One of Our Favourite Energy Names Goes on Sale

At its current price, BG Group should reward long-term investors

Allen Good 12 August, 2011 | 2:47PM

Recent anxiety about a debt crisis has roiled European equities while concerns over a weakening global economic growth have taken a toll on shares of energy companies. We believe the combined effect of these two issues has created a buying opportunity in BG Group (BG.), one of our favourite, if often overlooked, international oil and gas companies. Given a proven business model, favourable market conditions, and unrivalled growth, BG is significantly undervalued in our opinion.

Differentiated Business Model
Investors may have overlooked BG in the past given its differentiated business model. Without any directly comparable peers in the marketplace or a listing on the NYSE or Nasdaq, BG may not appear on many U.S. investors' radar. In our opinion, that would be a mistake. Though many international oil and gas companies are investing in liquefied natural gas projects, none make it the central focus of the company like BG has done. As an early mover into LNG, BG secured stranded, low-cost sources of natural gas in regions with little domestic demand to use as feedstock for exported LNG. As a result, the company has gradually built up a global portfolio of liquefaction and gasification assets, as well as secured contracted volumes, which it is able to leverage and trade against to ensure cargos reach the highest value markets at any given time.

Additionally, we do not think investors should be overly concerned with the U.S. pink sheet listing considering BG is not a speculative play with a market cap of $66 billion. Also, we think there is likely ample liquidity in the ADR shares for retail investors. Meanwhile, we find the company's financial disclosures to be on par with other international firms listed on the major exchanges. The company also complies with SEC reporting standards for oil and gas firms, including the reporting of reserves.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
BG Group PLC  

About Author

Allen Good  Allen Good is a senior stock analyst covering the oil and gas industries.

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