1st Quarter Results

RNS Number : 0032L

BG GROUP plc

29 April 2010

 

BG Group plc

2010 FIRST QUARTER RESULTS

First Quarter Highlights

·; Earnings per share of 33.2 cents, up 13%

·; QCLNG Engineering, Procurement and Construction contracts signed

·; Contract signed with CNOOC for 20-year sale of 3.6 mtpa of LNG from QCLNG

·; Heads of agreement with Tokyo Gas for 20-year sale of 1.2 mtpa of LNG from QCLNG

·; Further development progress and successful appraisal results on Tupi, Santos Basin, Brazil

·; Acquisition of further US shale gas interests

·; Disposal of US power plants and BG Group's interest in Seabank in the UK

BG Group's Chief Executive, Frank Chapman said:

"This is a good set of operating results, complemented by excellent project progress which further de-risks our key ventures in Australia, Brazil, the UK and the USA. We have also continued the strengthening and rebalancing of our global portfolio with the expansion of our US upstream position, which will take our US reserves and resources to around 5 trillion cubic feet."

 

Please note that, as previously announced on 28 October 2009 and with effect from first quarter 2010, BG Group now reports its financial results in US Dollars.

	First Quarter
Business Performance(a)	2010 $m	2009(b) $m
Total operating profit including share of pre-tax operating results from joint ventures and associates	1 995	1 824	+9%
Earnings for the period	1 120	988	+13%
Earnings per share	33.2c	29.4c	+13%
Total results for the period (including disposals, re-measurements and impairments)
Operating profit before share of results from joint ventures and associates	1 627	1 739	-6%
Total operating profit including share of pre-tax operating results from joint ventures and associates	1 758	1 868	-6%
Earnings for the period	960	1 008	-5%
Earnings per share	28.4c	30.0c	-5%

a) 'Business Performance' excludes disposals, certain re-measurements and impairments as exclusion of these items provides a clear and consistent presentation of the underlying operating performance of the Group's ongoing business. 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 13) and note 3 (page 15). For further details of the items included in disposals, re-measurements and impairments, see note 2 (page 14). Unless otherwise stated, the results discussed in this release relate to BG Group's Business Performance.

b) 2009 trading results have been translated from Pounds Sterling to US Dollars using monthly average rates of exchange. Assets and liabilities have been translated from Pounds Sterling to US Dollars at closing rates of exchange.

Business Review - Group

	First Quarter
Business Performance	2010 $m		2009 $m
Revenue and other operating income(a)	4 647		4 450		+4%
Total operating profit including share of pre-tax results from joint ventures and associates
Exploration and Production	1 192		834		+43%
Liquefied Natural Gas	633		827		-23%
Transmission and Distribution	125		115		+9%
Power Generation	55		35		+57%
Other activities	(10)		13		-
	1 995		1 824		+9%
Net finance costs	(18)		(67)		-73%
Taxation for the period	(831)		(746)		+11%
Earnings for the period	1 120		988		+13%
Earnings per share	33.2c		29.4c		+13%
Capital investment	1 901		1 872		+2%

a) 2009 comparatives have been restated on the application of IFRIC 12. See note 1, page 13.

First quarter

Revenue and other operating income of $4 647 million was 4% higher, reflecting a 6% increase in E&P production volumes and higher oil and liquids prices, partially offset by lower realised gas prices in the E&P and LNG segments.

Total operating profit of $1 995 million was 9% higher, reflecting the increase in revenue and other operating income and a lower exploration charge.

Cash generated by operations increased by 26% to $2 508 million.

Net finance costs were $49 million lower than 2009 as a result of foreign exchange gains of $51 million in the quarter. At the end of the quarter, the gearing ratio of the Group was 16%.

The Group's effective tax rate (including BG Group's share of joint venture and associates' tax) was 42.0% (2009 42.5%).

Capital investment in the quarter of $1 901 million reflected continuing investment in E&P ($1 030 million), LNG ($799 million), T&D ($52 million) and Power ($20 million).

Disposals, re-measurements and impairments

A post-tax charge of $160 million was recorded in the quarter in respect of disposals, re-measurements and impairments. For further information, see note 2 (page 14).

Exploration and Production (E&P)

	First Quarter
Business Performance	2010 $m		2009 $m
Production volumes (mmboe)	61.3		57.9			+6%
Revenue and other operating income	2 294		1 830			+25%
Total operating profit before exploration charge	1 296		1 086			+19%
Exploration charge	(104)		(252)			-59%
Total operating profit	1 192		834			+43%
Capital investment	1 030		1 676			-39%

Additional operating and financial data is given on page 20.

First quarter

Revenue and other operating income of $2 294 million was 25% higher, reflecting a 6% increase in production volumes and higher oil and liquids prices, partially offset by lower realised gas prices. Total operating profit was 43% higher as a result of the increase in revenue and other operating income and a lower exploration charge.

Production volume growth in the quarter was driven by higher volumes in the USA and Australia and the ramp-up of production at Hasdrubal in Tunisia. BG Group continues to expect only slight production growth for the full year.

