3rd May 2006 07:01
BG GROUP plc03 May 2006 BG GROUP PLC2006 FIRST QUARTER RESULTS HIGHLIGHTS First Quarter 2006 2005 (ii)Business Performance(i) £m £m Revenue and other operating income 1 972 1 094 +80% Total operating profit including share ofpre-tax operating results from joint venturesand associates 958 485 +98% Earnings 563 269 +109% Earnings per share 16.0p 7.6p +111% Total results for the period (including disposalsand re-measurements) Revenue and other operating income 1 996 1 056 +89% Operating profit before share of results 912 408 +124%from joint ventures and associates Total operating profit including share ofpre-tax operating results from joint venturesand associates 982 460 +113%Earnings 578 259 +123% Earnings per share 16.4p 7.3p +125% i) 'Business Performance' excludes disposals and certain re-measurementsand is presented as management believes that exclusion of these items providesreaders with a clear and consistent presentation of the underlying operatingperformance of the Group's ongoing business. For further explanation of BusinessPerformance and the presentation of results from joint ventures and associates,see Presentation of Non-GAAP measures, page 10 and Results Presentation, page 3.ii) 2005 comparatives have been restated on the application of IFRIC 4and amendments to IAS 39. See Note 1, page 17. PERFORMANCE HIGHLIGHTS BG Group's Chief Executive, Frank Chapman said: "BG has made an excellent start to the year, in line with our plans presented inFebruary. The 111% increase in earnings per share was driven by a step change inboth E&P production and contracted LNG supply, together with higher realisations." • Earnings per share up by 111% • At constant US$/UK£ exchange rates and upstream prices, total operating profit increased by 42% • E&P production increased by 28% • First production from Glenelg, offshore UK and from Chinguetti, offshore Mauritania • LNG operating profit up £109 million to £138 million on increased contracted supplies and strong seasonal prices in Japan and Europe • MoU signed for further long term LNG supply from Nigeria • New exploration acreage acquired in Norway, India and Alaska • New country entry in Oman RESULTS PRESENTATION The presentation of BG Group's results under IFRS separately identifies theeffect of: • The re-measurement of certain UK gas sales contracts and financial instruments.• Profits and losses on the disposal of non-current assets and businesses. These items are excluded from Business Performance in order to provide readerswith a clear and consistent presentation of the underlying operating performanceof the Group's ongoing businesses. Under IFRS the results of joint ventures and associates are presented net offinance costs and tax (see page 12). Given the relevance of these businesseswithin BG Group, the results of joint ventures and associates are presented bothbefore interest and tax, and after tax. The pre-interest and tax result isincluded in Business Performance discussed on pages 3 to 9. The table belowprovides a reconciliation from Business Performance to the Group's Total Result,identifying the amounts related to joint ventures and associates,re-measurements under IAS 39 and profits on disposal of non-current assets andbusinesses. First Quarter Business Disposals Total Performance and re-measurements(i) Result 2006 2005 2006 2005 2006 2005 £m £m £m £m £m £m Operating profitbefore share of results from joint ventures andassociates 888 433 24 (25) 912 408 Pre-tax share ofoperatingresults of joint ventures and associates 70 52 - - 70 52 Total operating profit 958 485 24 (25) 982 460 Net finance costsFinance income 36 11 3 11 39 22 Finance costs (19) (23) (3) (9) (22) (32) Share of joint venturesand associates (16) (9) - - (16) (9) 1 (21) - 2 1 (19) TaxationTaxation (368) (183) (10) 16 (378) (167) Share of joint venturesand associates (16) (4) - - (16) (4) (384) (187) (10) 16 (394) (171) Profit for the period 575 277 14 (7) 589 270 Profit attributableto:Shareholders (earnings) 563 269 15 (10) 578 259Minority Interests 12 8 (1) 3 11 11 575 277 14 (7) 589 270 i) Re-measurements excluded from Business Performance The IAS 39 re-measurements reflect movements in external market prices andexchange rates. Financial instruments include certain long-term UK gas contractswhich are classified as derivatives under IAS 39 due to the nature of thecontract terms and are therefore required to be marked-to-market. This treatmenthas no impact on the ongoing cashflows of the business and these unrealisedmark-to-market movements are presented separately from underlying businessperformance. For an explanation of Non-GAAP measures see page 10. BUSINESS REVIEW The results discussed in this Business Review (pages 4 to 9) relate to BGGroup's performance excluding disposals and re-measurements. For the impact anda description of these items, see the consolidated income statement (page 12)and Note 2 of the accounts (page 18). Results at constant US$/UK£ exchange ratesand upstream prices are also quoted. See Presentation of Non-GAAP measures (page10) for an explanation of these metrics. GROUP Business Performance First Quarter 2006 2005 £m £m Revenue and other operating income 1 972 1 094 +80% Total operating profit including share of pre-taxresults from joint ventures and associates Exploration and Production 726 387 +88% Liquefied Natural Gas 138 29 +376% Transmission and Distribution 65 46 +41% Power Generation 39 36 +8% Other activities (10) (13) -23% 958 485 +98% Net finance costs 1 (21) -105% Taxation (384) (187) +105% Earnings 563 269 +109% Earnings per share 16.0p 7.6p +111% Capital investment 386 315 +23% Total operating profit increased by 98% (£473 million) to £958 millionreflecting a step up in E&P production and contracted LNG supply, together withhigher realisations. At constant US$/UK£ exchange rates and upstream prices, total operating profitincreased by 42%. Earnings per share rose by 111% due to strong operating performances, highervolumes