4th May 2007 07:01
BG GROUP plc04 May 2007 BG GROUP PLC2007 FIRST QUARTER RESULTS-------------------------------------------------------------------------------- BG Group's Chief Executive, Frank Chapman said: "BG has delivered a good operating performance against a background of softercommodity prices and a weaker US dollar. In addition, the ramping up ofproduction from Buzzard, a new LNG supply agreement from Nigeria and the awardof an initial FEED contract for the Karachaganak Phase III expansion representsolid progress against our long-term growth programme." HIGHLIGHTS First QuarterBusiness Performance(i) 2007 2006 £m £m Revenue and other operating income 1 980 1 972 - Total operating profit including share of pre-tax operating results from joint ventures andassociates 823 958 -14% Earnings for the period 448 563 -20% Earnings per share 13.1p 16.0p -18% Total results for the period(including disposals, re-measurements andimpairments) Revenue and other operating income 1 947 1 996 -2% Operating profit before share of results from jointventures and associates 734 912 -20% Total operating profit including share of pre- taxoperating results from joint ventures andassociates 789 982 -20% Earnings for the period 432 578 -25% Earnings per share 12.7p 16.4p -23% 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 10 and Results Presentation, page 3. Unless otherwise stated, the results discussed in this release relate to BG Group's Business Performance. HIGHLIGHTS •Earnings were £448 million for the first quarter. •At constant US$/UK£ exchange rates and upstream prices, total operating profit would have increased by 3% for the first quarter. •LNG managed volumes increased by 25%. •Agreed to acquire Masspower power plant, USA. •Sale of selected Canadian exploration and production assets. •Sale and Purchase Agreement signed with Nigeria LNG for the acquisition of 2.25 mtpa from Train 7 for a 20 year term. •Shareholders' Agreement signed for OKLNG, Nigeria. •Shareholders' Agreement signed for Quintero LNG, Chile. •Signed a Production Sharing Contract for a 45% interest in Block KG-OSN-2004/1 in the Krishna-Godavari basin, India. •Capital investment of £869 million included the acquisitions of the Lake Road and Serene power plants. RESULTS PRESENTATION The presentation of BG Group's results under IFRS separately identifies theeffect of: • The re-measurement of certain financial instruments. • Profits and losses on the disposal and impairment 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 4 to 9. The table below setsout the amounts related to joint ventures and associates, re-measurements underIAS 39 and profits on disposal and impairment of non-current assets andbusinesses. Disposals, First Quarter Business re-measurements Total Performance and impairments(i) Result 2007 2006 2007 2006 2007 2006 £m £m £m £m £m £m Operating profit before share of results from joint ventures andassociates 768 888 (33) 24 735 912 Profits and losses on disposal of non-current assets and impairments - - (1) - (1) - Operating profit before share of results fromjoint ventures and associates 768 888 (34) 24 734 912 Pre-tax share of operating results of joint ventures and associates 55 70 - - 55 70Total operating profit 823 958 (34) 24 789 982 Net finance costsFinance income 33 36 5 3 38 39Finance costs (30) (19) (4) (3) (34) (22)Share of joint ventures andassociates (12) (16) - - (12) (16) (9) 1 1 - (8) 1TaxationTaxation (357) (368) 17 (10) (340) (378)Share of joint ventures and associates 1 (16) - - 1 (16) (356) (384) 17 (10) (339) (394) Profit for the period 458 575 (16) 14 442 589 Profit attributable to:Shareholders (earnings) 448 563 (16) 15 432 578Minority interest 10 12 - (1) 10 11 458 575 (16) 14 442 589 i) Re-measurements excluded from Business Performance The IAS 39 re-measurements reflect movements in external market prices and exchange rates. Financial instruments include certain long-term UK gas contracts which are classified as derivatives under IAS 39 due to the nature of the contract terms and are therefore required to be marked-to-market. This treatment has no impact on the ongoing cashflows of the business and these unrealised mark-to-market movements are best presented separately from underlying business performance. 