30th Apr 2008 07:01
BG GROUP plc30 April 2008 BG GROUP PLC2008 FIRST QUARTER RESULTS - INTERIM MANAGEMENT STATEMENT Highlights • Very strong results driven by increased E&P and LNG volumes and improved realisations • E&P total operating profit up £316 million to £942 million • LNG total operating profit up £274 million to £395 million • Group total operating profit up £579 million to £1 402 million • Earnings per share up 10.5p to 23.6p • Appointed to supply up to 3 mtpa of LNG to the Singapore market from 2012 for up to 20 years • Acquisition of interests in Queensland Gas Company completed BG Group's Chief Executive, Frank Chapman said: "BG Group has made an excellent start to the year driven by increased productionvolumes, higher commodity prices and strong first quarter performance in LNG. Wemade significant progress in our Asia Pacific strategy with a new LNG supplyagreement in Singapore and the completion of our alliance with Queensland GasCompany in Australia." First QuarterBusiness Performance(i) 2008 2007 £m £mTotal operating profit including share of pre-tax operating results from 1 402 823 +70%joint ventures and associatesEarnings for the period 789 448 +76%Earnings per share 23.6p 13.1p +80% Total results for the period (including disposals,re-measurements and impairments) Operating profit before share of results from joint ventures and associates 1 317 734 +79%Total operating profit including share of pre-tax operating results from joint ventures and associates 1 370 789 +74%Earnings for the period 767 432 +78%Earnings per share 22.9p 12.7p +80% i) '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. For further explanation of Business Performance and the presentation of results from joint ventures and associates, see Presentation of Non-GAAP measures, page 7, note 1, page 14 and note 3, page 16. Unless otherwise stated, the results discussed in this release relate to BG Group's Business Performance. Business Review Group First QuarterBusiness Performance 2008 2007 £m £m Revenue and other operating income 3 106 1 980 +57% Total operating profit including share of pre-tax resultsfrom joint ventures and associates Exploration and Production 942 626 +50%Liquefied Natural Gas 395 121 +226%Transmission and Distribution 31 50 -38%Power Generation 38 38 -Other activities (4) (12) -67% 1 402 823 +70%Net finance costs (11) (9) +22%Taxation for the period (598) (356) +68%Earnings for the period 789 448 +76% Earnings per share 23.6p 13.1p +80% Capital investment 647 869 -26% First quarter Revenue and other operating income increased by 57% to £3 106 million,reflecting higher commodity prices and volumes in E&P and LNG, and LNG diversionactivity. Total operating profit increased by 70% to £1 402 million primarily due tohigher commodity prices and increased E&P and LNG volumes and margins, partiallyoffset by increased exploration costs and higher gas costs at Comgas. Atconstant US$/UK£ exchange rates and upstream prices, underlying total operatingprofit would have increased by 24%. Cash generated by operations increased by £480 million to £1 566 millionprimarily due to higher operating profit. Capital investment in the quarter of £647 million comprised investment inAfrica, Middle East and Asia (£307 million), Americas and Global LNG (£161million) and Europe and Central Asia (£179 million). Exploration and Production (E&P) First QuarterBusiness Performance 2008 2007 £m £m Production volumes (mmboe) 60.7 58.2 +4% Revenue and other operating income 1 455 1 027 +42% Total operating profit 942 626 +50% Capital investment 582 359 +62% Additional operating and financial data is given on page 20. First quarter E&P total operating profit increased by 50% to £942 million reflecting a 4%increase in volumes and higher commodity prices, partially offset by increasedexploration costs. Production volumes increased by 4% principally due to the Buzzard field in theUK, which commenced production in early 2007, and increased production from theTapti field in India, partially offset by the disposal of certain Canadianassets. Unit operating expenditure increased 12% to £2.80 ($5.55) per boe (2007 £2.51)primarily due to the impact of higher commodity prices on royalty costs. The Group's average realised gas price per produced therm rose by 2.4 pence to23.9 