British Gas has reported a big jump in net profit for the fourth quarter, slightly ahead of analyst expectations, and is raising its 2006 production targets.
Net profit before exceptional items rose 36 per cent yesterday to £249 million, largely on the back of higher oil prices but also helped by higher volumes, and was £842 million for full year 2004.
Fourth-quarter operating profit rose to £451 million from £327 million a year earlier.
A Reuters poll of 10 analysts had given an average forecast of £246 million for fourth-quarter net profit and £435 million for operating profit, before exceptionals.
Oriel Securities oil analyst Brendan Wilders said it was a good result and the accompanying strategy statement outlining higher output targets showed BG was also performing well at an operational level.
BG stock was up 0.6 per cent at 390 pence by 8.40 a.m while the DJ Stoxx European oil and gas sector index was little changed, down 0.03 per cent.
BG increased its 2006 production target to 580,000 barrels of oil equivalent (boed) from 530,000 boed on the back of improvements at existing fields and new projects.
The firm raised its 2006 liquified natural gas volume target to 6.9 million tonnes per annum (mtpa) from 6.6 mtpa.
BG's strong fourth-quarter result follows big earnings jumps at rivals such as BP and ChevronTexaco, which doubled profits on the back of record oil prices during the quarter.
BG's profit rise was more modest partly because it reports in pounds and the benefit to the firm of the rapid rise in international oil and gas prices, which are denominated in dollars, has been partly eroded by weakness in the US currency.
BG boosted production last year and turned in a healthy oil and gas reserve replacement rate of 126 per cent, based on year-end pricing, the most commonly used industry measure.
Most oil firms are struggling to hit the 100 per cent rate that shows a firm is finding as much oil as it pumps.
BG is regularly tipped as a takeover target for oil majors such as Shell and BP. However, analysts say at current high oil prices an acquisition was likely to dilute any of the purchaser's return on equity.
Also both BP Chief Executive John Browne and Shell boss Jeroen van der Veer have both downplayed the chances of a bid for BG in recent weeks.