8th Feb 2007 07:01
BG GROUP plc08 February 2007 BG GROUP PLC2006 FOURTH QUARTER AND FULL YEAR RESULTS-------------------------------------------------------------------------------- BG Group's Chief Executive, Frank Chapman said: "BG Group has delivered another year of record results in 2006, with E&P volumesup 19% and earnings up 21%. In addition, we made significant progress on thedelivery of major projects and substantially enhanced our E&P resource base,adding attractive opportunities for longer-term growth." HIGHLIGHTS Fourth Quarter Full Year 2006 2005(i) Business Performance(ii) 2006 2005(i) £m £m £m £m Revenue and other operating 1 897 2 098 -10% income 7 270 5 664 +28% Total operating profit including share of pre-tax operating results from joint ventures and 760 860 -12% associates 3 103 2 389 +30% Earnings before prior period 410 503 -18% taxation 1 678 1 354 +24% - - Prior period taxation(iii) (38) - - Earnings for the period after 410 503 -18% prior period taxation 1 640 1 354 +21% 12.0p 14.2p -15% Earnings per share 47.4p 38.2p +24% 4.20p 4.09p +3% Dividend per share 7.20p 6.00p +20% Total results for the period (including disposals and re-measurements) Revenue and other operating 2 088 1 995 +5% income 7 674 5 424 +41% Operating profit before share of results from joint ventures and 855 700 +22% associates 3 225 2 353 +37% Total operating profit including share of pre-tax operating results from joint ventures and 910 774 +18% associates 3 458 2 595 +33% Earnings before prior period 486 462 +5% taxation 1 853 1 525 +22% - - Prior period taxation(iv) 23 - - Earnings for the period after 486 462 +5% prior period taxation 1 876 1 525 +23% 14.3p 13.0p +10% Earnings per share 54.2p 43.1p +26% For notes i) to iv) see footnotes on page 2 HIGHLIGHTS • Earnings rose 21% to £1 640 million for the full year. • Full year dividend increased by 20% to 7.20 pence per share. • £1 billion share buyback completed and a further £750 million announced. • At constant US$/UK£ exchange rates and upstream prices, total operating profit would have increased by 5% for the quarter and by 15% for the full year. • E&P volumes rose 5% in the quarter and 19% in the full year. • Strong LNG performance with total operating profit up 42% in the quarter and 94% in the full year. • Signed Heads of Agreement with The National Gas Company of Trinidad and Tobago Limited to supply 220 mmscfd for up to 15 years from January 2009. • Project sanction agreed for Karachaganak Train 4. • Three year average unit finding and development cost(v) was $11.50/boe. • Three year average proved reserve replacement rate(vi) was 108%. The one year proved reserve replacement rate was 84% at year end prices and 110% on an underlying basis. • Total resource base increased by approximately 1 billion boe. • Oil production from the Buzzard field in the UK North Sea started on 7 January 2007. • Agreed to purchase the 805 MW Lake Road oil and gas combined cycle power plant located in Connecticut, USA. • Sold Mauritanian interests and two LNG ships, the Methane Arctic and Methane Polar. • Two new LNG ships ordered for delivery in 2010. i) 2005 comparatives have been restated on the application of IFRIC 4 and amendments to IAS 39. See Note 1, page 21.ii) 'Business Performance' excludes disposals and certain re-measurements 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 12 and Results Presentation, page 3. Unless otherwise stated, the results discussed in this release relate to BG Group's Business Performance.iii) Prior period taxation is as a result of the increase in North Sea taxation and includes an additional charge of £38 million in respect of the restatement of deferred tax balances at 1 January 2006.iv) In addition to (iii) above, prior period taxation includes a £61 million credit relating to the impact of the increase in North Sea taxation on certain re-measurement balances.v)& vi) See page 33 for an explanation of how these ratios are calculated. 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 associated 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 pages 14 and 15). 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 is disclosed in Business Performance discussed on pages 4 to 11. Thetable below sets out the amounts related to joint ventures and associates,certain re-measurements under IAS 39 and profits on disposal and associatedimpairment of non-current assets and businesses. FOURTH QUARTER Business Disposals Total Performance and re- Result measurements(i) 2006 2005 2006 2005 2006 2005 £m £m £m £m £m £m Operating profit before disposal of non-current assets 705 786 191 (103) 896 683 Profits and losses on disposal of non-current assets and impairments - - (41) 17 (41) 17 Operating profit before share of results from joint ventures andassociates 705 786 150 (86) 855 700 Pre-tax share of operating results of joint ventures and associates 55 74 - - 55 74 Total operating profit 760 860 150 (86) 910 774 Net finance costs Finance income 22 24 15 (5) 37 19 Finance costs (23) (27) (13) 9 (36) (18) Share of joint ventures and associates (16) (14) - - (16) (14) (17) (17) 2 4 (15) (13)Taxation Taxation (323) (326) (75) 44 (398) (282) Share of joint ventures and associates (1) (20) - - (1) (20) (324) (346) (75) 44 (399) (302) Profit for the period 419 497 77 (38) 496 459 Profit attributable to: Shareholders (earnings) 410 503 76 (41) 486 462 Minority interest 9 (6) 1 3 10 (3) 419 497 77 (38) 496 459 i) Re-measurements excluded from Business Performance The IAS 39 re-measurements reflect movements in external market prices andexchange rates. Financial instruments include certain long-term UK gas contractswhich are classified as derivatives under IAS 39 due to the nature of thecontract terms and are therefore required to be marked-to-market. This treatmenthas no impact on the ongoing cashflows of the business and these unrealisedmark-to-market movements are best presented separately from underlying businessperformance. For an explanation of Non-GAAP measures see page 12. BUSINESS REVIEW The results discussed in this Business Review (pages 4 to 11) relate to BGGroup's performance excluding disposals and certain re-measurements. For theimpact and a description of these items, see the consolidated income statements(pages 14 and 15) and Note 2 of the preliminary un-audited financial statements(page 22). Results at constant US$/UK£ exchange rates and upstream prices arealso quoted. See Presentation of Non-GAAP measures (page 12) for an explanationof these metrics. GROUP Fourth Quarter Business Performance Full Year 2006 2005 2006 2005 £m £m £m £m Revenue and other operating 1 897 2 098 -10% income 7 270 5 664 +28% Total operating profit including share of pre-tax results from joint ventures and associates 575 729 -21% Exploration and Production 2 457 1 942 +27% 115 81 +42% Liquefied Natural Gas 352 181 +94% 53 45 +18% Transmission and Distribution 231 211 +9% 28 35 -20% Power Generation 106 113 -6% (11) (30) -63% Other activities (43) (58) -26% 760 860 -12% 3 103 2 389 +30% (17) (17) - Net finance costs (43) (65) -34% (324) (346) -6% Taxation