pence primarily due to increased international gas prices. The exploration charge of £97 million is £41 million higher than 2007principally due to higher well write-off charges. Capital investment of £582 million included expenditure in Tunisia (£148million), Egypt (£105 million), UK (£102 million), Trinidad and Tobago (£53million), Kazakhstan (£47 million), India (£24 million), Canada (£18 million)and Brazil (£17 million). First quarter business highlights The acquisition of a 20% interest in Queensland Gas Company Limited's (QGC) coalseam gas interests in the Surat Basin in Australia and of a 9.9% stake in QGC'sshare capital was completed on 11 April 2008. In a related development, BG Groupwas appointed to supply the Singapore market with up to 3 million tonnes perannum of LNG from 2012 (see page 5). During the quarter, BG Group announced the successful delivery of first gas fromthe West Delta Deep Marine Phase IV and the Rosetta Phase III projects in Egypt.The gas will be used to supply Egyptian domestic and export market commitments. In India, following the Government's appointment of GAIL (India) Limited as itsnominee to take the entire gas production from the Panna/Mukta and Tapti (PMT)fields, BG Group and partners entered into an agreement with GAIL to supply 17.3mmscmd of gas from these fields. An agreement was also entered into with GAILfor it to supply 2.13 mmscmd of gas to Gujarat Gas Company Limited. During the quarter, BG Group and partners sanctioned the Nexen-operated BuzzardEnhancement Project which involves the construction of an additional processingplatform to remove hydrogen sulphide and extend plateau production beyond 2010. In February, BG Group announced the signing of two farm-in agreements with Oiland Natural Gas Corporation Limited to acquire a participating interest in twodeep water blocks off the Indian east coast. Under the terms of the agreements, BG Group will acquire a 30% participating interest in the KG-DWN-98/4 block in the Krishna Godavari basin, and a 25% participating interest in theMN-DWN-2002/02 block in the Mahanadi basin. The farm-in agreements are subjectto Government approval. Liquefied Natural Gas (LNG) First QuarterBusiness Performance 2008 2007 £m £m Revenue and other operating income 1 336 697 +92% Total operating profitShipping and marketing 383 115 +233%Liquefaction 26 25 +4%Business development and other (14) (19) -26% 395 121 +226% Capital investment 33 60 -45% Additional operating and financial data is given on page 20. First quarter LNG total operating profit increased by £274 million to £395 million. Shipping and marketing produced an excellent performance with operating profitincreasing by £268 million to £383 million. Volumes increased by 23% andseasonal demand from Asia was strong, resulting in 90% of cargoes beingdiverted. Based on the first quarter's result and our current view of tradingconditions, we estimate that our shipping and marketing business will deliver anoperating profit for 2008 of around £1.1 billion. BG Group's share of operating profit from liquefaction activities of £26 millionwas in line with the prior year. Capital investment of £33 million in the quarter included £29 million relatingto GNL Quintero S.A. in Chile. First quarter business highlights In April, the Energy Market Authority of Singapore appointed BG Group as theaggregator of LNG demand for the Singaporean market. Under the agreement, BGGroup will be responsible for sourcing and supplying up to 3 mtpa of LNG for upto 20 years. Initial deliveries are expected to begin in 2012. Transmission and Distribution (T&D) First QuarterBusiness Performance 2008 2007 £m £mRevenue and other operating incomeComgas 243 174 +40%Other 46 46 - 289 220 +31% Total operating profitComgas 20 40 -50%Other 11 10 +10% 31 50 -38% Capital investment 28 16 +75% First quarter T&D total operating profit for the quarter was £31 million. At Comgas, in Brazil, total operating profit of £20 million reflected increasedcost of gas purchases, partially offset by increased volumes in the power andindustrial markets. Excluding the increased cost of gas and Brazilian Realforeign exchange movements, total operating profit would have increased 30% from£40 million to £52 million, primarily due to increased volumes. Recovery of theincreased