8th Nov 2005 07:01
BG GROUP plc08 November 2005 BG GROUP PLC2005 THIRD QUARTER RESULTS BG Group's Chief Executive, Frank Chapman said: "These are good results which reflect a strong business performance and firm oiland gas prices. "Following the completion of an extensive maintenance and inspection programmeduring the third quarter, we expect strong growth in E&P volumes in the fourthquarter and we remain on track to deliver our 2006 production target. Thestrength of our financial position and outlook enables us to return up to £1billion to shareholders and also increase our investment in new growth projectsby £500 million." HIGHLIGHTS---------------------------------------------------------------------------------------- Third Quarter Nine Months 2005 2004 Business Performance(i) 2005 2004 £m £m £m £m Revenue and other operating 1 339 1 084 +24% income 3 566 2 902 +23% Total operating profit including share of pre-tax operating results from joint 548 395 +39% ventures and associates 1 522 1 078 +41% 308 214 +44% Earnings 853 593 +44% 8.7p 6.1p +43% Earnings per share 24.1p 16.8p +43% ---------------------------------------------------------------------------------------- Total results for the period (including disposals and re-measurements(i)) Revenue and other operating 1 360 1 084 +25% income 3 429 2 902 +18% Operating profit before share of results from joint ventures 509 346 +47% and associates 1 646 1 019 +62% Total operating profit including share of pre-tax operating results from joint 569 395 +44% ventures and associates 1 814 1 165 +56% 321 214 +50% Earnings 1 065 650 +64% 9.1p 6.1p +49% Earnings per share 30.1p 18.5p +63%---------------------------------------------------------------------------------------- i) 'Business Performance' excludes disposals and certain re-measurements and is presented as management believes that exclusion of these items provides readers with 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 8 and Results Presentation, page 2. RESULTS PRESENTATION The presentation of BG Group's results under IFRS separately identifies theeffect of: • The re-measurement of financial instruments under IAS 39 • Profits and losses on the disposal of non-current assets and businesses. These items are excluded from Business Performance in order to provide readerswith a clear and consistent presentation of the underlying operating performanceof the Group's ongoing businesses. Under IFRS the results of joint ventures and associates are presented net offinance costs and tax (see pages 10 and 11). Given the relevance of thesebusinesses within BG Group, the results of joint ventures and associates arepresented both before interest and tax, and after tax. The pre-interest and taxresult for joint ventures and associates is included in Business Performancediscussed on pages 2 to 7. The tables below set out the amounts related to jointventures and associates, re-measurements under IAS 39 and profits on disposal ofnon-current assets and businesses. -------------------------------------------------------------------------------- Third Quarter Nine Months 2005 2004 2005 2004 £m £m £m £m Operating profit for the period before share of results from joint 509 346 ventures and associates 1 646 1 019 Share of pre-tax operating results 60 49 from joint ventures and associates 168 146------ ------ ------ ------ Operating profit for the period including share of pre-tax results 569 395 from joint ventures and associates 1 814 1 165------ ------ ------ ------ Disposals and re-measurements: (21) - Re-measurements - IAS 39(i) 137 - - - Profit on disposal (429) (87)------ ------ ------ ------ Business Performance - total 548 395 operating profit for the period 1 522 1 078-------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Third Quarter Nine Months 2005 2004 2005 2004 £m £m £m £m Earnings for the period - including 321 214 disposals and re-measurements 1 065 650 Disposals and re-measurements - (21) - before interest and tax (292) (87) Disposals and re-measurements - (1) - interest (11) - Tax and minority interest on 9 - disposals and re-measurements 91 30 ------ ------ ------ ------ Earnings - excluding disposals and 308 214 re-measurements 853 593------ ------ ---------------------------------- ------ ------ i) Re-measurements excluded from Business Performance The IAS 39 re-measurements reflect movements in external market prices andexchange rates. Financial instruments include certain long-term UK gas contractswhich are classified as derivatives under IAS 39 due to the nature of thecontract terms and are therefore required to be marked-to-market. This treatmenthas no impact on the ongoing cashflows of the business and management believesthese unrealised mark-to-market movements are best presented separately fromunderlying business performance. For an explanation of Non-GAAP measures seepage 8. BUSINESS REVIEW The results discussed in this Business Review (pages 3 to 7) relate to BGGroup's performance excluding disposals and re-measurements. For the impact anda description of these items, see the consolidated income statement (pages 10and 11) and Note 2 of the accounts (page 17). Results at constant US$/UK£exchange rates and upstream prices are also quoted. See Presentation of Non-GAAPmeasures (page 8) for an explanation of these metrics. GROUP Business Performance Third Quarter 2005 2004 £m £m Revenue and other operating income 1 339 1 084 +24% Total operating profit including share of pre-tax resultsfrom joint ventures and associates ------ ------Exploration and Production 419 291 +44%Liquefied Natural Gas 51 37 +38%Transmission and Distribution 64 51 +25%Power Generation 21 21 -Other activities (7) (5) +40% ------ ------ 548 395 +39%Net finance costs(i) (10) (16) -38%Taxation(ii) (215) (151) +42%Earnings 308 214 +44%Earnings per share 8.7p 6.1p +43% Capital investment 378 356 +6% Third quarter Total operating profit increased by 39% to £548 million reflecting higher E&Pvolumes and margins together with strong performances from the LNG and T&Dsegments. As expected, E&P volumes were held back during the third quarter byextensive maintenance and inspection activities in the UK and Kazakhstan. At constant E&P prices and US$/UK£ exchange rates, total operating profitincreased by 1%. Net finance costs were £6 million lower primarily due to reduced average netdebt levels following the receipt of the cash proceeds from the sale of theGroup's interest in the North Caspian Sea PSA in the second quarter of 2005. Theeffective tax rate (including the BG Group share of tax attributable to jointventures and associates) was unchanged at 40%. Earnings increased by 44% to £308 million. Cash generated from operations increased by £244 million to £692 millionprimarily due to higher operating profit. Gearing, including non-recourse debtin MetroGAS, was 1.6%. The company has today announced a programme to buy backup to £1 billion of ordinary shares and an increase in the Group's plannedinvestment by £500 million, including exploration expenditure, to accommodatethe development of new growth projects. Capital investment in the quarter of £378 million comprised continuinginvestment in North America and the Caribbean (£144 million), Europe (£109million), South America (£46 million), Mediterranean Basin and Africa (£44million) and Asia and the Middle East (£35 million). i) Includes Group share of net finance costs from joint ventures and associates for the quarter of £11 million (2004 £8 million).ii) Includes Group share of taxation from joint ventures and associates for the quarter of £8 million (2004 £9 million). EXPLORATION AND PRODUCTION Business Performance Third