for the period (1 337) (939) +42% 410 503 -18% Earnings for the period 1 678 1 354 +24% - - - Prior period taxation (38) - - Earnings after prior period 410 503 -18% taxation 1 640 1 354 +21% 12.0p 14.2p -15% Earnings per share 47.4p 38.2p +24% 548 408 +34% Capital investment 1 847 1 595 +16% Fourth quarter Total operating profit of £760 million (down 12%) reflected increased E&Pproduction (up 5%) and strong growth in the LNG business, offset by lower gasprices and a weaker US$ exchange rate. At constant US$/UK£ exchange rates andupstream prices, total operating profit increased by 5%. The increase in the effective tax rate (including BG Group's share of jointventures and associates) in the quarter reflects the increased North Sea taxrate. Cash conversion remained strong and cash generated by operations increased by£95 million to £804 million. Capital investment in the quarter of £548 million comprised continuinginvestment in North America and the Caribbean (£175 million), Europe and CentralAsia (£159 million), Mediterranean Basin and Africa (£125 million), SouthAmerica (£46 million) and Asia Pacific (£43 million). Full year Total operating profit increased by 30% to £3 103 million reflecting the stepchange in E&P production (up 19%), strong growth in the LNG business and higherprices in the first half of the year, partially offset by an increase inexploration costs and the deconsolidation of MetroGAS. At constant US$/UK£ exchange rates and upstream prices, total operating profitincreased by 15%. The effective tax rate (including BG Group's share of joint ventures andassociates) was approximately 44% for the full year (prior year 40%) followingthe increase in North Sea taxation. This excludes the effect of a one-off chargeof £38 million to reflect the increased North Sea tax rate on deferred taxbalances at 1 January 2006. Cash generated by operations increased by £851 million to £3 360 millionprimarily due to higher operating profit. Capital investment of £1 847 million comprised continuing investment in Europeand Central Asia (£530 million), Mediterranean Basin and Africa (£337 million),North America and the Caribbean (£654 million), South America (£199 million) and Asia Pacific (£127 million). The Board recommends a final dividend of 4.20 pence per share bringing the fullyear dividend to 7.20 pence per share, an increase of 20% compared with lastyear. This increase reflects the strong financial performance in 2006. The Board has approved a share buyback of £750 million. The Board consider thatthis amount can be returned to shareholders whilst leaving the company stronglyresourced to fund its growth plans and to meet its policy of increasing thedividend in line with underlying earnings growth. EXPLORATION AND PRODUCTION Fourth Quarter Business Performance Full Year 2006 2005 2006 2005 £m £m £m £m 57.2(i) 54.3 +5% Production volumes(mmboe) 219.2(i) 183.8 +19% Revenue and other operating 1 001 1 093 -8% income 3 928 3 074 +28% 575 729 -21% Total operating profit 2 457 1 942 +27% 368 290 +27% Capital investment 1 165 935 +25% (i) Includes fuel gas for the quarter of 1.05 mmboe, and 4.25 mmboe for the full year. Supplementary operating and financial data is given on page 32. Fourth quarter E&P total operating profit of £575 million (down 21%) reflected a 5% increase involumes, offset by lower commodity prices, higher maintenance costs and anadverse US$/UK£ exchange rate. Production volumes increased by 5% principally at West Delta Deep Marine (Egypt)and the Dolphin field (Trinidad and Tobago), following the continued build-up ofproduction at Egyptian LNG Train 2 and Atlantic LNG Train 4. The start-up of theAtlantic/Cromarty field in the UK also contributed to the increase in volumes. Unit operating expenditure(ii) at £2.53 ($4.82) per boe was up 34 pence (97cents) principally due to one-off maintenance and repair activities in Trinidadand Tobago and Egypt. The Group's average international gas price was 16.7 pence (2005 21.4 pence) perproduced therm reflecting lower international spot prices. In the UK, theaverage realised price per produced therm was 34.4 pence (2005 38.9 pence) ashigher contract prices were offset by lower spot prices. Capital investment of £368 million included expenditure in the UK (£90 million),Egypt (£18 million), Trinidad and Tobago (£39 million), India (£25 million) andTunisia (£46 million) and acquisition of exploration acreage in Nigeria andAlgeria (£54 million). Full year E&P total operating profit increased by 27% to £2 457 million principallyreflecting the 19% increase in production volumes and higher prices, partiallyoffset by higher exploration costs. Increased production primarily came fromWest Delta Deep Marine (Egypt) and the Dolphin field (Trinidad and Tobago). Fullyear volumes of 589 kboed (net of fuel gas) were within 2% of BG Group's targetof 600 kboed. The production rate in the fourth quarter including fuel gas was 622 kboed. Unit operating expenditure(ii) was up 4% to £2.29 ($4.18) per boe. The exploration charge of £272 million was £91 million higher than 2005 mainlydue to increased exploration activity across the Group. Capital investment of £1 165 million included expenditure in the UK (£342million), Egypt (£126 million), Trinidad and Tobago (£104 million), India (£84million) and Tunisia (£93 million) and acquisition of exploration acreage inNigeria and Algeria (£79 million). ii) See page 34 for an explanation of how this ratio is calculated Fourth quarter business highlights Oil production from the Buzzard field in the UK North Sea began on 7 January2007. BG Group holds a 21.73% interest in the field in which peak production -expected in the second half of 2007, is forecast to be 200 000 barrels of oilper day (gross) and 60 million standard cubic feet of gas per day (gross). On 18 December, BG Group announced it had signed Sale and Purchase Agreementsfor the acquisition of a further 11.45% interest in the Armada field (BG Groupoperated), increasing its stake to 58.22%. In the Everest field, BG Group alsoagreed to acquire a further 1.01% interest taking its total stake to 59.32%. Thetotal consideration is $143 million and completion is expected in March 2007. On 29 December, BG Group entered into a Heads of Agreement with The National GasCompany of Trinidad and Tobago Limited (NGC) for the supply of 220 mmscfd for upto 15 years with initial deliveries beginning on 1 January 2009. The gas will besourced from the East Coast Marine Area (BG Group 50%) and delivered to NGC foruse in the Trinidad and Tobago domestic market. In Algeria, a Presidential Decree was signed confirming BG Group's entry intothe Hassi Ba Hamou Perimeter with a 36.75% share and position as operator, witheffect from 13 December. In November, BG Group agreed to farm into the UK central North Sea Columbusprospect, which lies partly in P.1314, Block 23/16f (in which BG Group will takea 25% stake on completion of the farm-in), and partly in the adjacent Block 23/21, in which the Lomond field is situated (BG Group 61.10%). In December,testing of the Columbus well 23/16f-11 was