cost of gas is expected to commence in the third quarter 2008 afternew tariffs are set by the Regulator. At the end of the quarter, the balance tobe recovered in future periods was £28 million. Elsewhere, operating profit increased by £1 million reflecting growth inoperating profit at Gujarat Gas in India offset by the impact of theInterconnector disposal in the UK. Capital investment mainly represents the development of the Comgas pipelinenetwork. Power Generation First QuarterBusiness Performance 2008 2007 £m £mRevenue and other operating income 139 96 +45% Total operating profitPower Generation 41 43 -5%Business development and other (3) (5) -40% 38 38 - Capital investment 4 433 - First quarter The increase in revenue and other operating income reflected a full quarter'scontribution from both Lake Road in the USA and BG Italia Power S.p.A. whichwere acquired during the first quarter 2007. Total operating profit, includingthe results of joint ventures and associates, was in line with the prior year,as increased profit associated with the US and Italian acquisitions offset theone-off benefit in 2007 from a contractual settlement at Premier Power. Presentation of Non-GAAP measures Business Performance 'Business Performance' excludes disposals, certain re-measurements andimpairments (see below) as exclusion of these items provides a clear andconsistent presentation of the underlying operating performance of the Group'songoing 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, 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 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 and are disclosedseparately as 'disposals, re-measurements and impairments'. BG Group also uses commodity instruments to manage certain price exposures inrespect of optimising the timing and location of its physical gas and LNG salescommitments. These instruments are also required to be measured at fair value atthe balance sheet date under IAS 39. However, IAS 39 does not always allow thematching of these fair values to the economically hedged value of the relatedcommodity, resulting in unrealised movements in fair value being recorded in theincome statement. These movements in fair value are disclosed separately as'disposals, re-measurements and impairments'. 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 and disclosed separately as 'disposals, re-measurements and impairments'. Realised gains and losses relating to the instruments referred to above areincluded in Business Performance. This presentation best reflects the underlyingperformance of the business since it distinguishes between the temporary timingdifferences associated with re-measurements under IAS 39 rules and actualrealised gains and losses. BG Group has also separately identified profits and losses associated with thedisposal of non-current assets, and impairments of non-current assets as theyrequire separate disclosure in order to provide a clearer understanding of theresults for the period. For a reconciliation between the overall results and Business Performance anddetails of disposals, re-measurements and impairments, see the consolidatedincome statement, page 9 and note 3, page 16. 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. This approachprovides additional information on the source of BG Group's operating profits.For a reconciliation between operating profit and earnings including andexcluding the results of joint ventures and associates, see note 3, page 16. 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 this is an importantliquidity measure for the Group. Legal Notice Certain statements included in these results contain forward-looking informationconcerning BG Group's strategy, operations, financial performance or condition,outlook, growth opportunities or circumstances in the countries, sectors ormarkets in which BG Group operates. By their nature, forward-looking statementsinvolve uncertainty because they depend on future circumstances, and relate toevents, not all of which are within BG Group's control or can be predicted by BGGroup. Although BG Group believes that the expectations reflected in suchforward-looking statements are reasonable, no assurance can be given that suchexpectations will prove to have been correct. Actual results could differmaterially