Quarter 2005 2004 £m £m Production volumes (mmboe) 41.2 39.7 +4% Revenue and other operating income 688 534 +29% Total operating profit 419 291 +44% Capital investment 207 238 -13% Additional operating and financial data are given on page 27. Third quarter E&P total operating profit increased by 44% to £419 million due primarily tohigher prices and volumes. This was partially offset by the impact of increasedexploration activity and extensive maintenance and inspection activities in theUK and Kazakhstan. Increased production volumes from West Delta Deep Marine in Egypt following theearly start-up of Egyptian LNG Trains 1 and 2 were partially offset by themaintenance and inspection activities referred to above. These activitiesaffected production in the UK and exports to Russia from Kazakhstan. Theseprogrammes have been completed and we expect strong volume growth in the fourthquarter. Unit operating expenditure at £2.56 ($4.57) per boe was up 35 pence (56 cents)per barrel of oil equivalent, principally due to the cost and volume impact ofincreased maintenance activity referred to above and the impact of higherupstream prices on royalties. It is expected that the full year unit operatingexpenditure will be approximately $4.00 per boe after taking into account theeffect of higher commodity prices. The exploration charge of £42 million was £8 million higher reflecting theplanned increase in exploration activity across the Group. For the UK gas year starting 1 October 2005, BG Group expects to realise anaverage price of approximately 23 pence per therm on North Sea production soldunder various contracts. This compares to 20 pence per therm in the prior gasyear. Capital investment of £207 million included expenditure in the UK (£80 million)and Egypt (£46 million). Third quarter business highlights In Egypt, the Sapphire field in the West Delta Deep Marine concession cameon-stream in September to supply Egyptian LNG Train 2. The third quarter saw significant progress in building BG Group's explorationportfolio. In September, BG Group was awarded 100% and operatorship of North Sea blocks 20/2b, 20/3d and part block 13/21b and 50% and operatorship of part block 22/8a inthe UK 23rd Licensing Round. Block 22/8a lies close to existing infrastructureat the Everest hub (BG Group 58.31%). The other blocks build on BG Group's existing position in the Outer Moray Firth. In September, BG Group successfully bid to acquire six sections in the WatertonNorthern Block and three in the Southern Block in Alberta, Canada. BG Group was awarded three onshore exploration licences in the 2nd LibyanLicensing Round in October. BG Group will assume 100% and operatorship of twolicences in the Sirt basin and 50% in a block in the Kufra basin. In Egypt, BG Group was successful in its bid for a 50% stake and operatorship ofthe Sidi Kerir Deep concession, in the Nile Delta, subject to finalisation ofterms and its ratification by the People's Assembly. In October, BG Group was awarded ten exploration licences in the 7th BrazilianLicensing Round. This includes two BG Group-operated blocks and acreageoff-shore in the Santos basin and on-shore. As a result of BG Group's success in licensing rounds this year, BG Group hasincreased its net exploration acreage by around a third. Since the start of the year, BG Group has completed 20 exploration and appraisalwells of which 11 have been successful (55%). LIQUEFIED NATURAL GAS Business Performance Third Quarter 2005 2004 £m £m Revenue and other operating income 404 336 +20% Total operating profit ------ ------Shipping and marketing 28 24 +17%Liquefaction 30 19 +58%Business development and other (7) (6) +17% 51 37 +38% ------ ------Capital investment 128 97 +32% Additional operating and financial data are given on page 27. Third quarter Total operating profit was up 38% to £51 million reflecting higher prices and astrong performance from the liquefaction businesses. In shipping and marketing, total operating profit was £4 million higher,primarily due to increased shipping utilisation. Short-term LNG suppliesremained tight but this was offset by higher realisations. Operations at theLake Charles regasification facilities were suspended from 23 September to 3October due to Hurricane Rita but overall volumes were unaffected. The fourth quarter will see an increased build up of new contracted volumes fromEgypt. These volumes represent the start of a major shift from short-term tolong-term supply, which will build further as contracted volumes start fromTrinidad and Nigeria in 2006 and Equatorial Guinea in 2007. BG Group's share of operating profit from liquefaction increased by 58% to £30million, principally due to the early start-up of exports from Egyptian LNGTrains 1 and 2. Capital investment primarily relates to LNG vessels in construction due fordelivery in 2006 and 2007. Financial close of Egyptian LNG Train 2 projectfinancing in the quarter resulted in a reimbursement of capital investment of$153 million. Third quarter business highlights On 5 September, BG Group (38%) and partners announced the early start-up ofEgyptian LNG Train 2. The first cargo was lifted on 15 September. BG Group willtake 50% of any early cargoes until the second quarter of 2006 when BG Groupwill lift the entire output of Train 2 under its LNG purchase agreement. At Lake Charles new facilities came into service in September that increasedsustainable base load throughput capacity to 1.2 bcfd. This expansion wascompleted in anticipation of the increase in contracted cargoes as referred toabove. TRANSMISSION AND DISTRIBUTION Business Performance Third Quarter 2005 2004 £m £m Revenue and other operating income ------ ------Comgas 141 107 +32%MetroGAS 53 47 +13%Other 30 24 +25% ------ ------ 224 178 +26%Total operating profit ------ ------Comgas 43 31 +39%MetroGAS 11 11 -Other 10 9 +11% ------ ------ 64 51 +25% Capital investment 39 15 +160% Third quarter T&D total operating profit increased by 25% to £64 million. At Comgas, in Brazil, the impact of 11% volume growth and stronger exchangerates underpinned a 39% increase in operating profit, up £12 million in thequarter. Total operating profit included a net £4 million benefit in the quarterfrom lower gas costs which is expected to be passed back to customers throughlower tariffs in the future. MetroGAS, in Argentina, reported an operating profit of £11 million, in linewith last year. The capital restructuring of MetroGAS continues to makeprogress. Capital investment mainly represents the development of the Comgas pipelinenetwork. POWER GENERATION Business Performance Third Quarter 2005 2004 £m £m Revenue and other operating income 47 40 +18% Total operating profit 21 21 - Capital investment - - - Third quarter The increase in revenue is primarily due to pass through of gas costs. Total operating profit of £21 million was in line with last year. Seabank Power,in the UK, continues to be affected by the failure of a steam turbine whichoccurred in June 2005. Presentation of Non-GAAP measures Business Performance 'Business Performance' excludes certain disposals and re-measurements (seebelow) and is presented as management believes that exclusion of these itemsprovides readers with a clear and consistent presentation of the underlyingoperating performance of the Group's ongoing business. Disposals and re-measurements BG Group's commercial arrangements for marketing gas include the use oflong-term gas sales contracts. Whilst the activity surrounding these contractsinvolves the physical delivery of gas, certain UK gas sales contracts areclassified as derivatives under the rules of IAS 39 and are required to bemeasured at fair value