BG Group Earnings Down, Production Up

In its third quarter 2015 financial results, BG Group plc revealed its EBITDA was down 37 percent year on year, to $1.244 billion, and stated that its full year production guidance has been increased to between 680,000 and 700,000 barrels of oil per day.

Earnings at the EBIT level decreased 70 percent, year on year, to $384 million in 3Q 2015 and the company’s net cash flow from operating activities also reduced by 52 percent to $2.728 billion. BG’s revenue and other operating income fell by 9 percent to $4.147 billion, although the group’s net debt reduced by 14 percent to $9.584 billion. A cost and efficiency program implemented by the company is “progressing well”, according to BG, and remains on track to deliver “at least” $300 million target savings for 2015. Capital expenditure is also expected to be around 30 percent lower this year, compared to 2014, at around $6.5 billion.

Production in the quarter reached 716,000 barrels of oil equivalent per day, which marked an increase of 26 percent compared to the third quarter of 2014. Growth in the third quarter was driven by ramp-ups in Australia, Brazil and Norway, with volumes in Australia almost trebling to 98,000 barrels of oil equivalent per day and almost doubling in Brazil to 158,000 barrels of oil equivalent per day. In Norway, Knarr ramped-up to 13,000 barrels of oil equivalent per day in the quarter. Following its production increase, the company has escalated its outlook for 2015 production volumes to between 680,000 and 700,000 barrels of oil equivalent per day.

BG Group’s Chief Executive, Helge Lund, commented in a company statement:

“Our teams delivered another strong operational performance in the third quarter. In our upstream business, we maintained positive momentum in our growth projects in Australia and Brazil, and we continued to improve reliability and efficiency in our base assets. We are now increasing our full year guidance for production to 680,000 to 700,000 thousand barrels of oil equivalent per day. Our LNG operations had a robust operating performance, despite challenging market conditions, and we have maintained our EBITDA guidance for 2015.

“We are on track to deliver our promised operating and capital cost savings for 2015 and are adding new low cash cost volumes through Australia and Brazil. These actions will help mitigate the impact of lower commodity prices on our financial results.  We continue to work with Shell on integration planning and to secure the necessary regulatory approvals ahead of the shareholder vote. The transaction remains on track to complete in early 2016.”

Royal Dutch Shell announced Apr 8 that it had reached an agreement to acquire BG Group. The transaction is expected to be finalized in early 2016, according to BG, and Jefferies International Limited has stated that the probability of the deal completing is "very high". The company’s year on year financial losses and subsequent production increase marks a trend among energy majors, with Eni S.p.A and Total announcing similar actions yesterday.