from those set out in the forward-looking statements. For a detailedanalysis of the factors that may affect our business, financial performance orresults of operations, we urge you to look at the "Risk Factors" included in BGGroup plc's Annual Report and Accounts 2007. Nothing in these results should beconstrued as a profit forecast and no part of these results constitutes, orshall be taken to constitute, an invitation or inducement to invest in BG Groupplc or any other entity, and must not be relied upon in any way in connectionwith any investment decision. BG Group undertakes no obligation to update anyforward-looking statements. Consolidated Income Statement First quarter 2008 2007 Disposals Disposals re-measure re-measure- ments and ments and Business impairments Total Business impairments Total Performance (Note 2) Result Performance (Note 2) Results Notes £m £m £m £m £m £m Group revenue 3 3 089 - 3 089 1 943 - 1 943Other operating income 2 17 (10) 7 37 (33) 4 Group revenue and other operating income 3 3 106 (10) 3 096 1 980 (33) 1 947Operating costs (1 757) - (1 757) (1 212) - (1 212)Profits and losses on disposal of non-current assets and impairments 2 - (22) (22) - (1) (1) Operating profit/(loss)(ii) 3 1 349 (32) 1 317 768 (34) 734 Finance income 2, 4 40 1 41 33 5 38Finance costs 2, 4 (39) (1) (40) (30) (4) (34)Share of post-tax results from joint ventures and associates 3 34 - 34 44 - 44 Profit/(loss) before tax 1 384 (32) 1 352 815 (33) 782 Taxation 2, 5 (591) 8 (583) (357) 17 (340) Profit/(loss) for the period 793 (24) 769 458 (16) 442Attributable to: BG Group shareholders (earnings) 789 (22) 767 448 (16) 432Minority interest 4 (2) 2 10 - 10 793 (24) 769 458 (16) 442Earnings per share - basic 6 23.6p (0.7p) 22.9p 13.1p (0.4p) 12.7pEarnings per share - diluted 6 23.3p (0.6p) 22.7p 13.0p (0.4p) 12.6p Total operating profit/(loss) including share of pre-tax operating results fromjoint ventures and associates(i)(iii) 3 1 402 (32) 1 370 823 (34) 789 i) See Presentation of Non-GAAP measures, page 7, for an explanation of results excluding disposals, certain re-measurements and impairments and presentation of the results of joint ventures and associates. ii) Operating profit/(loss) is before share of results from joint ventures and associates. iii) This measurement is shown by BG Group as it is used as a means of measuring the underlying performance of the business. Consolidated Balance Sheet As at As at As at 31 Mar 31 Dec 31 Mar 2008 2007 2007 £m £m £mAssetsNon-current assetsGoodwill 395 385 339Other intangible assets 909 823 665Property, plant and equipment 7 609 7 426 6 535Investments 1 180 1 157 1 094Deferred tax assets 89 86 70Trade and other receivables 75 70 48Commodity contracts and other derivative financial instruments 447 378 402 10 704 10 325 9 153Current assets Inventories 364 382 228Trade and other receivables 2 483 2 261 1 828Current tax receivable 59 52 -Commodity contracts and other derivative financial instruments 1 145 489 247Cash and cash equivalents 2 273 1 881 1 705 6 324 5 065 4 008Assets classified as held for sale 21 - 224 Total assets 17 049 15 390 13 385 LiabilitiesCurrent liabilitiesBorrowings (278) (275) (66)Trade and other payables (2 289) (2 251) (1 711)Current tax liabilities (688) (554) (513)Commodity contracts and other derivative financial instruments (1 436) (804) (507) (4 691) (3 884) (2 797) Non-current liabilitiesBorrowings (1 598) (1 668) (1 768)Trade and other payables (27) (30) (19)Commodity contracts and other derivative financial instruments (485) (366) (196)Deferred income tax liabilities (1 311) (1 258) (1 171)Retirement benefit obligations (162) (165) (145)Provisions for other liabilities and charges (663) (662) (402) (4 246) (4 149) (3 701)Liabilities associated with assets classified as held for sale (3) - (27) Total liabilities (8 940) (8 033) (6 525) Net assets 8 109 7 357 6 860 Attributable to:BG Group equity shareholders 7 974 7 225 6 747Minority interest 135 132 113 Total equity 8 109 7 357 6 860 Consolidated Statement of Recognised Income and Expense First Quarter 2008 2007 £m £m Profit for the period 769 442Hedge adjustments net of tax 5 13Currency translation adjustments (37) 26 Net gains/(losses) recognised directly in equity (32) 39 Total recognised income for the period 