Buy-recommended BG Group plc (OTCPK:BRGXF) offers unlevered appreciation potential of 23% to a McDep Ratio of 1.0 where stock price would equal Net Present Value (NPV) of $22 a share. Fourth quarter results released today exceeded our estimate for unlevered cash flow (Ebitda) from three months ago with downstream higher than we thought and upstream lower than we thought. NPV is supported by cash flow and reserve life in an industry context after allocating 21% for offshore Brazil.
BG expects Brazilian output to grow to 25% of production in 2020. In a presentation today, Chief Executive Frank Chapman provided new detail on Australia as another wedge of growth. BG believes its Queensland Curtis Liquefied Natural Gas (QCLNG) project can compete with the best of existing and planned ventures that might account for a quarter of global LNG capacity ten years from now. Developing coal seam gas as the feedstock, QCLNG would be among projects to open a new LNG export area in northeast Australia, while most of the exports to date have been from the northwest. Meanwhile, oil markets have turned downward with futures prices for the next six years at $81 a barrel, below the 40-week average of $82.
Originally published on February 5, 2010.