BG Reports Revenue, Production Increase in 1Q10
First Quarter Highlights
- Earnings per share of 33.2 cents, up 13%
- QCLNG Engineering, Procurement and Construction contracts signed
- Contract signed with CNOOC for 20-year sale of 3.6 mtpa of LNG from QCLNG
- Heads of agreement with Tokyo Gas for 20-year sale of 1.2 mtpa of LNG from QCLNG
- Further development progress and successful appraisal results on Tupi, Santos Basin, Brazil
- Acquisition of further US shale gas interests
- Disposal of US power plants and BG Group's interest in Seabank in the UK
BG Group's Chief Executive, Frank Chapman said, "This is a good set of operating results, complemented by excellent project rogress which further de-risks our key ventures in Australia, Brazil, the UK and the USA. We have also continued the strengthening and rebalancing of our global portfolio with the expansion of our US upstream position, which will take our US reserves and resources to around 5 trillion cubic feet."
Revenue and other operating income of $4 647 million was 4% higher, reflecting a 6% increase in E&P production volumes and higher oil and liquids prices, partially offset by lower realised gas prices in the E&P and LNG segments.
Total operating profit of $1 995 million was 9% higher, reflecting the increase in revenue and other operating income and a lower exploration charge.
Cash generated by operations increased by 26% to $2 508 million.
Net finance costs were $49 million lower than 2009 as a result of foreign exchange gains of $51 million in the quarter. At the end of the quarter, the gearing ratio of the Group was 16%.
The Group's effective tax rate (including BG Group's share of joint venture and associates' tax) was 42.0% (2009 42.5%).
Capital investment in the quarter of $1 901 million reflected continuing investment in E&P ($1 030 million), LNG ($799 million), T&D ($52 million) and Power ($20 million).
Revenue and other operating income of $2 294 million was 25% higher, reflecting a 6% increase in production volumes and higher oil and liquids prices, partially offset by lower realised gas prices. Total operating profit was 43% higher as a result of the increase in revenue and other operating income and a lower exploration charge.
Production volume growth in the quarter was driven by higher volumes in the USA and Australia and the ramp-up of production at Hasdrubal in Tunisia. BG Group continues to expect only slight production growth for the full year. The 17% fall in the Group's average realized gas price per produced therm to 37.37 cents reflected lower UK gas contract prices, lower market prices in the UK and the lagged effect of oil market price changes on realizations in Tunisia and Thailand.
The exploration charge of $104 million is $148 million lower than 2009 as a result of lower well write-offs. Unit operating expenditure increased to $6.95 per barrel of oil equivalent, principally reflecting changes in the production mix and a more extensive well work-over programme in the UK.
Capital investment of $1 030 million in the quarter comprised investment in Americas ($401 million), Europe and Central Asia ($271 million), Africa, Middle East and Asia ($243 million) and Australia ($115 million).
First quarter business highlights
In March, BG Group announced the completion of a drill stem test on the Tupi North-East well in BM-S-11 (BG Group 25%) in the Santos Basin, offshore Brazil. Potential production from the well is estimated at around 30 000 bopd. BG Group and partners also completed a further successful Tupi appraisal well, situated 12.5 kilometers north of the Tupi discovery well. Further evaluation of the well data is ongoing and work on optimizing field development options continues to advance.
In the North Sea, BG Group and its partner have approved submission of the Field Development Plan for the Pi project to the Norwegian Ministry. The Pi project will be developed via a tie-back to BG Group's existing Armada infrastructure in the UK. Production is due to begin by 2012.
BG Group and partners continue to progress towards first production from the Jasmine field in 2012. In the first four months of 2010, five of the nine major contracts related to this significant development were awarded, including the drilling rig and fabrication of the jacket and topsides.