737 481 Attributable to:BG Group shareholders 734 470Minority interest 3 11 737 481 Consolidated Cash Flow Statement First Quarter 2008 2007 £m £mCash flows from operating activitiesProfit before tax 1 352 782Share of post-tax results from joint ventures and associates (34) (44)Depreciation and impairments of property, plant and equipment and amortisation 218 168of intangible assetsFair value movements in commodity based contracts 30 72Losses on disposal of non-current assets and impairments 22 1Unsuccessful exploration expenditure written off 56 10Decrease in provisions (9) (20)Finance income (41) (38)Finance costs 40 34Share-based payments 7 7(Increase)/decrease in working capital (75) 114 Cash generated by operations 1 566 1 086 Income taxes paid (401) (184) Net cash inflow from operating activities 1 165 902 Cash flows from investing activitiesDividends received from joint ventures and associates - 24Proceeds from disposal of subsidiary undertakings and investments - 80Purchase of property, plant and equipment and intangible assets (478) (374)Loans to joint ventures and associates (18) (15)Business combinations and investments (10) (406) Net cash outflow from investing activities (506) (691) Cash flows from financing activitiesNet interest paid(i) (10) (2)Net proceeds from issue of new borrowings 38 137Repayment of borrowings (107) (16)Issue of shares 3 7Purchase of own shares (197) (96) Net cash (outflow)/inflow from financing activities (273) 30 Net increase in cash and cash equivalents 386 241Cash and cash equivalents at beginning of period 1 881 1 463Effect of foreign exchange rate changes 8 1 Cash and cash equivalents at end of period(ii) 2 275 (iii) 1 705 i) Includes capitalised interest for the first quarter of £8 million (2007 £11 million). ii) Cash and cash equivalents comprise cash and short-term liquid investments that are readily convertible to cash. iii) The balance at 31 March 2008 includes cash and cash equivalents of £2 273 million and cash included within assets classified as held for sale of £2 million. Reconciliation of Net Borrowings/Funds(i) £mNet funds as at 31 December 2007 25Net increase in cash and cash equivalents 386Cash outflow from changes in gross borrowings 69Foreign exchange and other re-measurements 28Cash and cash equivalents classified as assets held for sale (2) Net funds as at 31 March 2008(i) (ii) 506 Net borrowings attributable to Comgas were £365 million (31 December 2007 £318million). As at 31 March 2008, BG Group's share of the net borrowings in joint venturesand associates amounted to approximately £1 billion, including BG Groupshareholder loans of approximately £0.6 billion. These net borrowings areincluded in BG Group's share of the net assets in joint ventures and associateswhich are consolidated in BG Group's accounts. i) Net borrowings/funds are defined on page 22. ii) Net borrowings/funds comprise: As at As at 31 Mar 31 Dec 2008 2007 £m £mAmounts receivable/(due) within one year Cash and cash equivalents 2 273 1 881Overdrafts, loans and finance leases (278) (275)Derivative financial instruments(iii) 42 60 2 037 1 666Amounts receivable/(due) after more than one year Loans and finance leases (1 598) (1 668)Derivative financial instruments(iii) 67 27 (1 531) (1 641) Net funds 506 25 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 2008. 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 2007, as they provide anupdate of previously reported information. The latest statutory accountsdelivered to the registrar were for the year ended 31 December 2007 which were audited by BG Group's statutory auditors PricewaterhouseCoopers LLP. Thesefinancial statements are Interim Management Statements and have been prepared inaccordance with the requirements of the Disclosure and Transparency Rules issuedby the Financial Services Authority and the accounting policies set out in the2007 Annual Report and Accounts. The preparation of the financial statements requires management to makeestimates and assumptions that affect the reported amount of revenues, expenses,assets and liabilities at the date of the financial statements. If in the futuresuch estimates and assumptions, which are based on management's best judgementat the date of the financial statements, deviate from the actual circumstances,the original estimates and assumptions will be modified as appropriate in theyear in which the circumstances change. The presentation of BG Group's results under IFRS separately identifies theeffect 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 accounts, page 15, are excludedfrom Business Performance in order to provide readers with a clear andconsistent presentation of the underlying operating performance of the Group'songoing businesses. Under IFRS the results of joint ventures and associates are presented net offinance costs and tax (see page 7). 