at the balance sheet date. Unrealised gains or losses onthese contracts reflect the comparison between current market gas prices and theactual prices to be realised under the gas sales contract. BG Group also usescommodity derivative instruments to manage certain price exposures in respect ofoptimising the timing of its gas sales, including the use of gas in storagefacilities. These instruments are also required to be measured at fair value atthe balance sheet date under IAS 39. BG Group uses financial instruments, including derivatives, to manage foreignexchange and interest rate exposure. These instruments are required to berecognised at fair value or amortised cost on the balance sheet in accordancewith IAS 39. Most of these instruments have been designated either as hedges offoreign exchange movements associated with the Group's net investments inforeign operations, or as hedges of interest rate risk. Where these instrumentscannot be designated as hedges under IAS 39, unrealised movements in fair valueare recorded in the income statement. Unrealised gains and losses in respect of long-term gas sales contracts andother financial instruments are disclosed separately as 'disposals andre-measurements'. Realised gains and losses relating to these instruments areincluded in Business Performance. Management considers that this presentationbest reflects the underlying performance of the business since it distinguishesbetween the temporary timing differences associated with re-measurements underIAS 39 rules and actual realised gains and losses. For a reconciliation between the overall results and Business Performance anddetails of disposals and re-measurements, see the consolidated income statement,pages 10 and 11 and Note 2 to the accounts, page 17. Joint ventures and associates Under IFRS the results from jointly controlled entities (joint ventures) andassociates, accounted for under the equity method, are required to be presentednet of finance costs and tax on the face of the income statement. Given therelevance of these businesses within BG Group, the results of joint ventures andassociates are presented before interest and tax, and after tax. Managementconsiders that this approach aids comparability with prior years' publishedresults and provides additional information on the source of BG Group'soperating profits. For a reconciliation between operating profit and earningsincluding and excluding the results of joint ventures and associates, see Note 3to 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 manneris intended to provide additional information to explain further the underlyingtrends in the business. Net borrowings BG Group provides a reconciliation of net borrowings and an analysis of theamounts included within net borrowings as management believes that this is animportant liquidity measure for the Group. LEGAL NOTICE These results include "forward-looking information" within the meaning ofSection 27A of the US Securities Act of 1933, as amended and Section 21E of theUS Securities Exchange Act of 1934, as amended. Certain statements included inthese results, including without limitation, those concerning (i) strategies,outlook and growth opportunities, (ii) positioning to deliver future plans andto realise potential for growth, (iii) delivery of the performance required toachieve the 2006 targets, (iv) development of new markets, (v) the developmentand commencement of commercial operations of new projects, (vi) liquidity andcapital resources, (vii) plans for capital and investment expenditure and (viii)statements preceded by "expected", "scheduled", "targeted", "planned","proposed", "intended" or similar statements, contain certain forward-lookingstatements concerning operations, economic performance and financial condition.Although the Company believes that the expectations reflected in suchforward-looking statements are reasonable, no assurance can be given that suchexpectations will prove to have been correct. Accordingly, results could differmaterially from those set out in the forward-looking statements as a result of,among other factors, (i) changes in economic, market and competitive conditions,including oil and gas prices, (ii) success in implementing business andoperating initiatives, (iii) changes in the regulatory environment and othergovernment actions, including UK and international corporation tax rates, (iv) amajor recession or significant upheaval in the major markets in which BG Groupoperates, (v) the failure to ensure the safe operation of assets worldwide, (vi)implementation risk, being the challenges associated with delivering capitalintensive projects on time and on budget, including the need to retain andmotivate staff, (vii) commodity risk, being the risk of a significantfluctuation in oil and/or gas prices from those assumed, (viii) fluctuations inexchange rates, in particular the US$/UK£ exchange rate being significantlydifferent to that assumed, (ix) risks encountered in the gas and oil explorationand production sector in general, (x) business risk management and (xi) the RiskFactors included in BG Group's Annual Report and Accounts 2004. BG Groupundertakes no obligation to update any forward-looking statements. 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 THIRD QUARTER --------------------------------------- ----------------------------------------- 2005 2004 Busi- Disposals and Total Busi- Disposals and Total ness re-measure- Result ness re-measure- Result Perfor- ments Perfor- (Note 2)(i) mance(i) (Note 2)(i) mance(i) Notes £m £m £m £m £m £m Group revenueand otheroperatingincome 3 1 339 21 1 360 1 084 - 1 084 Operating costs (851) - (851) (738) - (738) Profit on disposal of non-currentassets - - - - - - --------------------------------------- -----------------------------------------Operatingprofit/(loss)before shareof resultsfrom jointventures andassociates 3 488 21 509 346 - 346 --------------------------------------- ----------------------------------------- Finance income 4 21 - 21 12 - 12 Finance costs 4 (20) 1 (19) (20) - (20) Share ofpost-taxresults fromjoint venturesand associates 3 41 - 41 32 - 32 --------------------------------------- -----------------------------------------Profit/(loss)before tax 530 22 552 370 - 370Taxation 5 (207) (11) (218) (142) - (142) --------------------------------------- -----------------------------------------Profit for theperiod 323 11 334 228 - 228 ======================================= ========================================= Attributable to: --------------------------------------- -----------------------------------------BG Groupshareholders (earnings) 308 13 321 214 - 214 Minorityinterest 15 (2) 13 14 - 14 --------------------------------------- ----------------------------------------- 323 11 334 228 - 228 ======================================= ========================================= Earnings pershare - basic 6 8.7p 0.4p 9.1p 6.1p - 6.1pEarnings pershare -diluted 6 8.7p 0.4p 9.1p 6.1p - 6.1p --------------------------------------- ----------------------------------------- Total operatingprofit includingshare of pre-taxoperating results from joint venturesand associates(ii) 3 548 21 569 395 - 395 ======================================= ========================================= i) See Presentation of Non-GAAP measures, page 8, for an explanation of results excluding disposals and re-measurements and presentation of the results of joint ventures and associates. ii) This measurement is shown by BG Group as it is used by management as a means of measuring the underlying performance of the business. CONSOLIDATED INCOME STATEMENT NINE MONTHS --------------------------------------- ----------------------------------------- 2005 2004 Busi- Disposals and Total Busi- Disposals and Total ness re-measure- Result ness re-measure- Result Perfor- ments Perfor- (Note 2)(i) mance(i) (Note 2)(i) mance(i) Notes £m £m £m £m £m £m Group revenueand otheroperatingincome 3 3 566 (137) 3 429 2 902 - 2 902 Operatingcosts (2 212) - (2 212) (1 970) - (1 970) Profit ondisposal ofnon-currentassets - 429 429 - 87 87 --------------------------------------- -----------------------------------------Operatingprofit/(loss)before shareof resultsfrom jointventures andassociates 3 1 354 292 1 646 932 87 1 019 --------------------------------------- ----------------------------------------- Finance income 4 51 - 51 33 - 33 Finance costs 4 (61) 11 (50) (54) - (54) Share of post-taxresults fromjoint venturesand associates 3 119 - 119 92 - 92 --------------------------------------- -----------------------------------------Profit/(loss)before tax 1 463 303 1 766 1 003 87 1 090 Taxation 5 (573) (85) (658) (384) (30) (414) --------------------------------------- -----------------------------------------Profit/(loss)for the period 890 218 1 108 619 57 676 ======================================= =========================================Attributable to: --------------------------------------- -----------------------------------------BG Groupshareholders (earnings) 853 212 1 065 593 57 650 Minorityinterest 37 6 43 26 - 26 --------------------------------------- ----------------------------------------- 890 218 1 108 619 57 676 ======================================= ========================================= --------------------------------------- -----------------------------------------Earnings pershare - basic 6 24.1p 6.0p 30.1p 16.8p 1.7p 18.5pEarnings pershare -diluted 6 24.0p 6.0p 30.0p 16.8p 1.7p 18.5p --------------------------------------- ----------------------------------------- ================================================================================================================Total operatingprofit includingshare of pre-taxoperating results from joint venturesand associates(ii) 3 1 522 292 1 814 1 078 87 1 165================================================================================================================ i) See Presentation of Non-GAAP measures, page 8, for an explanation of results excluding disposals and re-measurements and presentation of the results of joint ventures and associates. ii) This measurement is shown by BG Group as it is used by management as a means of measuring the underlying performance of the business. CONSOLIDATED BALANCE SHEET THIRD QUARTER -------------------------------------------------------------------------------- As at 30 Sept 31 Dec 30 Sept 2005 2004 2004 £m £m £mAssetsNon-current assetsGoodwill 349 272 267Other intangible assets 712 585 504Property, plant and equipment 5 403 4 509 4 408Investments 1 094 1 050 1 053Deferred tax assets 77 68 61Trade and other receivables 54 46 79Derivative financial instruments 115 - --------------------------------------------------------------------------------- 7 804 6 530 6 372Current assetsInventories 144 99 175Trade and other receivables 1 243 1 190 937Commodity contracts and other derivativefinancial instruments 16 - -Cash and cash equivalents 1 335 340 350-------------------------------------------------------------------------------- 2 738 1 629 1 462Non-current assets classified as held for sale - 530 475--------------------------------------------------------------------------------Total assets 10 542 8 689 8 309-------------------------------------------------------------------------------- LiabilitiesCurrent liabilitiesBorrowings (332) (577) (542)Trade and other payables (1 031) (976) (904)Current tax liabilities (340) (264) (182)Commodity contracts and other derivativefinancial instruments (619) - --------------------------------------------------------------------------------- (2 322) (1 817) (1 628)Non-current liabilitiesBorrowings (1 187) (762) (814)Trade and other payables (85) (89) (77)Derivative financial instruments (1) - -Deferred income tax liabilities (805) (907) (861)Retirement benefit obligations (152) (135) (134)Provisions for other liabilities and charges (349) (325) (288)-------------------------------------------------------------------------------- (2 579) (2 218) (2 174)Liabilities associated with non-current assetsclassified as held for sale - (67) (51)--------------------------------------------------------------------------------Total liabilities (4 901) (4 102) (3 853)================================================================================Net assets 5 641 4 587 4 456================================================================================ Attributable to:BG Group equity shareholders 5 593 4 567 4 440Minority interests 48 20 16================================================================================Total equity 5 641 4 587 4 456================================================================================ STATEMENT OF CHANGES IN EQUITY Third Quarter Nine Months 2005 2004 2005 2004 £m £m £m £m Equity as at start of period5 195 4 225 BG Group shareholders' funds 4 567 3 924 43 1 Minority interest 20 (9)================================================================================5 238 4 226 4 587 3 915 - - Effect of adoption of IAS 39 (238) -================================================================================5 238 4 226 Equity as at start of period 4 349 3 915 334 228 Profit for the financial period 1 108 676 14 1 Issue of shares 28 8 (2) - Purchase of own shares (4) - 3 8 Adjustment in respect of employee 11 9 share schemes (68) (61) Dividends on ordinary shares (142) (127) (9) (2) Dividends paid to minority interest (23) (2) Currency translation and hedge 131 56 adjustments net of tax 314 (23)-------------------------------------------------------------------------------- Net changes in equity for the 403 230 financial period 1 292 541 Equity as at 30 Sept 5 593 4 440 BG Group shareholders' funds 5 593 4 440 48 16 Minority interest 48 16================================================================================5 641 4 456 5 641 4 456================================================================================ CONSOLIDATED CASH FLOW STATEMENT Third Quarter Nine Months 2005 2004 2005 2004 £m £m £m £m Cash flows from operating activities 509 346 Profit from operations 1 646 1 019 Depreciation of property, plant and equipment and amortisation of 116 110 intangible assets 350 327 Fair value movements in commodity (21) - contracts 137 - Profit on disposal of non-current - - assets (429) (87) Unsuccessful exploration expenditure 11 16 written off 32 23 (13) (4) (Decrease)/increase in provisions - (2) 3 4 Share based payments 11 4 Decrease/(increase) in working 87 (24) capital 39 (137)-------------------------------------------------------------------------------- 692 448 Cash generated by operations 1 786 1 147 (229) (94) Income taxes paid (543) (263)-------------------------------------------------------------------------------- Net cash inflow from operating 463 354 activities 1 243 884-------------------------------------------------------------------------------- Cash flows from investing activities Dividends received from joint 22 5 ventures and associates 60 38 Proceeds from disposal of subsidiary - - undertakings and investments 26 32 Proceeds from disposal of property, plant and equipment and intangible 13 - assets 949 143 Purchase of property, plant and (365) (214) equipment and intangible assets (893) (635) Loans (to)/from joint ventures and 60 (19) associates 6 