completed, and confirmed a discoverywhere hydrocarbons are present in what BG Group believe to be commercialquantities. Further drilling is expected to take place in 2007. In December, BG Group and its partners sanctioned the Fourth Train project atthe Karachaganak field in Kazakhstan, which will allow further condensatevolumes to be sold in Western markets. In January 2007, BG Group completed the sale of Mauritania Holdings BV for atotal consideration of $128 million. The agreement marks the disposal of all BGGroup's current interests in Mauritania which include: 13.08% equity in PSC A,11.63% equity in PSC B and 10.23% equity in the Chinguetti field. In January 2007, BG Group was awarded interests in two new licences in theNorwegian APA 2006 licensing round. The awards cover one licence (BG Group 40%and operator) in the southern North Sea which contains the Bream discovery, andone licence (BG Group 25%) in the North Tampen Area in the northern North Sea. In January 2007, BG Group was awarded interests in three new licences in the UK24th Licensing Round. The awards cover Block 23/27b (BG 100% and operator) whichlies immediately north of the Jackdaw discovery; Block 22/25d (BG Group 100% andoperator) which lies west of Lomond; and 30/3b (BG Group 30.5%, non-operated)which is adjacent to the Jackdaw discovery. During 2006, BG Group has completed 42 exploration and appraisal wells of which22 have been successful (56%) and 3 are under evaluation. During the quarter, 10successful wells were drilled in Brazil (1), Canada (4), Thailand (3), Trinidadand Tobago (1) and the UK (1). LIQUEFIED NATURAL GAS Fourth Quarter Business Performance Full Year 2006 2005 2006 2005 £m £m £m £m Revenue and other operating 675 771 -12% income 2 442 1 631 +50% Total operating profit 118 69 +71% Shipping and marketing 332 120 +177% 25 36 -31% Liquefaction 104 111 -6% Business development and (28) (24) +17% other costs (84) (50) +68% 115 81 +42% 352 181 +94% 91 66 +38% Capital investment 496 501 -1% Supplementary operating and financial data are given on page 32. Fourth quarter LNG total operating profit increased by £34 million to £115 million principallyreflecting higher volumes and margins in the shipping and marketing businessdespite lower US Henry Hub prices. In shipping and marketing, total operating profit increased by £49 million to£118 million reflecting an increase in long-term contract supply volumes and theoptimisation of that supply through global marketing. During the second quarterof 2006, a future profit of £30 million was secured by selling inventory forwardinto the higher priced first quarter of 2007. Under IFRS, £20 million of thisprofit has been recognised during 2006, following a change in market prices. BG Group's share of operating profit from liquefaction activities decreased to£25 million. This was principally due to more profit being recognised in the E&Psegment as the contract at Egyptian LNG Train 1 entered its commercial phase,lower realised prices at Atlantic LNG Train 1, and start up costs at AtlanticLNG Train 4. Capital investment includes £54 million relating to LNG vessels, £28 millionrelating to regasification development projects and £6 million investment inAtlantic LNG. Full year LNG total operating profit increased by £171 million to £352 million due toincreased volumes and margins in the shipping and marketing business, whichcaptured strong prices in Europe and Asia during the year. BG Group's share ofoperating profit from liquefaction activities of £104 million reflected theentry of Egyptian LNG Train 1 into its commercial phase, as outlined above. LNGliquefaction volumes for the full year were 6.7 mtpa, slightly below plannedlevels (7.1 mtpa). The increase in business development and other costs reflects the development ofliquefaction, supply and regasification opportunities across the portfolio,including the OKLNG project in Nigeria and Chile LNG. Capital investment includes three LNG vessels delivered during 2006 and four duefor delivery in 2007 (£313 million), regasification development projects (£74million), Atlantic LNG (£58 million) and the Lake Charles Phase 2 expansion (£43million). Fourth quarter business highlights In November, BG Group sold two LNG vessels, Methane Arctic and Methane Polar, toJSC Sovcomflot for a total consideration of $92.5 million. The ships were olderassets which were not used in BG Group trades and were sold following astrategic review of BG Group's shipping portfolio. In January, BG Group announced an order to purchase from Samsung HeavyIndustries Co. Limited two new-build dual-fuel diesel electric LNG ships. Thenew ships will be 170 000 cubic-metre capacity and are scheduled to be deliveredin early 2010. TRANSMISSION AND DISTRIBUTION Fourth Quarter Business Performance Full Year 2006 2005 2006 2005 £m £m £m £m Revenue and other operating income 186 158 +18% Comgas 738 532 +39% - 32 - MetroGAS - 164 - 40 29 +38% Other 139 112 +24% 226 219 +3% 877 808 +9% Total operating profit 39 37 +5% Comgas 186 147 +27% - 1 - MetroGAS - 26 - 14 7 +100% Other 45 38 +18% 53 45 +18% 231 211 +9% 38 47 -19% Capital investment 123 136 -10% Fourth quarter T&D total operating profit increased by 18% to £53 million. At Comgas, in Brazil, total operating profit increased by £2 million to £39million, primarily due to an 8% increase in volumes, partially offset by anadverse Brazilian Real (BRL) exchange rate. Operating profit in the fourthquarter of 2006 includes the net cost (£5 million) of passing back to customersthe reduced gas costs experienced in earlier periods. A further £6 million isexpected to be passed back in future periods. Other T&D operating profit benefited from improved performance at theInterconnector business which resulted in a one-off reduction in provisions of£11 million. Capital investment mainly represents the development of the Comgas pipelinenetwork. Full year T&D total operating profit rose by £20 million to £231 million. Excluding theresults of MetroGAS in 2005, total operating profit increased by 25%. At Comgas,a £39 million increase in total operating profit reflected a 10% increase involumes and a favourable BRL exchange rate. Overall T&D volume for the full yearwas 11.9 bcmpa, ahead of the 2006 target of 11.7 bcmpa. Comgas' total operating profit in 2006 includes the net cost (£11 million) ofpassing back to customers the reduced gas costs experienced in earlier periods. Fourth quarter business highlights In November 2006, BG Group completed the sale of its 37.5% interest in the NileValley Gas Company in Egypt. POWER GENERATION Fourth Quarter Business Performance Full Year 2006 2005 2006 2005 £m £m £m £m Revenue and other operating 64 59 +8% income 248 227 +9% 28 35 -20% Total operating profit 106 113 -6% 48 - - Capital investment 55 3 +1 733% Fourth quarter and full year The increase in revenue is primarily due to the pass through of gas costs. Totaloperating profit in the year was £7 million lower reflecting increasedmaintenance costs at Premier Power. In the quarter, the reduction in totaloperating profit included the impact of the recognition