BG Boosted By Petrobras Glow

BG (BG.L) despite its British Gas roots is now - with operations in 27 countries - a large, diversified and global energy group. Though still domiciled in the UK, more than 60% of BG staff are located outside its home market.

That strategy of pursuing international expansion received a further significant boost this week on confirmation the group, in partnership with Petrobras and Repsol, have proven the commercial viability of the Guara field in the Santos Basin. The find is estimated to contain up to two billion barrels of oil equivalent. During recent testing Guara flowed at 7 200 barrels of oil equivalent per day (boepd). These flow rates were constrained, and test data indicates that a permanent production infrastructure could produce up to 50 000 boepd. Not surprisingly BG stock rallied strongly on the news with investors further encouraged by management comments: “It is clear that the Santos Basin pre-salt will make a very material contribution to the production and cash flow of BG Group for many years to come.”

The giant find follows BP’s recent Tiber discovery in the Gulf of Mexico. Petrobras, the Brazilian energy company holds an interest in both finds and has been providing bullish forecasts on its reserve’s growth potential for years. That growth is now being fulfilled whilst the energy balance of power in Central and South America continues to fade from Hugo Chavez and Venezuela, the thorn in America’s side.

BG stock is fast approaching its 12-month high. If energy prices stay firm, that ceiling should be broken with more gains thereafter.

Subscribe by RSS Subscribe by Email