17 Purchase of subsidiary undertakings (1) - and investments(i) (13) (342) Net cash inflow/(outflow) from (271) (228) investing activities 135 (747)-------------------------------------------------------------------------------- Cash flows from financing activities (2) (3) Net interest paid(ii) (18) (22) (68) (58) Dividends paid (142) (123) (9) (2) Dividends paid to minority (23) (2) Net increase/(decrease) in 4 46 short-term borrowings (253) 125 Net increase/(decrease) in long-term (29) (22) borrowings - (76) 14 1 Issue of shares 28 8 (2) - Purchase of own shares (4) --------------------------------------------------------------------------------- Net cash outflow from financing (92) (38) activities (412) (90)-------------------------------------------------------------------------------- Net increase/(decrease) in cash and 100 88 cash equivalents 966 47 Cash and cash equivalents at 1 223 259 beginning of period 340 313 Effect of foreign exchange rate 12 3 changes 29 (10)-------------------------------------------------------------------------------- Cash and cash equivalents at end of 1 335 350 period(iii) 1 335 350-------------------------------------------------------------------------------- i) Includes cash acquired of £18 million (2004 £10 million) on the purchase of a subsidiary undertaking.ii) Includes capitalised interest for the third quarter of £9 million (2004 £2 million), and for the nine months of £19 million (2004 £8 million).iii) Cash and cash equivalents comprise cash and short-term liquid investments that are readily convertible to cash. RECONCILIATION OF NET BORROWINGS(i) - NINE MONTHS £mNet borrowings as at 31 December 2004(i) (ii) (999)Adoption of IAS 39 (6)================================================================================ (1 005) Net increase in cash and cash equivalents 966Cash outflow from changes in gross borrowings 253Inception of finance leases (184)Foreign exchange and other re-measurements (134)================================================================================Net borrowings as at 30 Sept 2005(i) (ii) (104)================================================================================ Net borrowings attributable to MetroGAS (including Gas Argentino) was £178million (31 December 2004 £202 million) and to Comgas was £211 million (31 December 2004 £98 million). The gearing ratio (net borrowings as a percentage of net borrowings plus equity)was 1.6% (31 December 2004 17.9%). As at 30 Sept 2005, BG Group's share of the net borrowings in joint ventures andassociates amounted to approximately £1 billion, including BG Group shareholderloans of approximately £600 million. 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. i) Net borrowings are defined on page 29.ii) Net borrowings comprise: As at 30 Sept 31 Dec 2005 2004 £m £mAmounts receivable/(due) within one yearCash and cash equivalents 1 335 340Overdrafts, loans and finance leases (332) (577)Derivative financial instruments (34)(iii) -================================================================================ 969 (237)Amounts receivable/(due) after more than one yearLoans and finance leases (1 187) (762)Derivative financial instruments 114 -================================================================================ (1 073) (762)================================================================================Net borrowings (104) (999)================================================================================ 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 consolidated financial statements ofBG Group plc for both the quarter ended and the nine months ended 30 Sept 2005.The financial information does not comprise statutory accounts within themeaning of Section 240 of the Companies Act 1985, and should be read inconjunction with the Annual Report and Accounts for the year ended 31 December2004, as they provide an update of previously reported information. From 1 January 2005, BG Group is required to prepare its consolidated financialstatements in accordance with accounting standards adopted for use in theEuropean Union. In the 2004 Annual Report and Accounts (pages 110 to 118)information was provided in order to provide clarity on the impact ofInternational Financial Reporting Standards (IFRS) in advance of the publicationof results under these standards. It included details of BG Group's principalaccounting policies under IFRS and the adjustments required to restatecomparative information for the year ended 31 December 2003 (including thetransition balance sheet as at 1 January 2003) and the year ended 31 December2004. The financial information set out in this interim statement has beenprepared in accordance with the accounting policies under IFRS published in the2004 Annual Report and Accounts. Standards currently in issue and adopted by the EU are subject to interpretationissued from time to time by the International Financial ReportingInterpretations Committee (IFRIC). Further standards may be issued by theInternational Accounting Standards Board that will be adopted for financialyears beginning on or after 1 January 2005. Additionally, IFRS is currentlybeing applied in the United Kingdom and in a large number of countriessimultaneously for the first time. Furthermore, due to a number of new andrevised Standards included within the body of the Standards that comprise IFRS,there is not yet a significant body of established practice on which to draw informing options regarding interpretation and application. Accordingly, practiceis continuing to evolve. At this preliminary stage, therefore, the fullfinancial effect of reporting under IFRS as it will be applied and reported onin the Company's first IFRS Financial Statements for the year ended 31 December2005 may be subject to change. The preparation of the interim financial statements requires management to makeestimates and assumptions that affect the reported amount of revenues, expenses,assets and liabilities and disclosure of contingent liabilities at the date ofthe interim financial statements. If in the future such estimates andassumptions, which are based on management's best judgement at the date of theinterim financial statements, deviate from the actual circumstances, theoriginal estimates and assumptions will be modified as appropriate in the yearin which the circumstances change. Income tax expense is recognised based upon the best estimate of the weightedaverage annual income tax rate expected for the full financial year. 2. Disposals and re-measurements Third Quarter Nine Months 2005 2004 2005 2004 £m £m £m £m Revenue and other operating income - 21 -(i)re-measurements of commodity contracts (137) -(i) - - Profit on disposal of non-current assets 429 87 Finance costs - re-measurements of 1 -(i)financial instruments 11 -(i) (11) - Taxation (85) (30) 2 - Minority interest (6) -================================================================================ 13 - Impact on earnings 212 57================================================================================ i) BG Group adopted IAS 39 from 1 January 2005, figures for 2004 do not containany non-cash re-measurements. 2005 third quarter and nine months: Revenue and other operating income Re-measurements included within revenue and other operating income amount to anet credit of £21 million for the third quarter, including a credit of £25million which represents unrealised mark-to-market movements on certainlong-term UK gas contracts. Whilst the activity surrounding these contractsinvolves the physical delivery of gas, the contracts fall within the scope ofIAS 39 and meet the definition of a derivative instrument. The remaining £4million charge represents unrealised mark-to-market movements on derivativesused for gas marketing activity in the UK and US. For the second quarter of 2005, re-measurements included within revenue andother operating income amounted to a charge of £120 million. For the first quarter of 2005, re-measurements included within revenue and otheroperating income amounted to a charge of £38 million. 