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BG Group (BG.)

  Print      Mail a friend       Annual reports

Thursday 03 May, 2012

BG Group

1st Quarter Results

RNS Number : 6286C
BG GROUP plc
03 May 2012
 

First Quarter Key Points

 

 

· Total operating profit up 21% to $2.4 billion

· Cash generated by operations up 47% to $2.6 billion

· LNG operating profit up 42% to $812 million

· E&P production up 5% to 60.9 mmboe

· New projects onstream in Norway, Thailand, Bolivia and Egypt

· Fourth gas discovery in Tanzania, mean total gross recoverable resources approaching 7 tcf

· Execution of funding plan on track, with disposals and new funding agreements announced

 

 

 

 

 

First Quarter

 

Business Performance(a)

2012
$m

2011
$m

 

Total operating profit including share of pre-tax operating results

from joint ventures and associates

2 373

1 965

+21%

Earnings for the period

1 267

819(b)

+55%

Earnings per share

37.3c

24.2c

+54%

 

 

 

 

Total results for the period (including disposals, re-measurements and impairments)

 

 

 

Operating profit before share of results from joint ventures and associates

2 186

1 426

+53%

Total operating profit including share of pre-tax operating results

from joint ventures and associates

2 317

1 552

+49%

Earnings for the period continuing operations

1 219

595(b)

+105%

Earnings per share continuing operations

35.9c

17.5c

+105%

a) 'Business Performance' excludes disposals, certain re-measurements and impairments as exclusion of these items provides a clear and consistent presentation of the underlying operating performance of the Group's ongoing business. During the first quarter, total results included a post-tax charge of $44 million (2011 $223 million charge) in respect of disposals, re-measurements and impairments. This included a post-tax charge of $36 million (2011 $281 million charge) in relation to
mark-to-market movements on long-term commodity contracts and economic hedges. For further information see Presentation of Non-GAAP measures (page 11) and notes 1 to 3 (pages 18 to 20). Unless otherwise stated, the results discussed in this release relate to BG Group's Business Performance.

b)  Includes a charge in respect of prior period taxation (Business Performance $195 million, Total Results $148 million) arising on the revision of deferred tax balances at
1 January 2011 due to changes in UK taxation rates.

 

 



 

BG Group's Chief Executive, Sir Frank Chapman said:

"BG Group has posted a strong set of first quarter results with total operating profit up 21% to
$2.4 billion, earnings up 55% to $1.3 billion and cash generated by operations up 47% to
$2.6 billion."

"Our exploration and production business delivered a 5% increase in volumes and total operating profit for our LNG business was up 42% to $812 million, boosted by continuing strong demand from Asian markets."

"This year we have brought key new developments into production, continued to make material progress across our major projects, and we announced further exploration success."

Sir Frank added, "four of our 2012 projects were successfully brought onstream and began production build-up."

"In Egypt, phase seven of the West Delta Deep Marine development was brought online; offshore Norway, we achieved first production from the Gaupe field; in Thailand, new facilities at Greater Bongkot South began delivering volumes; and, in Bolivia, the first phase of production from the Margarita field commenced."

"These new sources of production will, at plateau, add around 50 000 barrels of oil equivalent per day net to the Group's production; helping to keep us on track to deliver our 6% to 8% annual average growth rate through to 2020."

On BG Group's major projects Sir Frank said, "we're making rapid progress in Brazil with the development of the 'big five' Santos Basin discoveries. A fourth producing well has been connected to FPSO1 and the construction and conversion programmes for the further 12 FPSOs continue to advance providing tangible progress towards 2.3 mmboe per day of installed capacity by 2017."

"In Australia, we have increased drilling capacity as planned and delivered over 70 wells in the quarter; 31 in the month of March. Significant upstream contract awards for facilities and infrastructure are progressing. At the LNG plant on Curtis Island, dredging continues to progress to schedule; construction of the two LNG storage tanks is ongoing; and the first of 47 modules from Thailand is due for delivery in the second half of 2012. Despite cost pressures, the project remains firmly on track for first LNG in 2014."

Sir Frank continued, "in addition to project delivery, the Group continued to enjoy exploration and appraisal success, maintaining our position as one of the industry's leading explorers."

"In Tanzania, a fourth consecutive success in this emerging new province raised the estimated gross mean recoverable resources to approaching some 7 trillion cubic feet of gas. Offshore Brazil, a new appraisal well confirmed the westerly extension of the Iara accumulation in the BM-S-11 concession, underlining the potential of the Group's interests in the world-class pre-salt Santos Basin."

Commenting on the Group's funding programme, Sir Frank highlighted that, "since the start of the year, BG Group has met important milestones, executing a Memorandum of Understanding to sell our stake in Comgás and reaching an agreement for the sale of the Quintero regasification terminal in Chile; we are also moving further ahead with our plans to divest our interests in
gas-fired power generation plants in the Philippines. The execution of our funding plan was complemented by an agreement with Export Development Canada for a credit facility of
$500 million and, also, by the acceptance from the Brazilian Federal Development Bank of
BG Group's eligibility for up to $1.8 billion in long-term financing for its projects in Brazil."

Sir Frank also remarked upon the Elgin incident in the UK North Sea, in which BG Group holds a 14.11% interest, "we continue to work closely with the operator, Total, to ensure the issue is resolved in a safe and timely manner."

In conclusion, Sir Frank said, "BG Group has delivered significantly stronger financial results in the first quarter and with new production coming onstream, further progress on our major projects, and continued exploration success, we remain firmly on track to achieve our long-term objectives."

Business Review - Group

 

First Quarter


 

Business Performance

2012
$m

 

2011   
$m   

 

 

Revenue and other operating income

5 776

 

4 803

 

+20%

 

 

 


 

 

 

 

 


 

 

Exploration and Production

1 449

 

1 258

 

+15%

Liquefied Natural Gas

812

 

570

 

+42%

Transmission and Distribution

118

 

145

 

-19%

Other activities

(6)

 

(8)

 

-25%

Total operating profit including share of pre-tax results from joint ventures and associates

2 373

 

1 965

 

+21%

 

 

 


 

 

Net finance costs

(41)

 

(79)

 

-48%

Taxation for the period

(1 049)

 

(1 044)(b)

 

-

Earnings for the period

1 267

 

819(b)

 

+55%

 

 

 


 

 

Earnings per share (cents)

37.3c

 

24.2c

 

+54%

 

 

 


 

 

Cash generated by operations

2 645

 

1 799

 

+47%

 

 

 


 

 

Capital investment on a cash basis(a)

2 505

 

2 406

 

+4%

a)  For a definition of capital investment on a cash basis see Glossary (page 31). For a reconciliation between capital investment on a cash basis and total capital investment see Supplementary Information (page 26).

b)  Includes a charge of $195 million in respect of prior period taxation arising on the revision of deferred tax balances at 1 January 2011 due to changes in UK taxation rates.

First quarter

Revenue and other operating income increased by 20% to $5 776 million, reflecting the benefit of higher realised prices, continued strong demand for the Group's LNG cargoes, particularly from Asia, and a 5% increase in E&P production volumes.

Total operating profit in the quarter increased by 21% to $2 373 million as a result of the increase in revenue and other operating income and a lower exploration charge.

Cash generated by operations increased by 47% to $2 645 million, primarily as a result of higher profits and a lower working capital cash outflow.

The Group's effective tax rate (including BG Group's share of joint venture and associates' tax) was 45% for the quarter, in line with the underlying rate for 2011 excluding the $195 million charge in respect of prior period taxation.

As at 31 March 2012, the Group's net debt was $11 551 million. The average maturity of the Group's gross borrowings remained at around 10 years and the gearing ratio, at 26.6%, was slightly lower than at the end of the fourth quarter 2011. During the quarter, BG Group received initial approval from the Brazilian Federal Development Bank (BNDES) for up to $1.8 billion of long-term finance to fund part of the company's interests in the pre-salt Santos Basin, offshore Brazil. In April, BG Group signed a $500 million credit agreement with Export Development Canada. These agreements further diversify BG Group's long-term international funding sources and help underpin the delivery of the Group's global growth programme.

Net finance costs of $41 million included $21 million of interest received on tax refunds and foreign exchange losses of
$9 million (2011 net finance costs of $79 million including foreign exchange losses of $22 million).

Organic capital investment on a cash basis of $2 505 million in the quarter comprised investment in E&P
($1 806 million), LNG ($613 million) and T&D ($86 million). This investment focused primarily on the Group's major projects in Australia, Brazil and the UK, and represented a 20% increase in organic capital investment compared with the first quarter 2011, in line with our business plan. Further details on project developments are provided in the first quarter business highlights section.

