UBS has pared its price target for natural gas giant BG Group after the cautious tone its second-quarter results.
BG reported a net income of $1.073bn, under consensus forecasts of $1.09bn, but ahead of UBS's estimates. Exploration and production (E&P) was in line but earnings before interest and tax (EBIT) in liquefied natural gas (LNG) and transmission and distribution (T&D) both came up short of forecasts.
Meanwhile, the production target for the full year was lowered to what UBS calls a "more realistic" target of 720k barrels of oil equivalents per day, on the back of the delay of Jasmine and lower US natural gas production.
"Along with caution around the LNG outlook for 2012 and the impairment of US natgas properties this quarter saw a more cautious tone being adopted, we believe," the broker said.
UBS has cut its price target from 1,730p to 1,620p, but has maintained its 'buy' recommendation for the stock, with the current stock price at just 1,242.5p (down 0.28% on the day).
The new target is set at a sector-normal 20% discount to net asset value (NAV). "We believe that there is scope for this discount to close as and when markets become less risk averse, tangible operational progress is delivered or where further increments to the NAV are added."
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