2005 third quarter and nine months: Disposal of non-current assets During the second quarter of 2005, BG Group completed the sale of its 16.67%interest in the North Caspian Sea PSA and received net pre-tax proceeds ofapproximately $1.8 billion realising a £416 million pre-tax and £279 millionpost-tax profit on the sale. During the first quarter of 2005, BG Group disposed of its 50% interest inPremier Transmission Limited to Premier Transmission Financing plc for cashproceeds of £26 million. No tax arose on the disposal. 2004 third quarter and nine months: Disposal of non-current assets Profits on disposal of non-current assets during the second quarter of 2004 included the disposal of BG Group's interest in the Muturi Production Sharing Contract in Indonesia for £142 million realising a £66 million pre-tax and £38 million post-tax profit on the sale. £1 million of pre- and post-tax expenditure was incurred relating to a prioryear disposal. During the first quarter of 2004, BG Group disposed of its 1.21% holding ofshares in a listed company, Gas Authority of India Limited, for £32 million. Taxof £2 million arose on the profit on disposal, based on the effective rate ofcapital gains tax applicable in India for long-term investments. 2005 third quarter and nine months: Finance costs Re-measurements presented in finance costs relate primarily to the retranslationof MetroGAS US Dollar and Euro borrowings which cannot be designated as hedgesunder IAS 39. In addition there are re-measurement movements in respect ofcertain derivatives used to hedge foreign exchange and interest rate risk whichhave not been designated as hedges under IAS 39, partly offset by foreignexchange movements on certain borrowings in subsidiaries. 3. Segmental analysis Group revenue and Busi- Disposals and Total Busi- Disposals and Totalother operating ness re-measure- ness re-measure- Result income Perfor- ments Perfor- ments mance mance Third Quarter 2005 2005 2005 2004 2004 2004 £m £m £m £m £m £mExplorationand Production 688 37 725 534 - 534LiquefiedNatural Gas 404 (16) 388 336 - 336Transmissionand Distribution 224 - 224 178 - 178Power Generation 47 - 47 40 - 40Other activities 4 - 4 3 - 3Less: intra-group sales (28) - (28) (7) - (7)================================================================================================================== 1 339 21 1 360 1 084 - 1 084================================================================================================================== Group revenue and Busi- Disposals and Total Busi- Disposals and Totalother operating ness re-measure- ness re-measure- income Perfor- ments Perfor- ments mance manceNine Months 2005 2005 2005 2004 2004 2004 £m £m £m £m £m £m Exploration and Production 1 981 (121) 1 860 1 498 - 1 498Liquefied Natural Gas 860 (16) 844 802 - 802Transmission and Distribution 589 - 589 479 - 479Power Generation 168 - 168 132 - 132Other activities 10 - 10 6 - 6Less: intra-group sales (42) - (42) (15) - (15)================================================================================================================== 3 566 (137) 3 429 2 902 - 2 902================================================================================================================== 3. Segmental analysis (continued) Business Before share Share of Including Disposals and BusinessPerformance of results results in share of re-measurements Performance from joint joint results from (ii) (ii) ventures and ventures and joint ventures associates associates(i) and associatesThird Quarter 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 £m £m £m £m £m £m £m £m £m £mExplorationand Production 456 291 - - 456 291 (37) - 419 291LiquefiedNatural Gas 5 18 30 19 35 37 16 - 51 37Transmissionand Distribution 54 41 10 10 64 51 - - 64 51Power Generation 1 1 20 20 21 21 - - 21 21Other activities (7) (5) - - (7) (5) - - (7) (5)================================================================================================ Operating Profit 509 346 60 49 569 395 (21) - 548 395================================================================================================ Business Before share Share of Including Disposals and BusinessPerformance of results results in share of re-measurements Performance from joint joint results from (ii) (ii) ventures and ventures and joint ventures associates associates(i) and associatesNine Months 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 £m £m £m £m £m £m £m £m £m £m Explorationand Production 1 508 875 - - 1 508 875 (295) (46) 1 213 829LiquefiedNatural Gas 2 41 75 49 77 90 16 (19) 93 71TransmissionandDistribution 148 86 31 31 179 117 (13) - 166 117PowerGeneration 16 16 62 66 78 82 - - 78 82Otheractivities (28) 1 - - (28) 1 - (22) (28) (21)================================================================================================ OperatingProfit 1 646 1 019 168 146 1 814 1 165 (292) (87) 1 522 1 078================================================================================================ i) Share of results in joint ventures and associates in the table above isbefore finance costs and taxation. The share of results after finance costs andtaxation for the quarter is £41 million (2004 £32 million), and for the ninemonths is £119 million (2004 £92 million).ii) Business Performance excludes certain disposals and re-measurements. SeeNote 2, page 17 and Presentation of Non-GAAP measures, page 8. 3. Segmental analysis (continued) Total Result Operating profit Share of results in Total before share of joint ventures and Result results from joint associates ventures and associates Third Quarter 2005 2004 2005 2004 2005 2004 £m £m £m £m £m £m Explorationand Production 456 291 - - 456 291LiquefiedNatural Gas 5 18 22 14 27 32TransmissionandDistribution 54 41 6 6 60 47PowerGeneration 1 1 13 12 14 13Otheractivities (7) (5) - - (7) (5)-------------------------------------------------------------------------------- 509 346 41 32 550 378 Net financeincome/(costs) 2 (8)Taxation (218) (142)--------------------------------------------------------------------------------Profit for theperiod 334 228-------------------------------------------------------------------------------- Total Result Operating profit before Share of results in Total share of results from joint ventures and Result joint ventures and associates associates Nine Months 2005 2004 2005 2004 2005 2004 £m £m £m £m £m £m Explorationand Production 1 508 875 - - 1 508 875 LiquefiedNatural Gas 2 41 58 32 60 73TransmissionandDistribution 148 86 22 17 170 103PowerGeneration 16 16 39 43 55 59Otheractivities (28) 1 - - (28) 1-------------------------------------------------------------------------------- 1 646 1 019 119 92 1 765 1 111 Net financeincome/(costs) 1 (21)Taxation (658) (414)--------------------------------------------------------------------------------Profit for theperiod 1 108 676-------------------------------------------------------------------------------- 4. Net finance costs Third Quarter Nine Months 2005 2004 2005 2004 £m £m £m £m (21) (15) Interest payable (59) (46) (5) (4) Interest on obligations under finance (12) (8) leases 9 2 Interest capitalised 19 8 (3) (3) Unwinding of discount on provisions(i) (9) (8) 1 - Disposals and re-measurements (Note 2) 11 -================================================================================ (19) (20) Finance costs (50) (54) 21 12 Finance income 51 33================================================================================ 2 (8) Net finance income/(costs)(ii) 1 (21)================================================================================ i) Relates to the unwinding of the discount on provisions in respect ofdecommissioning and pension obligations, included in the income statement as afinancial item within net finance costs.ii) Excludes Group share of net finance costs from joint ventures andassociates for the quarter of £11 million (2004 £8 million), and for the ninemonths of £28 million (2004 £26 million). 