In April, BG Group signed an agreement to purchase Common Resources, L.L.C. (Common) jointly with EXCO Resources, Inc. (EXCO) for approximately $446 million ($223 million net to BG Group). Common owns producing assets, gathering lines and acreage in potentially highly productive areas in Shelby, San Augustine and Nacogdoches Counties, Texas. The assets acquired include seven producing wells and approximately 29 200 net acres prospective for the Haynesville and Bossier shales. BG Group and EXCO will each acquire 50% of Common, and development of these assets will be governed by the existing joint venture. The acquisition is expected to complete by May 12. On completion of the acquisition, BG Group's total estimated net reserves and resources in the USA will amount to
around 5 tcf.
LNG total operating profit for the quarter was $633 million. BG Group's share of total operating profit from liquefaction activities was $5 million lower at $83 million as a result of lower prices at Atlantic LNG.
Shipping and marketing total operating profit was 25% lower than in first quarter 2009, principally reflecting lower realizations. This performance was ahead of BG Group expectations as a result of a higher than anticipated level of diversions. BG Group confirms its 2010 operating profit guidance of $1.8 billion to $2.0 billion for the LNG segment. Capital investment of $799 million in the quarter included $492 million arising on recognition of a finance lease under IAS 17, following the commissioning of a natural gas liquids-stripping facility at Lake Charles in the USA, $186 million related to LNG ships and $114 million in Australia.
In February, BG Group announced it had signed the plant Engineering, Procurement and Construction contracts with Bechtel companies for the Queensland Curtis LNG (QCLNG) liquefaction plant in Queensland. Under the contracts, Bechtel has been issued interim notices to proceed with engineering works and the procurement of plant long-lead items, including compressors and storage tanks. QGC has begun to commit to contracts under plans to procure long-lead items during first half 2010, valued at more than US $3 billion.
In February, BG Group and Australia Pacific LNG (APLNG) agreed a framework for the development of jointly owned coal seam gas tenements ATP 648P and ATP 620P. BG Group also entered into conditional gas purchase agreements with APLNG under which BG Group expects to buy around 190 petajoules (PJ) of gas over an initial period of around two years from APLNG, reducing thereafter to an average of 25 PJ per annum.
In March, BG Group signed a LNG sales contract with the China National Offshore Oil Corporation (CNOOC) concluding negotiations announced in May 2009 for the supply of 3.6 mtpa of LNG over a 20-year period. CNOOC will be supplied with LNG manufactured at the QCLNG facility which is planned to come onstream by 2014. BG Group may also supply CNOOC from the Group's global LNG portfolio. Additionally, CNOOC will acquire a 5% equity interest in the reserves and resources of certain BG Group tenements in the Walloons Fairway of the Surat Basin in Queensland. CNOOC will also become a 10% equity investor in the first of two liquefaction trains which will form the first phase of the QCLNG development. In addition, BG Group and CNOOC have agreed to participate jointly in a consortium to construct two LNG ships in China that will be owned by the consortium.
All of these agreements are conditional on relevant approvals and on BG Group making a final investment decision on QCLNG, expected later this year.
In March, BG Group announced it had signed Heads of Agreement with Tokyo Gas, for the supply of LNG from the Group's QCLNG project. Tokyo Gas will buy 1.2 mtpa from 2015 which will be supplied from the QCLNG facility and also from the Group's global LNG portfolio. Additionally, Tokyo Gas will acquire a 1.25% interest in the reserves and resources of certain BG Group tenements in the Walloons Fairway of the Surat Basin in Queensland. Tokyo Gas will also become a 2.5% equity investor in the second of the two liquefaction trains. BG Group and Tokyo Gas intend to execute fully termed agreements by the end of 2010. These agreements will represent the first purchase by a Japanese company of LNG from coal seam gas.
In March, the Group announced it had agreed long-term contracts for the sale of a total of 1.5 mtpa of regasified LNG to six power generating companies in Singapore. This is the first tranche of contracts to be confirmed under the LNG aggregator agreement entered into by BG Group and the Energy Market Authority of Singapore in June 2009. BG Group has the sole right to supply up to 3 mtpa to the Singaporean market under gas sales agreements with a term of up to 20 years.
In total, BG Group has now secured up to 9.5 mtpa of long-term LNG sales in Chile, China, Japan and Singapore.
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