BG Posts First Quarter Results, Makes Progress in Key Growth Areas

First Quarter Highlights

  • Profit and cash flow resilience delivered from integrated gas business model
  • Total operating profit £1 275 million, earnings per share 20.5 pence
  • Continued exploration success in pre-salt Santos Basin, Brazil
  • Tupi flowed oil on April 25 for the commissioning of its FPSO
  • Acquisition of Pure Energy in Australia

BG Group's Chief Executive, Frank Chapman said, "The strength of BG Group's integrated gas business is reflected in the distinctive resilience of our profits and cash flow in this challenging economic environment. We have also continued to make progress in key growth areas of our business, with the acquisition of Pure Energy in Australia, continued exploration success in Brazil and the development of projects across the portfolio."

First quarter

Revenue and other operating income of £3 095 million was in line with 2008 as higher gas prices, a favourable sales mix and the effect of a stronger US Dollar offset lower oil prices.

Total operating profit of £1 275 million was 9% lower than 2008. This resilient performance, in the face of challenging economic conditions, reflects the strength of BG Group's integrated gas business model. LNG and T&D posted strong profits and in E&P, firmer gas prices, improved sales mix and favourable US$/UK£ exchange rates mitigated the effect of lower oil prices, a higher exploration charge and lower production volumes. Cash generated by operations of £1 392 million covered capital investment of £1 311 million; which included the acquisition of Pure Energy Resources Limited (Pure Energy). At the end of the quarter, the gearing ratio of the Group was 9%.

Net finance costs were £36 million higher principally due to lower cash balances and interest rates.

The Group's effective tax rate (including BG Group's share of joint venture and associates' tax) was 42.5% (2008 43.0%) for the quarter.

Capital investment in the quarter of £1 311 million included £464 million on the acquisition of Pure Energy, and continuing investment in E&P (£711 million), LNG (£104 million), T&D (£29 million) and Power (£3 million).

First quarter business highlights

On March 27, BG Group completed the acquisition of Queensland Gas Company Limited (QGC).

During the quarter, BG Group Australia was established as a new region within BG Group's organization, and Catherine Tanna was appointed as Executive Vice President and Managing Director, Australia. The region covers all of BG Group's interests in Australia, including the development of QGC's coal seam gas resources, domestic gas marketing and the Queensland Curtis LNG export facility.

In April, BG Group announced it had acquired over 99% of the ordinary share capital of Pure Energy under its recommended all cash takeover offer. The offer at A$8.25 per share valued Pure Energy's ordinary equity at £464 million. BG Group is in the process of completing the compulsory acquisition of the remaining Pure Energy shares. The acquisition of Pure Energy brings additional coal seam gas reserves and resources to BG Group at a low cost, located adjacent to key QGC licences in the Surat Basin. In addition, the acquisition brings large tracts of prospective coal seam gas acreage in Queensland's Bowen Basin. In total, BG Group now owns interests in onshore concessions in Australia covering more than 130 000 square kilometers.

Exploration and Production (E&P)

First quarter

E&P total operating profit was £583 million. Excluding the exploration charge, total operating profit was 27% lower at £760 million. The resilience of this performance, in the face of sharply lower oil prices, was due to firmer gas price realisations, BG Group's success in improving its sales mix and the translation effect of a stronger US Dollar.

Volumes were 2.8 mmboe lower principally due to the expected depletion of Atlantic/Cromarty in the UK and lower local demand in Kazakhstan, Thailand and Brazil. Production guidance for the year is unchanged at 680 000 barrels of oil equivalent per day based on new projects due on stream later in the year and other production opportunities in the portfolio.

Unit operating expenditure fell to $5.44 per barrel of oil equivalent.

The exploration charge of £177 million is £80 million higher than 2008, principally due to the phasing of exploration activity and the impact of the US$/UK£ exchange rate on costs.

Capital investment of £1 175 million included expenditure in Australia (£511 million including £464 million on the acquisition of Pure Energy), Egypt (£114 million), UK (£102 million), Tunisia (£93 million) and Brazil (£77 million).

First quarter business highlights

In Thailand, BG Group has agreed to acquire all the shares of Petroleum Resources (Thailand) Pty Limited (PRT). PRT holds a 16.67% participating interest in the Blocks 7, 8 and 9 Concession (B789) and a 16.67% interest in an Overriding Royalty Agreement (ORRA) covering production from Block 9a in the Gulf of Thailand. Prior to this transaction, BG Group held a 50% interest in B789 (and operatorship) and a 50% interest in the ORRA.

In Brazil, the Tupi field flowed oil on 25 April as BG Group and partners began commissioning in preparation for first commercial production, expected imminently. A second well, Tupi P1, which commences drilling in June, will also be tied back to the FPSO. The extended well test is scheduled to last for 15 months and production is expected to peak at around 15 000 barrels per day.

In April, BG Group and its partners made a new discovery in the pre-salt Santos Basin, offshore Brazil. The exploration well, known as Iguacu, has proven the presence of another accumulation of light oil, in the BM-S-9 concession. This is the third discovery by BG Group and partners in the BM-S-9 concession. Further evaluation of the discovery will continue in line with the National Petroleum Agency approved evaluation plan.

In April, BG Group encountered hydrocarbons in a pre-salt reservoir with the Corcovado-1 exploration well (BM-S-52 concession - Santos Basin). The well has reached its target depth and logging operations are ongoing. BG Group will move operations to Corcovado-2 on completion of the current well. BG Group is the operator of the BM-S-52 concession during the exploration phase and has a 40% interest in the concession, alongside partner Petrobras with a 60% interest.

In Egypt, BG Group was awarded Block 1, North Gamasa Offshore (BG Group 100%) in the latest licensing round of blocks by the Egyptian National Gas Holding Company.

Liquefied Natural Gas (LNG)

First quarter

LNG total operating profit increased by £183 million to £578 million.

Shipping and marketing performed well in a seasonally strong quarter with total operating profit increasing by £160 million to £543 million principally due to higher realisations and the impact of a stronger US Dollar.

BG Group's share of operating profit from liquefaction activities increased by £35 million to £61 million reflecting a 13% increase in volumes, the impact of the stronger US$/UK£ exchange rate and higher operating profits at Egyptian LNG.

BG Group's guidance for LNG segment operating profit is unchanged at £1.4 to £1.5 billion for 2009 and £1.2 to £1.3 billion for 2010.

Capital investment of £104 million in the quarter included £69 million relating to LNG vessels, £17 million in Chile and £12 million in Australia.

First quarter business highlights

On February 3, BG Group entered into an agreement with the Queensland Government to acquire a 270 hectare site at North China Bay on Curtis Island, the site of the proposed Queensland Curtis LNG project near Gladstone. The project remains on track for a final investment decision in 2010.

In February, BG Group successfully launched its first new-generation LNG carrier at the Samsung shipyard in Korea. The ship, to be delivered in 2010, will be the first of four 170 000 m3 LNG carriers for BG Group with dual-fuel diesel electric (DFDE) propulsion. The ships will be the first DFDE ships in the world to integrate an onboard reliquefaction system, allowing natural gas boil-off to be consumed for propulsion or reliquefied and returned to cargo tanks.