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, re-measurements and impairments. Forthe impact and a description of these items, see the consolidated incomestatement (page 12) and Note 2 of the accounts (page 17). Results at constantUS$/UK£ exchange rates and upstream prices are also quoted. See Presentation ofNon-GAAP measures (page 10) for an explanation of these metrics. GROUP Business Performance First Quarter 2007 2006 £m £m Revenue and other operating income 1 980 1 972 - Total operating profit including share of pre-taxresults from joint ventures and associates Exploration and Production 626 726 -14%Liquefied Natural Gas 121 138 -12%Transmission and Distribution 50 65 -23%Power Generation 38 39 -3%Other activities (12) (10) -20% 823 958 -14% Net finance costs (9) 1 -Taxation (356) (384) -7%Earnings 448 563 -20%Earnings per share 13.1p 16.0p -18% Capital investment 869 386 +125% Revenue and other operating income was broadly in line with the prior year.Increased volumes in all segments were offset by lower prices in the E&P and LNGsegments and the weaker US$/UK£ exchange rate. Total operating profit of £823 million reflected a 4% increase in E&P productionvolumes, offset by lower commodity prices and a weaker US$/UK£ exchange rate. Atconstant US$/UK£ exchange rates and upstream prices, underlying total operatingprofit would have increased by 3%. The increase in the Group's effective tax rate (including BG Group's share ofjoint ventures and associates) from 40% to 43.7% reflects the increase in theNorth Sea tax rate which became effective from the second quarter 2006. Cash conversion remained strong with cash generated by operations of £1 086million. Capital investment in the quarter of £869 million included power plantacquisitions of £431 million in the USA and Italy, E&P acquisitions of £67million in the UK, and continuing investment in North America and the Caribbean(£110 million), Europe and Central Asia (£113 million), Mediterranean Basin andAfrica (£93 million), Asia Pacific (£36 million) and South America (£19million). As at 31 March 2007, the Group had returned £105 million to shareholders as partof the share repurchase programme announced on 8 February 2007. As at 31 March2007, net borrowings were £27 million. EXPLORATION AND PRODUCTION Business Performance First Quarter 2007 2006 £m £m Production volumes (mmboe) 58.2 55.8 +4% Revenue and other operating income 1 027 1 073 -4% Total operating profit 626 726 -14% Capital investment 359 271 +32% Additional operating and financial data are given on page 23. E&P total operating profit of £626 million reflected a 4% increase in volumes,offset by lower commodity prices and a weaker US$/UK£ exchange rate. At constantUS$/UK£ exchange rates and upstream prices, total operating profit would haveincreased by 6%. Production volumes increased by 4% principally due to Atlantic/Cromarty and thestart-up of the Buzzard field in the UK. Unit operating expenditure was up 33 pence to £2.51 per boe reflecting thestart-up of new fields in the UK and maintenance activity. The exploration charge of £56 million is £12 million higher than 2006 reflectingthe increased exploration activities across the Group. The Group's average realised international gas price was 16.3 pence (2006 18.4pence) per produced therm reflecting lower Henry Hub prices and a weaker US$/UK£exchange rate. In the UK, the average realised price per produced therm was 37.0pence (2006 38.8 pence). Capital investment of £359 million included expenditure in Egypt (£28 million),India (£31 million), Trinidad and Tobago (£21 million), Tunisia (£63 million)and the UK (£141 million). First quarter business highlights In February, Stage 1 of the Front-End Engineering and Design contract for PhaseIII of the development of the Karachaganak Processing Complex in Kazakhstan wasawarded. On 2 March, BG Group announced that, together with Oil and Natural GasCorporation Limited, it had signed a Production Sharing Contract (PSC) with theGovernment of India for Block KG-OSN-2004/1, awarded in the NELP VI licensinground. BG Group has a 45% interest in the shallow water block, which covers anarea of approximately 1 131 square kilometres and is located in theKrishna-Godavari basin off the east coast of India. On 6 March, BG Group announced that it had signed a Sale and Purchase Agreementfor the sale of producing assets in Canada - Bubbles, Ojay and Copton/Lynx - fora final consideration of C$516 million (approximately US$437 million). BG Groupretains exploration prospects in Canada and Alaska. The sale completed on 2April. On 8 March, the PSC in Nigeria for offshore Block OPL 286 was completed by BGGroup and partners (BG Group 66% and operator). On 30 March, BG Group completed the acquisition of a further 11.45% of