* Q2 core earnings fall 48 percent, but beat forecasts
* Production rises on Australia, Brazil ramp ups
* BG has accepted $70 billion takeover from Shell
* Shell has flagged BG’s access to growth markets (Adds details, shares)
By Ron Bousso
LONDON, July 31 (Reuters) - BG Group’s oil and gas production hit record levels in the second quarter, limiting the damage of a near-halving in profits due to persistently weak crude prices.
Britain’s BG, which has accepted a $70 billion takeover bid from Royal Dutch Shell, on Friday reported a 48 percent drop in core earnings from a year earlier to $1.372 billion - but this nevertheless beat analysts’ forecast of $1.328 billion.
Shell says it is buying BG for its growth prospects; it has insisted that the benefits of the deal, expected to be completed in early 2016, go beyond the current downturn as BG’s focus on gas production in Australia and east Africa and Brazil’s deepwater oil fields offers access to growth markets and higher cash flow.
This assertion was supported by a 19 percent rise in BG’s output during the quarter to 703,000 barrels of oil equivalent per day (boed) - driven by Australia and Brazil - which helped cushion the company’s sharp drop in income.
Oil prices averaged $60 a barrel in the second quarter, up about $5 a barrel from the previous quarter but down from $110 a barrel a year earlier.
The company increased its full-year output forecast to “the upper half” of its previous range of 650,000 to 690,000 boed.
“BG results handily beat consensus expectations, and more importantly production was much stronger than expectations in the primary growth engines of Brazil and Australia,” said Jefferies analyst Jason Gammel, who recommends BG shares as ‘buy’.
The shares rose 0.8 percent in early trade in London, outperforming a 0.3 decline in the European oil and gas sector .
Production volumes in both Australia and Brazil more than doubled in the quarter, to an average of 80,000 barrels per day in Australia and 143,000 in Brazil.
The company has been boosting output from the Queensland Curtis liquefied national gas (LNG) facility in Australia, where the first LNG cargo from the second production train was shipped in July.
Chief Executive Helge Lund - who took over in February, weeks before Shell’s takeover bid - said BG’s activity in Brazil has not been affected so far by a huge corruption scandal engulfing state-run oil company Petrobras.
BG maintained its dividend at 14.38 cents per share.
The stronger-than-expected earnings were also a result of lower tax rates, which the company said would drop to 35 percent from 40 percent for the year.
BG maintained its 2015 annual capital spending guidance at $6-$7 billion.
The gas producer was forced to write $6 billion off the value of its oil and gas business in the fourth quarter of 2014, following the slump in crude prices. This followed a string of production outlook cuts after its gas and LNG business in Egypt performed disastrously.
Shell is still awaiting regulatory approvals for the BG deal from the European Union, China and Australia, after Brazil, the United States and South Korea cleared it. (Editing by David Clarke and Pravin Char)