and prices and lower finance costs. Cash generated by operations increased by £434 million to £987 million primarilydue to the increase in operating profit. Capital investment of £386 million comprised continuing investment in Europe andCentral Asia (£104 million), Mediterranean Basin and Africa (£77 million), NorthAmerica and the Caribbean (£109 million), South America (£73 million) and AsiaPacific (£23 million). The Group continued to expand its exploration portfolioand investment in the quarter included £68 million of exploration signature bonuses for the acquisition of exploration acreage, mainly in Brazil and Nigeria. As at 31 March 2006, the Group has returned £180 million to shareholders as partof the share repurchase programme. As at 31 March 2006 net funds were £183million. Net finance costs were £22 million lower than in 2005 and included a netinterest receipt of £18 million arising on a Lattice demerger tax settlement.The effective tax rate (including BG Group's share of tax attributable to jointventures and associates) was unchanged at 40%. The recent increase in North Seataxation is expected to add approximately 4% to the Group's annual effectiverate in 2006 and will be included in the Group's results when the Finance Billis enacted. In addition there will be a one-off adjustment in 2006 to reflectthe increased North Sea tax on opening deferred tax balances, comprising acharge of £38 million in Business Performance, and a credit of £61 million indisposals and re-measurements to restate deferred tax balances associated withmark-to-market balances. EXPLORATION AND PRODUCTION Business Performance First Quarter 2006 2005 £m £m Production volumes (mmboe) 55.8(i) 43.7 +28% Revenue and other operating income 1 073 635 +69% Total operating profit 726 387 +88% Capital investment 271 245 +11% (i) Includes fuel gas of 1.0 mmboe, see page 24. Supplementary operating and financial data is given on page 24. E&P total operating profit increased by 88% to £726 million primarily due tohigher volumes and prices partially offset by the cost of increased explorationactivity. Production volumes increased by 28% driven by increased production from WestDelta Deep Marine in Egypt and the Dolphin field in Trinidad following thestart-up of Egyptian LNG Trains 1 and 2 and Atlantic LNG Train 4. The Group's average international gas price was 18.4 pence per produced thermreflecting the benefit of new production into high value markets and higherinternational commodity prices. In the UK, where short term prices rose sharply,average realised price per produced therm was 38.8 pence. The exploration charge of £44 million is £19 million higher than 2005 reflectingthe increased exploration activities across the Group. Unit operating expenditure was up 10 pence to £2.18 ($3.82) per boe dueprimarily to the impact of higher upstream prices on input costs, tariffs androyalties and adverse exchange rate movements. Capital investment of £271 million included expenditure in the UK (£70 million),Southern Cone (£48 million), Egypt (£29 million) and Nigeria (£27 million).Capital investment included £68 million relating to the acquisition ofexploration acreage mainly in Brazil and Nigeria. First quarter business highlights On 30 April, BG Group signed an Exploration and Production Sharing Agreementwith the Government of the Sultanate of Oman for a 100% interest in andoperatorship of Block 60 onshore Oman. Block 60, contains the Abu Butabul gasand condensate discovery (1998) as well as other exploration prospects andcovers almost 1 500 square kilometres. On 31 March, BG Group was awarded eight new licences in the Norwegian 19thlicensing round. The awards cover five licences in the Norwegian Sea (four asoperator) and three licences in the Barents Sea (one as operator). On 27 January, BG Group signed a participation agreement for a 33.33% equityshare in 2.1 million acres of land in the Foothills area of the Alaskan North Slope. On 13 March, BG Group signed a farm-in agreement with Oil and Natural GasCorporation Limited for a 50% interest in three blocks in the Krishna GodavariBasin off the east coast of India. This agreement, which is subject togovernment approval and the execution of a Production Sharing Contract (PSC),triggers the release of technical data to BG Group. PSC and Joint OperatingAgreement negotiations will proceed in parallel with data interpretation andformulation of a work programme. On 26 March, BG Group and Sonatrach Petroleum Corporation of Algeria signed anMoU, which provides for co-operation on joint activities across the gas chainfrom upstream development through to new liquefaction and gas marketingactivities. On 24 February, first oil was produced from the Chinguetti field (BG Group10.23%) offshore Mauritania. The Chinguetti development consists of sub-seacompleted wells tied back to a leased floating production, storage andoffloading tanker. The Dolphin reservoir (BG Group 50%) in Trinidad began supplying Trains 3 and 4of Atlantic LNG in mid-March via a new 24 inch offshore pipeline. On 28 March, first production flowed from the Glenelg field (BG Group 14.70%).The gas and condensate field was developed through a well drilled from the Elginwellhead platform. President Evo Morales of Bolivia has issued a Supreme Decree nationalising thehydrocarbon natural resources of Bolivia with effect from 1 May 2006. BG Groupis carefully reviewing this new decree and developments in Bolivia and will beengaging with the Bolivian Government in the coming months. BG Group'sinvestment in Bolivia represents less than 2% of the Group's capital employedand less than 4% of the Group's proved reserves. Since the start of the year, BG Group has completed 13 exploration and appraisalwells of which 9 have been successful. Successful wells were drilled in Canada,Egypt, India and the UK. LIQUEFIED NATURAL GAS Business Performance First Quarter 2006 2005 £m £m Revenue and other operating income 653 220 +197% Total operating