The 17% fall in the Group's average realised gas price per produced therm to 37.37 cents reflected lower UK gas contract prices, lower market prices in the UK and the lagged effect of oil market price changes on realisations in Tunisia and Thailand.

The exploration charge of $104 million is $148 million lower than 2009 as a result of lower well write-offs.

Unit operating expenditure increased to $6.95 per barrel of oil equivalent, principally reflecting changes in the production mix and a more extensive well work-over programme in the UK.

Capital investment of $1 030 million in the quarter comprised investment in Americas ($401 million), Europe and Central Asia ($271 million), Africa, Middle East and Asia ($243 million) and Australia ($115 million).

First quarter business highlights

Brazil

In March, BG Group announced the completion of a drill stem test on the Tupi North-East well in BM-S-11 (BG Group 25%) in the Santos Basin, offshore Brazil. Potential production from the well is estimated at around 30 000 bopd. BG Group and partners also completed a further successful Tupi appraisal well, situated 12.5 kilometres north of the Tupi discovery well. Further evaluation of the well data is ongoing and work on optimising field development options continues to advance.

UK/Norway

In the North Sea, BG Group and its partner have approved submission of the Field Development Plan for the Pi project to the Norwegian Ministry. The Pi project will be developed via a tie-back to BG Group's existing Armada infrastructure in the UK. Production is due to begin by 2012.

BG Group and partners continue to progress towards first production from the Jasmine field in 2012. In the first four months of 2010, five of the nine major contracts related to this significant development were awarded, including the drilling rig and fabrication of the jacket and topsides.

USA

In April, BG Group signed an agreement to purchase Common Resources, L.L.C. (Common) jointly with EXCO Resources, Inc. (EXCO) for approximately $446 million ($223 million net to BG Group). Common owns producing assets, gathering lines and acreage in potentially highly productive areas in Shelby, San Augustine and Nacogdoches Counties, Texas. The assets acquired include seven producing wells and approximately 29 200 net acres prospective for the Haynesville and Bossier shales. BG Group and EXCO will each acquire 50% of Common, and development of these assets will be governed by the existing joint venture. The acquisition is expected to complete by 12 May.

On completion of the acquisition, BG Group's total estimated net reserves and resources in the USA will amount to around 5 tcf.

Liquefied Natural Gas (LNG)

	First Quarter
Business Performance	2010 $m		2009 $m
Revenue and other operating income	1 683		2 043		-18%
Total operating profit
Shipping and marketing	585		775		-25%
Liquefaction	83		88		-6%
Business development and other	(35)		(36)		-3%
	633		827		-23%
Capital investment	799		149		+436%

Additional operating and financial data is given on page 20.

First quarter

LNG total operating profit for the quarter was $633 million.

BG Group's share of total operating profit from liquefaction activities was $5 million lower at $83 million as a result of lower prices at Atlantic LNG.

Shipping and marketing total operating profit was 25% lower than in first quarter 2009, principally reflecting lower realisations. This performance was ahead of BG Group expectations as a result of a higher than anticipated level of diversions. BG Group confirms its 2010 operating profit guidance of $1.8 billion to $2.0 billion for the LNG segment.

Capital investment of $799 million in the quarter included $492 million arising on recognition of a finance lease under IAS 17, following the commissioning of a natural gas liquids-stripping facility at Lake Charles in the USA, $186 million related to LNG ships and $114 million in Australia.

First quarter business highlights

Australia

In February, BG Group announced it had signed the plant Engineering, Procurement and Construction contracts with Bechtel companies for the Queensland Curtis LNG (QCLNG) liquefaction plant in Queensland. Under the contracts, Bechtel has been issued interim notices to proceed with engineering works and the procurement of plant long-lead items, including compressors and storage tanks. QGC has begun to commit to contracts under plans to procure long-lead items during first half 2010, valued at more than US$3 billion.

In February, BG Group and Australia Pacific LNG (APLNG) agreed a framework for the development of jointly owned coal seam gas tenements ATP 648P and ATP 620P. BG Group also entered into conditional gas purchase agreements with APLNG under which BG Group expects to buy around 190 petajoules (PJ) of gas over an initial period of around two years from APLNG, reducing thereafter to an average of 25 PJ per annum.

In March, BG Group signed a LNG sales contract with the China National Offshore Oil Corporation (CNOOC) concluding negotiations announced in May 2009 for the supply of 3.6 mtpa of LNG over a 20-year period. CNOOC will be supplied with LNG manufactured at the QCLNG facility which is planned to come onstream by 2014. BG Group may also supply CNOOC from the Group's global LNG portfolio. Additionally, CNOOC will acquire a 5% equity interest in the reserves and resources of certain BG Group tenements in the Walloons Fairway of the Surat Basin in Queensland. CNOOC will also become a 10% equity investor in the first of two liquefaction trains which will form the first phase of the QCLNG development. In addition, BG Group and CNOOC have agreed to participate jointly in a consortium to construct two LNG ships in China that will be owned by the consortium.

All of these agreements are conditional on relevant approvals and on BG Group making a final investment decision on QCLNG, expected later this year.