Industry Trends

Despite the uneven nature of the global recovery, global energy prices remain relatively robust. Brent crude oil averaged $118 per barrel in the first quarter, elevated at least partly by rising geopolitical tensions around Iran. Lower crude inventories globally, outside of the USA, and the perceived limited spare capacity of the major players are also contributing, together with outages in a number of producers including Nigeria and Sudan. West Texas Intermediate (WTI) remains at a discount relative to Brent, averaging $101 per barrel; the differential is largely driven by historically high levels of crude inventories at Cushing, the delivery point for WTI-marker crude.

Henry Hub prices, in marked contrast to other energy prices, remain at relatively low levels, averaging $2.74 per million British thermal units (mmbtu) in the first quarter, compared to $4.11 and $3.55 per mmbtu in the first and fourth quarters of 2011, respectively. Although demand has improved, recording an additional 1.7 billion cubic feet per day (bcfd) in 2011 compared with 2010, production has increased much faster (4.6 bcfd), even though companies are reducing rig counts. As of 16 April 2012, gas-directed horizontal rigs numbered 425, a reduction of over 27% (160 rigs) from the beginning of the year. This reduction was not able to offset the rise in gas associated with liquids production and the effects of a warmer than normal winter, both of which have led to record high inventory levels (2 482 bcf in storage at the end of the first quarter, 57% higher than last year). In April, prices averaged $1.94 per mmbtu.

In terms of global LNG markets, January saw record high flows from the Atlantic Basin to Pacific Basin markets as demand in Asia continued to pull increasing volumes into the region and away from Europe. LNG supply levels in January were approximately 264 million tonnes per annum (mtpa). However, supply growth is slowing, with no new trains due to come online until Pluto LNG Train 1 (T1) and Angola LNG T1 in the second quarter.

On the demand side, Japanese LNG imports reached record levels reflecting the effects of further nuclear units going offline, winter weather and stronger economic performance. As a result, Asian spot LNG prices were significantly higher, averaging some $16.00 per mmbtu in the first quarter versus $9.93 per mmbtu in the first quarter of 2011. Prices have however fallen somewhat from their recent peaks in the $17 to $18 per mmbtu range, but are expected to stay near current levels if nuclear capacity remains offline for the foreseeable future.

UK imports continued to hold at approximately 12 mtpa, with National Balancing Point (NBP) prices averaging
$9.35 per mmbtu in the first quarter, above the $9.06 and $8.94 per mmbtu averages in the first and fourth quarters of 2011, respectively.

 

First quarter business highlights

Australia

The Queensland Curtis LNG (QCLNG) project progressed well as some $1.1 billion was invested during the first quarter in the parallel projects of upstream development of gas and water treatment facilities, the 540 kilometre pipeline network, and the first phase two-train LNG plant.

In the upstream, three further petroleum leases were granted in the quarter taking the total number of leases held to
22 in the core Surat Basin acreage. The remaining seven petroleum leases required for first LNG in 2014 are expected to be granted during the remainder of 2012, in line with BG Group's plan.

Over 70 wells were delivered in the quarter (31 in March), as drilling capacity increased in line with plans. Drilling activities will continue to ramp up as the rig count increases from the current six to 11 rigs in the second half of the year. Some 800 wells have been drilled to date.

The first water treatment plant, at Windibri, was commissioned and treated water is being provided to the Condamine power station. The Windibri plant has a capacity of some six million litres per day.

Field compressor station (FCS) construction activities progressed at Argyle and Bellevue and a significant contract was awarded for six further FCSs and one central processing plant (CPP). Further, the award of an additional 13 FCSs and 3 CPPs is currently being evaluated.

All of the 42" gas collection header, totalling almost 200 kilometres, has now been strung out along the pipeline route, welding is advancing and pipeline trenching and laying has commenced. Way-leave clearance continued for the
340 kilometre main trunkline to Curtis Island.

Construction of the LNG plant is moving ahead well, with work continuing in both Thailand and on Curtis Island.

In Thailand, construction of 47 modules progressed well with piping, mechanical and cable ladder construction underway. The first module is on schedule for delivery in the second half of 2012. On Curtis Island, notable achievements included completion of dredging in and around the jetty berth, delivery of the first shipment of the LNG tank roof plates and completion of pile driving on the heavy lift dock. The first quarter also saw ongoing construction of the two LNG storage tanks and the completion of the QCLNG site offices on Curtis Island and subsequent construction team relocation.

QCLNG is therefore making good progress towards first LNG in 2014, in a busy Australian construction environment. Increasing costs for local goods and services, although mitigated through early implementation and contracting strategies, are clearly evident from ongoing upstream tendering. BG Group now estimates that the QCLNG sanctioned investment of $15 billion1 will increase by 19% due to local market effects, increased costs of compliance with regulatory processes and some scope change. This underlying cost increase, combined with the 20% appreciation of the Australian dollar, yields a revised QCLNG investment of $20.4 billion2 and an upstream unit capex of $9 per boe3.

Bolivia

In May, BG Group announced the start-up of production from Margarita Phase I. This development phase represents a key milestone in the continued development of the Caipipendi block. Margarita is expected to produce some
40 000 barrels of oil equivalent per day (boed) net to BG Group by the end of 2014, following completion of the Phase II project sanctioned in July 2011.

Brazil

In Brazil, all aspects of developing the 'big five' Santos Basin fields are progressing according to plans.

This progress, as well as strategic objectives and future outlook, was presented during a February analyst/investor visit to Rio de Janeiro hosted by BG Group. The visit also included third-party supplier site visits and presentations from partners. Key messages included: the stable business environment in Brazil; fast track developments with production already underway; field development plans in place, with substantial opportunities for enhancement as experience is gained; improved drilling performance and significant economies of scale; gas evacuation optimisation to enhance oil recovery; local content requirements being exceeded with quality and depth from local suppliers; very strong partner alignment; and BNDES support for BG Group's Santos Basin investments.

 

 

1.   2011 to 2014 capex at the 2011 BG Group reference exchange rate of US$1:A$1.2 as announced on 8 February 2011.

2.   At the 2012 BG Group reference exchange rate of US$1:A$1.

3.   Reference $8 per boe presented in QCLNG economics summary in 9 February 2012 Strategy Presentation.



 

First quarter business highlights (continued)

Brazil (continued)

Strong progress continues with the floating production, storage and offloading vessels (FPSOs). A fourth producing well has been connected to FPSO1. FPSOs 2 to 5 are on schedule with the latest FPSOs exhibiting lower unit costs than previous vessels. FPSO 2 is now over 85% complete, in line with plans and expected to start up in the first half of 2013. The hull conversion for FPSO 3 has been completed in Singapore; this vessel is now 75% complete and is due to sail to Brazil for integration of topsides in the second quarter, in line with plans to bring the unit onstream in 2013. Hull conversion is ongoing in China for FPSOs 4 and 5, which are both around 15% complete, and integration activities will take place in Brazil ahead of planned start-up in 2014. The fabrication of hulls for FPSOs 6 to 13 continues in the Rio Grande de Sul shipyard in Brazil.

In March, BG Group announced the start of a new extended well test (EWT) in the Iracema area of the BM-S-11
(BG Group 25%) concession. The EWT is expected to span approximately a six month period, gathering technical information on reservoir behaviour and production performance. The well has been producing around
12 000 barrels of oil per day (bopd), constrained by facilities. The information gathered will support the development of the permanent 150 000 bopd capacity FPSO Cidade de Mangaratiba, planned to be in operation in 2014.

In April, BG Group announced the completion of drilling at the Iara West appraisal well in the BM-S-11 concession. Good quality oil samples were encountered and the results confirmed the westerly extension of the Iara accumulation in the pre-salt Santos Basin and demonstrate the high potential of the reservoirs within that area. Iara West is the third well drilled in the Iara area and is part of the fast-track programme to develop the Santos Basin discoveries. BG Group and its partners will continue to appraise the area, including production tests to evaluate reservoir performance.

Norway

In April, BG Group announced the start-up of production from the Gaupe field (BG Group 60% and operator) located in the Norwegian North Sea. Gaupe marks BG Group's first production from the Norwegian Continental Shelf and the project has been delivered on budget and just four years after the declaration of commerciality. The Gaupe field is a cross-border sub-sea tie-back to the BG Group-operated Armada infrastructure located in the UK central North Sea. Production from Gaupe is expected to reach a plateau rate of around 15 000 boed gross during the third quarter of 2012.

Tanzania

In March, BG Group announced its fourth Tanzanian gas discovery with the Jodari-1 (BG Group 60% and operator) exploration well located in Block 1, 39 kilometres offshore southern Tanzania. Preliminary evaluation of the well results indicates gross recoverable resources are in the range of 2.5 to 4.4 trillion cubic feet (tcf) of gas. This is the fourth consecutive successful well drilled in Tanzania, resulting in mean total gross recoverable resources estimated to be approaching some 7 tcf of gas. The Jodari-1 well is the first of a three-to-four well exploration programme, which also includes the acquisition of 2 500 square kilometres of 3D seismic data in Block 1. The next target, currently drilling, is the Mzia-1 location in Block 1, 23 kilometres to the north of Jodari-1.

Thailand

In April, BG Group announced the start of production from the Greater Bongkot South field (BG Group 22.22%) in the Gulf of Thailand, 70 kilometres south of the existing Bongkot North development. Greater Bongkot South has new standalone facilities with processing capacity of 350 million cubic feet of gas and 15 000 barrels of condensate per day. Once plateau production is achieved, Greater Bongkot South will deliver some 14 000 boed net to BG Group. Production is expected to reach plateau in the second quarter of 2012. This development represents a key milestone in the continued development of the Greater Bongkot area.

UK 

On 25 March, production at Elgin/Franklin (BG Group 14.11%, non-operated) was shut-in due to a well control issue on the Elgin platform. BG Group production up to 25 March had reached 1.3 mmboe. In the Group's business plan for 2012, the total expected production was 6.4 mmboe.

In April, the operator of the Jasmine field (BG Group 30.5%, non-operated) advised that production start-up is not now expected until 2013.

Uruguay

In April, BG Group successfully bid for three offshore blocks (8, 9 and 13) in the licensing round held by the Republic of Uruguay. The bid commits BG Group to a seismic work programme of 13 000 square kilometres intended to evaluate the awarded blocks in the first three year exploration phase.



First quarter business highlights (continued)

USA

In April, a proposal for a LNG liquefaction project at Lake Charles in Louisiana was filed with the Federal Energy Regulatory Commission (FERC). The project is at a design and permitting stage and is planned to export up to
15 million tonnes per annum (mtpa) of LNG. BG Group has previously received US Department of Energy (DOE) authorisation for LNG export from the Lake Charles terminal to countries with which the USA has a free trade agreement (FTA). BG Group is also awaiting authorisation from the DOE on an application for LNG export from Lake Charles to non-FTA countries.

In April, FERC granted the operator approval to construct and operate facilities for the liquefaction and export of LNG from the Sabine Pass liquefaction terminal in the USA. Significantly, the Sabine Pass terminal, from which BG Group has an agreement to purchase 5.5 mtpa of LNG, now has the key approvals required from the DOE and FERC which will allow the project to proceed. LNG exports from the Sabine Pass facility are expected to commence in 2015.

As planned, given the weak pricing environment in the USA, the Group continues to reduce its rig count and had
11 rigs in operation as at the end of April.

Capital expenditure and funding plan

Following the update on costs for the QCLNG project (page 5) and refinements to the Group's portfolio rationalisation programme, BG Group now expects its capital expenditure to increase from $10.6 billion to $11.5 billion in 2012, and from $11.4 billion to $12.0 billion in 2013 on a cash basis. In aggregate, this equates to a 7% increase in the Group's capital expenditure programme for the 2012 to 2013 period.

During the first few months of 2012, BG Group made significant progress in the execution of its funding plan. In May, and as part of its portfolio rationalisation programme, BG Group signed a Memorandum of Understanding with
Cosan S.A. Indústria e Comércio for the sale of BG Group's 60.1% interest in Comgás, Brazil's largest gas distribution company, for Brazilian Reais 3.4 billion (some $1.8 billion at the current exchange rate). In addition, net borrowings attributable to Comgás as at 31 March 2012 were $1.1 billion; this transaction therefore would lead to some $2.9 billion reduction in the Group's net debt.

In April, BG Group announced that subject to certain consents and regulatory approvals, it had entered into an agreement to sell the Group's 40% share in GNL Quintero S.A. (GNLQ) for up to $352 million.

In May, BG Group sold its entire shareholding of 73.9 million shares (8%) in Senex Energy Limited in Australia for a total of A$75 million ($78 million).

BG Group has also further advanced negotiations on the sale of the Group's interests in two gas-fired power generation plants in the Philippines, Santa Rita and San Lorenzo, with expected completion in 2012.

In March, BG Group announced it had received initial approval from BNDES for up to $1.8 billion of long-term finance to fund part of the Group's interests in the pre-salt Santos Basin, offshore Brazil. The funding will be allocated to
BG Group's share of local procurement and construction costs for the eight FPSOs that will be owned by BG Group and its partners, as part of the wider first phase Santos Basin development programme that is expected to deliver
2.3 mmboe capacity by 2017.

In April, BG Group announced that it had signed a $500 million credit agreement with Export Development Canada. These agreements are in line with the Group's objective of further diversifying BG Group's international funding sources and help underpin the delivery of the Group's global growth programme.

The progress made so far in the implementation of the Group's funding plan is consistent with the target to release around $5 billion in 2012 and 2013 and the objective to achieve further diversification of long-term funding options.

Exploration and Production (E&P)

 

First Quarter

 

 

Business Performance

2012
$m

 

2011   
$m   

 

 

Production volumes (mmboe)

60.9

 

58.2

 

+5%

 

 

 


 

 

Revenue and other operating income

2 826

 

2 510

 

+13%

 

 

 


 

 

Total operating profit before exploration charge

1 561

 

1 442

 

+8%

Exploration charge

(112)

 

(184)

 

-39%

Total operating profit

1 449

 

1 258

 

+15%

 

 

 


 

 

Capital investment on a cash basis

1 806

 

1 733

 

+4%

Additional operating and financial data is given on page 26.

First quarter

Revenue and other operating income increased by 13% to $2 826 million, reflecting higher realised prices and a 5% increase in production volumes. Total operating profit was 15% higher as a result of the increase in revenue and other operating income combined with a lower exploration charge.

Production volumes in the quarter increased by 5% primarily as a result of the continued ramp up of production in the Group's growth Assets, including Brazil and Australia.

The Group's average realised gas price per produced therm increased by 4% to 41.15 cents; International gas price realisations were 5% higher at 37.79 cents per produced therm reflecting gas prices linked to higher oil market prices, and the average UK realised gas price was 10% higher at 46.59 pence per produced therm primarily as a result of higher contract prices.

The exploration charge of $112 million was $72 million lower primarily as a result of lower well write-off costs. Gross exploration expenditure of $312 million included spend in Tanzania ($97 million), Brazil ($74 million), Australia
($40 million) and the UK ($35 million).

Unit operating expenditure increased to $9.54 per barrel of oil equivalent, principally reflecting changes in the production mix, higher commodity prices and higher maintenance costs.

Capital investment on a cash basis of $1 806 million in the quarter included investment in Australia ($491 million),
Brazil ($313 million), the UK ($298 million), the USA ($218 million) and Egypt ($173 million).

 



Liquefied Natural Gas (LNG)

 

First Quarter

 

 

Business Performance

2012
$m

 

2011   
$m   

 

 

Revenue and other operating income

2 300

 

1 733

 

+33%

 

 

 


 

 

Shipping and marketing

748

 

501

 

+49%

Liquefaction

93

 

87

 

+7%

Business development and other

(29)

 

(18)

 

+61%

Total operating profit

812

 

570

 

+42%

 

 

 


 

 

Capital investment on a cash basis

613

 

599

 

+2%

Additional operating and financial data is given on page 26.

First quarter

LNG total operating profit for the quarter of $812 million was 42% higher than last year as a result of favourable market conditions, with continuing strong demand for cargo deliveries outside of the USA, particularly from Asia. During the quarter, BG Group delivered 91% of cargoes (2011 84%) to global markets outside the USA including 34 to Asia, 12 to South America and two to Europe (2011 21 Asia, 10 South America and 11 Europe). Deliveries to Japan increased from four to 16, reflecting record demand as a result of the combined effects of further nuclear units going offline and stronger economic performance. As a consequence of these additional deliveries to Japan, fewer cargoes were delivered to Europe.

BG Group's share of total operating profit from liquefaction activities increased by 7% to $93 million.

These results are in line with the expected seasonal phasing underpinning the Group's full year guidance for 2012 of between $2.6 and $2.8 billion.

Capital investment on a cash basis of $613 million in the quarter was primarily associated with the development of the QCLNG project.

 

 

 



Transmission and Distribution (T&D)

 

First Quarter

 

 

Business Performance

2012
$m

 

2011   
$m   

 

 

 

 

 

 

 

 

Comgás

633

 

547

 

+16%

Other

270

 

238

 

+13%

Revenue and other operating income

903

 

785

 

+15%

 

 

 


 

 

Comgás before gas cost recovery

109

 

101

 

+8%

Comgás gas cost recovery

(34)

 

(21)

 

+62%

Comgás

75

 

80

 

-6%

Other

43

 

65

 

-34%

Total operating profit

118

 

145

 

-19%

 

 

 


 

 

Capital investment on a cash basis

86

 

74

 

+16%

Additional operating and financial data is given on page 26.

First quarter

Revenue and other operating income increased by 15% to $903 million, principally due to higher prices and volumes at Comgás in Brazil and higher prices at Gujarat Gas in India.

T&D total operating profit decreased by 19% to $118 million. Total operating profit at Comgás of $75 million was 6% lower as a result of the timing effect of gas cost recovery.

Excluding this timing effect, total operating profit at Comgás increased by 8% primarily as a result of higher margins and increased volumes. In the quarter, $34 million was passed back to customers compared with $21 million passed back to customers in 2011. At the end of the quarter, the cost of gas to be recovered in future periods was $111 million.

The $22 million reduction in Other T&D activities' operating profit included the impact of adverse foreign exchange movements and higher gas costs at Gujarat Gas.

Capital investment on a cash basis of $86 million mainly represents the development of the Comgás pipeline network.



 



Presentation of Non-GAAP measures

Business Performance

'Business Performance' excludes discontinued operations and disposals, certain re-measurements and impairments (see below) as exclusion of these items provides a clear and consistent presentation of the underlying operating performance of the Group's ongoing business.

BG Group uses commodity instruments to manage price exposures associated with its marketing and optimisation activity. This activity enables the Group to take advantage of commodity price movements. It is considered more appropriate to include both unrealised and realised gains and losses arising from the mark-to-market of derivatives associated with this activity in 'Business Performance'.

Disposals, certain re-measurements and impairments

BG Group's commercial arrangements for marketing gas include the use of long-term gas sales contracts. Whilst
the activity surrounding these contracts involves the physical delivery of gas, certain gas sales contracts are classified as derivatives under the rules of IAS 39 and are required to be measured at fair value at the balance sheet date. Unrealised gains and losses on these contracts reflect the comparison between current market gas prices and the actual prices to be realised under the gas sales contract and are disclosed separately as 'disposals,
re-measurements and impairments'.

BG Group also uses commodity instruments to manage certain price exposures in respect of optimising the timing and location of its physical gas and LNG sales commitments. These instruments are also required to be measured
at fair value at the balance sheet date under IAS 39 and where practical have been designated as formal hedges. However, IAS 39 does not always allow the matching of fair values to the economically hedged value of the related commodity, resulting in unrealised movements in fair value being recorded in the income statement. These movements in fair value, together with any unrealised gains and losses associated with discontinued hedge accounting relationships that continue to represent economic hedges, are disclosed separately as 'disposals,
re-measurements and impairments'.

BG Group also uses financial instruments, including derivatives, to manage foreign exchange and interest rate exposure. These instruments are required to be recognised at fair value or amortised cost on the balance sheet in accordance with IAS 39. Most of these instruments have been designated either as hedges of foreign exchange movements associated with the Group's net investments in foreign operations, or as hedges of interest rate risk. Where these instruments represent economic hedges but cannot be designated as hedges under IAS 39, unrealised movements in fair value, together with foreign exchange movements associated with the underlying borrowings, are recorded in the income statement and disclosed separately as 'disposals, re-measurements and impairments'.

Realised gains and losses relating to the instruments referred to above are included in Business Performance. This presentation best reflects the underlying performance of the business since it distinguishes between the temporary timing differences associated with re-measurements under IAS 39 rules and actual realised gains and losses.

BG Group has also separately identified profits and losses associated with the disposal of non-current assets, impairments of non-current assets and certain restructuring costs when material, as they require separate disclosure in order to provide a clearer understanding of the results for the period.

For a reconciliation between the overall results and Business Performance and details of disposals,
re-measurements and impairments, see the consolidated income statement (page 13), note 2 (page 19) and note 3 (page 20).

Joint ventures and associates

Under IFRS the results from jointly controlled entities (joint ventures) and associates, accounted for under the equity method, are required to be presented net of finance costs and tax on the face of the income statement. Given the relevance of these businesses within BG Group, the results of joint ventures and associates are presented before interest and tax, and after tax. This approach provides additional information on the source of BG Group's operating profits. For a reconciliation between operating profit and earnings including and excluding the results of joint ventures and associates, see note 3 (page 20).

Net borrowings/funds

BG Group provides a reconciliation of net borrowings/funds and an analysis of the amounts included within net borrowings/funds as this is an important liquidity measure for the Group.

 



Legal Notice

Certain statements included in these results contain forward-looking information concerning BG Group's strategy, operations, financial performance or condition, outlook, growth opportunities or circumstances in the countries, sectors or markets in which BG Group operates. In addition, certain statements and management expectations and opinions set out in the Industry Trends section are forward-looking. Certain statistical information within the Industry Trends section contain information which BG Group has derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information, and such information should not be relied upon as a recommendation or forecast by BG Group. By their nature, forward-looking statements involve uncertainty because they depend on future circumstances, and relate to events, not all of which are within BG Group's control or can be predicted by BG Group. Although BG Group believes that the expectations and opinions reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations and opinions will prove to have been correct. Actual results and market conditions could differ materially from those set out in the forward-looking statements. For a detailed analysis of the factors that may affect our business, financial performance or results of operations, we urge you to look at the 'Principal risks and uncertainties' included in BG Group plc's Annual Report and Accounts 2011. No part of these results constitutes, or shall be taken to constitute, an invitation or inducement to invest in BG Group plc or any other entity, and must not be relied upon in any way in connection with any investment decision. BG Group undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.

 



Consolidated Income Statement

First Quarter

 

 

 

2012

 

2011

 

 

 

Notes

Business    Perform-  
ance(a)
$m   

Disposals,   
re-measure-   
ments and     impairments    
(Note 2)(a)
$m   

Total
Result
$m


Business    Perform-  
ance(a)
$m   

Disposals,   
re-measure-   
ments and     impairments    
(Note 2)(a)
$m    

Total
Result
$m

 

 

Group revenue

 

5 780

-

5 780

 

4 793

-

4 793

 

 

Other operating income

2

(4)

(53)

(57)

 

10

(408)

(398)

 

 

Group revenue and other operating income

3

5 776

(53)

5 723

 

4 803

(408)

4 395

 

 

Operating costs

 

(3 534)

-

(3 534)

 

(2 964)

-

(2 964)

 

 

Profits and losses on disposal of non-current assets and impairments

2

-

(3)

(3)

 

-

(5)

(5)

 

 

Operating profit/(loss)(b)

3

2 242

(56)

2 186

 

1 839

(413)

1 426

 

 

Finance income

2, 4

49

18

67

 

19

74

93

 

 

Finance costs

2, 4

(75)

(23)

(98)

 

(84)

(69)

(153)

 

 

Share of post-tax results from joint ventures
and associates

3

81

-

81

 

79

-

79

 

 

Profit/(loss) before tax

 

2 297

(61)

2 236

 

1 853

(408)

1 445

 

 

Taxation

2, 5

(1 014)

17

(997)

 

(1 011)

185

(826)

 

 

Profit/(loss) for the period from continuing operations

3

1 283

(44)

1 239

 

842

(223)

619

 

 

Profit/(loss) for the period from discontinued operations

 

-

2

2

 

-

2

2

 

 

Profit/(loss) for the period

 

1 283

(42)

1 241

 

842

(221)

621

 

 

Attributable to:

 

 

 

 

 




 

 

BG Group shareholders (earnings)

 

1 267

(46)

1 221(c)

 

819

(222)

597(c)

 

 

Non-controlling interest

 

16

4

20

 

23

1

24

 

 

 

 

1 283

(42)

1 241

 

842

(221)

621

 

 

Earnings per share continuing operations - basic

6

37.3c

(1.4c)

35.9c

 

24.2c

(6.7c)

17.5c

 

 

Earnings per share discontinued operations - basic

 

-

0.1c

0.1c

 

-

0.1c

0.1c

 

 

Earnings per share continuing operations - diluted

6

37.1c

(1.4c)

35.7c

 

24.0c

(6.6c)

17.4c

 

 

Earnings per share discontinued operations - diluted

 

-

0.1c

0.1c

 

-

0.1c

0.1c

 

 

Total operating profit/(loss) including share of pre-tax operating results from joint ventures and associates(d)

3

2 373

(56)

2 317

 

1 965

(413)

1 552

 

a) See Presentation of Non-GAAP measures (page 11) for an explanation of results excluding disposals, certain re-measurements and impairments and presentation of the results of joint ventures and associates.

b) Operating profit/(loss) is before share of results from joint ventures and associates.

c)  Includes earnings from continuing operations of $1 219 million (2011 $595 million) and from discontinued operations of $2 million (2011 $2 million).

d) This measurement is shown by BG Group as it is used as a means of measuring the underlying performance of the business.

The notes on pages 18 to 25 form an integral part of these condensed financial statements.



Consolidated Statement of Comprehensive Income

 

First Quarter

 

2012
$m

2011
$m

Profit for the period

1 241

621

 

 


Hedge adjustments net of tax(a)

127

(344)

Fair value movements on 'available-for-sale' assets net of tax(b)

45

(1)

Currency translation adjustments

(42)

(39)

Other comprehensive income, net of tax

130

(384)

 

 


Total comprehensive income for the period

1 371

237

 

 



Attributable to:

 


BG Group shareholders

1 345

212

Non-controlling interest

26

25

 

1 371

237

a)  Income tax relating to hedge adjustments is a $57 million charge for the quarter (2011 $113 million credit).

b) Income tax relating to fair value movements on 'available-for-sale' assets is a $20 million charge for the quarter (2011 $1 million credit).

The notes on pages 18 to 25 form an integral part of these condensed financial statements.



Consolidated Balance Sheet

 

As at
31 Mar
2012
$m

As at
31 Dec
2011
$m

As at
31 Mar
2011
$m

Assets

 

 

 

Non-current assets

 

 

 

Goodwill

769

752

847

Other intangible assets

6 471

6 159

7 618

Property, plant and equipment

39 449

37 316

29 536

Investments

3 057

3 044

2 875

Deferred tax assets

542

589

677

Trade and other receivables

668

695

205

Commodity contracts and other derivative financial instruments

397

366

290

 

51 353

48 921

42 048

Current assets

 



Inventories

743

768

605

Trade and other receivables

7 882

7 375

7 202

Current tax receivable

124

141

259

Commodity contracts and other derivative financial instruments

288

331

515

Cash and cash equivalents

3 496

3 601

1 142

 

12 533

12 216

9 723

Assets classified as held for sale

186

245

292

Total assets

64 072

61 382

52 063

 

 



Liabilities

 



Current liabilities

 



Borrowings

(1 291)

(1 160)

(1 295)

Trade and other payables

(5 809)

(5 342)

(4 811)

Current tax liabilities

(1 514)

(1 238)

(1 652)

Commodity contracts and other derivative financial instruments

(1 395)

(1 345)

(1 872)

 

(10 009)

(9 085)

(9 630)

Non-current liabilities

 



Borrowings

(14 142)

(13 977)

(8 514)

Trade and other payables

(134)

(72)

(75)

Commodity contracts and other derivative financial instruments

(562)

(696)

(1 234)

Deferred income tax liabilities

(4 163)

(3 961)

(3 386)

Retirement benefit obligations

(222)

(214)

(267)

Provisions for other liabilities and charges

(3 658)

(3 603)

(1 872)

 

(22 881)

(22 523)

(15 348)

Liabilities associated with assets classified as held for sale

(100)

(99)

(105)

Total liabilities

(32 990)

(31 707)

(25 083)

Net assets

31 082

29 675

26 980

Equity

 



Total shareholders' equity

30 765

29 384

26 599

Non-controlling interest in equity

317

291

381

Total equity

31 082

29 675

26 980

The notes on pages 18 to 25 form an integral part of these condensed financial statements.



Consolidated Statement of Changes in Equity

 

 

Called up share capital
$m

Share premium account

$m

Hedging reserve
$m

Translation reserve
$m

Other reserves
$m

Retained earnings
$m

Total
$m

Non-con-trolling interest
$m

Total
$m

 

Equity as at 31 December 2011

577

584

(642)

2 508

2 710

23 647

29 384

291

29 675

 

Total comprehensive income for the period

-

-

(63)

142

-

1 266

1 345

26

1 371

 

Issue of shares

-

11

-

-

-

-

11

-

11

 

Net purchase of own shares

-

-

-

-

-

(16)

(16)

-

(16)

 

Adjustment in respect of employee share schemes

-

-

-

-

-

41

41

-

41

 

Equity as at 31 March 2012

577

595

(705)

2 650

2 710

24 938

30 765

317

31 082

 

 

 

 

 

 

 

 

 

 

 

 

 

Called up share capital
$m

Share premium account

$m

Hedging reserve
$m

Translation reserve
$m

Other reserves
$m

Retained earnings
$m

Total
$m

Non-con-trolling interest
$m

Total
$m

 

Equity as at 31 December 2010

576

537

(457)

2 877

2 710

20 085

26 328

356

26 684

 

Total comprehensive income for the period

-

-

(407)

23

-

596

212

25

237

 

Issue of shares

-

18

-

-

-

-

18

-

18

 

Net purchase of own shares

-

-

-

-

-

(26)

(26)

-

(26)

 

Adjustment in respect of employee share schemes

-

-

-

-

-

67

67

-

67

 

Equity as at 31 March 2011

576

555

(864)

2 900

2 710

20 722

26 599

381

26 980

The notes on pages 18 to 25 form an integral part of these condensed financial statements.

 



Consolidated Cash Flow Statement

 

First Quarter

 

2012   
$m   

2011   
$m   

Cash flows from operating activities

 

 

Profit before tax(a)

2 239

1 448

Share of post-tax results from joint ventures and associates

(81)

(79)

Depreciation of property, plant and equipment and amortisation of intangible assets

641

540

Fair value movements in commodity based contracts

5

394

Losses on disposal of non-current assets and impairments

2

4

Unsuccessful exploration expenditure written off

40

83

Decrease in provisions

(77)

(38)

Finance income

(69)

(95)

Finance costs

98

153

Share-based payments

20

21

Increase in working capital

(173)

(632)

Cash generated by operations

2 645

1 799

Income taxes paid

(593)

(817)

Net cash inflow from operating activities

2 052

982

Cash flows from investing activities

 


Dividends received from joint ventures and associates

17

11

Proceeds from disposal of property, plant and equipment, intangible assets and investments

-

98

Purchase of property, plant and equipment and intangible assets

(2 429)

(2 260)

Loans to joint ventures and associates

(1)

(50)

Repayments from joint ventures and associates

299

43

Investments in subsidiaries, joint ventures and associates

(75)

(96)

Net cash outflow from investing activities

(2 189)

(2 254)

Cash flows from financing activities

 


Net interest paid(b)

(50)

(56)

Dividends paid

(1)

(1)

Dividends paid to non-controlling interest

(1)

(2)

Net proceeds from issue and repayment of borrowings

99

8

Issue of shares

11

18

Movements in own shares

(16)

(26)

Net cash inflow/(outflow) from financing activities

42

(59)

Net decrease in cash and cash equivalents(c)

(95)

(1 331)

Cash and cash equivalents at beginning of period(d)

3 601 

2 551

Effect of foreign exchange rate changes

(10)

(61)

Cash and cash equivalents at end of period(d)

3 496

1 159

a)  Includes profit before tax from discontinued operations for the quarter of $3 million (2011 $3 million).

b)  Includes capitalised interest for the quarter of $99 million (2011 $29 million).

c)  Cash and cash equivalents comprise cash and short-term liquid investments that are readily convertible to cash.

d)  The balance at 31 March 2012 includes cash and cash equivalents of $3 496 million (31 December 2011 $3 601 million; 31 March 2011 $1 142 million) and cash included within assets held for sale of $nil (31 December 2011 $nil; 31 March 2011 $17 million).

The notes on pages 18 to 25 form an integral part of these condensed financial statements.



Notes

1. Basis of preparation

These primary statements are the condensed financial statements ('the financial statements') of BG Group plc for the quarter ended 31 March 2012. The financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006, and should be read in conjunction with the Annual Report and Accounts for the year ended 31 December 2011 which have been prepared in accordance with IFRS as adopted by the EU, as they provide an update of previously reported information. The latest statutory accounts delivered to the registrar were for the year ended 31 December 2011 which were audited by BG Group's statutory auditors PricewaterhouseCoopers LLP and on which the Auditors' Report was unqualified and did not contain statements under Sections 498(2) or 498(3) of the Companies Act 2006. These financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU and the accounting policies, methods of computation and presentation as set out in the 2011 Annual Report and Accounts.

The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities at the date of the financial statements. If in the future such estimates and assumptions, which are based on management's best judgement at the date of the financial statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the year in which the circumstances change.

Presentation of results

The presentation of BG Group's results separately identifies the effect of:

·  The re-measurement of certain financial instruments; and

·  Profits and losses on the disposal and impairment of non-current assets and businesses.

These items, which are detailed in note 2 to the financial statements (page 19), are excluded from Business Performance in order to provide readers with a clear and consistent presentation of the underlying operating performance of the Group's ongoing businesses.

New accounting standards and interpretations

A number of amendments to accounting standards issued by the IASB are applicable from 1 January 2012. They have not had a material impact on the Group's financial statements for the quarter ended 31 March 2012.



2. Disposals, re-measurements and impairments

 

First Quarter

 

2012
$m

2011
$m

Revenue and other operating income - re-measurements of commodity based contracts

(53)

(408)

Profits and losses on disposal of non-current assets and impairments

(3)

(5)

Net finance (costs)/income - re-measurements of financial instruments

(5)

5

Taxation

17

185

 

(44)

(223)

Non-controlling interest

(4)

(1)

Impact on earnings - continuing operations

(48)

(224)

Revenue and other operating income

Re-measurements included within revenue and other operating income amount to a charge of $53 million for the quarter (2011 $408 million charge), of which a charge of $23 million (2011 $51 million charge) represents non-cash mark-to-market movements on certain long-term gas contracts. Whilst the activity surrounding these contracts involves the physical delivery of gas, the contracts fall within the scope of IAS 39 and meet the definition of a derivative instrument. In addition, re-measurements include a $30 million charge for the quarter (2011 $357 million charge) representing unrealised mark-to-market movements associated with economic hedges.

Disposals of non-current assets and impairments

During the first quarter, disposals and write-offs resulted in a pre-tax charge to the income statement of $3 million (post-tax $2 million charge).

During the first quarter of 2011, disposals and write-offs resulted in a pre-tax charge to the income statement of
$5 million (post-tax $8 million credit).

Net finance costs

Re-measurements presented in net finance costs include mark-to-market movements on certain derivatives used to hedge foreign exchange and interest rate risk, partly offset by foreign exchange movements on certain borrowings.

Taxation

During the first quarter of 2011, taxation included a $47 million credit which primarily relates to the impact of the increase in North Sea taxation on re-measurement balances.

 



3. Segmental analysis

Profit for the period

Business Performance

Disposals,
re-measurements and impairments

Total Result

Analysed by operating segment

First Quarter

2012
$m

2011
$m

2012
$m

2011
$m

2012
$m

2011
$m

Group revenue(a)  

 

 

 

 

 

 

Exploration and Production

2 830

2 518

-

-

2 830

2 518

Liquefied Natural Gas

2 301

1 715

-

-

2 301

1 715

Transmission and Distribution

902

785

-

-

902

785

Less: intra-group sales

(253)

(225)

-

-

(253)

(225)

Group revenue

5 780

4 793

-

-

5 780

4 793

Other operating income(b)

(4)

10

(53)

(408)

(57)

(398)

Group revenue and other operating income

5 776

4 803

(53)

(408)

5 723

4 395

Operating profit/(loss) before share of results from joint ventures and associates

 

 

 

 

 

 

Exploration and Production

1 437

1 251

(27)

(70)

1 410

1 181

Liquefied Natural Gas

703

468

(27)

(343)

676

125

Transmission and Distribution

108

128

(2)

-

106

128

Other activities

(6)

(8)

-

-

(6)

(8)

 

2 242

1 839

(56)

(413)

2 186

1 426

Share of pre-tax operating results from joint ventures and associates

 

 

 

 

 

 

Exploration and Production

12

7

-

-

12

7

Liquefied Natural Gas

109

102

-

-

109

102

Transmission and Distribution

10

17

-

-

10

17

 

131

126

-

-

131

126

Total operating profit/(loss)

 


 

 

 


Exploration and Production

1 449

1 258

(27)

(70)

1 422

1 188

Liquefied Natural Gas

812

570

(27)

(343)

785

227

Transmission and Distribution

118

145

(2)

-

116

145

Other activities

(6)

(8)

-

-

(6)

(8)

 

2 373

1 965

(56)

(413)

2 317

1 552

Net finance (costs)/income

 


 


 


Finance income

49

19

18

74

67

93

Finance costs

(75)

(84)

(23)

(69)

(98)

(153)

Share of joint ventures and associates

(15)

(14)

-

-

(15)

(14)

 

(41)

(79)

(5)

5

(46)

(74)

Taxation

 


 


 


Taxation

(1 014)

(1 011)

17

185

(997)

(826)

Share of joint ventures and associates

(35)

(33)

-

-

(35)

(33)

 

(1 049)

(1 044)

17

185

(1 032)

(859)

Profit/(loss) for the period from continuing operations

1 283

842

(44)

(223)

1 239

619

Attributable to:

 


 


 


BG Group shareholders (earnings)

1 267

819

(48)

(224)

1 219

595

Non-controlling interest

16

23

4

1

20

24

 

1 283

842

(44)

(223)

1 239

619

a)  External sales are attributable to segments as follows: E&P $2 648 million (2011 $2 293 million), LNG $2 230 million (2011 $1 715 million) and T&D $902 million
(2011 $785 million). Intra-group sales are attributable to segments as follows: E&P $182 million (2011 $225 million) and LNG $71 million (2011 $nil).

b)  Business Performance Other operating income is attributable to segments as follows: E&P $(4) million (2011 $(8) million), LNG $(1) million (2011 $18 million) and T&D $1 million (2011 $nil).

3. Segmental analysis continued

Business Performance

Disposals,
re-measurements and impairments

Total Result

First Quarter

2012
$m

2011
$m

2012
$m

2011
$m

2012
$m

2011
$m

Total operating profit/(loss)

 

 

 

 

 

 

1 449

1 258

(27)

(70)

1 422

1 188

812

570

(27)

(343)

785

227

118

145

(2)

-

116

145

 

2 379

1 973

(56)

(413)

2 323

1 560

Other activities

(6)

(8)

-

-

(6)

(8)

 

2 373

1 965

(56)

(413)

2 317

1 552

Less: Share of pre-tax operating results
from joint ventures and associates

 

 

 

 

(131)

(126)

 

 

 

 

81

79

Net finance (costs)/income

 

 

 

 

(31)

(60)

Profit before tax

 

 

 

 

2 236

1 445

Taxation

 

 

 

 

(997)

(826)

Profit for the period from continuing operations

 

 

 

 

1 239

619

 



4. Net finance (costs)/income

 

First Quarter

 

2012
$m

2011
$m

Interest payable(a)

(123)

(73)

Interest on obligations under finance leases

(26)

(26)

Interest capitalised

99

29

Unwinding of discount on provisions(b)

(25)

(14)

Disposals, re-measurements and impairments(c)

(23)

(69)

Finance costs

(98)

(153)

Interest receivable

49

19

Disposals, re-measurements and impairments(c)

18

74

Finance income

67

93

Net finance (costs)/income(d)

(31)

(60)

a)  In 2012 includes foreign exchange losses of $9 million (2011 $22 million).

b)  Relates to the unwinding of the discount on provisions and amounts in respect of pension obligations which represent the unwinding of discount on the plans' liabilities offset by the expected return on the plans' assets.

c)  Net finance (costs)/income on disposals, re-measurements and impairments for the quarter of $(5) million (2011 $5 million) is included in note 2 (page 19) and principally reflects mark-to-market movements on certain derivatives used to hedge foreign exchange and interest rate risk, partly offset by foreign exchange movements on certain borrowings.

d)  Excludes the Group's share of net finance costs from joint ventures and associates for the quarter of $15 million (2011 $14 million).

5. Taxation

The tax charge for the quarter was as follows:

Business Performance

Disposals,
re-measurements and impairments

Total Result

 

First Quarter

2012
$m

2011
$m

2012
$m

2011
$m

2012
$m

2011
$m

Tax charge/(credit) for the quarter

1 014

816

(17)

(138)

997

678

Prior period taxation(a)

-

195

-

(47)

-

148

Total excluding share of taxation from joint ventures and associates

1 014

1 011

(17)

(185)

997

826

Share of taxation from joint ventures and associates

35

33

-

-

35

33

Total including share of taxation from joint ventures and associates

1 049

1 044

(17)

(185)

1 032

859

a)  Prior period taxation relates to the revision of deferred tax balances at 1 January 2011, primarily as a result of the increase in North Sea taxation announced in March 2011.

Business Performance taxation for the first quarter, including share of taxation from joint ventures and associates, is
$1 049 million (2011 $849 million excluding prior period taxation). The effective tax rate of 45% for the first quarter is based on the best estimate of the weighted average annual income tax rate expected for the full year.

 

 



6. Earnings per ordinary share - continuing operations

 

First Quarter

 

2012

2011

 


$m

cents per share

$m

cents per share

Earnings - continuing operations excluding disposals, re-measurements and impairments

1 267

37.3

819

24.2

Disposals, re-measurements and impairments (after tax and non-controlling interest)

(48)

(1.4)

(224)

(6.7)

Earnings - continuing operations

1 219

35.9

595

17.5

Basic earnings per share calculations in 2012 are based on the weighted average number of shares in issue of
3 395 million for the quarter.

The earnings figure used to calculate diluted earnings per ordinary share is the same as that used to calculate earnings per ordinary share given above, divided by 3 416 million for the quarter, being the weighted average number of ordinary shares in issue during the period as adjusted for dilutive equity instruments.

7. Reconciliation of net borrowings(a) - First Quarter

 

$m

Net borrowings as at 31 December 2011

(11 336)

Net decrease in cash and cash equivalents

(95)

Cash inflow from changes in borrowings

(99)

Inception of finance lease liabilities/assets

1

Foreign exchange and other re-measurements

(22)

Net borrowings as at 31 March 2012

(11 551)

Net borrowings attributable to Comgás as at 31 March 2012 were $1 099 million (31 December 2011 $963 million).

As at 31 March 2012, BG Group's share of the net borrowings in joint ventures and associates amounted to approximately $1.8 billion, including BG Group shareholder loans of approximately $1.2 billion. These net borrowings are included in BG Group's share of the net assets in joint ventures and associates which are consolidated in BG Group's accounts.

a)  Net borrowings are defined on page 31.

Net borrowings comprise:

 

As at
31 Mar
2012
$m

As at
31 Dec
2011
$m

Amounts receivable/(due) within one year

 

 

Cash and cash equivalents

3 496

3 601

Overdrafts, loans and finance leases

(1 291)

(1 160)

Derivative financial instruments(a)

(16)

(45)

 

2 189

2 396

Amounts receivable/(due) after more than one year

 

 

Loans and finance leases(b)

(13 948)

(13 784)

Derivative financial instruments(a)

208

52

 

(13 740)

(13 732)

Net borrowings

(11 551)

(11 336)

a)  These items are included within commodity contracts and other derivative financial instrument balances on the balance sheet.

b)  Includes finance lease receivable of $194 million (2011 $193 million) included within non-current assets on the balance sheet.



7. Reconciliation of net borrowings - First Quarter continued

Liquidity and Capital Resources

All the information below is as at 31 March 2012

The Group's principal borrowing entities are: BG Energy Holdings Limited (BGEH), including wholly owned subsidiary undertakings, the majority of whose borrowings are guaranteed by BG Energy Holdings Limited (collectively BGEH), and Comgás and Gujarat Gas which conduct their borrowing activities on a stand-alone basis.

BGEH had a $4.0 billion US Commercial Paper Programme, of which $3 650 million was unutilised, and a $2.0 billion Eurocommercial Paper Programme, of which $1 850 million was unutilised. BGEH also had a $15.0 billion Euro Medium Term Note Programme, of which $7 980 million was unutilised.

BGEH had aggregate committed multicurrency revolving borrowing facilities of $4.50 billion, of which $2.32 billion expires in 2013 and $2.18 billion expires in 2016. There are no restrictions on the application of funds under these facilities, which were undrawn as at 31 March 2012.

In addition, BGEH had uncommitted borrowing facilities including multicurrency lines, overdraft facilities of £45 million and credit facilities of $20 million, all of which were unutilised.

Comgás had committed borrowing facilities of Brazilian Real (BRL) 1 775 million, of which BRL 24 million was unutilised, and uncommitted borrowing facilities of BRL 390 million, of which BRL 28 million was unutilised.



8. Quarterly information: earnings and earnings per share

 

2012

$m

2011

$m

2012
cents per share

2011
cents per share

First quarter

 

 

 

 

   Total Result - continuing operations

1 219

595

35.9

17.5

   Total Result - discontinued operations

2

2

0.1

0.1

   Business Performance

1 267

819

37.3

24.2

Second quarter

 


 


   Total Result - continuing operations

 

1 245

 

36.8

   Total Result - discontinued operations

 

(2)

 

(0.1)

   Business Performance

 

1 120

 

33.1

Third quarter

 


 


   Total Result - continuing operations

 

1 060

 

31.3

   Total Result - discontinued operations

 

(2)

 

(0.1)

   Business Performance

 

1 021

 

30.1

Fourth quarter

 


 


   Total Result - continuing operations

 

1 336

 

39.4

   Total Result - discontinued operations

 

-

 

-

   Business Performance

 

1 477

 

43.5

Full year

 


 


   Total Result - continuing operations

 

4 236

 

125.0

   Total Result - discontinued operations

 

(2)

 

(0.1)

   Business Performance

 

4 437

 

130.9

9. Commitments and contingencies

Details of the Group's commitments and contingent liabilities as at 31 December 2011 can be found in note 24,
page 127 of the 2011 Annual Report and Accounts.

There have been no material changes to the Group's commitments in respect of capital expenditure in the three month period to 31 March 2012. There have been no material changes to the Group's other commitments and contingent liabilities in the period.

10. Related party transactions

The Group provides goods and services to, and receives goods and services from, its joint ventures and associates. In addition, the Group provides financing to some of these parties by way of loans. Details of related party transactions for the year ended 31 December 2011 can be found in note 25, page 129 of the 2011 Annual Report and Accounts. There have been no material changes in these relationships in the three month period to 31 March 2012. No related party transactions have taken place in the first three months of the current financial year that have materially affected the financial position or the performance of the Group during that period.



Supplementary information: Operating and financial data

 

First Quarter

Fourth
 Quarter

 

2012

2011

2011

Production volumes (mmboe)

 

 

 

Oil

8.1

6.6

8.6

Liquids

8.4

8.7

8.0

Gas

44.4

42.9

43.6

Total

60.9

58.2

60.2

 

 



Production volumes (boed in thousands)

 



Oil

89

73

93

Liquids

92

97

87

Gas

488

477

474

Total

669

647

654

 

 

Average realised oil price per barrel

$116.96

$108.58

$108.30

 

 



Average realised liquids price per barrel

$99.78

$83.32

$89.87

 

 



Average realised UK gas price per produced therm

73.56c

67.32c

76.04c

(46.59p)

(42.37p)

(47.92p)

 

 



Average realised International gas price per produced therm

37.79c

36.00c

38.54c

 

 



Average realised gas price per produced therm

41.15c

39.45c

42.94c

 

 



Lifting costs per boe

$6.22

$5.24

$5.98

 

 



Operating expenditure per boe

$9.54

$7.99

$9.19

 

 



Development expenditure (including acquisitions) ($m)

1 437

1 195

1 640

 

 



Gross exploration expenditure ($m)

 



Capitalised expenditure (including acquisitions)

240

514

318

Other expenditure

72

101

107

Total

312

615

425

 

 



Gross exploration expenditure by country ($m)

 



Australia

40

26

60

Brazil

74

75

30

Egypt

12

3

18

Tanzania

97

93

49

UK

35

26

70

USA

7

268

43

Other

47

124

155

Total

312

615

425

 

 





 

Supplementary information: Operating and financial data continued

 

First Quarter

Fourth
 Quarter

 

2012

2011

2011

Exploration expenditure charge ($m)

 



Capitalised expenditure written off

40

83

109

Other expenditure

72

101

107

Total

112

184

216


Capital investment ($m)

 

 


Australia

1 094

885

1 178

Brazil

392

246

330

Egypt

173

119

196

UK

298

188

237

USA

226

585

319

Other

322

383

405

Capital investment on a cash basis ($m)(a)

2 505

2 406

2 665

Non cash items:

 

 


Movements in accruals/(prepayments)

151

(139)

116

Capitalised financing costs

99

29

88

Total capital investment ($m)

2 755

2 296

2 869

a) Capital investment on a cash basis includes acquisitions for the quarter of $nil (first quarter 2011 $319 million; fourth quarter 2011 $nil).

 

E&P capital investment ($m)

 



Australia

491

322

488

Brazil

313

171

247

Egypt

173

119

196

UK

298

188

237

USA

218

580

330

Other

313

353

394

Capital investment on a cash basis ($m)(a)

1 806

1 733

1 892

Non cash items

(13)

93

261

Total capital investment ($m)

1 793

1 826

2 153

a) E&P capital investment on a cash basis includes acquisitions for the quarter of $nil (first quarter 2011 $319 million; fourth quarter 2011 $nil).

 

 



LNG capital investment ($m)

 



Australia

603

563

690

Other

10

36

3

Capital investment on a cash basis ($m)

613

599

693

Non cash items

263

(200)

(61)

Total capital investment ($m)

876

399

632



 

Supplementary information: Operating and financial data continued

 

First Quarter

Fourth
 Quarter

 

2012

2011

2011

T&D capital investment ($m)

 



Brazil

79

68

71

Other

7

6

9

Capital investment on a cash basis ($m)

86

74

80

Non cash items

-

(3)

4

Total capital investment ($m)

86

71

84


Depreciation and amortisation by segment ($m)

 



E&P

558

454

500

LNG

39

43

40

T&D

43

42

43

Other

1

1

2

Total

641

540

585

 

 



LNG cargo deliveries by country

 



Argentina

2

-

3

Chile

10

10

6

China

-

-

2

France

-

1

-

India

1

-

2

Japan

16

4

16

Netherlands

1

-

-

Portugal

1

-

-

South Korea

14

16

7

Spain

-

2

-

Taiwan

3

1

6

Turkey

-

-

1

UAE

-

-

1

UK

-

8

1

USA

5

8

7

Total

53

50

52

 

 



LNG managed volumes (thousand tonnes)

3 203

3 104

3 164

 

 



 

 



 



 

Supplementary information: Operating and financial data continued

Historical information

 

First
 Quarter


First
 Quarter

Second Quarter

Third
 Quarter

Fourth
 Quarter

Full Year

 

2012

 

2011

Gross exploration expenditure by country ($m)

 







Australia

40


26

27

20

60

133

Brazil

74


75

69

47

30

221

Egypt

12


3

4

3

18

28

Tanzania

97


93

30

47

49

219

UK

35


26

22

24

70

142

USA

7


268

30

14

43

355

Other

47


124

136

104

155

519

Total

312


615

318

259

425

1 617


 







Capital investment on a cash basis ($m)(a)

 







Australia

1 094


885

1 187

1 308

1 178

4 558

Brazil

392


246

356

264

330

1 196

Egypt

173


119

134

159

196

608

UK

298


188

173

267

237

865

USA

226


585

393

424

319

1 721

Other

322


383

508

447

405

1 743

Total

2 505


2 406

2 751

2 869

2 665

10 691

a) Includes acquisitions for the first quarter 2012 of $nil (2011: first quarter $319 million; second quarter $113 million; third quarter $nil; fourth quarter $nil and full year
$432 million).


 







E&P capital investment on a cash basis ($m)(a)

 







Australia

491


322

457

569

488

1 836

Brazil

313


171

277

185

247

880

Egypt

173


119

126

158

196

599

UK

298


188

173

267

237

865

USA

218


580

369

404

330

1 683

Other

313


353

499

431

394

1 677

Total

1 806


1 733

1 901

2 014

1 892

7 540

a) Includes acquisitions for the first quarter 2012 of $nil (2011: first quarter $319 million; second quarter $113 million; third quarter $nil; fourth quarter $nil and full year
$432 million).


 







LNG capital investment on a cash basis ($m)

 







Australia

603


563

730

739

690

2 722

Other

10


36

36

34

3

109

Total

613


599

766

773

693

2 831


 







T&D capital investment on a cash basis ($m)

 







Brazil

79


68

76

76

71

291

Other

7


6

8

6

9

29

Total

86


74

84

82

80

320


 









 

Supplementary information: Operating and financial data continued

Historical information continued

 

First
 Quarter


First
 Quarter

Second Quarter

Third
 Quarter

Fourth
 Quarter

Full Year

 

2012

 

2011

Depreciation and amortisation by segment ($m)








E&P

558


454

504

485

500

1 943

LNG

39


43

43

42

40

168

T&D

43


42

45

46

43

176

Other

1


1

1

-

2

4

Total

641


540

593

573

585

2 291

 








LNG cargo deliveries by country








Argentina

2


-

3

3

3

9

Chile

10


10

10

9

6

35

China

-


-

3

6

2

11

France

-


1

1

-

-

2

India

1


-

2

2

2

6

Japan

16


4

7

13

16

40

Netherlands

1


-

-

-

-

-

Portugal

1


-

-

-

-

-

South Korea

14


16

3

4

7

30

Spain

-


2

-

-

-

2

Taiwan

3


1

5

10

6

22

Turkey

-


-

-

-

1

1

UAE

-


-

1

1

1

3

UK

-


8

7

2

1

18

USA

5


8

8

6

7

29

Total

53


50

50

56

52

208

 

Further historical supplementary information is available on the BG Group plc website: www.bg-group.com



Glossary

 

In BG Group's results some or all of the following definitions are used:

 

 

bcf

billion cubic feet

 

 

bcfd

billion cubic feet per day

 

 

boe

barrels of oil equivalent

 

 

boed

barrels of oil equivalent per day

 

 

bopd

barrels of oil per day

 

 

CAGR

compound annual growth rate

 

 

Capital investment

Comprises expenditure on property, plant and equipment, other intangible assets and investments, including business combinations

 

 

Capital investment on a cash basis

Comprises cash flows on purchase of property, plant and equipment and intangible assets, loans to joint ventures and associates and investments in subsidiaries, joint ventures and associates

 

 

E&P

Exploration and Production

 

 

FPSO

floating production, storage and offloading system

 

 

Gearing ratio

net borrowings as a percentage of total shareholders' funds (excluding the re-measurement
of commodity financial instruments and associated deferred tax) plus net borrowings

 

 

IAS

International Accounting Standard issued by the IASB

 

 

IASB

International Accounting Standards Board

 

 

IFRIC

International Financial Reporting Interpretations Committee

 

 

IFRS

International Financial Reporting Standards

 

 

kboed

thousand barrels of oil equivalent per day

 

 

LNG

Liquefied Natural Gas

 

 

Managed volumes

Comprises all LNG volumes contracted for purchase and having related revenue and other

operating income recognised in the applicable period

 

 

m

million

 

 

mmboe

million barrels of oil equivalent

 

 

mmbtu

million british thermal units

 

 

mmcfd

million cubic feet per day

 

 

mmcmd

million cubic metres per day

 

 

mmscfd

million standard cubic feet per day

 

 

mmscm

million standard cubic metres

 

 

mmscmd

million standard cubic metres per day

 

 

mtpa

million tonnes per annum

 

 

Net borrowings

Comprise cash and cash equivalents, finance leases, currency and interest rate derivative financial instruments and short and long-term borrowings

 

 

PSC

production sharing contract

 

 

SEC

US Securities and Exchange Commission

 

 

T&D

Transmission and Distribution

 

 

Tbtu

trillion british thermal units

 

 

tcf

trillion cubic feet

 

 

Total operating profit

Group operating profit plus share of pre-tax operating results of joint ventures and associates

 

 

UKCS

United Kingdom Continental Shelf

 

 

Unit operating expenditure per boe

Production costs and royalties incurred over the period divided by the net production for the period. This measure does not include the impact of depreciation and amortisation costs and exploration costs as they are not considered to be costs associated with the operation of producing assets

 

 

Unit lifting costs per boe

'Unit operating expenditure' as defined above, excluding royalty, tariff and insurance costs incurred over the period divided by the net production for the period

 



 

 

Enquiries

 

 

Enquiries relating to BG Group's results, business
and financial position should be made to:

General enquiries about shareholder matters
should be made to:

 

 

Investor Relations Department
BG Group plc
Thames Valley Park Drive
Reading
Berkshire
RG6 1PT

 

Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA

 

 

Tel: 0118 929 3025
e-mail: invrel@bg-group.com

Tel: 0871 384 2064
e-mail: via
https://help.shareview.co.uk

 



 

Media Enquiries:
Neil Burrows

Tel: 0118 929 2462

 

 

High resolution images are available at www.vismedia.co.uk

 

 

 

 

 

BG Group is listed on the US over-the-counter market known
as the International OTCQX. Enquiries should be made to:

 

 

OTC Markets Group Inc.
304 Hudson Street
3rd Floor
New York, NY 10013
USA

 

 

e-mail: info@otcmarkets.com


 




Financial calendar

 

 

Payment of 2011 final dividend

25 May 2012

 

Announcement of 2012 second quarter and half year results

26 July 2012

 

 

 

 

BG Group plc website: www.bg-group.com

 

 

 

 

 

Registered office

100 Thames Valley Park Drive, Reading RG6 1PT
Registered in England No. 3690065

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
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