of insurance income atSeabank Power in 2005. At the year end power capacity was 3 GW, against the 2006target of 2.8 GW. Capital investment relates primarily to the acquisition of the Dighton powerplant in the USA. Fourth quarter business highlights On 14 December, BG Italia S.p.A. signed an agreement with Edison S.p.A for theacquisition of 66.316% of Serene S.p.A., a company in which BG Italia alreadyowns the remaining 33.684%. The purchase price is €98 million. Serene currentlymanages five thermoelectric plants with a total installed capacity of 400 MW.Completion is expected in February 2007. On 28 December, BG Group announced that it had signed a Sales and PurchaseAgreement for the purchase of the Lake Road power plant, an 805 MW gas and oilfired combined cycle facility located in Dayville, Connecticut, USA for $685million. Completion, which is subject to FERC and Hart-Scott Rodino approvals,is expected during the first half of 2007. Presentation of Non-GAAP measures Business Performance 'Business Performance' excludes disposals and certain re-measurements (seebelow) as exclusion of these items provides a clear and consistent presentationof the underlying operating performance of the Group's ongoing business. BG Group uses commodity instruments to manage price exposures associated withits marketing and optimisation activity in the UK and US. This activity enablesthe Group to take advantage of commodity price movements. It is considered moreappropriate to include both unrealised and realised gains and losses arisingfrom the mark-to-market of derivatives associated with this activity in'Business Performance'. Disposals and certain re-measurements BG Group's commercial arrangements for marketing gas include the use oflong-term gas sales contracts. Whilst the activity surrounding these contractsinvolves the physical delivery of gas, certain UK gas sales contracts areclassified as derivatives under the rules of IAS 39 and are required to bemeasured at fair value at the balance sheet date. Unrealised gains and losses onthese contracts reflect the comparison between current market gas prices and theactual prices to be realised under the gas sales contract. BG Group also uses commodity instruments to manage certain price exposures inrespect of optimising the timing of its gas sales associated with contracted UKstorage and pipeline capacity. These instruments are also required to bemeasured at fair value at the balance sheet date under IAS 39. However, IAS 39does not allow the matching of these fair values to the economically hedgedvalue of the related gas in storage (taking account of gas prices based on theforward curve or expected delivery destination and the associated storage andcapacity costs). BG Group also uses financial instruments, including derivatives, to manageforeign exchange and interest rate exposure. These instruments are required tobe recognised at fair value or amortised cost on the balance sheet in accordancewith IAS 39. Most of these instruments have been designated either as hedges offoreign exchange movements associated with the Group's net investments inforeign operations, or as hedges of interest rate risk. Where these instrumentscannot be designated as hedges under IAS 39, unrealised movements in fair valueare recorded in the income statement. Unrealised gains and losses in respect of long-term gas sales contracts andderivatives associated with gas in UK storage and pipeline facilities andinterest rate and foreign exchange exposure in respect of financial instrumentswhich cannot be designated as hedges under IAS 39 are disclosed separately as'disposals and re-measurements'. Realised gains and losses relating to theseinstruments are included in Business Performance. This presentation bestreflects 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. BG Group has also separately identified profits and losses associated with thedisposal of non-current assets, closures and associated impairments, as they areitems which require separate disclosure in order to provide a clearerunderstanding of the results for the period. For a reconciliation between the overall results and Business Performance anddetails of disposals and re-measurements, see the consolidated income statement,page 14 and 15 and note 2 to the preliminary unaudited financial statements,page 22. Joint ventures and associates Under IFRS the results from jointly controlled entities (joint ventures) andassociates, accounted for under the equity method, are required to be presentednet of finance costs and tax on the face of the income statement. Given therelevance of these businesses within BG Group, the results of joint ventures andassociates are presented before interest and tax, and after tax. This approachprovides additional information on the source of BG Group's operating profits.For a reconciliation between operating profit and earnings including andexcluding the results of joint ventures and associates, see Note 3 to thepreliminary unaudited financial statements, page 25. Exchange rates and prices BG Group also discloses certain information, as indicated, at constant US$/UK£exchange rates and upstream prices. The presentation of results in this manneris intended to provide additional information to explain further the underlyingtrends in the business. Net borrowings/funds BG Group provides a reconciliation of net borrowings/funds and an analysis ofthe amounts included within net borrowings/funds as this is an importantliquidity measure for the Group. LEGAL NOTICE 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 2005. BG Group undertakes no obligation to update any forward-lookingstatements. No part of these results constitutes or shall be taken to constitute aninvitation or inducement to invest in BG Group plc or any other entity and mustnot be relied upon in any way in connection with any investment decision. Cautionary note to US investors The United States Securities and Exchange Commission (SEC) permits oil and gascompanies, in their filings with the SEC, to disclose only proved reserves thata company has demonstrated by actual production or conclusive formation tests tobe economically and legally producible under existing economic and operatingconditions. We use certain terms in this presentation such as "probablereserves", "unbooked resources", "risked exploration", and "total reserve/resource base" that the SEC's guidelines strictly prohibit us from including infilings with the SEC. US investors are urged to consider closely the disclosurein our Form 20-F, File No. 1-09337, available from us at BG Group, 100 ThamesValley Park Drive, Reading RG6 1PT, Attention: Company Secretary. You may readand copy this information at the SEC's public reference room, located at 100FStreet NE., Room 1580 Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. This filing is alsoavailable at the internet website maintained by SEC at http://www.sec.gov. CONSOLIDATED INCOME STATEMENT FOURTH QUARTER 2006 2005 restated(i) Business Disposals Total Business Disposals Total Perfor- and re- Result Perfor- and re- Result