In March, BG Group announced it had signed Heads of Agreement with Tokyo Gas Co., Ltd. (Tokyo Gas), for the supply of LNG from the Group's QCLNG project. Tokyo Gas will buy 1.2 mtpa from 2015 which will be supplied from the QCLNG facility and also from the Group's global LNG portfolio. Additionally, Tokyo Gas will acquire a 1.25% interest in the reserves and resources of certain BG Group tenements in the Walloons Fairway of the Surat Basin in Queensland. Tokyo Gas will also become a 2.5% equity investor in the second of the two liquefaction trains. BG Group and Tokyo Gas intend to execute fully termed agreements by the end of 2010. These agreements will represent the first purchase by a Japanese company of LNG from coal seam gas.

Singapore

In March, the Group announced it had agreed long-term contracts for the sale of a total of 1.5 mtpa of regasified LNG to six power generating companies in Singapore. This is the first tranche of contracts to be confirmed under the LNG aggregator agreement entered into by BG Group and the Energy Market Authority of Singapore in June 2009. BG Group has the sole right to supply up to 3 mtpa to the Singaporean market under gas sales agreements with a term of up to 20 years.

In total, BG Group has now secured up to 9.5 mtpa of long-term LNG sales in Chile, China, Japan and Singapore.

Transmission and Distribution (T&D)

	First Quarter
Business Performance	2010 $m		2009 $m
Revenue and other operating income(a)
Comgás	519		423		+23%
Other	95		66		+44%
	614		489		+26%
Total operating profit
Comgás	100		100		-
Other	25		15		+67%
	125		115		+9%
Capital investment	52		42		+24%

a) 2009 comparatives have been restated on the application of IFRIC 12. See note 1, page 13.

First quarter

T&D total operating profit of $125 million was 9% higher, principally as a result of a strong performance in India.

At Comgás in Brazil, past gas costs were substantially recovered ($9 million) and total operating profit was in line with 2009.

Capital investment mainly represents the development of the Comgás pipeline network.

Power Generation

	First Quarter
Business Performance	2010 $m		2009 $m
Revenue and other operating income	240		204		+18%
Total operating profit
Power Generation	61		39		+56%
Business development and other	(6)		(4)		+50%
	55		35		+57%
Capital investment	20		5		+300%

First quarter

Power total operating profit increased by $20 million to $55 million, due to lower fuel costs incurred in Italy.

First quarter business highlights

In March, BG Group signed a sale and purchase agreement for the sale of its power plants in the USA for a total consideration of $450 million. Closing of the transaction is subject to receiving the customary Federal and State regulatory approvals. The transaction is expected to complete in second quarter 2010.

In April, BG Group signed a sale and purchase agreement for the sale of its 50% interest in Seabank Power Limited in the UK for a total consideration of £211.7 million (approximately $320 million). The transaction is expected to complete in second quarter 2010.

Presentation of Non-GAAP measures

Business Performance 'Business Performance' excludes disposals, certain re-measurements and impairments (see below) as exclusion of these items provides a clear and consistent presentation of the underlying operating performance of the Group's ongoing business. BG Group uses commodity instruments to manage price exposures associated with its marketing and optimisation activity in the UK and US. This activity enables the Group to take advantage of commodity price movements. It is considered more appropriate to include both unrealised and realised gains and losses arising from the mark-to-market of derivatives associated with this activity in 'Business Performance'. Disposals, certain re-measurements and impairments BG Group's commercial arrangements for marketing gas include the use of long-term gas sales contracts. Whilst the activity surrounding these contracts involves the physical delivery of gas, certain UK gas sales contracts are classified as derivatives under the rules of IAS 39 and are required to be measured at fair value at the balance sheet date. Unrealised gains and losses on these contracts reflect the comparison between current market gas prices and the actual prices to be realised under the gas sales contract and are disclosed separately as 'disposals, re-measurements and impairments'. BG Group also uses commodity instruments to manage certain price exposures in respect of optimising the timing and location of its physical gas and LNG sales commitments. These instruments are also required to be measured at fair value at the balance sheet date under IAS 39 and where practical have been designated as formal hedges. However, IAS 39 does not always allow the matching of fair values to the economically hedged value of the related commodity, resulting in unrealised movements in fair value being recorded in the income statement. These movements in fair value, together with any unrealised gains and losses associated with discontinued hedge accounting relationships that continue to represent economic hedges, are disclosed separately as 'disposals, re-measurements and impairments'. BG Group also uses financial instruments, including derivatives, to manage foreign exchange and interest rate exposure. These instruments are required to be recognised at fair value or amortised cost on the balance sheet in accordance with IAS 39. Most of these instruments have been designated either as hedges of foreign exchange movements associated with the Group's net investments in foreign operations, or as hedges of interest rate risk. Where these instruments cannot be designated as hedges under IAS 39, unrealised movements in fair value are recorded in the income statement and disclosed separately as 'disposals, re-measurements and impairments'. Realised gains and losses relating to the instruments referred to above are included in Business Performance. This presentation best reflects the underlying performance of the business since it distinguishes between the temporary timing differences associated with re-measurements under IAS 39 rules and actual realised gains and losses. BG Group has also separately identified profits and losses associated with the disposal of non-current assets, and impairments of non-current assets as they require separate disclosure in order to provide a clearer understanding of the results for the period. For a reconciliation between the overall results and Business Performance and details of disposals, re-measurements and impairments, see the consolidated income statement (page 9), note 2 (page 14) and note 3 (page 15). Joint ventures and associates Under IFRS the results from jointly controlled entities (joint ventures) and associates, accounted for under the equity method, are required to be presented net of finance costs and tax on the face of the income statement. Given the relevance of these businesses within BG Group, the results of joint ventures and associates are presented before interest and tax, and after tax. This approach provides additional information on the source of BG Group's operating profits. For a reconciliation between operating profit and earnings including and excluding the results of joint ventures and associates, see note 3 (page 15). Net borrowings/funds BG Group provides a reconciliation of net borrowings/funds and an analysis of the amounts included within net borrowings/funds as this is an important liquidity measure for the Group.