profit Shipping and marketing 126 17 +641% Liquefaction 30 21 +43% Business development and other costs (18) (9) +100% 138 29 +376% Capital investment 88 45 +96% Supplementary operating and financial data is given on page 24. Total operating profit increased by £109 million reflecting significantly highervolumes and realisations in the shipping and marketing business and the positiveimpact of an expanded liquefaction business. In shipping and marketing, total operating profit increased by £109 million to£126 million, reflecting increased volumes (up 47%) and strong seasonal pricesin Japan and Europe. The increased operating profit during the quarterunderscores the Group's capability to re-direct its flexible LNG supply tocapture higher value in alternative markets, as these opportunities arise. BG Group's share of operating profit from liquefaction activities increased by£9 million to £30 million, principally due to higher margins at Atlantic LNGTrain 1 and the start-up of Egyptian LNG Trains 1 and 2.Increased businessdevelopment and other costs reflect higher activity across the segment includingthe progressing of opportunities in Nigeria and elsewhere. Capital investment includes £56 million in relation to LNG vessels underconstruction due for delivery in 2006 and 2007. First quarter business highlights During the quarter, BG Group took first deliveries from its 20 year 2.5 mtpacontract with Nigeria LNG. In addition, BG Group signed a MoU for 2 mtpa fromBrass LNG for 20 years from 2010. On 15 February, BG Group was selected as the preferred bidder to enter intoexclusive negotiations with a group of Chilean energy companies to build andsupply a regasification plant on the central Chilean coast. The proposed plantis intended to begin supplying fuel to the Chilean market by 2009. The terminalwill have an anticipated capacity of 2.5 mtpa. On 20 February, BG Group, along with its partners in the Nigerian OKLNG project(BG Group 13.5%), signed the Project Development Agreement. OKLNG is in the FEEDphase. On 7 April, BG Group took delivery of the 145 000 cubic metre Methane RitaAndrea LNG carrier. On 5 April, BG LNG Services announced an agreement with LLC Trunkline LNGCompany to enhance the operations of the Lake Charles regasification terminal inthe Gulf of Mexico and extend its terminal services contract by five years to2028. This infrastructure enhancement project will enhance fuel efficiency andreduce air emissions. It will also allow for the extraction and sale of naturalgas liquids, enabling the terminal to receive LNG from a wider range of supplysources. TRANSMISSION AND DISTRIBUTION Business Performance First Quarter 2006 2005 £m £mRevenue and other operating income Comgas 168 107 +57% MetroGAS - 34 - Other 35 28 +25% 203 169 +20% Total operating profit Comgas 50 29 +72% MetroGAS - 4 - Other 15 13 +15% 65 46 +41% Capital investment 25 17 +47% T&D total operating profit increased by £19 million to £65 million. At Comgas, in Brazil, operating profit increased by £21 million to £50 million,primarily due to a 11% increase in volumes and a favourable Brazilian Real (BRL)exchange rate. Operating profit included a £5 million benefit from lower gascosts. This benefit is expected to be passed back to customers through lowertariffs in future periods. Capital investment mainly represents the development of the Comgas pipelinenetwork. Following the de-consolidation of MetroGAS and GASA in December 2005 thesecompanies made no contribution to the results of BG Group. POWER GENERATION Business Performance First Quarter 2006 2005 £m £m Revenue and other operating income 92 75 +23% Total operating profit 39 36 +8% Capital investment 1 - - The increase in revenue is primarily due to the pass through of gas costs.Operating profit includes a one-off contribution of insurance proceeds atSeabank Power. First quarter business highlights During the first quarter, remedial works were completed on the Seabank steamturbine and the plant was declared fully operational on 27 February. Presentation of Non-GAAP measures Business Performance 'Business Performance' excludes certain disposals and re-measurements (seebelow) and is presented as management believes that exclusion of these itemsprovides readers with a clear and consistent presentation of the underlyingoperating performance of the Group's ongoing business. BG Group uses commodity instruments to manage price exposures associated withits marketing and optimisation activity in the UK and US. This activity enablesthe Group to take advantage of commodity price movements. It is considered moreappropriate to include both unrealised and realised gains and losses arisingfrom the mark-to-market of derivatives associated with this activity in'Business Performance'. Disposals and re-measurements BG Group's commercial arrangements for marketing gas include the use oflong-term gas sales contracts. Whilst the activity surrounding these contractsinvolves the physical delivery of gas, certain UK gas sales contracts areclassified as derivatives under the rules of IAS 39 and are required to bemeasured at fair value at the balance sheet date. Unrealised gains and losses onthese contracts reflect the comparison between current market gas prices and theactual prices to be realised under the gas sales contract. BG Group also uses commodity instruments to manage certain price exposures inrespect of optimising the timing of its gas sales associated with contracted UKstorage and pipeline capacity. These instruments are also required to bemeasured at fair value at the balance sheet date under IAS 39. However, IAS 39does not allow the matching of these fair values to the economically hedgedvalue of the related gas in storage (taking account of gas prices based on theforward curve or expected delivery destination and the associated storage andcapacity costs). BG Group also uses financial instruments, including derivatives, to manageforeign exchange and interest rate exposure. These instruments