Oils Well That Ends Well For BG

Friday, 5 February: Ahead of their proposed takeover by Shell, BG are the third and final oil and gas producer in the blue-chip index to report full year results. The takeover by Royal Dutch Shell is set to be completed this month, and BG, in their final results prior to the landmark merger, have reported pre-tax profits of $2.98bn , compared with a $2.3bn loss in the previous year. Shell have previously identified Australia and Brazil as key growth areas, and a key driver for the takeover bid; a surge in production in these areas led to BG beating its own yearly output target of 704,000 barrels of oil equivalent per day. A ramp-up in oilfield production in Norway also helped trigger this improvement. Overall, despite plunging oil prices going against them, BG have reported results in line with, or ahead of, expectations. Royal Dutch Shell reported yesterday that they are maintaining their dividend payout to shareholders, and as part of the takeover deal, BG shareholders are to receive Shell’s 2015 Q4 dividend (Shell’s dividend is 47c p/share, equivalent to 20.93c per BG share.

Employers in the US added 151,000 jobs in January, less than expected, but enough to pull the jobless rate down to 4.9%. The US unemployment  rate dropping to below 5% is the lowest reading since February 2008. Economists had expected payrolls to rise by 185,000 and the jobless rate to hold still at 5%. Since the Fed increased short-term rates for the first time in nearly a decade in December, global uncertainty has weighed on investors’ minds, and questions have been raised regarding further rate rises over the course of 2016. There is one more US jobs report due before Janet Yellen and the Fed meet again in March, with a current 14% probability of a rate hike to come at the next meeting.

At the close European indices were down with the CAC 40 -0.7%, and the DAX -1.1%. The FTSE 100 reversed gains of +0.8% during mid-morning trading to end the day lower by -0.9%. In the US, the Dow Jones and the S&P 500 are both lower on the back of the jobs report, lower by 1% and 1.5% respectively.