Armadaand 1.0134% of Everest fields in the UKCS. In March, the Venezuela and Trinidad and Tobago governments signed a frameworkagreement on sharing cross-border reserves in the Plataforma Deltana whichincludes the Manatee discovery (BG Group 50%). LIQUEFIED NATURAL GAS Business Performance First Quarter 2007 2006 £m £m Revenue and other operating income 697 653 +7% Total operating profitShipping and marketing 115 126 -9%Liquefaction 25 30 -17%Business development and other (19) (18) +6% 121 138 -12% Capital investment 60 88 -32% Additional operating and financial data are given on page 23. LNG total operating profit fell by £17 million to £121 million as higher volumeswere more than offset by the lower Henry Hub price and the weaker US$/UK£exchange rate. In shipping and marketing, total operating profit of £115 million was down 9%,reflecting the weaker US$ and lower Henry Hub price. At constant US$/UK£exchange rates, shipping and marketing underlying total operating profit wouldhave increased by 2%. Managed volumes were up 25% due to increased long-term contracted supply andhigher spot cargo availability. BG Group's share of operating profit from liquefaction activities decreased by£5 million to £25 million, principally due to lower Henry Hub prices. Capital investment includes £43 million relating to LNG vessels, £6 millionrelating to regasification development projects and £9 million in Atlantic LNG. First quarter business highlights On 12 February, BG Group announced that it had signed a Sale and PurchaseAgreement with Nigeria LNG for the acquisition of 2.25 million tonnes per annum(mtpa) of LNG for a 20 year term from the planned Train 7 project in Finima,Bonny Island, Nigeria. On 22 March, BG Group and its partners signed the Shareholders' Agreement forthe OKLNG project in Nigeria (BG Group 13.5%). The Agreement governs the OKLNGFree Zone Enterprise, and the development of the OKLNG Project. During the first quarter, BG Group signed the Shareholders' Agreement for GNLQuintero S.A., (BG Group 40%). GNL Quintero has been formed to construct, ownand operate an LNG import facility in Quintero Bay, Chile. In February, work was suspended at the Brindisi LNG site following allegationsregarding the permitting process for the project. Further details of this postbalance sheet event, were included in the 2006 Annual Report and Accounts. TRANSMISSION AND DISTRIBUTION Business Performance First Quarter 2007 2006 £m £m Revenue and other operating incomeComgas 174 168 +4%Other 46 35 +31% 220 203 +8% Total operating profitComgas 40 50 -20%Other 10 15 -33% 50 65 -23% Capital investment 16 25 -36% T&D total operating profit for the quarter was £50 million. At Comgas, in Brazil, total operating profit of £40 million was down £10 millionas the 7% increase in volumes was offset by the adverse effect of the BrazilianReal (BRL) exchange rate, movements in the regulatory current account and highercosts. Operating profit in the quarter includes £2 million (2006 £5 million) tobe passed back to customers in future periods. At the end of the quarter, thetotal to be passed back to customers in future periods is £8 million. Profits derived from Interconnector capacity were £5 million lower reflectinglower differentials between UK and European gas prices. Capital investment mainly represents the development of the Comgas pipelinenetwork. POWER GENERATION Business Performance First Quarter 2007 2006 £m £m Revenue and other operating income 96 92 +4% Total operating profit 38 39 -3% Capital investment 433 1 - The increase in revenue is primarily due to the pass through of gas costs. Totaloperating profit of £38 million in the quarter was broadly in line with 2006.This includes a one-off contribution from the settlement of a contractualdispute at Premier Power, and lower profits at Seabank where one-off insuranceproceeds arose in 2006. Capital investment relates primarily to the acquisitions of the Lake Road powerplant in the USA and the remaining equity (66.3%) of Serene S.p.A in Italy. First quarter business highlights The acquisition of the Lake Road power plant, located in Connecticut, USAcompleted on 13 March and the acquisition of the remaining equity in the Serenepower plants, Italy completed on 14 February. On 2 April, BG Group announced that it had signed a Sale and Purchase Agreementto acquire the Masspower power plant, a 262 MW gas- and oil-fired combined cyclefacility located in Indian Orchard, Massachusetts, USA for US$150 million. Thepurchase completed on 1 May 2007. 