5. Taxation The taxation charge for the quarter before disposals and re-measurements was£207 million (2004 £142 million), and the taxation charge including disposalsand re-measurements was £218 million (2004 £142 million). For the nine months, the taxation charge before disposals and re-measurementswas £573 million (2004 £384 million). The taxation charge including disposalsand re-measurements was £658 million (2004 £414 million). The Group share of taxation from joint ventures and associates for the quarterwas £8 million (2004 £9 million) and for the nine months was £21 million (2004£28 million). 6. Earnings per ordinary share Third Quarter Nine Months 2005 2004 2005 2004-------------------------------------------------------------------------------- £m Pence £m Pence £m Pence £m Pence per per per per share share share share-------------------------------------------------------------------------------- 321 9.1 214 6.1 Earnings 1 065 30.1 650 18.5 Disposals and re-measurements (after tax and (13) (0.4) - - minority interest) 80 2.3 - - Profit on - - - - disposals (292) (8.3) (57) (1.7)================================================================================ Earnings - excluding disposals and 308 8.7 214 6.1 re-measurements 853 24.1 593 16.8================================================================================ Basic earnings per share calculations in 2005 are based on shares in issue of 3542 million for the quarter and 3 539 million for the year to date. 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 3 555 million for the quarter and 3 554 million for the year to date, beingthe weighted average number of ordinary shares in issue during the year asadjusted for share options. 7. Capital investment - geographical analysis Third Quarter Nine Months 2005 2004 2005 2004 £m £m £m £m 109 65 Europe 327 143 46 18 South America 103 72 35 75 Asia and the Middle East 152 225 144 82 North America and the Caribbean 309 606 44 116 Mediterranean Basin and Africa 217 339================================================================================ 378 356 1 108 1 385================================================================================ 8. Quarterly information: earnings and earnings per share 2005 2004 2005 2004 £m £m pence pence First quarter- including disposals and 260 207 7.3 5.9re-measurements- excluding disposals and 270 187 7.6 5.3re-measurementsSecond quarter- including disposals and 484 229 13.7 6.5re-measurements- excluding disposals and 275 192 7.8 5.4re-measurementsThird quarter- including disposals and 321 214 9.1 6.1re-measurements- excluding disposals and 308 214 8.7 6.1re-measurementsFourth quarter- including disposals and 236 6.7re-measurements- excluding disposals and 236 6.7re-measurements ================================================================================Full year- including disposals and 886 25.1re-measurements- excluding disposals and 829 23.5re-measurements ================================================================================ 9. IFRS 1 requirement - Reconciliation of profit and equity to previous GAAP Included within the Annual Report and Accounts for BG Group for the year ended31 December 2004 is a reconciliation of the income statement from UK GAAP toIFRS for the years ended 31 December 2003 and 2004 and a reconciliation ofequity at the transition date (1 January 2003), 31 December 2003, 31 December2004 and 1 January 2005, the date of adoption of IAS 32 and 39. This documentalso provides details of the impact of the adoption of IAS 32 and IAS 39 from 1January 2005, details of the reconciling items, BG Group's principal accountingpolicies under IFRS and the exemptions taken by BG Group in accordance with IFRS1 on transition to IFRS. In order to comply with IFRS 1, in this statement BG Group also presents areconciliation from UK GAAP to IFRS of the profit for the comparable financialperiod (the quarter and nine months ended 30 Sept 2004), together with theequity at the end of the comparable period (30 Sept 2004) as follows: Reconciliation of earnings between UK GAAP and Notes Third NineIFRS Quarter Months 2004 2004 £m £m Profit attributable to shareholders (earnings)under UK GAAP 215 655Effect of transition to IFRS:Pensions 1 (1) (5)Premier Power CCGT Project 2 (1) (3)Goodwill amortisation 3 4 12Regulatory current account 4 3 7Share-based payments 5 (3) (3)Tax 6 (3) (8)Profit on disposal of non-current assets 7 - (5)================================================================================Profit attributable to shareholders (earnings)under IFRS 214 650================================================================================ Reconciliation of equity between UK GAAP and IFRS Notes 30 Sept 2004 £m Total equity under UK GAAP 4 516Effect of transition to IFRS:Pensions 1 (40)Premier Power CCGT Project 2 16Goodwill 3 28Regulatory current account 4 14Deferred tax 6 (81)Other 3================================================================================Total equity under IFRS 4 456================================================================================ Notes 1. Pensions Cumulative actuarial gains and losses in respect of the Group's pension andpost-retirement benefit plans have been recognised in full on transition to IFRS(1 January 2003). Actuarial gains and losses arising from the transition dateare recognised over the average remaining service lives of employees (commonlyreferred to as the 'corridor' approach). The charge to operating costs inrespect of pensions has increased by £1 million for the quarter ended 30 Sept2004 (£5 million for the nine 9. IFRS 1 requirement - Reconciliation of profit and equity to previous GAAP(continued) 1. Pensions (continued) months ended 30 Sept 2004) compared to UK GAAP. The impact on earnings is areduction of £1 million for the quarter ended 30 Sept 2004 (£5 million for thenine months ended 30 Sept 2004) compared to UK GAAP and the impact on net assetsas at 30 Sept 2004 is a reduction of £40 million compared to UK GAAP. 2. Premier Power CCGT Project In 2000, BG Group's wholly-owned subsidiary Premier Power Limited received £168million in consideration for the restructuring of power purchase agreements withNorthern Ireland Electricity following agreement to construct a new CCGT powerplant at Ballylumford. Under UK GAAP this amount was treated as deferred incomeand released over the life of the remaining power agreements, matched to theassociated asset depreciation charge. Under IFRS the amount has been recognisedas income in the year of receipt, along with the impairment of the property,plant and equipment associated with the original power plants. This has resultedin a reduction in operating profit for the quarter ended 30 Sept 2004 of £1million (£3 million for the nine months ended 30 Sept 2004) and an increase innet assets as at 30 Sept 2004 of £16 million. 