are required tobe recognised at fair value or amortised cost on the balance sheet in accordancewith IAS 39. Most of these instruments have been designated either as hedges offoreign exchange movements associated with the Group's net investments inforeign operations, or as hedges of interest rate risk. Where these instrumentscannot be designated as hedges under IAS 39, unrealised movements in fair valueare recorded in the income statement. Unrealised gains and losses in respect of long-term gas sales contracts andderivatives associated with gas in UK storage and pipeline facilities andinterest rate and foreign exchange exposure in respect of financial instrumentswhich cannot be designated as hedges under IAS 39 are disclosed separately as'disposals and re-measurements'. Realised gains and losses relating to theseinstruments are included in Business Performance. Management considers that thispresentation best reflects the underlying performance of the business since itdistinguishes between the temporary timing differences associated withre-measurements under IAS 39 rules and actual realised gains and losses. BG Group has also separately identified profits and losses associated with thedisposal of non-current assets as they are considered by management to be itemswhich require separate disclosure in order to provide a clearer understanding ofthe results for the period. For a reconciliation between the overall results and Business Performance anddetails of disposals and re-measurements, see the consolidated income statement,page 12 and note 2 to the accounts, page 18. Joint ventures and associates Under IFRS the results from jointly controlled entities (joint ventures) andassociates, accounted for under the equity method, are required to be presentednet of finance costs and tax on the face of the income statement. Given therelevance of these businesses within BG Group, the results of joint ventures andassociates are presented before interest and tax, and after tax. Managementconsiders that this approach provides additional information on the source of BGGroup's operating profits. For a reconciliation between operating profit andearnings including and excluding the results of joint ventures and associates,see Note 3 to the accounts, page 19. Exchange rates and prices BG Group also discloses certain information, as indicated, at constant US$/UK£exchange rates and upstream prices. The presentation of results in this manneris intended to provide additional information to explain further the underlyingtrends in the business. Net borrowings/funds BG Group provides a reconciliation of net borrowings/funds and an analysis ofthe amounts included within net borrowings/funds as management believes thatthis is an important liquidity measure for the Group. LEGAL NOTICE These results include "forward-looking information" within the meaning ofSection 27A of the US Securities Act of 1933, as amended and Section 21E of theUS Securities Exchange Act of 1934, as amended. Certain statements included inthese results, including without limitation, those concerning (i) strategies,outlook and growth opportunities, (ii) positioning to deliver future plans andto realise potential for growth, (iii) delivery of the performance required toachieve the revised 2006 targets, (iv) development of new markets, (v) thedevelopment and commencement of commercial operations of new projects, (vi)liquidity and capital resources, (vii) plans for capital and investmentexpenditure and (viii) statements preceded by "expected", "scheduled","targeted", "planned", "proposed", "intended" or similar statements, containcertain forward-looking statements concerning operations, economic performanceand financial condition. Although the Company believes that the expectationsreflected in such forward-looking statements are reasonable, no assurance can begiven that such expectations will prove to have been correct. Accordingly,results could differ materially from those set out in the forward-lookingstatements as a result of, among other factors, (i) changes in economic, marketand competitive conditions, including oil and gas prices, (ii) success inimplementing business and operating initiatives, (iii) changes in the regulatoryenvironment and other government actions, including UK and internationalcorporation tax rates, (iv) a major recession or significant upheaval in themajor markets in which BG Group operates, (v) the failure to ensure the safeoperation of assets worldwide, (vi) implementation risk, being the challengesassociated with delivering capital intensive projects on time and on budget,including the need to retain and motivate staff, (vii) commodity risk, being therisk of a significant fluctuation in oil and/or gas prices from those assumed,(viii) fluctuations in exchange rates, in particular the US$/UK£ exchange ratebeing significantly different to that assumed, (ix) risks encountered in the gasand oil exploration and production sector in general, (x) business riskmanagement and (xi) the Risk Factors included in BG Group's Annual Report andAccounts 2005. BG Group undertakes no obligation to update any forward-lookingstatements. No part of these results constitutes or shall be taken to constitute aninvitation or inducement to invest in BG Group plc or any other entity and mustnot be relied upon in any way in connection with any investment decision. CONSOLIDATED INCOME STATEMENT FIRST QUARTER 2006 2005 restated(ii) Busi- Disposals and Total Busi- Disposals and Total ness re-measure- Result ness re-measurements Result Perfor- ments Performance (Note 2)(i) mance(i) (Note 2)(i) (i) Notes £m £m £m £m £m £m Group revenue 1 931 - 1 931 1 070 - 1 070Otheroperatingincome 41 24 65 24 (38) (14) ------- -------- -------- ------- -------- --------Group revenueand otheroperatingincome 3 1 972 24 1 996 1 094 (38) 1 056Operatingcosts (1 084) - (1 084) (661) - (661) Profit ondisposal ofnon-currentassets - - - - 13 13 ------- -------- -------- ------- -------- --------Operatingprofit/(loss)before shareof resultsfrom jointventures andassociates 3 888 24 912 433 (25) 408 ------- -------- -------- ------- -------- --------Finance income 4 36 3 39 11 11 22Finance costs 4 (19) (3) (22) (23) (9) (32)Share ofpost-taxresults fromjoint venturesand associates 3 38 - 38 39 - 39 ------- -------- -------- ------- -------- --------Profit/(loss)before tax 943 24 967 460 (23) 437Taxation 5 (368) (10) (378) (183) 16 (167) ------- -------- -------- ------- -------- --------Profit for theperiod 575 14 589 277 (7) 270 ------- -------- -------- ------- -------- --------Attributable to: ------- -------- -------- ------- -------- --------BG Groupshareholders 563 15 578 269 (10) 259(earnings) Minorityinterest 12 (1) 11 8 3 11 ------- -------- -------- ------- -------- -------- 575 14 589 277 (7) 270 ------- -------- -------- ------- -------- -------- ------- -------- -------- ------- -------- --------Earnings pershare - basic 6 16.0p 0.4p 16.4p 7.6p (0.3)p 7.3pEarnings pershare -diluted 6 15.9p 0.4p 16.3p 7.6p (0.3)p 7.3p ------- -------- -------- ------- -------- ------------------------- ----- ------- -------- -------- ------- -------- --------Total operatingprofit includingshare of pre-taxoperatingresults fromjoint venturesandassociates(iii) 3 958 24 982 485 (25) 460----------------- ------ ------- -------- -------- --- ------- -------- -------- i) See Presentation of Non-GAAP measures, page 10, for an explanation of resultsexcluding disposals and re-measurements and presentation of the results of jointventures and associates.ii) 2005 comparatives have been restated on the application of IFRIC 4 andamendments to IAS 39. See Note 1, page 17.iii) This measurement is shown by BG Group as it is used by management as ameans of measuring the underlyingperformance of the business. CONSOLIDATED BALANCE SHEET FIRST QUARTER As at 31 Mar 31 Dec 31 Mar 2006 2005 restated 2005 restated £m £m £mAssetsNon-current assetsGoodwill 361 342 272Other intangible assets 797 682 601Property, plant and equipment 5 835 5 830 4 873Investments 1 203 1 129 1 090Deferred tax assets 90 91 74Trade and other receivables 51 52 48Derivative financial instruments 95 84 142------------------------------------- ------- ------- ------- 8 432 8 210 7 100Current assetsInventories 170 185 85Trade and other receivables 1 837 1 674 1 224Commodity contracts and otherderivative financial instruments 12 10 26Cash and cash equivalents 1 697 1 516 245------------------------------------- ------- ------- ------- 3 716 3 385 1 580Assets classified as held for sale 10 10 581------------------------------------- ------- ------- -------Total assets 12 158 11 605 9 261------------------------------------- ------- ------- ------- LiabilitiesCurrent liabilitiesBorrowings (47) (81) (381)Trade and other payables (1 529) (1 308) (1 049)Current tax liabilities (466) (409) (260)Commodity contracts and otherderivative financial instruments (658) (711) (458)------------------------------------- ------- ------- ------- (2 700) (2 509) (2 148)Non-current liabilitiesBorrowings (1 507) (1 497) (1 096)Trade and other payables (63) (68) (87)Derivative financial instruments - (2) -Deferred income tax liabilities (774) (733) (787)Retirement benefit obligations (159) (154) (139)Provisions for other liabilities andcharges (375) (372) (338)------------------------------------- ------- ------- ------- (2 878) (2 826) (2 447)Liabilities associated with assetsclassified as held for sale (3) (3) (74)------------------------------------- ------- ------- -------Total liabilities (5 581) (5 338) (4 669)------------------------------------- ------- ------- ------- ------------------------------------ ------- ------- -------Net assets 6 577 6 267 4 592------------------------------------- ------- ------- ------- Attributable to:BG Group equity shareholders 6 464 6 169 4 564Minority interests 113 98 28------------------------------------- ------- ------- -------Total equity 6 577 6 267 4 592------------------------------------- ------- ------- ------- STATEMENT OF CHANGES IN EQUITY First Quarter 2006 2005 £m restated £m BG Group shareholders' funds 6 182 4 567Minority interest 98 20---------------------------- ------- -------Equity as at 31 December 2005 and 2004 as reported 6 280 4 587 Effect of adoption of IFRIC 4 (see Note 1) (13) (8)Effect of adoption of IAS 39(i) - (238)---------------------------- ------- -------Equity as at 1 January 2006 and 2005 restated 6 267 4 341 Profit for the financial period 589 270Issue of shares 6 8Purchase of own shares (140) -Adjustment in respect of employee share schemes 6 3Dividends on ordinary shares (144) (74)Currency translation and hedge adjustments net of tax (7) 44---------------------------- ------- -------Net changes in equity for the financial period 310 251 Equity as at 31 MarchBG Group shareholders' funds 6 464 4 564Minority interest 113 28---------------------------- ------- ------- 6 577 4 592---------------------------- ------- ------- i) BG Group adopted IAS 39 from 1 January 2005. CONSOLIDATED CASH FLOW STATEMENT First Quarter 2006 2005 restated £m £mCash flows from operating activitiesProfit from operations 912 408Depreciation of property, plant and equipment andamortisation of intangible assets 149 117Fair value movements in commodity contracts (41) 37Profit on disposal of non-current assets - (13)Unsuccessful exploration expenditure written off 11 10Increase/(decrease) in provisions 4 8Share based payments 6 3(Increase)/decrease in working capital (54) (17)-------------------------- ------- -------Cash generated by operations 987 553 Income taxes paid (285) (143)-------------------------- ------- -------Net cash inflow from operating activities 702 410-------------------------- ------- -------Cash flows from investing activitiesDividends received from joint ventures and associates 11 12Proceeds from disposal of subsidiary undertakings andinvestments 4 26Purchase of property, plant and