mance(ii) measure- mance(ii) measure- ments ments (Note 2)(ii) Note 2)(ii) Notes £m £m £m £m £m £m Group revenue 1 831 - 1 831 2 056 - 2 056Other operating income 2 66 191 257 42 (103) (61) Group revenue and other operating income 3 1 897 191 2 088 2 098 (103) 1 995Operating costs (1 192) - (1 192) (1 312) - (1 312)Profits and losses on disposal of non-current assets and impairments 2 - (41) (41) - 17 17 Operating profit/(loss) before share of results from joint ventures andassociates 3 705 150 855 786 (86) 700 Finance income 2, 4 22 15 37 24 (5) 19 Finance costs 2, 4 (23) (13) (36) (27) 9 (18) Share of post-tax results from joint ventures and associates 3 38 - 38 40 - 40 Profit/(loss) before tax 742 152 894 823 (82) 741Taxation 2, 5 (323) (75) (398) (326) 44 (282) Profit for the period 419 77 496 497 (38) 459 Attributable to:BG Group shareholders (earnings) 410 76 486 503 (41) 462Minority interest 9 1 10 (6) 3 (3) 419 77 496 497 (38) 459 Earnings per share - basic 6 12.0p 2.3p 14.3p 14.2p (1.2p) 13.0pEarnings per share - diluted 6 11.9p 2.3p 14.2p 14.2p (1.2p) 13.0p Total operating profit including share of pre-tax operating resultsfrom joint ventures and associates(iii) 3 760 150 910 860 (86) 774 i) 2005 comparatives have been restated on the application of IFRIC 4 and amendments to IAS 39. See Note 1, page 21.ii) See Presentation of Non-GAAP measures, page 12, for an explanation of results excluding disposals and re-measurements and presentation of the results of joint ventures and associates.iii) This measurement is shown by BG Group as it is used as a means of measuring the underlying performance of the business. CONSOLIDATED INCOME STATEMENT FULL YEAR 2006 2005 restated(i) Business Disposals Total Business Disposals Total Perfor- and re- Result Perfor- and re- Result mance(ii) measure- mance(ii) measure- ments ments (Note 2)(ii) Note 2)(ii) Notes £m £m £m £m £m £m Group revenue 7 136 - 7 136 5 612 - 5 612Other operating income 2 134 404 538 52 (240) (188) Group revenue and other operating income 3 7 270 404 7 674 5 664 (240) 5 424Operating costs (4 400) - (4 400) (3 517) - (3 517)Profits and losses on disposal of non-current assets and impairments 2 - (49) (49) - 446 446 Operating profit/(loss) before share of results from joint ventures andassociates 3 2 870 355 3 225 2 147 206 2 353 Finance income 2, 4 104 23 127 75 30 105 Finance costs 2, 4 (80) (22) (102) (97) (15) (112)Share of post-tax results from joint ventures and associates 3 139 - 139 158 - 158 Profit/(loss) before tax 3 033 356 3 389 2 283 221 2 504Taxation 2, 5 (1 348) (120) (1 468) (898) (41) (939) Profit/(loss) for the period 1 685 236 1 921 1 385 180 1 565 Attributable to:BG Group shareholders (earnings) 1 640 236 1 876 1 354 171 1 525Minority interest 45 - 45 31 9 40 1 685 236 1 921 1 385 180 1 565 Earnings per share - basic 6 47.4p 6.8p 54.2p 38.2p 4.9p 43.1pEarnings per share - diluted 6 47.0p 6.8p 53.8p 38.1p 4.8p 42.9p Total operating profit including share of pre-tax operating resultsfrom joint ventures and associates(iii) 3 3 103 355 3 458 2 389 206 2 595 Pence per Pence per ordinary ordinary share £m share £m Dividend per share - declared and paid 7.09 247 3.99 142Dividend per share - final proposed 4.20 143 4.09 144 i) 2005 comparatives have been restated on the application of IFRIC 4 and amendments to IAS 39. See Note 1, page 21.ii) See Presentation of Non-GAAP measures, page 12, for an explanation of results excluding disposals and re-measurements and presentation of the results of joint ventures and associates.iii) This measurement is shown by BG Group as it is used as a means of measuring the underlying performance of the business. CONSOLIDATED BALANCE SHEET FULL YEAR 31 Dec 31 Dec 2006 2005 restated £m £mAssetsNon-current assetsGoodwill 328 342Other intangible assets 694 682Property, plant and equipment 6 064 5 830Investments 1 086 1 129Deferred tax assets 74 91Trade and other receivables 49 52Commodity contracts and other derivative financialinstruments 273 84 8 568 8 210Current assetsInventories 247 185Trade and other receivables 1 854 1 674Commodity contracts and other derivative financialinstruments 575 10Cash and cash equivalents 1 463 1 516 4 139 3 385Assets classified as held for sale 85 10Total assets 12 792 11 605 LiabilitiesCurrent liabilitiesBorrowings (103) (81)Trade and other payables (1 618) (1 308)Current tax liabilities (357) (409)Commodity contracts and other derivative financialinstruments (741) (711) (2 819) (2 509)Non-current liabilitiesBorrowings (1 559) (1 497)Trade and other payables (21) (68)Commodity contracts and other derivative financialinstruments (90) (2)Deferred income tax liabilities (1 153) (733)Retirement benefit obligations (167) (154)Provisions for other liabilities and charges (387) (372) (3 377) (2 826)Liabilities associated with assets classified as held forsale (34) (3)Total liabilities (6 230) (5 338) Net assets 6 562 6 267 Attributable to:BG Group equity shareholders 6 460 6 169Minority interest 102 98Total equity 6 562 6 267 CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE Fourth Quarter Full Year 2006 2005 2006 2005 restated restated £m £m £m £m 496 459 Profit for the year 1 921 1 565 43 4 Hedge adjustments net of tax 127 (70) (163) 138 Currency translation adjustments (575) 526 Net gains/(losses) recognised (120) 142 directly in equity (448) 456 Total recognised income for the 376 317 year 1 473 2 021 Attributable to: 9 1 Minority interests 39 54 367 316 Shareholders 1 434 1 967 376 317 1 473 2 021 - - Effect of adoption of IFRIC 4 - (8) - - Effect of adoption of IAS 39 - (238) 376 317 1 473 1 775 CONSOLIDATED CASH FLOW STATEMENT Fourth Quarter Full Year 2006 2005 2006 2005 restated restated £m £m £m £m Cash flows from operating activities 894 741 Profit before taxation 3 389 2 504 Share of post-tax results from joint (38) (40) ventures and associates (139) (158) Depreciation of property, plant and equipment and amortisation of intangible 160 146 assets 608 503 Fair value movements in commodity (230) 116 contracts (456) 253 Profit and losses on disposal of 41 (17) non-current assets and impairments 49 (446) Unsuccessful exploration expenditure 36 38 written off 113 70 5 7 (Decrease)/increase in provisions 5 7 (37) (19) Finance income (127) (105) 36 18 Finance costs 102 112 12 9 Share-based payments 30 20 (75) (290) (Increase)/decrease in working capital (214) (251) 804 709 Cash generated by operations 3 360 2 509 (227) (340) Income taxes paid (979) (883) 577 369 Net cash inflow from operating activities 2 381 1 626 Cash flows from investing activities Dividends received from joint ventures 66 33 and associates 193 93 Proceeds from disposal of subsidiary 4 (93) undertakings and investments 9 (67) Proceeds from disposal of property, plant 49 1 and equipment and intangible assets 49 950 Purchase of property, plant and equipment (403) (171) and intangible assets (1 313) (1 064) Loans (to)/from joint ventures and (13) 59 associates (66) 65 Purchase of subsidiary undertakings and (47) (26) investments(i) (67) (39) Net cash (outflow) from investing (344) (197) activities (1 