Client BG Group investors say Finlayson’s exit raises takeover prospect
Chris Finlayson’s abrupt departure as chief executive of BG Group has increased the chances that the FTSE 100 oil and gas producer could be taken over by a larger rival such as ExxonMobil, say some shareholders.
The company announced on Monday that Mr Finlayson had resigned as CEO after only 15 months in the job, citing personal reasons. Chairman Andrew Gould will step in to run the company until a permanent replacement is found.
In a statement, Mr Gould – a former CEO of oil services company Schlumberger – said that while there would be no change to BG’s strategy, the company “must accelerate the creation and delivery of the longer-term value for our shareholders, while delivering the group’s business plans”.
However, a top 10 shareholder said that, with BG now rudderless, it had become a prime takeover target. “It’s a green light to a potential bidder,” the investor said, noting that Pfizer’s approach to UK pharmaceuticals group AstraZeneca had shown that the “era of the megadeal is back”.
This view was supported by Charles Whall, co-portfolio manager at Investec Asset Management, who also holds a stake in BG. He said ExxonMobil might be attracted by BG’s holdings in Brazil and Tanzania, and its successful liquefied natural gas-trading business.
He added that any acquirer would be encouraged by a sharp fall in shareholders’ expectations over the past two years. “People were aspiring to £20 a share 18 months ago, and now they might settle for £15 or less,” he said.
ExxonMobil declined to comment.
BG had been a stock market favourite for many years, as it grew from a medium-sized explorer to an oil and gas major, with huge projects in some of the most promising parts of the world for exploration.
But market sentiment towards the company has soured in recent years with investors disappointed by repeated revisions to production forecasts and a profit warning in January.
Mr Finlayson had been regarded as a competent operations manager who kept BG’s Brazilian and Australian mega projects on track, but was less successful as a dealmaker, said one person familiar with the company.
,With BG needing to unlock the value of some of its assets by “farming down” its stakes, forming joint ventures and making divestments, such dealmaking skills were essential, the person added.
“There needs to be more active portfolio management,” he said. “BG can’t do everything at once.”
On Monday, BG also issued a trading update that pointed out the continuing problems it faces in Egypt, where political instability meant the Cairo government was unable to honour agreements on BG’s gas exports. The company said Egypt remained “challenging”, with volumes in the first quarter declining 35 per cent from the fourth quarter of last year to 66,000 barrels of oil equivalent a day (boe/d). It said its gas continued to be diverted to the domestic market, where BG is entitled to a lower share of production.
The company left its 2014 production guidance unchanged at 590,000-630,000 boe/d, though it said output was now expected to be at the lower end of the range given the issues in Egypt. The deterioration there would also affect 2015 production, it said.