Legal Notice

Certain statements included in these results contain forward-looking information concerning BG Group's strategy, operations, financial performance or condition, outlook, growth opportunities or circumstances in the countries, sectors or markets in which BG Group operates. By their nature, forward-looking statements involve uncertainty because they depend on future circumstances, and relate to events, not all of which are within BG Group's control or can be predicted by BG Group. Although BG Group believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Actual results could differ materially from those set out in the forward-looking statements. For a detailed analysis of the factors that may affect our business, financial performance or results of operations, we urge you to look at the 'Risk Factors' included in BG Group plc's Annual Report and Accounts 2009. No part of these results constitutes, or shall be taken to constitute, an invitation or inducement to invest in BG Group plc or any other entity, and must not be relied upon in any way in connection with any investment decision. BG Group undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required.

Consolidated Income Statement

First Quarter

			2010				2009 Restated(a)
		Notes	Business Perform-ance(b) $m	Disposals, re-measure- ments and impairments (Note 2)(b) $m	Total Result $m		Business Perform- ance(b) $m	Disposals, re-measure- ments and impairments (Note 2)(b) $m	Total Result $m
	Group revenue		4 502	-	4 502		4 332	-	4 332
	Other operating income	2	145	140	285		118	44	162
	Group revenue and other operating income	3	4 647	140	4 787		4 450	44	4 494
	Operating costs		(2 783)	-	(2 783)		(2 755)	-	(2 755)
	Profits and losses on disposal of non-current assets and impairments	2	-	(377)	(377)		-	-	-
	Operating profit/(loss)(c)	3	1 864	(237)	1 627		1 695	44	1 739
	Finance income	2, 4	65	19	84		9	18	27
	Finance costs	2, 4	(63)	-	(63)		(60)	(16)	(76)
	Share of post-tax results from joint ventures and associates	3	79	-	79		92	-	92
	Profit/(loss) before tax		1 945	(218)	1 727		1 736	46	1 782
	Taxation	2, 5	(799)	58	(741)		(725)	(26)	(751)
	Profit/(loss) for the period	3	1 146	(160)	986		1 011	20	1 031
	Attributable to:
	BG Group shareholders (earnings)		1 120	(160)	960		988	20	1 008
	Minority interest		26	-	26		23	-	23
			1 146	(160)	986		1 011	20	1 031
	Earnings per share - basic	6	33.2c	(4.8c)	28.4c		29.4c	0.6c	30.0c
	Earnings per share - diluted	6	32.9c	(4.7c)	28.2c		29.2c	0.6c	29.8c
	Total operating profit/(loss) including share of pre-tax operating results from joint ventures and associates(d)	3	1 995	(237)	1 758		1 824	44	1 868

a) See note 1, page 13.

b) 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.

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

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

Consolidated Statement of Comprehensive Income

	First Quarter
	2010 $m	2009 $m
Profit for the period	986	1 031
Hedge adjustments net of tax(a)	(165)	(269)
Fair value movements on 'available-for-sale' assets net of tax(b)	-	7
Currency translation adjustments	(70)	130
Other comprehensive (expense)/income, net of tax	(235)	(132)
Total comprehensive income for the period	751	899
Attributable to:
BG Group shareholders	724	874
Minority interest	27	25
	751	899

a) Income tax relating to hedge adjustments is a $73 million credit for the quarter (2009 $109 million credit).

b) Income tax relating to fair value movements on 'available-for-sale' assets is $nil for the quarter (2009 $nil).

