By Eduard Gismatullin July 29 (Bloomberg) -- BG Group Plc, the U.K.’s third- largest natural-gas producer, said second-quarter profit fell 31 percent as prices for the fuel declined. Net income dropped to 513 million pounds ($842 million) from 747 million pounds a year earlier, the Reading, England- based company said today in a statement. Sales sank 28 percent to 2.3 billion pounds. “BG should show the smallest year-on-year decline in quarterly results among the integrated stocks,” Richard Griffith, a London-based analyst at Evolution Securities Ltd., said before the figures were released. U.S. gas futures averaged $3.81 a million British thermal units in the second quarter, down 67 percent from a year earlier, curbing revenue for producers. In liquefied natural gas, BG Group has shifted to term contracts from spot trades as global economic turmoil erodes demand for energy. LNG prices have fallen as much as 75 percent from last year’s levels. Excluding disposals and other one-time items, earnings retreated 37 percent to 507 million pounds, BG said. That beat the 501 million-pound median estimate of 13 analysts surveyed by Bloomberg News. The company increased oil and gas output by 7 percent to 58.5 million barrels of oil equivalent, or 643,000 barrels a day, in the second quarter of the year. It also delayed today its average 680,000 barrel-a-day production target for this year into the first quarter of 2010 on lower demand for fuels. LNG Profit BG fell as much as 47 pence, or 4.3 percent, to 1,035 pence today, the biggest intra-day drop since June 22, and was trading 31 pence, or 2.9 percent, down at 1,051 pence at 8:10 a.m. London time. It has climbed 10 percent so far this year. BG’s LNG operating profit fell 15 percent to 311 million pounds in the second quarter from the same period last year, it said. “Despite the plunge in global energy demand, BG’s LNG portfolio has displayed amazing resilience,” Gianna Bern, president of U.S.’s Brookshire Advisory and Research Inc., said before the earnings release. “The strength in LNG can mitigate weakness in hydrocarbon prices felt elsewhere in the BG portfolio.” BP reported a 53 percent drop in second-quarter earnings yesterday, citing lower oil and gas prices. Crude traded in New York averaged $59.79 a barrel in the second quarter, compared with $123.80 a year earlier, as the recession cut demand. Brazilian Projects BG and partners Petroleo Brasileiro SA and Galp Energia SGPS are working to restore production from the Tupi field off Brazil after shutting a well earlier this month, suspending tests on the biggest oil discovery in the Americas since 1976. The British company expects together with partners to make investment decision on developing Iara and Guara, the Brazilian offshore fields, by the end of the year, BG said. The fields designed production capacity has been increased by 20 percent to 120,000 barrels of oil equivalent a day. BG entered its first U.S. shale-gas project last month and agreed with Exco Resources Inc. to invest about $2.8 billion through 2012 in East Texas and northern Louisiana. Shale is a rock composed of layers of sediment from which oil and gas can be extracted. In Australia, BG in May completed the acquisition of coal- seam gas producer Pure Energy Resources Ltd. after buying Queensland Gas Co. last year as it seeks fuel for the A$8 billion ($6.6 billion) Queensland Curtis LNG venture. BG will host a Webcast presentation at 12 p.m. London time. To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net

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