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. BG Group also uses commodity instruments to manage certain price exposures in respect of optimising the timing of its gas sales associated with contracted UK storage and pipeline capacity. These instruments are also required to be measured at fair value at the balance sheet date under IAS 39. However, IAS 39 does not allow the matching of these fair values to the economically hedged value of the related gas in storage (taking account of gas prices based on the forward curve or expected delivery destination and the associated storage and capacity costs). 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. Unrealised gains and losses in respect of long-term gas sales contracts and derivatives associated with gas in UK storage and pipeline facilities and interest rate and foreign exchange exposure in respect of financial instruments which cannot be designated as hedges under IAS 39 are disclosed separately as 'disposals, re-measurements and impairments'. Realised gains and losses relating to these instruments 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, closures and impairments, as they are items which 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 12 and note 2 to the accounts, page 17. 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 to the accounts, page 18. 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 manner is intended to provide additional information to explain further the underlying trends in the business. 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 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 BG Group's growth programme, (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 2006. 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 2007 2006 Business Disposals, Total Business Disposals, Total Performance re-measurements Result Performance re-measurements Result (i) and impairments (i) and impairments (Note 2)(i) (Note 2)(i) Notes £m £m £m £m £m £m Group revenue 1 943 - 1 943 1 931 - 1 931Other operating income 2 37 (33) 4 41 24 65Group revenue and otheroperating income 3 1 980 (33) 1 947 1 972 24 1 996Operating costs (1 212) - (1 212) (1 084) - (1 084)Profits and losses on disposal of non-current assets and impairments 2 - (1) (1) - - -Operating profit/(loss) before share of resultsfrom joint ventures andassociates 3 768 (34) 734 888 24 912Finance income 2, 4 33 5 38 36 3 39Finance costs 2, 4 (30) (4) (34) (19) (3) (22)Share of post-tax results from joint ventures and associates 3 44 - 44 38 - 38Profit/(loss) before tax 815 (33) 782 943 24 967Taxation 2, 5 (357) 17 (340) (368) (10) (378)Profit for the period 458 (16) 442 575 14 589Attributable to:BG Group shareholders(earnings) 448 (16) 432 563 15 578Minority interest 10 - 10 12 (1) 11 458 (16) 442 575 14 589 Earnings per share - basic 6 13.1p (0.4p) 12.7p 16.0p 0.4p 16.4pEarnings per share -diluted 6 13.0p (0.4p) 12.6p 15.9p 0.4p 16.3p Total operating profitincluding share of pre-taxoperating results from joint ventures and associates(ii) 3 823 (34) 789 958 24 982 i) See Presentation of Non-GAAP measures, page 10, for an explanation of results excluding disposals, re-measurements and impairments and presentation of the results of joint ventures and associates. ii) 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 31 Mar 31 Dec 31 Mar 2007 2006(i) 2006 £m £m £mAssetsNon-current assetsGoodwill 339 328 361Other intangible assets 665 694 797Property, plant and equipment 6 535 5 960 5 835Investments 1 094 1 086 1 203Deferred tax assets 70 74 90Trade and other receivables 48 49 51Commodity contracts and other derivativefinancial instruments 402 273 95 9 153 8 464 8 432 Current assetsInventories 228 247 170Trade and other receivables 1 828 1 854 1 837Commodity contracts and other derivativefinancial instruments 247 575 12Cash and cash equivalents 1 705 1 463 1 697 4 008 4 139 3 716Assets classified as held for sale 224 85 10 Total assets 13 385 12 688 12 158 LiabilitiesCurrent liabilitiesBorrowings (66) (103) (47)Trade and other payables (1 711) (1 618) (1 529)Current tax liabilities (513) (357) (466)Commodity contracts and other derivativefinancial instruments (507) (741) (658) (2 797) (2 819) (2 700) Non-current liabilitiesBorrowings (1 768) (1 559) (1 507)Trade and other payables (19) (21) (63)Commodity contracts and other derivativefinancial instruments (196) (90) -Deferred income tax liabilities (1 171) (1 146) (774)Retirement benefit obligations (145) (167) (159)Provisions for other liabilities and charges (402) (387) (375) (3 701) (3 370) (2 878)Liabilities associated with assets classified asheld for sale (27) (34) (3) Total liabilities (6 525) (6 223) (5 581) Net assets 6 860 6 465 6 577 Attributable to:BG Group equity shareholders 6 747 6 363 6 464Minority interest 113 102 113 Total equity 6 860 6 465 6 577 (i) Restated as a result of post balance sheet events as detailed in the 2006 Annual Report and Accounts. CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE First Quarter 2007 2006 £m £m Profit for the period 442 589 Hedge adjustments net of tax 13 22Currency translation adjustments 26 (29) Net gains/(losses) recognised directly in equity 39 (7) Total recognised income for the period 481 582 Attributable to:Minority interests 11 15Shareholders 470 567 481 582 CONSOLIDATED CASH FLOW STATEMENT First Quarter 2007 2006 £m £mCash flows from operating activitiesProfit before taxation 782 967Share of post-tax results from joint ventures andassociates (44) (38)Depreciation of property, plant and equipment andamortisation of intangible assets 168 149Fair value movements in commodity contracts 72 (41)Profit and losses on disposal of non-current assets andimpairments 1 -Unsuccessful exploration expenditure written off 10 11(Decrease)/increase in provisions (20) 4Finance income (38) (39)Finance costs 34 22Share-based payments 7 6Decrease/(increase) in working capital 114 (54) Cash generated by operations 1 086 987 Income taxes paid (184) (285) Net cash inflow from operating activities 902 702 Cash flows from investing activitiesDividends received from joint ventures and associates 24 11Proceeds from disposal of subsidiary undertakings andinvestments 80 4Purchase of property, plant and equipment and intangibleassets (374) (349)Loans (to)/from joint ventures and associates (15) (16)Business combinations and investments (406) (2) Net cash (outflow)/inflow from investing activities (691) (352) Cash flows from financing activitiesNet interest received/(paid)(i) (2) 8Net proceeds from issue of new borrowings 137 16Repayment of borrowings (16) (48)Issue of shares 7 6Purchase of own shares (96) (147) Net cash inflow/(outflow) from financing activities 30 (165) Net increase in cash and cash equivalents 241 185 Cash and cash equivalents at beginning of period 1 463 1 516Effect of foreign exchange rate changes 1 (4) Cash and cash equivalents at end of period(ii) 1 705 1 697 i) Includes capitalised interest for the first quarter of £11 million (2006 £14 million). ii) Cash and cash equivalents comprise cash and short-term liquid investments that are readily convertible to cash. RECONCILIATION OF NET BORROWINGS/FUNDS(i) - FIRST QUARTER £m Net borrowings as at 31 December 2006(i) (ii) (103) Net increase in cash and cash equivalents 241Cash inflow from changes in gross borrowings (121)Inception of finance leases (16)Effect of acquisitions (40)Foreign exchange and other re-measurements 12 Net borrowings as at 31 March 2007(i) (ii) (27) Net borrowings attributable to Comgas were £265 million (31 December 2006 £242million). As at 31 March 2007, 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 25. ii) Net borrowings/funds comprise: As at 31 Mar 2007 31 Dec 2006 £m £mAmounts receivable/(due) within one yearCash and cash equivalents 1 705 1 463Overdrafts, loans and finance leases (66) (103)Derivative financial instruments(iii) (7) - 1 632 1 360 Amounts receivable/(due) after more than one yearLoans and finance leases (1 768) (1 559)Derivative financial instruments(iii) 109 96 (1 659) (1 463) Net borrowings (27) (103) iii) These items are included within commodity contracts and other derivative financial 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 2007. 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 2006, 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 at the date of the interim financial statements. If inthe future such estimates and assumptions, which are based on management's bestjudgment at the date of the interim financial statements, deviate from theactual circumstances, the original estimates and assumptions will be modified asappropriate in the year in which the circumstances change. 