3. Goodwill amortisation BG Group has used the exemption available under IFRS 1 for not restatingbusiness combinations. IFRS 3 requires that goodwill arising from businesscombinations should not be amortised. Accordingly, the carrying value ofgoodwill as at 30 Sept 2004 is increased by £28 million and operating costs inrespect of goodwill amortisation under UK GAAP for the quarter ended30 Sept 2004 of £4 million, and for the nine months ended 30 Sept 2004 of £12million, have been reversed. There is no tax impact. 4. Regulatory current account balances - Comgas Comgas (BG Group's Brazilian gas distribution business) recognised balancesunder UK GAAP in respect of the pass-through of costs after formal approval of arevised tariff by the Comgas Regulator. These balances do not meet the criteriafor recognition under current IFRS and accordingly have been de-recognised. Thishas resulted in a decrease in operating costs for the quarter ended 30 Sept 2004of £6 million and for the nine months ended 30 Sept 2004 of £10 million with anincrease in earnings for the quarter ended 30 Sept 2004 of £3 million (£7million for the nine months ended 30 Sept 2004), and has led to an increase innet assets as at 30 Sept 2004 of £14 million. 5. Share-based payments On adoption of IFRS 2, BG Group has recognised the cost of providing share-basedpayments to employees in the income statement over the relevant vesting period.The cost is based on the fair value of the options and shares allocateddetermined using a Black-Scholes option pricing model and a Monte Carloprojection model. This has resulted in a decrease in earnings for the quarterended 30 Sept 2004 of £3 million and for the nine months ended 30 Sept 2004 of£3 million. 6. Deferred tax On adoption of IAS 12, BG Group has recognised deferred tax liabilities inrespect of unremitted earnings of overseas associates and jointly controlledentities and in respect of fixed assets held at fair value following a businesscombination. The effective tax rate under IFRS is 40% for the quarter and thenine months ended 30 Sept 2004. The impact of these adjustments is an increaseto the deferred tax provision as at 30 Sept 2004 of £81 million. 7. Profit on disposal of non-current assets The adjustment to profit on disposal of non-current assets represents foreigncurrency losses previously recognised in equity which are recycled through theincome statement on the disposal of the related assets in accordance with IAS21. 10. Commitments and Contingencies Pages 93 and 94 of the 2004 Annual Report and Accounts provide details of thesize and nature of BG Group's commitments and contingencies as at 31 Dec 2004.As at 30 Sept 2005, the amounts and transactions were not significantlydifferent to those at the year end, except for the following: Commitments for capital expenditure were £419 million lower principallyreflecting the Kashagan disposal. The outstanding balance on loans guaranteed by BG Energy Holdings Limited haddecreased by £284 million. Supplementary information: Operating and financial data Third Quarter Second Nine Months Quarter 2005 2004 2005 2005 2004 Production volumes (mmboe) 4.6 4.8 4.5 - oil 13.8 15.6 5.8 6.4 8.4 - liquids 21.9 17.8 30.8 28.5 31.7 - gas 93.8 88.4 ------------------------ -------------- 41.2 39.7 44.6 - total 129.5 121.8 ------------------------ -------------- Production volumes (boepd in thousands) 50 52 50 - oil 50 57 63 70 92 - liquids 80 65 335 310 348 - gas 344 324 ------------------------ -------------- 448 432 490 - total 474 446 ------------------------ -------------- LNG cargoes (standard) 9 25 10 - delivered to Lake Charles 27 53 15 11 11 - delivered to Elba Island 36 29 7 8 1 - re-marketed 18 11 ------------------------ -------------- 31 44 22 - total 81 93 ------------------------ -------------- £35.25 £23.65 £28.01 Average realised oil price per £29.50 £20.36 barrel($63.02)($42.80) ($52.36) ($54.68) ($36.94) £26.98 £16.89 £21.15 Average realised liquids price £20.68 £12.92 per barrel($48.23)($30.56) ($39.54) ($38.32) ($23.45) 20.10p 18.33p 22.98p Average realised UK gas price 22.72p 18.69p per produced therm 17.92p 14.17p 14.16p Average realised International 15.39p 13.68p gas price per produced therm 18.42p 15.71p 16.81p Average realised gas price per 17.56p 15.69p produced therm £1.42 £1.22 £1.13 Lifting costs per boe(i) £1.23 £1.05($2.54) ($2.20) ($2.10) ($2.27) ($1.91) £2.56 £2.21 £2.04 Operating expenditure per boe £2.22 £2.03($4.57) ($4.01) ($3.82) ($4.11) ($3.69) 166 151 174 Development expenditure (£m) 495 415 Gross exploration expenditure(£m) 34 75 15 - capitalised expenditure 136 170 31 18 23 - other expenditure 69 44 ------------------------ -------------- 65 93 38 - gross expenditure 205 214 ------------------------ -------------- i) Lifting costs are defined as operating expenditure excluding royalties,tariffs and insurance. Supplementary information: Operating and financial data (continued) BG Group's exposure to the oil price varies according to a number of factorsincluding the mix of production and sales. Management estimates that, otherfactors being constant, a $1.00 rise (or fall) in the Brent price would increase(or decrease) operating profit in 2005 by approximately £30 million to £40million. BG Group's exposure to the US$/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 2005, otherfactors being constant, a 10 cent strengthening (or weakening) in the US Dollarwould increase (or decrease) operating profit by approximately£80 million to £90 million. DefinitionsIn these results:bcf billion cubic feetbcfd billion cubic feet per daybcmpa billion cubic metres per annumboe barrels of oil equivalentboed barrels of oil equivalent per daybopd barrels of oil per dayCCGT combined cycle gas turbineDCQ daily contracted quantityE&P Exploration and ProductionEPC engineering, procurement and constructionEPIC engineering, procurement, installation and commissioningFEED front end engineering designFERC Federal Energy Regulatory CommissionGearing Net borrowings as a percentage of total shareholders' funds (excluding the re-measurement of commodity financial instruments) plus net borrowingsGW gigawattIAS 39 International Accounting Standard 39 (Financial Instruments)IFRS International Financial Reporting StandardsLNG Liquefied Natural Gasm millionmmboe million barrels of oil equivalentmmcfd 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 daymtpa million tonnes per annumMW megawattNet Comprise cash, current asset investments, finance leases, currencyborrowings and interest rate derivative financial instruments and short- and long-term borrowingsPSA production sharing agreementROACE return on average capital employedStandard 2 750 000 mmbtuCargoT&D Transmission and DistributionTotal Group operating profit plus share of pre-tax operating results ofoperating joint ventures and associatesprofitUKCS United Kingdom Continental Shelf Enquiries Enquiries relating to BG Group's General enquiries about shareholderresults, business and financial position matters should be made to:should be made to: Investor Relations Department Lloyds TSB RegistrarsBG Group plc The CausewayThames Valley Park Drive WorthingReading West SussexBerkshire BN99 6DARG6 1PT Tel: 0118 929 3025 Tel: 0870 600 3951e-mail: [email protected] e-mail: [email protected] Financial Calendar Announcement of 2005 fourth quarter 9 February 2006results and full year results and annual strategy presentation Announcement of 2006 first quarter results 4 May 2006 BG Group plc website: www.bg-group.com Registered office Thames Valley Park Drive, Reading RG6 1PT Registered in England No. 3690065 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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