195) (62) Cash flows from financing activities 9 3 Net interest received/(paid)(ii) 14 (25) (3) - Dividends paid (246) (142) (18) (6) Dividends paid to minority (36) (29) 109 78 Net proceeds from issue of new borrowings 214 334 (51) (42) Repayment of borrowings (192) (555) 12 6 Issue of shares 25 34 - - Issue of shares to minority shareholder 1 - (14) (33) Purchase of own shares (972) (37) Net cash (outflow)/inflow from financing 44 6 activities (1 192) (420) Net increase/(decrease) in cash and cash 277 178 equivalents (6) 1 144 Cash and cash equivalents at beginning of 1 191 1 335 period 1 516 340 (5) 3 Effect of foreign exchange rate changes (47) 32 Cash and cash equivalents at end of 1 463 1 516 period(iii) 1 463 1 516 i) Includes cash acquired of nil (2005 £18 million) on the purchase of a subsidiary undertaking.ii) Includes capitalised interest for the fourth quarter of £11 million (2005 £11 million), and for the full year of £54 million (2005 £30 million).iii) Cash and cash equivalents comprise cash and short-term liquid investments that are readily convertible to cash. RECONCILIATION OF NET BORROWINGS/FUNDS(i) - FULL YEAR £mNet funds as at 31 December 2005 as reported 253Adoption of IFRIC 4 (See Note 1) (283) Net borrowings as at 31 December 2005 restated(i) (ii) (30) Net decrease in cash and cash equivalents (6)Cash inflow from changes in gross borrowings (22)Transferred to assets held for sale 11Inception of finance leases (199)Foreign exchange and other re-measurements 143 Net borrowings as at 31 December 2006(i) (ii) (103) Net borrowings attributable to Comgas were £242 million (31 December 2005 £189million). As at 31 December 2006, 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 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/funds are defined on page 34.ii) Net borrowings/funds comprise: As at 31 Dec 2006 31 Dec 2005 £m £mAmounts receivable/(due) within one yearCash and cash equivalents 1 463 1 516Overdrafts, loans and finance leases (103) (81)Derivative financial instruments(iii) - (50) 1 360 1 385Amounts receivable/(due) after more than one yearLoans and finance leases (1 559) (1 497)Derivative financial instruments(iii) 96 82 (1 463) (1 415) Net borrowings (103) (30) iii) These items are included within commodity contracts and other derivative financial instrument balances on the balance sheet. RECONCILIATION OF NET BORROWINGS - FULL YEAR (Continued) LIQUIDITY AND CAPITAL RESOURCES All the information below is as at 31 December 2006. The Group's principal borrowing entities are: BG Energy Holdings Limited (BGEH),including wholly-owned subsidiary undertakings, the majority of whose borrowingsare guaranteed by BG Energy Holdings Limited (collectively BGEH), and Comgas andGujarat Gas, which conduct their borrowing activities on a stand-alone basis. BGEH had aggregate committed multicurrency revolving borrowing facilities of$1.04 billion, of which $520 million expires in 2007 and $520 million expires in2009. In addition, BGEH had a note purchase facility of $65 million expiring inOctober 2007. There are no restrictions on the application of funds under thesefacilities, which were undrawn. BGEH is also lessee under a number of LNG ship charters which constitute financeleases. The total unutilised facility under these finance leases amounted to$122.6 million, such amounts being available exclusively to fund theconstruction of certain LNG ships. BGEH had a $1.0 billion US Commercial Paper Programme, which was unutilised, anda $1.0 billion Eurocommercial Paper Programme, of which $961.4 million wasunutilised. BGEH also had a $2.0 billion Euro Medium Term Note Programme, of which $1.477 billion was unutilised. In addition, BGEH had the following uncommitted borrowing facilities -multicurrency facilities of £581 million, overdraft facilities of £60 million and credit facilities of $40 million, all of which were unutilised. Comgas had committed borrowing facilities of Brazilian Reals (BRL) 1 954.1million, of which BRL 760.0 million was unutilised, and uncommitted borrowingfacilities of BRL 577.6 million, all of which were unutilised. Gujarat Gas Company Limited had committed borrowing facilities of Indian Rupees(INR) 780 million, all of which were utilised. Notes 1. Basis of preparation These financial statements are the unaudited preliminary consolidated financialstatements of BG Group plc for both the quarter ended and the full year ended 31December 2006. The financial information does not comprise statutory accountswithin the meaning of Section 240 of the Companies Act 1985, and should be readin conjunction with the Annual Report and Accounts for the year ended 31December 2005, as they provide an update of previously reported information. Thelatest statutory accounts delivered to the registrar were for the year ended 31December 2005 which were audited by BG Group's statutory auditorsPricewaterhouseCoopers LLP. These financial statements have been prepared inaccordance with the requirements of the UK Listing Rules and the accountingpolicies set out in the 2005 Annual Report and Accounts with the exception ofthe adoption of new accounting standards as set out below. The preparation of the 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 preliminary financial statements. If in the future such estimates andassumptions, which are based on management's best judgment at the date of thefinancial statements, deviate from the actual circumstances, the originalestimates and assumptions will be modified as appropriate in the year in whichthe circumstances change. IFRIC Interpretation 4 'Determining whether an Arrangement contains a Lease' IFRIC 4 requires companies to determine whether they have any arrangements whichare or contain leases based on an assessment of whether specific assets arerequired to fulfil each arrangement or whether each arrangement conveys a rightof use of the asset. If an arrangement contains a lease, the requirements ofIAS 17, 'Leases', should be applied to the lease element of the arrangement. BG Group has applied IFRIC 4 from 1 January 2006 and has concluded that thecontract for the provision of capacity at Lake Charles contains a financelease. Comparative information has been amended to reflect this arrangement.As at 1 January 2006, borrowings have been increased by £283 million, property, plant and equipment has increased by £263 million, deferred tax assets have increased by £7 million and retained earnings have decreased by £13 million to reflect this arrangement; comparative information has also been restated. The effect of this restatement on 2005 operating profit is a £2 million increase in the quarter and a £9 million increase in the full year and an increase in finance costs of £4 million in the quarter and £14 million in the full year. The tax effect was a £1 million decrease in the quarter and £2 million decrease in the full year, resulting in a £1 million decrease in earnings in the quarter and a £3 million decrease in the full year. IAS 39 'Financial Guarantee Contracts and Credit Insurance' In August 2005, the IASB issued an amendment to IAS 