2. Disposals, re-measurements and impairments First Quarter 2007 2006 £m £m Revenue and other operating income - (33) 24re-measurements of commodity contractsProfits and losses on disposal of non-current assets andimpairments (1) -Net finance income - re-measurements of financial instruments 1 -Taxation 17 (10)Minority interest - 1 Impact on earnings (16) 15 First quarter: Revenue and other operating income Re-measurements included within revenue and other operating income amount to acharge of £33 million for the quarter (2006 £24 million credit), of which a £3million charge (2006 £19 million credit) represents non-cash mark-to-marketmovements on certain long-term UK gas contracts. Whilst the activity surroundingthese contracts involves the physical delivery of gas, the contracts fall withinthe 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. 2007 first quarter: Disposal of non-current assets During the first quarter, BG Group disposed of its Mauritanian interests. Thisresulted in a loss on disposal of £1 million. No tax arose on the disposal. 3. Segmental analysis Group revenue and Business Disposals, Total Business Disposals, Totalother operating income Performance re-measurements Result Performance re-measurements Result and impairments and impairmentsFirst Quarter 2007 2007 2007 2006 2006 2006 £m £m £m £m £m £m Exploration and Production 1 027 (33) 994 1 073 24 1 097Liquefied Natural Gas 697 - 697 653 - 653Transmission and Distribution 220 - 220 203 - 203Power Generation 96 - 96 92 - 92Other activities 2 - 2 3 - 3Less: intra-group sales (62) - (62) (52) - (52) 1 980 (33) 1 947 1 972 24 1 996 Business Disposals, Total Result Performance(i) re-measurements and impairments(i)First Quarter 2007 2006 2007 2006 2007 2006 £m £m £m £m £m £mTotal operating profitbefore share of resultsfrom joint ventures andassociates Exploration and Production 626 726 (34) 24 592 750Liquefied Natural Gas 96 108 - - 96 108Transmission and Distribution 40 54 - - 40 54Power Generation 18 10 - - 18 10Other activities (12) (10) - - (12) (10) 768 888 (34) 24 734 912 Pre-tax share of operating results of joint venturesand associates(ii) Liquefied Natural Gas 25 30 - - 25 30Transmission and Distribution 10 11 - - 10 11Power Generation 20 29 - - 20 29 55 70 - - 55 70Total operating profitincluding share of resultsfrom joint ventures andassociates Exploration and Production 626 726 (34) 24 592 750Liquefied Natural Gas 121 138 - - 121 138Transmission and Distribution 50 65 - - 50 65Power Generation 38 39 - - 38 39Other activities (12) (10) - - (12) (10) 823 958 (34) 24 789 982 i) Business Performance excludes disposals, certain re-measurements and impairments. See Note 2, page 17 and Presentation of Non-GAAP measures, page 10. ii) Share of results in joint ventures and associates in the table above is before finance costs and taxation. The share of results after finance costs and taxation for the quarter is £44 million (2006 £38 million). 3. Segmental analysis (continued) Total Result Operating profit before Share of results in Total Result share of results from joint joint ventures and ventures and associates associates First Quarter 2007 2006 2007 2006 2007 2006 £m £m £m £m £m £m Exploration and Production 592 750 - - 592 750Liquefied Natural Gas 96 108 16 12 112 120Transmission and Distribution 40 54 15 6 55 60Power Generation 18 10 13 20 31 30Other activities (12) (10) - - (12) (10) 734 912 44 38 778 950 Net finance income 4 17Taxation (340) (378) Profit for the period 442 589 4. Net finance costs First Quarter 2007 2006 £m £m Interest payable (23) (18)Interest on obligations under finance leases (13) (12)Interest capitalised 11 14Unwinding of discount on provisions(i) (5) (3)Disposals, re-measurements and impairments (Note 2) (4) (3) Finance costs (34) (22) Interest receivable 33 36Disposals, re-measurements and impairments (Note 2) 5 3 Finance income 38 39 Net finance income(ii) 4 17 i) Relates to the unwinding of the discount on provisions in respect of decommissioning 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 (2006 £16 million). 5. Taxation The taxation charge for the quarter before disposals, re-measurements andimpairments was £357 million (2006 £368 million) and the taxation chargeincluding disposals, re-measurements and impairments was £340 million (2006 £378million). The Group share of taxation from joint ventures and associates for the quarterwas £1 million credit (2006 £16 million charge). 