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. The tables in note 3 provide a reconciliationbetween the Total Result and Business Performance and operating profit includingand excluding the results of joint ventures and associates. 2. Disposals, re-measurements and impairments First Quarter 2008 2007 £m £mRevenue and other operating income - (10) (33) re-measurements of commodity based contractsProfits and losses on disposal of non-current assets and impairments (22) (1)Net finance income - re-measurements of financial instruments - 1Taxation 8 17Minority interest 2 - Impact on earnings (22) (16) First quarter: Revenue and other operating income Re-measurements included within revenue and other operating income amount to acharge of £10 million for the quarter (2007 £33 million), including a £22million charge (2007 £3 million) representing non-cash mark-to-market movementson certain long-term UK gas contracts. Whilst the activity surrounding thesecontracts involves the physical delivery of gas, the contracts fall within thescope of IAS 39 and meet the definition of a derivative instrument. First quarter: Disposals of non-current assets and impairments During the first quarter BG Group committed to a plan to sell certain non-corebusinesses and accordingly reclassified these businesses as held for sale. As aresult, these businesses were revalued to the lower of their carrying amount andfair value less costs to sell. This resulted in a pre- and post-tax charge tothe income statement of £21 million. Also during the first quarter, other disposals resulted in a pre- and post-taxcharge to the income statement of £1 million. During the first quarter of 2007, BG Group disposed of its Mauritanianinterests. This resulted in a loss on disposal of £1 million. No tax arose onthe disposal. First quarter: Net finance costs Re-measurements presented in net finance costs relate primarily to certainderivatives used to hedge foreign exchange and interest rate risk, partly offsetby foreign exchange movements on certain borrowings. 3. Segmental analysis and results presentation Profit for the period Analysed by business segment Disposals, Business re-measurements Performance and impairments Total Result First Quarter 2008 2007 2008 2007 2008 2007 £m £m £m £m £m £m Group revenueExploration and Production 1 448 1 010 - - 1 448 1 010Liquefied Natural Gas 1 333 677 - - 1 333 677Transmission and Distribution 289 220 - - 289 220Power Generation 132 96 - - 132 96Other activities 2 2 - - 2 2Less: intra-group sales(i) (115) (62) - - (115) (62) Group revenue 3 089 1 943 - - 3 089 1 943Other operating income(ii) 17 37 (10) (33) 7 4 Group revenue and other operating income 3 106 1 980 (10) (33) 3 096 1 947 Operating profit/(loss) before share ofresults from joint ventures and associates Exploration and Production 942 626 (10) (34) 932 592Liquefied Natural Gas 370 96 - - 370 96Transmission and Distribution 25 40 (1) - 24 40Power Generation 16 18 - - 16 18Other activities (4) (12) (21) - (25) (12) 1 349 768 (32) (34) 1 317 734 Pre-tax share of operating results of jointventures and associates Liquefied Natural Gas 25 25 - - 25 25Transmission and Distribution 6 10 - - 6 10Power Generation 22 20 - - 22 20 53 55 - - 53 55 Total operating profit/(loss) Exploration and Production 942 626 (10) (34) 932 592Liquefied Natural Gas 395 121 - - 395 121Transmission and Distribution 31 50 (1) - 30 50Power Generation 38 38 - - 38 38Other activities (4) (12) (21) - (25) (12) 1 402 823 (32) (34) 1 370 789 Net finance costs Finance income 40 33 1 5 41 38Finance costs (39) (30) (1) (4) (40) (34)Share of joint ventures and associates (12) (12) - - (12) (12) (11) (9) - 1 (11) (8) Taxation Taxation (591) (357) 8 17 (583) (340)Share of joint ventures and associates (7) 1 - - (7) 1 (598) (356) 8 17 (590) (339) Profit for the period 793 458 (24) (16) 769 442 i) Intra-group sales are attributable to segments as follows: E&P £98 million (2007 £61 million) and LNG £17 million (2007 £1 million). ii) Other operating income is attributable to segments as follows: E&P £7 million (2007 £17 million), LNG £3 million (2007 £20 million) and Power £7 million (2007 £nil). 