39 which covers theaccounting required for financial guarantee contracts that provide payment to bemade if a debtor fails to make a payment when due. These contracts should beinitially measured at fair value and subsequently re-measured using the higherof the provision required by IAS 37 'Provisions, Contingent Liabilities andContingent Assets' or the initial amount less cumulative amortisation inaccordance with IAS 18, 'Revenue'. This amendment is mandatory for periodsbeginning on or after 1 January 2006 and BG Group has adopted it from that date.As at 1 January 2006, investments have been increased by £5 million andprovisions for other liabilities and charges have been increased by £5 million;comparative information has also been restated. The effect of this restatementon 2005 operating profit is nil for both quarter and full year. There is adecrease of £1 million in finance costs in the quarter and £2 million for thefull year and a £1 million decrease to the pre-tax share of operating results ofjoint ventures and associates in the quarter and £2 million for the full year. 2. Disposals and re-measurements Fourth Quarter Full Year 2006 2005 2006 2005 £m £m £m £m Revenue and other operating income - 191 (103) re-measurements of commodity contracts 404 (240) Profits and losses on disposal of non-current (41) 17 assets and impairments (49) 446 Net finance income/(costs) - re-measurements of 2 4 financial instruments 1 15 (75) 44 Taxation (120) (41) (1) (3) Minority interest - (9) 76 (41) Impact on earnings 236 171 Fourth quarter and full year: Revenue and other operating income Re-measurements included within revenue and other operating income amount to acredit of £191 million for the quarter (2005 £103 million charge), of which £167 million (2005 £111 million charge) represents non-cash mark-to-market movements on certain long-term UK gas contracts. For the full year, a credit of £404 million in respect of re-measurements is included within revenue and other operating income (2005 £240 million charge), of which £366 million represents non-cash mark-to-market movements on certain long-term UK gas contracts (2005 £224 million charge). Whilst the activity surrounding these contracts involves the physical delivery of gas, the contracts fall within the scope of IAS 39 and meet the definition of a derivative instrument. Fourth quarter and full year: Net finance costs Re-measurements presented in net finance costs relate primarily to certainderivatives used to hedge foreign exchange and interest rate risk which have notbeen designated as hedges under IAS 39, partly offset by foreign exchangemovements on certain borrowings in a subsidiary. In 2005, re-measurementsincluded the retranslation of MetroGAS US Dollar and Euro borrowings which couldnot be designated as hedges under IAS 39. Following the de-consolidation ofMetroGAS and GASA in December 2005, these companies made no contribution to theresults of BG Group in 2006. 2006 fourth quarter and full year: Disposals of non-current assets During the second quarter, BG Group disposed of its Indian telecoms businesses.This resulted in a loss on disposal of £8 million. No tax arose on the disposal. During the fourth quarter, BG Group disposed of its 37.5% interest in NileValley Gas Company which resulted in a £1 million profit on disposal. No taxarose on the disposal. During the fourth quarter, BG Group sold two LNG ships, the Methane Arctic andMethane Polar. This disposal resulted in a £35 million profit on disposal. Notax arose on the disposal. During the fourth quarter, BG Group committed to a plan to sell its Mauritaniabusiness and accordingly reclassified this business as held for sale. As aresult, it was revalued to the lower of its carrying amount and fair value lesscosts to sell. This resulted in a pre-tax charge to the income statement of £67million (post-tax charge of £49 million). BG Group announced the sale of thisbusiness in January 2007. During the fourth quarter, BG Group committed to a plan to dispose of Microgenand accordingly reclassified the business as held for sale. As a result, it wasrevalued to the lower of its carrying amount and fair value less costs to sellresulting in a pre-tax charge to the income statement of £10 million and post-tax charge of £7 million. 2005 fourth quarter and full year: Disposal of non-current assets 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. 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 million post-tax profit on the sale. 3. Segmental analysis Group revenue and other operating Business Disposals Total Business Disposals Totalincome Performance and Performance and re-measurements re-measurementsFourth Quarter 2006 2006 2006 2005 2005 2005 £m £m £m £m £m £m Exploration and Production 1 001 191 1 192 1 093 (118) 975Liquefied Natural Gas 675 - 675 771 15 786Transmission and Distribution 226 - 226 219 - 219Power Generation 64 - 64 59 - 59Other activities 1 - 1 5 - 5Less: intra-group sales (70) - (70) (49) - (49) 1 897 191 2 088 2 098 (103) 1 995 Group revenue and other operating income Business Disposals Total Business Disposals Total Performance and Performance and re-measurements re-measurementsFull Year 2006 2006 2006 2005 2005 2005 £m £m £m £m £m £m Exploration and Production 3 928 404 4 332 3 074 (239) 2 835Liquefied Natural Gas 2 442 - 2 442 1 631 (1) 1 630Transmission and Distribution 877 - 877 808 - 808Power Generation 248 - 248 227 - 227Other activities 8 - 8 15 - 15Less: intra-group sales (233) - (233) (91) - (91) 7 270 404 7 674 5 664 (240) 5 424 3. Segmental analysis (continued) Business Disposals and Total Performance(i) re-measurements(i)Fourth Quarter 2006 2005 2006 2005 2006 2005 £m £m £m £m £m £mTotal operating profit before share of results from joint ventures and associates Exploration and Production 575 729 124 (117) 699 612Liquefied Natural Gas 90 45 35 15 125 60Transmission and Distribution 44 34 1 48 45 82Power Generation 7 8 - - 7 8Other activities (11) (30) (10) (32) (21) (62) 705 786 150 (86) 855 700Pre-tax share of operatingresults of joint ventures and associates(ii) Liquefied Natural Gas 25 36 - - 25 36Transmission and Distribution 9 11 - - 9 11Power Generation 21 27 - - 21 27 55 74 - - 55 74Total operating profit including share of results from joint ventures and associates Exploration and Production 575 729 124 (117) 699 612Liquefied Natural Gas 115 81 35 15 150 96Transmission and Distribution 53 45 1 48 54 93Power Generation 28 35 - - 28 35Other activities (11) (30) (10) (32) (21) (62) 760 860 150 (86) 910 774 For notes i) to ii) see footnotes on page 26 3. Segmental analysis (continued) Business Disposals and Total Performance(i) re-measurements(i)Full Year 2006 2005 2006 2005 2006 2005 £m £m £m £m £m £m Total operating profit beforeshare of results from jointventures and associates Exploration and Production 2 457 1 942 337 178 2 794 2 120Liquefied Natural Gas 248 70 35 (1) 283 69Transmission and Distribution 190 169 1 61 191 230Power Generation 18 24 - - 18 24Other activities (43) (58) (18) (32) (61) (90) 2 870 2 147 355 206 3 225 2 353 Pre-tax share of operating results of joint ventures and associates(ii) Liquefied Natural Gas 104 111 - - 104 111Transmission and Distribution 41 42 - - 41 42Power Generation 88 89 - - 88 89 233 242 - - 233 242 Total operating profit including share of results from joint ventures and associates Exploration and Production 2 457 1 942 337 178 2 794 2 120Liquefied Natural Gas 352 181 35 (1) 387 180Transmission and Distribution 231 211 1 61 232 272Power Generation 106 113 - - 106 113Other activities (43) (58) (18) (32) (61) (90) 3 103 2 389 355 206 3 458 2 595 i) Business Performance excludes disposals and certain re-measurements. See Note 2, page 22 and Presentation of Non-GAAP measures, page 12.