6. Earnings per ordinary share First Quarter 2007 2006 £m Pence £m Pence per per share share Earnings 432 12.7 578 16.4Re-measurements (after tax and minority interest) 15 0.4 (15) (0.4) Profits and losses on disposals (after tax) 1 - - - Earnings - excluding disposals, re-measurementsand impairments 448 13.1 563 16.0 Basic earnings per share calculations in 2007 are based on shares in issue of 3407 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 3 437 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 2007 2006 £m £m Europe and Central Asia 260 104South America 19 73Asia Pacific 36 23North America and the Caribbean 461 109Mediterranean Basin and Africa 93 77 869 386 8. Quarterly information: earnings and earnings per share 2007 2006 2007 2006 £m £m pence pence First quarter - including disposals, re-measurements and impairments 432 578 12.7 16.4 - excluding disposals, re-measurements and impairments 448 563 13.1 16.0 Second quarter - including disposals, re-measurements and impairments 418 12.0 - excluding disposals, re-measurements and impairments 325 9.3 Third quarter - including disposals, re-measurements and impairments 394 11.5 - excluding disposals, re-measurements and impairments 342 10.0 Fourth quarter - including disposals, re-measurements and impairments 389(i) 11.4(i) - excluding disposals, re-measurements and impairments 410 12.0 Full year - including disposals, re-measurements and impairments 1 779(i) 51.4(i) - excluding disposals, re-measurements and impairments 1 640 47.4 (i) Restated as a result of post balance sheet events as detailed in the 2006 Annual Report and Accounts. Supplementary information: Operating and financial data First Quarter Fourth Quarter 2007 2006 2006 Production volumes (mmboe) - oil 6.5 5.6 5.9 - liquids 8.8 7.4 8.7 - gas 42.9 42.8 42.6 - total 58.2 55.8 57.2 Production volumes (kboed) - oil 72 62 64 - liquids 98 82 95 - gas 477 476 463 - total 647 620 622 LNG cargoes - Lake Charles, USA 18 2 13 - Elba Island, USA 15 9 14 - Europe, Asia and other USA 19 29 23 - total 52 40 50 LNG managed volumes (thousand mmbtu) 144 752 115 812 139 763 Average realised oil price per barrel £29.60 £35.74 £31.57 ($58.13) ($62.53) ($60.13) Average realised liquids price per barrel £23.21 £28.68 £24.36 ($45.57) ($50.17) ($46.40) Average realised UK gas price per producedtherm 37.03p 38.84p 34.41p Average realised International gas price perproduced therm 16.31p 18.40p 16.69p Average realised gas price per produced therm 21.50p 23.69p 21.28p Lifting costs per boe £1.51 £1.19 £1.51 ($2.97) ($2.08) ($2.88) Operating expenditure per boe £2.51 £2.18 £2.53 ($4.92) ($3.82) ($4.82) Development expenditure (£m) 291 131 201 Gross exploration expenditure (£m) - capitalised expenditure 59 136 129 - other expenditure 46 33 51 - gross expenditure 105 169 180 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 $1.00 rise (or fall) in the Brent price would increase(or decrease) operating profit in 2007 by approximately £40 million to £50 million. BG Group's exposure to the US$/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 2007, otherfactors being constant, a 10 cent strengthening (or weakening) in the US Dollarwould increase (or decrease) operating profit by approximately £140 million to£160 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 ProductionEPC engineering, procurement and constructionEPIC engineering, procurement, installation and commissioningFEED front end engineering designFERC Federal Energy Regulatory CommissionGearing net borrowings as a percentage of total shareholders' fundsratio (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 Comprises all LNG volumes contracted for purchase and having relatedvolumes 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 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 agreementT&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 SeaUnit Production costs and royalties incurred over the period divided byoperating the net production for the period. Production costs and royaltiesexpenditure (other operating costs) for the period are disclosed under "resultsper boe 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 Unit operating expenditure as defined above, excluding royalty,lifting tariff and insurance costs incurred over the period divided by thecosts per net production for the period. Unit lifting costs as used in thisboe ratio do not represent "Production (Lifting) Costs" as defined by FAS 19 and FAS 69. Enquiries Enquiries relating to BG Group's General enquiries about shareholderresults, business and financial matters should be made to:position 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 3951 e-mail: [email protected] e-mail: [email protected] Financial Calendar Payment of 2006 final dividend: Shareholders 25 May 2007 American depositary receipt holders 4 June 2007 Announcement of 2007 second quarter andhalf year results 27 July 2007 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:
BG..L