Consolidated Balance Sheet

	As at 31 Mar 2010 $m	As at 31 Dec 2009 Restated(a) $m	As at 31 Mar 2009 Restated(a) $m
Assets
Non-current assets
Goodwill	758	781	630
Other intangible assets	8 101	9 290	7 478
Property, plant and equipment	21 509	20 131	15 467
Investments	2 797	2 953	2 423
Deferred tax assets	202	137	124
Trade and other receivables	84	125	150
Commodity contracts and other derivative financial instruments	592	608	969
	34 043	34 025	27 241
Current assets
Inventories	640	769	555
Trade and other receivables	4 671	4 721	5 184
Current tax receivable	277	173	180
Commodity contracts and other derivative financial instruments	1 426	1 635	2 353
Cash and cash equivalents	803	1 119	1 004
	7 817	8 417	9 276
Assets classified as held for sale	661	-	-
Total assets	42 521	42 442	36 517
Liabilities
Current liabilities
Borrowings	(302)	(1 158)	(471)
Trade and other payables	(3 930)	(4 186)	(4 472)
Current tax liabilities	(1 820)	(1 579)	(1 618)
Commodity contracts and other derivative financial instruments	(1 485)	(1 390)	(1 986)
	(7 537)	(8 313)	(8 547)
Non-current liabilities
Borrowings	(5 320)	(5 024)	(2 757)
Trade and other payables	(65)	(63)	(61)
Commodity contracts and other derivative financial instruments	(614)	(849)	(1 099)
Deferred income tax liabilities	(3 144)	(3 147)	(2 976)
Retirement benefit obligations	(272)	(279)	(265)
Provisions for other liabilities and charges	(1 498)	(1 537)	(1 350)
	(10 913)	(10 899)	(8 508)
Liabilities associated with assets classified as held for sale	(26)	-	-
Total liabilities	(18 476)	(19 212)	(17 055)
Net assets	24 045	23 230	19 462
Equity
Total shareholders' equity	23 698	22 909	19 256
Minority interest in equity	347	321	206
Total equity	24 045	23 230	19 462

a) See note 1, page 13.

Consolidated Cash Flow Statement

	First Quarter
	2010 $m	2009 $m
Cash flows from operating activities
Profit before tax	1 727	1 782
Share of post-tax results from joint ventures and associates	(79)	(92)
Depreciation of property, plant and equipment and amortisation of intangible assets	526	406
Fair value movements in commodity based contracts	(121)	(56)
Profits and losses on disposal of non-current assets and impairments	377	-
Unsuccessful exploration expenditure written off	10	161
Increase in provisions	4	4
Finance income	(84)	(27)
Finance costs	63	76
Share-based payments	16	10
Decrease/(increase) in working capital	69	(272)
Cash generated by operations	2 508	1 992
Income taxes paid	(550)	(630)
Net cash inflow from operating activities	1 958	1 362
Cash flows from investing activities
Dividends received from joint ventures and associates	11	27
Purchase of property, plant and equipment and intangible assets	(1 377)	(1 171)
Loans from/(to) joint ventures and associates	2	(13)
Business combinations and investments	(47)	(700)
Net cash outflow from investing activities	(1 411)	(1 857)
Cash flows from financing activities
Net interest paid(a)	(47)	(28)
Dividends paid	(1)	-
Dividends paid to minority	(1)	-
Net (outflow)/proceeds from repayment and issue of borrowings	(837)	34
Issue of shares	42	14
Purchase of own shares	(2)	(4)
Net cash (outflow)/inflow from financing activities	(846)	16
Net decrease in cash and cash equivalents	(299)	(479)
Cash and cash equivalents at beginning of period	1 119	1 485
Effect of foreign exchange rate changes	(9)	(2)
Cash and cash equivalents at end of period(b)	811(c)	1 004

a) Includes capitalised interest for the quarter of $14 million (2009 $6 million).

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

c) The balance at 31 March 2010 includes cash and cash equivalents of $803 million and cash included within assets classified as held for sale of $8 million.

Notes

1. Basis of preparation

These primary statements are the unaudited preliminary consolidated financial statements ('the financial statements') of BG Group plc for the quarter ended 31 March 2010. The financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006, and should be read in conjunction with the Annual Report and Accounts for the year ended 31 December 2009 which have been prepared in accordance with IFRS as adopted by the EU, as they provide an update of previously reported information. The latest statutory accounts delivered to the registrar were for the year ended 31 December 2009 which were audited by BG Group's statutory auditors PricewaterhouseCoopers LLP and on which the Auditors' Report was unqualified and did not contain statements under Sections 498(2) or 498(3) of the UK Companies Act 2006. These financial statements have been prepared in accordance with the requirements of the Disclosure and Transparency Rules issued by the Financial Services Authority and the accounting policies set out in the 2009 Annual Report and Accounts (except as disclosed below).

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

With effect from 1 January 2010, BG Group has started to present its results in US Dollars. Accordingly, 2009 results have been translated from Pounds Sterling to US Dollars using monthly average rates of exchange. Assets and liabilities have been translated from Pounds Sterling to US Dollars at closing rates of exchange.

Presentation of results

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

·; The re-measurement of certain financial instruments; and

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

These items, which are detailed in note 2 to the financial statements (page 14) are excluded from Business Performance in order to provide readers with a clear and consistent presentation of the underlying operating performance of the Group's ongoing businesses.

