BG Group has appetite to find new partners following CEO exit

30 Apr 14 – The surprise resignation of BG Group [LON:BG] CEO Chris Finlayson “presents an opportunity” to accelerate the E&P group’s divestment programme, said a person close to the company.

The person cautioned, however, that the group’s primary objective this year is to find a new CEO. “We’ve got to look for a fresh leader who will have this vision to accelerate our goals in terms of the deals to be done.”

Finlayson resigned with immediate effect on 28 April, after 15 months in the post, citing personal reasons. Andrew Gould, the firm’s chairman, will take over as interim CEO until a replacement is found. The resignation coincided with the company’s fifth downward guidance on production since the beginning of last year. BG’s shares are down around 10% year to date.

“The very fact that Andrew Gould accepted Chris Finlayson’s resignation so readily indicates he thought it was for the best interests for the company,” said the source. “There is a hunger to do things faster.”

Following a production guidance cut in January, Finlayson had said the group would not accelerate its divestment programme.

The company has previously said it is prioritising reducing its ownership in the LNG projects in Tanzania and the Prince Rupert project in British Columbia, Canada. Analysts at RBC Capital Markets reportedly said yesterday BG may reconsider its position of not wanting to sell a stake in its key Brazil asset.

“Brazil is our gem. There is absolutely appetite and opportunity to bring on new partners,” said the person while reiterating that the top priority it to find a replacement CEO.

In March this news service reported that sector bankers expected BG Group to sell down stakes of its Tanzanian deep water LNG project and its Brazil Santos Basin oil field.

BG estimates the Santos Basin to hold between 4bn boe and 8bn boe and expects its interests there to be producing 500,000 boed net to the group by 2020, making the asset its future single biggest production contributor. The company’s interest in the asset is estimated to be worth around USD 40bn. The group’s 60% stake in a deep water LNG project in Tanzania, which it acquired in 2010 after it entered into a partnership with Ophir Energy, is valued at around USD 2.5bn by analysts.

Charles Whall, a fund manager at BG shareholder Investec Asset Management, was reported yesterday as saying that shareholders might have lower price expectations now and that the group’s Brazilian and Tanzanian assets might attract ExxonMobil [NYSE:XOM].

The Tanzania project remains in the pre Final Investment Decision (FID) stage. “The final investment decisions have not yet been made and we do not want to go into those projects with the majority of the equity,” the person close to the company said. “We want to structure deals akin to a 40% to 50% stake. We will not pursue the LNG projects on the same equity levels as before.”

BG Group on Wednesday morning had a market cap of GBP 41.04bn.

by Katie McQue