BG, in many respects, is an innovator, an upstart thats taken on large projects with a go-get-em approach. Decisions are often made quickly without the lengthy approval process that other oil majors (such as BP) implement.
BP, on the other hand, is considered a diplomat, looking to build healthy relationships and make reasoned investment decisions.
BGs hard-hitting approach has paid offover the years. In the 15 years to 2012, the company discovered 16 new, huge oil & gas prospects, which it has moved quickly to develop. This exploration record is unmatched, even by the likes of Tullow Oil.
However, as BG has grown, the companys go-go nature has started to hold it back. Over optimistic forecasts have resulted in a string of profit warnings and operational disappointments.
Factors outside of BGs control have also worked against the company. At the beginning of 2014 BG was forced to book a $3.1bn impairment charge on its Egyptian assets after thecountrys authorities diverted gas earmarked for export to the domestic market. The companystill cannot export gas from the region.
Additionally, BGs Australian assets have suffered from cost overruns, and the company has become caught up in thePetrobras scandal.
Specifically, BGs world-class Brazilian assets five oil fields in the offshore Santos Basin are jointly owned with Petrobras, Brazils state oil company. Theres a chance that Petrobras will struggle to pull its weight in the development of these fieldsbecause of thecorruption scandal.
Like BG, BP has its fair share of issues. However, BPs issues have been more costly to solve and are likely to hold the company back for longer.
For example, BPs ultimate liability for its role in the Gulf of Mexico disaster is still unknown. The courts have yet to decide the amount of responsibility and the final penalty the firm will pay for the catastrophe.
BP continues to fight compensation claims for the spill and has so far paid out $44bn in connection with the accident. An additional charge of $477m was taken in the fourth quarter of 2014 reflecting increased provision for litigation costs.
Then theres BPs Russian troubles to consider. The company owns around 20% of Russian oil giant Rosneft, which is struggling to raise capital amid a background of uncertainty. Rosneft is currently seeking shareholder approval to raise $204bn in loans.
The better pick
Despite BGs operational issues, the company is still going strong and isnt showing any signs of slowing down.
Moreover, Shells recent bid for the group, at a premium of 52% to the 90 trading day average, shows how much value is really locked up in BGs asset base.
Shells bid has put a floor under BGs share price. Shells offer of around 1,350p per share is 16.7% above current levels. If the bid fails to go through, BG has the potential to re-ignite growth as its world-class assets come on stream.
Moreover, much of the bad news released over the past few years has been factored into the companys share price.
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