New accounting standards and interpretations

IFRIC 12 'Service Concession Arrangements' is applicable to BG Group for the period beginning 1 January 2010. This interpretation provides guidance on the accounting by operators for public-to-private service concession arrangements and requires infrastructure considered to be under the control of a regulator rather than an operator to be recognised as an intangible concession asset and amortised over the concession period. Prior to the adoption of IFRIC 12 such infrastructure was recognised as property, plant and equipment of the operator and depreciated over its useful economic life. The interpretation also requires additions to the infrastructure incurred by the operator to be accounted for as a construction contract with the regulator, with revenues and associated costs recognised in the income statement on a percentage of completion basis.

BG Group has concluded that the Comgás concession in Brazil falls within the scope of IFRIC 12 and has applied the interpretation from 1 January 2010, restating comparative information as necessary. On 1 January 2010, infrastructure associated with the transmission and distribution network operated by Comgás of approximately $1.6 billion (31 March 2009 $1.2 billion) was recognised as intangible assets resulting in a corresponding decrease to property, plant and equipment. The application of IFRIC 12 has resulted in an increase to revenue and operating costs of $30 million in the 3 months to 31 March 2010 (2009 $19 million). There has been no change to total operating profit or earnings for the Group.

2. Disposals, re-measurements and impairments

	First Quarter
	2010 $m	2009 $m
Revenue and other operating income - re-measurements of commodity based contracts	140	44
Profits and losses on disposal of non-current assets and impairments	(377)	-
Net finance income - re-measurements of financial instruments	19	2
Taxation	58	(26)
Minority interest	-	-
Impact on earnings	(160)	20

First quarter: Revenue and other operating income

Re-measurements included within revenue and other operating income amount to a credit of $140 million for the quarter (2009 $44 million credit), of which a credit of $42 million (2009 $56 million credit) 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. In addition, re-measurements include a $118 million credit (2009 $nil) representing unrealised gains associated with discontinued hedges.

First quarter: Net finance costs

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

First quarter: Disposals and impairments of non-current assets

During the first quarter, BG Group signed a Sale and Purchase Agreement for the sale of its power plants in the USA and also committed to sell its Canadian E&P assets and its investment in the Seabank power plant in the UK. Accordingly, these assets were reclassified as held for sale and revalued to the lower of their carrying amount and fair value less costs to sell. This resulted in a pre-tax impairment charge of $377 million (post-tax charge $263 million) against the Group's US power and Canadian E&P assets in the quarter.

3. Segmental analysis

Profit for the period	Business Performance		Disposals, re-measurements and impairments		Total Result
Analysed by operating segment
First Quarter	2010 $m	2009 Restated(a) $m	2010 $m	2009 $m	2010 $m	2009 Restated(a) $m
Group revenue
Exploration and Production	2 253	1 809	-	-	2 253	1 809
Liquefied Natural Gas	1 579	1 953	-	-	1 579	1 953
Transmission and Distribution	614	489	-	-	614	489
Power Generation	240	197	-	-	240	197
Less: intra-group sales	(184)	(116)	-	-	(184)	(116)
Group revenue	4 502	4 332	-	-	4 502	4 332
Other operating income(b)	145	118	140	44	285	162
Group revenue and other operating income	4 647	4 450	140	44	4 787	4 494
Operating profit/(loss) before share of results from joint ventures and associates
Exploration and Production	1 193	834	(30)	45	1 163	879
Liquefied Natural Gas	544	741	118	-	662	741
Transmission and Distribution	112	106	-	(1)	112	105
Power Generation	25	1	(325)	-	(300)	1
Other activities	(10)	13	-	-	(10)	13
	1 864	1 695	(237)	44	1 627	1 739
Pre-tax share of operating results of joint ventures and associates
Exploration and Production	(1)	-	-	-	(1)	-
Liquefied Natural Gas	89	86	-	-	89	86
Transmission and Distribution	13	9	-	-	13	9
Power Generation	30	34	-	-	30	34
	131	129	-	-	131	129
Total operating profit/(loss)
Exploration and Production	1 192	834	(30)	45	1 162	879
Liquefied Natural Gas	633	827	118	-	751	827
Transmission and Distribution	125	115	-	(1)	125	114
Power Generation	55	35	(325)	-	(270)	35
Other activities	(10)	13	-	-	(10)	13
	1 995	1 824	(237)	44	1 758	1 868
Net finance (costs)/income
Finance income	65	9	19	18	84	27
Finance costs	(63)	(60)	-	(16)	(63)	(76)
Share of joint ventures and associates	(20)	(16)	-	-	(20)	(16)
	(18)	(67)	19	2	1	(65)
Taxation
Taxation	(799)	(725)	58	(26)	(741)	(751)
Share of joint ventures and associates	(32)	(21)	-	-	(32)	(21)
	(831)	(746)	58	(26)	(773)	(772)
Profit/(loss) for the period	1 146	1 011	(160)	20	986	1 031

a) See note 1, page 13.

b) Business Performance Other operating income is attributable to segments as follows: E&P $41 million (2009 $21 million), LNG $104 million (2009 $90 million) and Power $nil (2009 $7 million).

