Broker snap: Origin bid positive for BG Group, JPM says
JP Morgan has kept its 'overweight' recommendation on BG Group, saying the recent offer for Australia's Origin Energy reinforces its positive view on the oil and gas giant.
Shares in BG Group fell back yesterday after it said it was preparing a A$12.9bn (£6.1bn) approach for Origin Energy. It also reported a forecast busting 78% hike in first quarter earnings to £767m.
"We think yesterday's 6% price drop was related more to profit taking than concerns on Origin, and view it as a buying opportunity," JPM said.
The broker, which keeps its 1,400p price target on the BG, said a successful purchase of Origin would be an important step in the company's Asian liquid natural gas (LNG) strategy, while not appearing too expensive.It also praised the company's first quarter LNG performance.
(Article continues below)Advertisement
"BG's 1Q figures exceeded all expectations in LNG," JPM said. It added that it saw the company as well placed compared to its peers in the oil sector.
"We see risks of a correction in the oils after the recent rally, but think BG should recover versus its peers with news on progress on Origin and ongoing newsflow in Brazil," it said.
In February, BG said it estimates that more than 30 billion barrels of oil could be sitting beneath the sea off Brazil, where it has strong interests.
JPM yesterday raised its price targets on BG's peers BP and Shell after the oil giants' first quarter results the previous day exceeded expectations. The companies' share prices rallied strongly following the results.
