Oil and gas giant BG Group was Credit Suisse's 'Focus List Stock' on Friday, which it gave an outperform rating and 1,730p target price.

Credit Suisse said that BG's first-quarter results were overshadowed by a 36% increase in Queensland Curtis LNG capital expenditure, which "served as a reminder that BG is more exposed than other majors to execution risks owing to high concentration of value in two countries (Brazil and Australia)", this morning's research note said.

"BG remains a core long-term holding in European energy as the only real structural growth story in the sector; however, we think the shares could trade sideways in the next few months, as there are no material catalysts for BG in the near term and LNG profits will be seasonally lower in the summer," the broker said.

Furthermore, yesterday's news of delays in the Jasmine start-up and the uncertainty surrounding Elgin could make the firm's 750k-barrels-a-day (kbd) production exit rate target for 2012 "more challenging".

Credit Suisse is actually forecasting 670kbd production in 2012, up 5% year-on-year but below BG's long-term growth guidance of 6-8%.

"On the positive side, BG is making faster progress than we expected on its $5bn capital release plan with the sale of Comgas. We continue to believe BG will be able to fund its large capex programme in Australia and Brazil through debt and asset sales."

While the stock is trading at a 105% premium to its peers (on 2013 earnings), the broker says this premium reverts to zero by 2018-19 "with continued superior growth thereafter".

BC

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