equipment andintangible assets (349) (290)Loans (to)/from joint ventures and associates (16) (9)Purchase of subsidiary undertakings and investments (2) --------------------------- ------- -------Net cash outflow from investing activities (352) (261)-------------------------- ------- -------Cash flows from financing activitiesNet interest received/(paid)(i) 8 (15)Net proceeds from issue of new borrowings 16 56Repayment of borrowings (48) (313)Issue of shares 6 8Purchase of own shares (147) --------------------------- ------- -------Net cash outflow from financing activities (165) (264)-------------------------- ------- -------Net increase/(decrease) in cash and cash equivalents 185 (115) Cash and cash equivalents at beginning of period 1 516 340Effect of foreign exchange rate changes (4) 20-------------------------- ------- -------Cash and cash equivalents at end of period(ii) 1 697 245-------------------------- ------- ------- i) Includes capitalised interest for the first quarter of £14 million(2005 £3 million).ii) Cash and cash equivalents comprise cash and short-term liquidinvestments that are readily convertible to cash. RECONCILIATION OF NET BORROWINGS/FUNDS(i) - FIRST QUARTER £mNet funds as at 31 December 2005 as reported 253Adoption of IFRIC 4 (see Note 1) (283)--------------------------------- ---------Net borrowings as at 31 December 2005 restated(i) (ii) (30) Net increase in cash and cash equivalents 185Cash outflow from changes in gross borrowings 32Inception of finance leases (18)Foreign exchange and other re-measurements 14--------------------------------- ---------Net funds as at 31 March 2006(i) (ii) 183--------------------------------- --------- Net borrowings attributable to Comgas were £203 million (31 December 2005 £189million). As at 31 March 2006, BG Group's share of the net borrowings in joint venturesand associates amounted to approximately £1.0 billion, including BG Groupshareholder loans of approximately£0.6 billion. These net borrowings are included in BG Group's share of the netassets in joint ventures and associates which are consolidated in BG Group'saccounts. i) Net funds/(borrowings) are defined on page 26.ii) Net funds/(borrowings) comprise: As at 31 Mar 31 Dec 2006 2005 £m £mAmounts receivable/(due) within one yearCash and cash equivalents 1 697 1 516Overdrafts, loans and finance leases (47) (81)Derivative financial instruments (iii) (55) (50)--------------------------------- -------- -------- 1 595 1 385Amounts receivable/(due) after more than one yearLoans and finance leases (1 507) (1 497)Derivative financial instruments 95 82--------------------------------- -------- -------- (1 412) (1 415)--------------------------------- -------- --------Net funds/(borrowings) 183 (30)--------------------------------- -------- -------- iii) These items are included within commodity contracts and other derivativefinancial instrument balances on the balance sheet. Notes 1. Basis of preparation These primary statements are the unaudited interim consolidated financialstatements of BG Group plc for the quarter ended 31 March 2006. The financialinformation does not comprise statutory accounts within the meaning of Section240 of the Companies Act 1985, and should be read in conjunction with the AnnualReport and Accounts for the year ended 31 December 2005, as they provide anupdate of previously reported information. The preparation of the interim financial statements requires management to makeestimates and assumptions that affect the reported amount of revenues, expenses,assets and liabilities and disclosure of contingent liabilities at the date ofthe interim financial statements. If in the future such estimates andassumptions, which are based on management's best judgment at the date of theinterim financial statements, deviate from the actual circumstances, theoriginal estimates and assumptions will be modified as appropriate in the yearin which the circumstances change. IFRIC Interpretation 4 'Determining whether an Arrangement contains a Lease' IFRIC 4 requires companies to determine whether they have any arrangements whichare or contain leases based on an assessment of whether specific assets arerequired to fulfil each arrangement or whether each arrangement conveys a rightof use of the asset. If an arrangement contains a lease, the requirements ofIAS 17, 'Leases', should be applied to the lease element of the arrangement. BG Group has applied IFRIC 4 from 1 January 2006 and has concluded that thecontract for the provision of capacity at Lake Charles contains a financelease. Comparative information has been amended to reflect this arrangement.As at 1 January 2006, borrowings have been increased by£283 million, property, plant and equipment has increased by £263 million,deferred tax assets have increased by £7 million and retained earnings havedecreased by £13 million to reflect this arrangement; comparative informationhas also been restated. The effect of this restatement on the 2005 first quarterincome statement is an increase in operating profit of £2 million and anincrease in finance costs of £3 million, resulting in a decrease in earnings of£1 million. IAS 39 'Financial Guarantee Contracts and Credit Insurance' In August 2005, the IASB issued an amendment to IAS 39 which covers theaccounting required for financial guarantee contracts that provide payment to bemade if a debtor fails to make a payment when due. These contracts should beinitially measured at fair value and subsequently re-measured using the higherof the provision set out in IAS 37 'Provisions, Contingent Liabilities andContingent Assets' or the initial amount less cumulative amortisation inaccordance with IAS 18, 'Revenue'. This amendment is mandatory for periodsbeginning on or after 1 January 2006 and BG Group has adopted it from that date.As at 1 January 2006, investments have been increased by £5 million andprovisions for other liabilities and charges have been increased by £5 million;comparative information has also been restated. 