BG and BP highlight strength of North Sea

BP continues to grapple with the costs of the Gulf of Mexico oil disaster in 2010. Picture: Getty

Rival BP also provided some cheer for shareholders by revealing that annual profits had fallen slightly less than expected, helped by strong growth at its UK operations.

Shares in BG recovered some of the ground lost last week after it said Asian demand for liquefied natural gas (LNG) helped it meet quarterly earnings forecasts of $1.14 billion (£700 million).

The company, which has issued four profit warnings in the past 18 months, said it was making progress on major growth projects in Australia and Brazil although needed to address problems in Egypt which sparked last Monday’s alert.

North Sea production grew by 4 per cent last year, aided by strong performances from the Buzzard field, in which it has a major interest, and the Armada complex. Finlayson said the next potential investment for the group in the North Sea was the Jackdaw field.

“There are discussions ongoing with the government as we speak about the necessary incentive basis to make that happen. We remain committed to the UK North Sea,” said Finlayson. “It remains attractive production that we want to maintain and we want to find opportunities for further investment there.”

He added that the company plans to accelerate exploration in both the UK and Norway.

At BP, full-year profits dropped 21 per cent to $13.4bn after earnings were hit by a fall in production as assets were sold off, as well as from weaker margins in its refining business.

Profits were also hit by write-offs due to the failure of an exploration well in Brazil to encounter commercial quantities of oil or gas.

But these factors were partially offset by strong growth in underlying gas and oil production, particularly from key regions such as the North Sea, Angola and Gulf of Mexico.

The company continues to grapple with the costs of the Gulf of Mexico oil disaster in 2010 with a further $469m of costs booked in the year. The total charge recognised to date stands at $42.7bn.

Chief executive Bob Dudley said BP had delivered a “strong operating performance” throughout the year.

The results come in the wake of a 23 per cent slide in annual profits for rival Shell.

Shares in BG closed up 26.5p at 1,051.5p and in BP up 0.2p at 473.8p.

Meanwhile, an energy lawyer today said cash-rich Norwegian private equity firms were eyeing up potential North Sea acquisitions, encouraged by “proven management teams and reasonable market prices”. Rosalie Chadwick, a partner at Pinsent Masons, said there was evidence of increased confidence by Norwegian investors in UK oil and gas assets.

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