Gas producer BG Group saw its shares rise after announcing that it had doubled the best estimate of its oil and gas reserves in Brazil’s Santos basin to six billion barrels of oil equivalent (boe).
The new estimates for the area, which is co-owned with Spanish company Repsol and Portugal’s Galp Energia, follow testing and analysis and the results underline its significance for the company and the sector.
BG chief executive Sir Frank Chapman said the news means “reserves and resources is clearly significant and demonstrates the continued rapid evolution of our understanding of these enormous discoveries.”
He added: “Robust economics and solid progress with the fast-track development programme will see gross installed production capacity rising steadily to reach more than 2.3 million boe per day by 2017. I believe this – alongside progress with major ventures in Australia, the US and across our global portfolio – will transform the scope, scale and value of BG Group.”
Richard Griffith, analyst at Evolution Securities, said: “We had 4.5 billion boe in our core plus risked upside for BG Brazil which gave a valuation of just over 1,000p. The implication of today’s announcement is that on a simple pro rate basis is that our core plus risked valuation for Brazil could rise by circa 280p/sh. Today’s announcement should also add further confidence to the production growth target of 6-8% pa to 2020.”
Grifiith added that for now he is maintaining a target price of 1,800p with his ‘buy’ recommendation until he has reviewed the new data in more detail.