2. Disposals and re-measurements First Quarter 2006 2005 £m £m Revenue and other operating income - 24 (38)re-measurements of commodity contractsProfit on disposal of non-current assets - 13Net finance costs - re-measurements of financial instruments - 2Taxation (10) 16Minority interest 1 (3)------------------------- -------- ---------Impact on earnings 15 (10)------------------------- -------- --------- Revenue and other operating income Re-measurements included within revenue and other operating income amount to acredit of £24 million for the quarter (2005 £38 million charge), of which £19 million (2005 £29 million) represents non-cash mark-to-market movements on certain long-term UK 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. Net finance costs Re-measurements presented in net finance costs relate primarily to certainderivatives used to hedge foreign exchange and interest rate risk which have notbeen designated as hedges under IAS 39, partly offset by foreign exchangemovements on certain borrowings in a subsidiary. In 2005, re-measurementsincluded the retranslation of MetroGAS US Dollar and Euro borrowings which couldnot be designated as hedges under IAS 39. Following the de-consolidation ofMetroGAS and GASA in December 2005, these companies made no contribution to theresults of BG Group. 2005 first quarter: Disposal of investment During the first quarter of 2005, BG Group disposed of its 50% interest inPremier Transmission Limited to Premier Transmission Financing Plc for cashproceeds of £26 million. No tax arose on the disposal. 3. Segmental analysis Group revenue and Business Disposals and Total Business Disposals Totalother operating Performance re-measurements Perfor- and re-income mance measure- mentsFirst Quarter 2006 2006 2006 2005 2005 2005 £m £m £m £m £m £m Explorationand Production 1 073 24 1 097 635 (34) 601LiquefiedNatural Gas 653 - 653 220 (4) 216TransmissionandDistribution 203 - 203 169 - 169PowerGeneration 92 - 92 75 - 75Otheractivities 3 - 3 2 - 2Less:intra-groupsales (52) - (52) (7) - (7)--------------------- -------- -------- ------ ------- ------- ------ 1 972 24 1 996 1 094 (38) 1 056--------------------- -------- -------- ------ ------- ------- ------ Total operating Before share Share of Including Disposals and Businessprofit of results results in share of re-measurements Performance from joint joint results from (ii) (ii) ventures and ventures and joint associates associates(i) ventures and associatesFirst Quarter 2006 2005 2006 2005 2006 2005 2006 2005 2006 2005 £m £m £m £m £m £m £m £m £m £m Explorationand Production 750 353 - - 750 353 (24) 34 726 387LiquefiedNatural Gas 108 4 30 21 138 25 - 4 138 29TransmissionandDistribution 54 48 11 11 65 59 - (13) 65 46PowerGeneration 10 16 29 20 39 36 - - 39 36Otheractivities (10) (13) - - (10) (13) - - (10) (13)---------------- ---- ----- ------ ------ ------ ------ ------- ------ ------ ------- 912 408 70 52 982 460 (24) 25 958 485---------------- ---- ----- ------ ------ ------ ------ ------- ------ ------ ------- i) Share of results in joint ventures and associates in the table above isbefore finance costs and taxation. The share of results after finance costs andtaxation for the first quarter is £38 million (2005 £39 million).ii) Business Performance excludes certain disposals and re-measurements. SeeNote 2, page 18 and Presentation of Non-GAAP measures, page 10. 3. Segmental analysis (continued) Total Result Operating profit Share of results Total before share of in joint ventures Result results from joint and associates ventures and associates First Quarter 2006 2005 2006 2005 2006 2005 £m £m £m £m £m £m Explorationand Production 750 353 - - 750 353LiquefiedNatural Gas 108 4 12 17 120 21TransmissionandDistribution 54 48 6 10 60 58PowerGeneration 10 16 20 12 30 28Otheractivities (10) (13) - - (10) (13)---------------------- -------- -------- ------- ------- --------- --------- 912 408 38 39 950 447 Net financeincome/(costs) 17 (10)Taxation (378) (167)---------------------- -------- -------- ------- ------- --------- ---------Profit for theperiod 589 270---------------------- -------- -------- ------- ------- --------- --------- 4. Net finance costs First Quarter 2006 2005 £m £m Interest payable (18) (16)Interest on obligations under finance leases (12) (7)Interest capitalised 14 3Unwinding of discount on provisions(i) (3) (3)Disposals and re-measurements (Note 2) (3) (9)------------------------ --------- ---------Finance costs (22) (32) Interest receivable 36 11Disposals and re-measurements (Note 2) 3 11------------------------ --------- ---------Finance income 39 22------------------------ --------- ---------Net finance income/(costs)(ii) 17 (10)------------------------ --------- --------- i) Relates to the unwinding of the discount on provisions in respect ofdecommissioning and pension obligations, included in the income statement as afinancial item within net finance costs.ii) Excludes Group share of net finance costs from joint ventures andassociates for the first quarter of £16 million(2005 £9 million). 5. Taxation The taxation charge for the first quarter before disposals and re-measurementswas £368 million (2005 £183 million), and the taxation charge includingdisposals and re-measurements was£378 million (2005 £167 million). The Group share of taxation from joint ventures and associates for the firstquarter was£16 million (2005 £4 million). 6. Earnings per ordinary share First Quarter 2006 2005 £m Pence £m Pence per per share share Earnings 578 16.4 259 7.3Re-measurements (after tax and minority (15) (0.4) 23 0.7interest)Profit on disposals (after tax) - - (13) (0.4)----------------------- -------- --------- ------- ---------Earnings - excluding disposals and re-measurements 563 16.0 269 7.6----------------------- -------- --------- ------- --------- Basic earnings per share calculations in 2006 are based on shares in issue of 3527 million for the quarter. The earnings figure used to calculate diluted earnings per ordinary share is thesame as that used to calculate earnings per ordinary share given above, dividedby 3 551 million for the quarter, being the weighted average number of ordinaryshares in issue during the quarter as adjusted for share options. 