3. Segmental analysis and results presentation (continued) Total Result Operating profit before share of results from joint Share of results ventures and in joint ventures associates (i) and associates Total Result First Quarter 2008 2007 2008 2007 2008 2007 £m £m £m £m £m £m Exploration and Production 932 592 - - 932 592Liquefied Natural Gas 370 96 16 16 386 112Transmission and Distribution 24 40 4 15 28 55Power Generation 16 18 14 13 30 31Other activities (25) (12) - - (25) (12) 1 317 734 34 44 1 351 778 Net finance income 1 4Profit before tax 1 352 782Taxation (583) (340) Profit for the period 769 442 i) Including disposals, re-measurements and impairments. 4. Net finance income First Quarter 2008 2007 £m £mInterest payable (24) (23)Interest on obligations under finance leases (15) (13)Interest capitalised 8 11Unwinding of discount on provisions(i) (8) (5)Disposals, re-measurements and impairments (Note 2) (1) (4) Finance costs (40) (34) Interest receivable 40 33Disposals, re-measurements and impairments (Note 2) 1 5 Finance income 41 38 Net finance income(ii) 1 4 i) 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. ii) Excludes Group share of net finance costs from joint ventures and associates for the quarter of £12 million (2007 £12 million). 5. Taxation The taxation charge for the first quarter before disposals, re-measurements andimpairments was £591 million (2007 £357 million) and the taxation chargeincluding disposals, re-measurements and impairments was £583 million (2007 £340million). The Group share of taxation from joint ventures and associates for the firstquarter was a charge of £7 million (2007 £1 million credit). 6. Earnings per ordinary share First Quarter 2008 2007 Pence Pence £m per share £m per share Earnings 767 22.9 432 12.7Disposals, re-measurements and impairments (after tax and minority interest) 22 0.7 16 0.4 Earnings - excluding disposals, 789 23.6 448 13.1re-measurements and impairments Basic earnings per share calculations in 2008 are based on shares in issue of 3345 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 3 381 million for the quarter, being the weighted average number of ordinaryshares in issue during the period as adjusted for dilutive equity instruments. 7. Capital investment: geographical analysis First Quarter 2008 2007 £m £mEurope and Central Asia 179 260Americas and Global LNG 161 480Africa, Middle East and Asia 307 129 647 869 8. Quarterly information: earnings and earnings per share 2008 2007 2008 2007 £m £m pence penceFirst quarter including disposals, re-measurements and impairments 767 432 22.9 12.7 excluding disposals, re-measurements and impairments 789 448 23.6 13.1Second quarter including disposals, re-measurements and impairments 471 13.9 excluding disposals, re-measurements and impairments 409 12.0Third quarter including disposals, re-measurements and impairments 357 10.6 excluding disposals, re-measurements and impairments 368 10.9Fourth quarter including disposals, re-measurements and impairments 486 14.4 excluding disposals, re-measurements and impairments 558 16.6 Full year including disposals, re-measurements and impairments 1 746 51.6 excluding disposals, re-measurements and impairments 1 783 52.7 Supplementary information: Operating and financial data First Quarter Fourth Quarter 2008 2007 2007Production volumes (mmboe)- oil 7.9 6.5 7.7- liquids 9.3 8.8 9.0- gas 43.5 42.9 43.0 - total 60.7 58.2 59.7 Production volumes (boed in thousands)- oil 87 72 84- liquids 102 98 98- gas 478 477 467 - total 667 647 649 Average realised oil price per barrel £49.69 £29.60 £43.31 ($98.49) ($58.13) ($88.59) Average realised liquids price per barrel £41.05 £23.21 £35.92 ($81.35) ($45.57) ($73.48) Average realised UK gas price per produced therm 38.73p 37.03p 38.36pAverage realised International gas price per produced therm 19.54p 16.31p 16.00pAverage realised gas