BG Group Plc (BG/) should consider selling part of its interest in Brazilian oil fields within 18 months to secure funding for projects worldwide and minimize one-county exposure risk, Nomura Holdings Inc. said
Nomura increased its estimate of the Brazilian assets of the U.K.’s third-biggest oil and gas producer by 13 percent to $45 billion, valuing the resources at $7.20 a barrel across its “Big Five” fields in the Santos Basin.
“Management has consistently maintained that the Brazil assets remain core to its growth strategy,” analyst Theepan Jothilingam wrote today in an e-mailed report. “There is a growing frustration that the greater clarity on resources and economics has not been reflected in the current share price and that as a result, active portfolio management could be considered.”
A Brazilian sale would add to BG’s plans, announced in February, to sell $5 billion of assets in two years. BG may consider a deal if it had a better offer than the $3.5 billion China Petrochemical Corp. agreed in November to pay Galp Energia SGPS SA (GALP) for a stake in its Brazilian unit, valuing the assets at about $5.60 a barrel of oil equivalent, Nomura said.
BG keeps all its assets under review and its options open, Mark Todd, a spokesman, said by e-mail, declining to comment further on the company’s strategy.
BG expects oil to account for more of its output as volumes increase in Brazil. The natural gas portion will fall from about 70 percent “more toward the 50:50 level,” Chief Executive Officer Frank Chapman said Feb. 9. BG that day raised its Brazilian output forecast to 600,000 barrels of oil equivalent a day by 2020, up from last year’s guidance of 550,000 barrels a day.
BG, based in Reading, England, may expand in Brazil by adding eight floating, production, storage and offloading vessels, or FPSOs, to the 13 units already under development, Nomura said. Net output will rise to 800,000 barrels a day in 2025.
BG holds about 6 billion barrels of resources off Brazil, which can increase to 8 billion barrels, according to a presentation by Oliver Wambersie, a vice president of development. The Big Five fields are Lula, Cernambi and Iara in BMS-11 Block and Sapinhoa and Carioca in BMS-9 Block.
The company and partners plan to purchase eight FPSOs, which will be deployed from 2015 to 2017 and will help to exceed the requirement for local supplies and labor, according to a presentation by Steve Ollerearnshaw, a vice president of projects. The units will require “longer lead time” to start oil production.
“At present neither the quality nor the time schedule are issues, but we believe that local suppliers delivering on time is the main challenge,” Jean-Charles Lacoste, an analyst at Credit Agricole Cheuvreux SA, wrote in an e-mailed report yesterday.
BG has been reducing costs by using specialized rigs to drill wells, shortening drilling time, getting lower rates to rent equipment and introducing new technologies, according to a presentation by John de Lange, a vice president of well engineering.
BG will operate seven drill rigs in Brazil by the end of 2014, while it will need as many as 15 units, Peter Hutton, an analyst at RBC Capital Markets in London, wrote in a Feb. 28 report. “We see risk on availability given the demand for rigs especially as Angola exploration accelerates.”
The U.K. company expects to export 59 million barrels of oil from its eight FPSOs in 2015, up from 7 million barrels forecast this year, according to a presentation by Marcelo Menicucci, a vice president of commercial and strategy. It plans to start an offshore transshipment facility in 2015, which will allow loading tankers through at least two buoys simultaneously.
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