7. Capital investment - geographical analysis First Quarter 2006 2005 £m £m Europe and Central Asia 104 126South America 73 24Asia Pacific 23 14North America and the Caribbean 109 64Mediterranean Basin and Africa 77 87----------------------------------- -------- -------- 386 315----------------------------------- -------- -------- 8. Quarterly information: earnings and earnings per share 2006 2005 2006 2005 £m £m pence pence First quarter- including disposals and re-measurements 578 259 16.4 7.3- excluding disposals and re-measurements 563 269 16.0 7.6Second quarter- including disposals and re-measurements 484 13.7- excluding disposals and re-measurements 275 7.8Third quarter- including disposals and re-measurements 320 9.0- excluding disposals and re-measurements 307 8.7Fourth quarter- including disposals and re-measurements 462 13.0- excluding disposals and re-measurements 503 14.2------------------------- ------ -------- -------- --------Full year- including disposals and re-measurements 1 525 43.1- excluding disposals and re-measurements 1 354 38.3------------------------- ------ -------- -------- -------- Supplementary information: Operating and financial data First Quarter Fourth Quarter 2006 2005 2005 Production volumes (mmboe)- oil 5.6 4.7 5.5- liquids 7.4 7.7 7.8- gas 42.8(i) 31.3 41.0 ---------- ------- --------- total 55.8 43.7 54.3 --------- ------- -------- Production volumes (boepd in thousands)- oil 62 52 60- liquids 82 86 85- gas 476 348 445 -------- ------- --------- total 620 486 590 -------- ------- -------- LNG cargoes (standard)- delivered to Lake Charles 2 8 12- delivered to Elba Island 9 10 14- re-marketed 29 10 13 -------- ------- --------- total 40 28 39 -------- ------- -------- Average realised oil price per barrel £35.74 £25.35 £33.36 ($62.53) ($48.24) ($58.55) Average realised liquids price per barrel £28.68 £17.35 £26.87 ($50.17) ($33.01) ($47.17) Average realised UK gas price per producedtherm 38.84p 24.12p 38.89p Average realised International gas priceper produced therm 18.40p 13.85p 21.43p Average realised gas price per producedtherm 23.69p 17.48p 26.11p Lifting costs per boe(ii) £1.19 £1.15 £1.09 ($2.08) ($2.18) ($1.92) Operating expenditure per boe £2.18 £2.08 £2.19 ($3.82) ($3.96) ($3.85) Development expenditure (£m) 131 155 188 Gross exploration expenditure (£m)- capitalised expenditure 136 87 89- other expenditure 33 15 42 -------- ------- --------- gross expenditure 169 102 131 -------- ------- -------- i) Q1 2006 includes fuel gas of 1.0 mmboe.ii) Lifting costs are defined as operating expenditure excluding royalties,tariffs and insurance. Supplementary information: Operating and financial data (continued) BG Group's exposure to the oil price varies according to a number of factorsincluding the mix of production and sales. Management estimates that, otherfactors being constant, a $1.00 rise (or fall) in the Brent price would increase (or decrease) operating profit in 2006 by approximately £40 million to £50 million. BG Group's exposure to the US$/UK£ exchange rate varies according to a number offactors including commodity prices and the timing of US Dollar revenues andcosts including capital expenditure. Management estimates that in 2006, otherfactors being constant, a 10 cent strengthening (or weakening) in the US Dollarwould increase (or decrease) operating profit by approximately £120 million to£140 million. DefinitionsIn these results: bcf billion cubic feetbcfd billion cubic feet per daybcmpa billion cubic metres per annumboe barrels of oil equivalentboed barrels of oil equivalent per daybopd barrels of oil per dayCCGT combined cycle gas turbineDCQ daily contracted quantityE&P Exploration and ProductionEPC engineering, procurement and constructionEPIC engineering, procurement, installation and commissioningFEED front end engineering designFERC Federal Energy Regulatory CommissionGW gigawattJOA Joint operating agreementIAS 39 International Accounting Standard 39 (Financial Instruments)IFRS International Financial Reporting StandardsLNG Liquefied Natural Gasm millionmmboe million barrels of oil equivalentmmbtu million british thermal unitsmmcfd million cubic feet per daymmcmd million cubic metres per daymmscfd million standard cubic feet per daymmscm million standard cubic metresmmscmd million standard cubic metres per dayMoU Memorandum of understandingmtpa million tonnes per annumMW megawattNet Comprise cash, current asset investments, finance leases, currencyborrowings/ and interest rate derivative financial instruments and short- andfunds long-term borrowingsNGL Natural gas liquidsPSA production sharing agreementPSC production sharing contractStandard 2 750 000 mmbtuCargoT&D Transmission and DistributionTotal Group operating profit plus share of pre-tax operating results ofoperating joint ventures and associatesprofitUKCS United Kingdom Continental ShelfUKCNS United Kingdom central North Sea Enquiries Enquiries relating to BG Group's General enquiries about shareholderresults, business and financial position matters should be made to:should be made to: Investor Relations Department Lloyds TSB RegistrarsBG Group plc The CausewayThames Valley Park Drive WorthingReading West SussexBerkshire BN99 6DARG6 1PT Tel: 0118 929 3025 Tel: 0870 600 3951e-mail: [email protected] e-mail: [email protected] Financial Calendar Payment of 2005 final dividend: Shareholders 12 May 2006 American depositary receipt holders 19 May 2006 Announcement of 2006 second quarter andhalf year results 26 July 2006 Announcement of 2006 third quarter results 2 November 2006 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 ExchangeRelated Shares:
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