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Wednesday, November 18, 1998 Published at 14:35 GMT

Business: The Company File

BG reports mixed profits

Low oil prices have depressed profits

BG, the exploration and supply arm of British Gas, has posted a fall in net profits for the third quarter, although operating profit showed a healthy rise.

The company said low oil prices had hit its exploration and production business depressed overall pre-tax profits which fell from £21m to £11m.

However, BG surprised analysts with a jump in operating profit between July and September to £99m ($166m) against £38m during the period in 1997.

This was due to a healthy performance by gas supply arm Transco.

Turnover rose from £750m to £850m, excluding BG's share of joint ventures.

The news left investors lukewarm as BG stocks slipped 2.5p in morning trade to hover around 400p.

Chairman Richard Giordano said BG's continuing operations "performed satisfactorily" in the quarter.

Transco profits soar

Transco's profits rose by £53 million to £62 million despite the effect of a stringent review by regulator Ofgas.

[ image: BG 's summer operating profits rose by £61m]
BG 's summer operating profits rose by £61m
Mr Giordano said: "The resilience of BG's profit for the first half of 1998 in the face of low oil prices and the cut in Transco's prices was sustained into the third quarter."

Solid growth in Transco's supply volumes more than accounted for the price drop.

He added that Transco was still on course to meet its target of 2,500 job cuts.

"It is expected that this will be substantially achieved by the end of 1998 through further direct employees taking voluntary redundancy as well as reductions in agency jobs," he said.

About 70% of BG's output is gas, and finance director Philip Hampton said that although oil prices for the group fell 35% in the third quarter from a year earlier, gas prices dropped only 3.5%.

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