BG Group announced its full year results for 2010 this week and the share price continues to power on to new highs.
Although, profits before tax, at $5.73bn, are slightly down on last year on higher revenues, the main highlights are the company's 3 year reserves replacement ratio at 223% which basically means they are finding more oil and gas than they can sell at present. Total reserves and resources increased in the year by 1.7bn barrels of oil equivalent (boe) to 16.2bn.
Exciting for me as an investor is the company's update on its long term strategy which is to achieve growth of between 6 and 8% per annum up to 2020. In it the company states that growth of 7% can be achieved from existing finds up to 2011 (which is bang in the middle of their strategic target of 6 - 8%). In the short term horizon the company thinks it will achieve a growth of 7% for 2011 but that this will increase above that beyond 2011 as new production ramps up in Brazil, Australia and the US. Any new finds could lead to these targets being upgraded.
The dividend was also increased by 13% to 11.78cents per share resulting in a full year increase of 10% to 21.6cents or 13.66p. Not much in comparison to a share price of 1472.50p, in fact just under 1%, but the company does have quite a progressive dividend policy as shown by the following declaration on its website:
"The Board’s dividend policy is to increase the dividend in line with the long-term underlying growth in US Dollar earnings. Interim dividends are usually one half of the total dividend paid in respect of the preceding financial year."
Taking a short term view there has been a downgrade or two (to hold), on the back of the current share price high and visibility of the company's increased capital spend but I am quite comfortable with the results being achieved by a capable management team and the progress being made towards the company's long term strategic goals.
At a price to earnings ratio of 17.6 the company does carry a premium based upon its capability and assets but also on the ongoing speculation that the company could be acquired by one of the oil majors to bolster its reserves and exploration programs.
Finally, BG has been a patient investment in my Growth portfolio which is now showing a 35% gain but with the company being a successful player in the Oil and Gas industry I am still a long term holder.
The ex dividend date for the final dividend entitlement is 13 April 2011.
To download the full results from BG's website: bg-group.com: 2010 FOURTH QUARTER & FULL YEAR RESULTS
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