price per produced therm 23.87p 21.50p 21.40p Lifting costs per boe £1.57 £1.51 £1.58 ($3.11) ($2.97) ($3.22) Operating expenditure per boe £2.80 £2.51 £2.50 ($5.55) ($4.92) ($5.10) Development expenditure (£m) 407 291 340 Gross exploration expenditure (£m)- capitalised expenditure 146 59 116- other expenditure 41 46 65- gross expenditure 187 105 181 Exploration expenditure charge (£m)- capitalised expenditure written off 56 10 41- other expenditure 41 46 65- exploration charge 97 56 106 LNG Cargoes- delivered to Lake Charles - 18 1- delivered to Elba Island 6 15 10- re-marketed 52 19 37- total 58 52 48 LNG managed volumes (Tbtu) 177.8 144.8 144.8 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 $1.00 rise (or fall) in the Brent price would increase(or decrease) operating profit in 2008 by approximately £40 million to £50million. BG Group's exposure to the US$/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 2008, otherfactors being constant, a 10 cent strengthening (or weakening) in the US Dollarwould increase (or decrease) operating profit by approximately £200 million to£250 million. Glossary In BG Group's results some or all of the following definitions are used: 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 ProductionEBITDA earnings before interest, tax, depreciation and amortisationEPC engineering, procurement and constructionEPIC engineering, procurement, installation and commissioningFEED front end engineering designFERC Federal Energy Regulatory CommissionGearing ratio net borrowings as a percentage of total shareholders' funds (excluding the re-measurement of commodity financial instruments and associated deferred tax) plus net borrowingsGW gigawattIAS 39 International Accounting Standard 39 (Financial Instruments)IFRS International Financial Reporting Standardskboed thousand barrels of oil equivalent per dayLNG Liquefied Natural GasManaged volumes Comprises all LNG volumes contracted for purchase and having related revenue and other operating income recognised in the applicable periodm 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 borrowings/funds Comprise cash, current asset investments, finance leases, currency and interest rate derivative financial instruments and short- and long-term borrowingsNGL Natural gas liquidsPSA production sharing agreementSEC US Securities and Exchange CommissionT&D Transmission and DistributionTbtu trillion british thermal unitsTotal operating profit Group operating profit plus share of pre-tax operating results of joint ventures and associatesUKCS United Kingdom Continental ShelfUnit operating Production costs and royalties incurred over the period divided by the net production forexpenditure per boe the period. Production costs and royalties (other operating costs) for the period are disclosed under "results of operations" in the Supplementary information - Oil and Gas disclosures in BG Group's Annual Report & Accounts 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 'Unit operating expenditure' as defined above, excluding royalty, tariff and insuranceboe costs incurred over the period divided by the net production for the period. Enquiries Enquiries relating to BG Group's results, business and General enquiries about shareholder mattersfinancial position should be made to: should be made to: Investor Relations Department Equiniti LimitedBG Group plc Aspect HouseThames Valley Park Drive Spencer RoadReading LancingBerkshire West SussexRG6 1PT BN99 6DA Tel: 0118 929 3025 Tel: 0871 384 2064e-mail: [email protected] e-mail: [email protected] Media Enquiries: Jo Thethi: 0118 929 3110 Neil Burrows: 0118 929 2462 Edel McCaffrey: 0118 929 3508 BG Group is listed on the US over-the-counter market knownas the International OTCQX. Enquiries should be made to: Pink Sheets LLC304 Hudson Street2nd FloorNew York, NY 10013USA e-mail: [email protected] Financial Calendar Announcement of 2008 second quarter and half year results 24 July 2008Payment of 2007 final dividend: Shareholders 23 May 2008 American depositary receipt holders 2 June 2008 BG Group plc website: www.bg-group.com Registered office100 Thames Valley Park Drive, Reading RG6 1PTRegistered in England No. 3690065 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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