's first sales contract for its U.S. Gulf Coast liquefaction project and the first for export of LNG from the Lower 48.
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