BG Group, the oil and gas producer, today unveiled plans to return up to £1 billion to investors through a share buy back, after revealing a 44 per cent hike in third-quarter profits on the back of buoyant energy prices.

BG said net profits before exceptional items in the three months to September came in at £308 million, up from £214 million a year earlier, but at the lower end of analyst expectations.

"These are good results which reflect a strong business performance and firm oil and gas prices," Frank Chapman, the chief executive, said.

Shares in the group dipped in morning trade, falling 3.5p, or 0.7 per cent, to 524.5p. The stock had gained 6.5 per cent since the end of October in the run up to the results.

Oil prices held steady below $60 overnight as unseasonably mild weather dampened demand for fuel in the United States.

BG Group also increased capital spending for 2005 and 2006 by £500 million to £2.9 billion to take into account higher commodity prices and the funding of new projects.

However, BG retained the "flexibility to take advantage of further investment opportunities as and when they arise," Mr Chapman said.

The planned share repurchases, which are to be presented at the group’s next AGM for approval, are to be carried out over the next 12 to 18 months.

BG said production rose 4 per cent in the third quarter to 41.2 million barrels of oil equivalent, though the growth was held back by extensive maintenance work at the group’s major fields in the North Sea and Kazakhstan.

"Following the completion of an extensive maintenance and inspection programme during the third quarter, we expect strong growth in Exploration and Production volumes in the fourth quarter," Mr Chapman said.

For the UK gas year starting October 1, BG expects to realise an average price of around 23p a therm on North Sea production sold under various contracts, as against 20p a therm in the prior year.

BG added it remains on course to deliver its production target of 580,000 barrels of oil equivalent per day in 2006.

Follow BG Group shares here.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive