31st Jul 2015 11:02
LONDON (Alliance News) - BG Group PLC on Friday reported a slump in revenue in the second quarter, leading to an almost halving of earnings by one measure, as a large rise in production was not enough to offset the fall in world oil and gas prices.
The FTSE 100-listed multi-commodity company reported earnings before interest, tax, depreciation and amortisation of USD1.37 billion in the second quarter of 2015, down from USD2.64 billion a year earlier as revenue slumped to USD3.97 billion from USD5.50 billion.
A 19% rise in production volumes and a 17% lift in delivered volumes, meaning sales, was not enough to offset the fall in oil and gas prices compared to a year earlier.
Earnings before interest and tax plummeted to USD627 million from USD1.95 billion, but pretax profit rose to USD2.96 billion from USD2.12 billion a year earlier after benefiting from the proceeds of disposals.
Pretax profit before disposals dropped to USD572 million from USD1.95 billion.
BG Group maintained its interim dividend of 14.38 cents, or 9.22 pence per share as expected.
As expected, the upstream division reported a dramatic drop in earnings for the quarter due to the fall in world oil and gas prices. Upstream Ebitda fell 39% to USD1.13 billion from USD1.85 billion as revenue tanked to USD2.55 billion from USD3.16 billion. Upstream Ebit came in at USD422 million from USD1.20 billion.
In the second quarter, BG achieved an average oil price of USD60.42 per barrel, nearly half the USD110.21 per barrel it was making a year earlier. Gas prices dropped to 37.58 cents per therm from 47.90 cents.
Production for the first half was up 19% year-on-year to average 703,000 barrels of oil equivalent per day, averaging 671,000 barrels of oil per day which is still up 10% year-on-year.
Growth in the second quarter was driven by Australia and Brazil, where volumes in both more than doubled to an average of 80,000 barrel per day for Australia and 143,000 barrels for Brazil, along with the ramp-up at Knarr in Norway and a higher net entitlement in Kazakhstan.
However that was partially offset by declines in production in Egypt, which fell to 13,000 barrels per day from 44,000 barrels and in the UK, which saw production drop to 102,000 barrels per day from 112,000 barrels. US production also fell, to 33,000 barrels per day from 41,000 barrels.
For the full year, BG said E&P production will be in the upper half of its 650,000 to 690,000 barrel of oil equivalent per day guidance.
Its downstream liquefied natural gas shipping and marketing division reported a 66% drop in Ebitda to USD263 million in the second quarter from USD785 million, and Ebit fell to USD236 million from USD748 million, after revenue dropped to USD1.73 billion from USD2.44 billion.
The LNG shipping and marketing segment delivered 58 cargoes of LNG in the quarter, containing 3.6 million tonnes of product, up from 3.1 million tonnes a year earlier.
For the full year, BG Group expects the LNG shipping and marketing division to deliver Ebitda of USD1.30 to USD1.50 billion.
Capital expenditure in the first half totalled USD3.10 billion, and BG said full year expenditure will be "significantly lower" than it was in 2014. Full-year guidance remains at USD6.0 billion to USD7.0 billion, which would be around 30% lower than in 2014.
"We achieved a number of key milestones during the quarter while continuing to deliver on our cost and efficiency programmes. Production reached record levels, more than doubling in both Australia and Brazil, and we now expect output for the year to be in the upper half of our forecast range," said Chief Executive Helge Lund. "This performance reflects our actions to stabilise and de-risk the business and our teams remain focused on delivering our 2015 commitments."
BG Group is currently in the process of being taken over by fellow giant Royal Dutch Shell PLC in a GBP47 million mega-merger, which recently got given the green light by competition authorities in Brazil. The pair are now seeking approval for the deal from Australia, China and the European Union.
The proposed takeover of BG Group by Shell was agreed on April 8, whereby BG shareholders will get 383 pence in cash plus 0.4454 Shell B shares per BG share. Based on the 90 trading day volume weighted average price of 2,170.3 pence per Shell 'B' Share on April 7, the total value of the deal is 1,350.00 pence per BG share, valuing the company at USD47.0 billion.
BG Group shares were up 1.0% to 1,090.00 pence per share Friday morning, whilst Shell shares were up 0.1% to 1,840.50 pence per share.
The deal is the biggest UK-to-UK merger in history, breaking a record previously held by the GBP44.4 billion all-share merger of Glaxo Wellcome and SmithKline Beecham in 2000 to form GlaxoSmithKline PLC. It is also the biggest deal in the oil and gas sector since the turn of the century, when a fall in the oil price created an environment similar to the one providing today's backdrop.
On Thursday, Shell said it will slash further costs and jobs as it reported a USD1.7 billion drop in earnings in the second quarter of 2015. Revenue fell to USD73.95 billion from USD115.27 billion after also being hit by lower oil prices.
By Joshua Warner; [email protected]; @JoshAlliance
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