3. Segmental analysis continued

	Business Performance		Disposals, re-measurements and impairments		Total Result
First Quarter	2010 $m	2009 $m	2010 $m	2009 $m	2010 $m	2009 $m
Total operating profit/(loss)
Exploration and Production	1 192	834	(30)	45	1 162	879
Liquefied Natural Gas	633	827	118	-	751	827
Transmission and Distribution	125	115	-	(1)	125	114
Power Generation	55	35	(325)	-	(270)	35
	2 005	1 811	(237)	44	1 768	1 855
Other activities	(10)	13	-	-	(10)	13
	1 995	1 824	(237)	44	1 758	1 868
Less: Pre-tax share of operating results of joint ventures and associates					(131)	(129)
Add: Share of post-tax results from joint ventures and associates					79	92
Net finance income/(costs)					21	(49)
Profit before tax					1 727	1 782
Taxation					(741)	(751)
Profit for the period					986	1 031

4. Net finance income

	First Quarter
	2010 $m	2009 $m
Interest payable	(34)	(30)
Interest on obligations under finance leases	(26)	(19)
Interest capitalised	14	6
Unwinding of discount on provisions(a)	(17)	(17)
Disposals, re-measurements and impairments (Note 2)	-	(16)
Finance costs	(63)	(76)
Interest receivable	65	9
Disposals, re-measurements and impairments (Note 2)	19	18
Finance income	84	27
Net finance income/(costs)(b)	21	(49)

a) 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.

b) Excludes Group share of net finance costs from joint ventures and associates for the quarter of $20 million (2009 $16 million).

5. Taxation

The taxation charge for the first quarter before disposals, re-measurements and impairments was $799 million (2009 $725 million) and the taxation charge including disposals, re-measurements and impairments was $741 million (2009 $751 million).

The Group share of taxation from joint ventures and associates for the first quarter was $32 million (2009 $21 million).

6. Earnings per ordinary share

	First Quarter
	2010		2009
	$m	cents per share	$m	cents per share
Earnings - Total Result	960	28.4	1 008	30.0
Disposals, re-measurements and impairments (after tax and minority interest)	160	4.8	(20)	(0.6)
Earnings - Business Performance	1 120	33.2	988	29.4

Basic earnings per share calculations in 2010 are based on the weighted average number of shares in issue of 3 376 million for the quarter.

The earnings figure used to calculate diluted earnings per ordinary share is the same as that used to calculate earnings per ordinary share given above, divided by 3 400 million for the quarter, being the weighted average number of ordinary shares in issue during the period as adjusted for dilutive equity instruments.

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

	$m
Net borrowings as at 31 December 2009	(4 775)
Net decrease in cash and cash equivalents	(299)
Cash outflow from changes in borrowings	837
Inception of finance leases	(492)
Foreign exchange and other re-measurements	254
Cash and cash equivalents classified as held for sale	(8)
Net borrowings as at 31 March 2010(a)(b)	(4 483)

Net borrowings attributable to Comgás were $791 million (31 December 2009 $829 million).

As at 31 March 2010, BG Group's share of the net borrowings in joint ventures and associates amounted to approximately $1.9 billion, including BG Group shareholder loans of approximately $1.5 billion. These net borrowings are included in BG Group's share of the net assets in joint ventures and associates which are consolidated in BG Group's accounts.

a) Net borrowings/funds are defined on page 22.

b) Net borrowings comprise:

 

	As at 31 Mar 2010 $m	As at 31 Dec 2009 $m
Amounts receivable/(due) within one year
Cash and cash equivalents	803	1 119
Overdrafts, loans and finance leases	(302)	(1 158)
Derivative financial instruments(c)	124	48
	625	9
Amounts receivable/(due) after more than one year
Loans and finance leases	(5 320)	(5 024)
Derivative financial instruments(c)	212	240
	(5 108)	(4 784)
Net borrowings	(4 483)	(4 775)

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

8. Capital investment: geographical analysis

	First Quarter
	2010 $m	2009 $m
Europe and Central Asia	278	207
Americas and Global LNG	1 131	402
Africa, Middle East and Asia	250	518
Australia	242	745
	1 901	1 872

9. Quarterly information: earnings and earnings per share

	2010 $m	2009 $m	2010 cents	2009 cents
First quarter
Total Result	960	1 008	28.4	30.0
Business Performance	1 120	988	33.2	29.4
Second quarter
Total Result		761		22.7
Business Performance		754		22.4
Third quarter
Total Result		796		23.7
Business Performance		782		23.3
Fourth quarter
Total Result		754		22.4
Business Performance		965		28.6
Full year
Total Result		3 319		98.7
Business Performance		3 489		103.8

Supplementary information: Operating and financial data

	First Quarter		Fourth Quarter
	2010	2009	2009
Production volumes (mmboe)
- oil	7.9	8.1	8.6
- liquids	9.0	8.6	9.2
- gas	44.4	41.2	44.1
- total	61.3	57.9	61.9
Production volumes (boed in thousands)
- oil	88	90	93
- liquids	100	96	100
- gas	493	457	480
- total	681	643	673
Average realised oil price per barrel	$76.45	$43.46	$74.83
Average realised liquids price per barrel	$62.81	$33.02	$59.85
Average realised UK gas price per produced therm	65.22c	90.99c	60.38c
	(41.00p)	(63.58p)	(37.00p)
Average realised International gas price per produced therm	32.64c	34.13c	26.93c
Average realised gas price per produced therm	37.37c	44.96c	32.30c
Lifting costs per boe	$4.48	$3.21	$3.90
Operating expenditure per boe	$6.95	$5.44	$6.40
Development expenditure (including acquisitions)($m)	607	574	743
Gross exploration expenditure ($m)
- capitalised expenditure (including acquisitions)	341	1 070	315
- other expenditure	94	91	121
- gross expenditure	435	1 161	436
Exploration expenditure charge ($m)
- capitalised expenditure written off	10	161	163
- other expenditure	94	91	121
- exploration charge	104	252	284
LNG cargoes
- delivered to US	14	9	14
- delivered to global markets	41	46	44
- total	55	55	58
LNG managed volumes (Tbtu)	173.6	180.2	190.1

Supplementary information: Operating and financial data continued

BG Group's exposure to the oil price varies according to a number of factors including the mix of production and sales. Management estimates that, other factors being constant and assuming a constant relationship between commodity prices, a $1.00 rise (or fall) in the Brent price would increase (or decrease) E&P business operating profit in 2010 by approximately $90 million to $110 million.

Management estimates that in 2010, other factors being constant, a 10 cent strengthening (or weakening) in the US Dollar would increase (or decrease) operating profit by approximately $10 million to $30 million.

Glossary

	In BG Group's results some or all of the following definitions are used:
	bcf	billion cubic feet
	bcfd	billion cubic feet per day
	boe	barrels of oil equivalent
	boed	barrels of oil equivalent per day
	bopd	barrels of oil per day
	CAGR	compound annual growth rate
	Capital investment	Comprises expenditure on property, plant and equipment, other intangible assets and investments, including business combinations
	E&P	Exploration and Production
	EBITDA	earnings before interest, tax, depreciation and amortisation
	FPSO	Floating Production Storage and Offloading system
	Gearing ratio	net borrowings as a percentage of total shareholders' funds (excluding the re-measurement of commodity financial instruments and associated deferred tax) plus net borrowings
	GW	gigawatt
	IAS 39	International Accounting Standard 39 (Financial Instruments)
	IFRS	International Financial Reporting Standards
	kboed	thousand barrels of oil equivalent per day
	LNG	Liquefied Natural Gas
	Managed volumes	Comprises all LNG volumes contracted for purchase and having related revenue and other operating income recognised in the applicable period
	m	million
	mmboe	million barrels of oil equivalent
	mmbtu	million british thermal units
	mmcfd	million cubic feet per day
	mmcmd	million cubic metres per day
	mmscfd	million standard cubic feet per day
	mmscm	million standard cubic metres
	mmscmd	million standard cubic metres per day
	mtpa	million tonnes per annum
	MW	megawatt
	Net borrowings/ funds	Comprise cash, current asset investments, finance leases, currency and interest rate derivative financial instruments and short and long-term borrowings
	PJ	Petajoule (1 petajoule = 0.943 bcf)
	PSC	production sharing contract
	SEC	US Securities and Exchange Commission
	T&D	Transmission and Distribution
	Tbtu	trillion british thermal units
	tcf	trillion cubic feet
	Total operating profit	Group operating profit plus share of pre-tax operating results of joint ventures and associates
	UKCS	United Kingdom Continental Shelf
	Unit operating expenditure per boe	Production costs and royalties incurred over the period divided by the net production for the period. This measure does not include the impact of depreciation and amortisation costs and exploration costs as they are not considered to be costs associated with the operation of producing assets.
	Unit lifting costs per boe	'Unit operating expenditure' as defined above, excluding royalty, tariff and insurance costs incurred over the period divided by the net production for the period.

Enquiries

	Enquiries relating to BG Group's results, business and financial position should be made to:	General enquiries about shareholder matters should be made to:
	Investor Relations Department BG Group plc Thames Valley Park Drive Reading Berkshire RG6 1PT	Equiniti Limited Aspect House Spencer Road Lancing West Sussex BN99 6DA
	Tel: 0118 929 3025 e-mail: [email protected]	Tel: 0871 384 2064 e-mail: [email protected]
	Media Enquiries: Jo Thethi: 0118 929 3110
	High resolution images are available at www.vismedia.co.uk
	BG Group is listed on the US over-the-counter market known as the International OTCQX. Enquiries should be made to:
	Pink OTC Markets Inc. 304 Hudson Street 2nd Floor New York, NY 10013 USA
	e-mail: [email protected]
	Financial Calendar
	Announcement of 2010 second quarter and half year results	28 July 2010
	Payment of 2009 final dividend
	Shareholders	21 May 2010
	American depositary receipt holders	28 May 2010
	BG Group plc website: www.bg-group.com
	Registered office 100 Thames Valley Park Drive, Reading RG6 1PT Registered in England No. 3690065

 

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