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 £38 million (2005 £40 million), and for the full year is £139 million (2005 £158 million). 3. Segmental analysis (continued) Total Result Operating profit Share of results Total before share of in joint ventures Result results from and associates joint ventures and associates Fourth Quarter 2006 2005 2006 2005 2006 2005 £m £m £m £m £m £m Exploration and Production 699 612 - - 699 612Liquefied Natural Gas 125 60 16 27 141 87Transmission and Distribution 45 82 6 4 51 86Power Generation 7 8 16 9 23 17Other activities (21) (62) - - (21) (62) 855 700 38 40 893 740 Net finance income/(costs) 1 1Taxation (398) (282) Profit for the period 496 459 Total Result Operating profit Share of results Total before share of in joint ventures results from and associates Result joint ventures and associates Full Year 2006 2005 2006 2005 2006 2005 £m £m £m £m £m £m Exploration and Production 2 794 2 120 - - 2 794 2 120Liquefied Natural Gas 283 69 55 84 338 153Transmission and Distribution 191 230 25 26 216 256Power Generation 18 24 59 48 77 72Other activities (61) (90) - - (61) (90) 3 225 2 353 139 158 3 364 2 511 Net finance income/(costs) 25 (7)Taxation (1 468) (939) Profit for the period 1 921 1 565 4. Net finance costs Fourth Quarter Full Year 2006 2005 2006 2005 £m £m £m £m (14) (22) Interest payable (61) (80) (15) (11) Interest on obligations under finance leases (58) (33) 11 11 Interest capitalised 54 30 (5) (5) Unwinding of discount on provisions(i) (15) (14) (13) 9 Disposals and re-measurements (Note 2) (22) (15) (36) (18) Finance costs (102) (112) 22 24 Interest receivable 104 75 15 (5) Disposals and re-measurements (Note 2) 23 30 37 19 Finance income 127 105 1 1 Net finance income/(costs)(ii) 25 (7) i) Relates to the unwinding of the discount on provisions in respect of decommissioning and pension obligations, included in the income statement as a financial item within net finance costs.ii) Excludes Group share of net finance costs from joint ventures and associates for the quarter of £16 million (2005 £14 million), and for the full year of £67 million (2005 £43 million). 5. Taxation The taxation charge for the fourth quarter before disposals and re-measurementswas £323 million (2005 £326 million) and the taxation charge including disposals and re-measurements was £398 million (2005 £282 million). For the full year, the taxation charge before disposals and re-measurements was£1 348 million (2005 £898 million) and the taxation charge including disposalsand re-measurements was £1 468 million (2005 £939 million), including £725million (2005 £669 million) in respect of overseas tax. The Group share of taxation from joint ventures and associates for the fourthquarter was £1 million (2005 £20 million) and for the full year was £27 million (2005 £41 million). 6. Earnings per ordinary share Fourth Quarter Full Year 2006 2005 2006 2005 £m Pence £m Pence £m Pence £m Pence per per per per share share share share 486 14.3 462 13.0 Earnings 1 876 54.2 1 525 43.1 Re-measurements (after tax and (96) (2.8) 58 1.6 minority interest) (264) (7.6) 138 3.9 Profits and losses on disposals and impairments (after 20 0.5 (17) (0.4) tax) 28 0.8 (309) (8.8) Earnings - excluding disposals and 410 12.0 503 14.2 re-measurements 1 640 47.4 1 354 38.2 Basic earnings per share calculations in 2006 are based on shares in issue of 3411 million for the quarter and 3 464 million for the full year. 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 3 432 million for the quarter and 3 488 million for the full year, being theweighted average number of ordinary shares in issue during the period asadjusted for share options. 7. Results Presentation FULL YEAR Business Disposals Total Performance and re- Result measurements(i) 2006 2005 2006 2005 2006 2005 £m £m £m £m £m £m Operating profit before disposal of non-current assets 2 870 2 147 404 (240) 3 274 1 907 Profits and losses on disposal of non-current assets and impairments(ii) - - (49) 446 (49) 446 Operating profit before share of results from joint ventures and associates 2 870 2 147 355 206 3 225 2 353 Pre-tax share of operating results of joint ventures and associates 233 242 - - 233 242 Total operating profit 3 103 2 389 355 206 3 458 2 595 Net finance costs Finance income 104 75 23 30 127 105 Finance costs (80) (97) (22) (15) (102) (112) Share of joint ventures and associates (67) (43) - - (67) (43) (43) (65) 1 15 (42) (50) Taxation Taxation(iii) (1 348) (898) (120) (41) (1 468) (939) Share of joint ventures and associates (27) (41) - - (27) (41) (1 375) (939) (120) (41) (1 495) (980) Profit for the period 1 685 1 385 236 180 1 921 1 565 Profit attributable to: Shareholders (earnings) 1 640 1 354 236 171 1 876 1 525 Minority interest 45 31 - 9 45 40 1 685 1 385 236 180 1 921 1 565 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 12.ii) 2005 includes £416 million on disposal of BG Group's interest in the North Caspian PSA.iii) 2006 includes prior period taxation adjustments following the increase in North Sea taxation. 8. Capital investment: geographical analysis Fourth Quarter Full Year 2006 2005 2006 2005 £m £m £m £m 159 141 Europe and Central Asia 530 554 46 57 South America 199 160 43 19 Asia Pacific 127 80 175 94 North America and the Caribbean 654 482 125 97 Mediterranean Basin and Africa 337 319 548 408 1 847 1 595 9. Quarterly information: earnings and earnings per share 2006 2005 2006 pence 2005 £m £m pence First quarter - including disposals and re-measurements 578 259 16.4 7.3 - excluding disposals and re-measurements 563 269 16.0 7.6Second quarter - including disposals and re-measurements 418 484 12.0 13.7 - excluding disposals and re-measurements 325 275 9.3 7.8Third quarter - including disposals and re-measurements 394 320 11.5 9.0 - excluding disposals and re-measurements 342 307 10.0 8.6Fourth quarter - including disposals and re-measurements 486 462 14.3 13.0 - excluding disposals and re-measurements 410 503 12.0 14.2Full year - including disposals and re-measurements 1 876 1 525 54.2 43.1 - excluding disposals and re-measurements 1 640 1 354 47.4 38.2 Supplementary information: Operating and financial data Fourth Quarter Third Quarter Full Year 2006 2005 2006 2006 2005 Production volumes (mmboe) 5.9 5.5 4.3 - oil 21.1 19.3 8.7 7.8 6.9 - liquids 30.6 29.7 42.6(i) 41.0 39.4 - gas 167.5(i) 134.8 57.2 54.3 50.6 - total 219.2 183.8 Production volumes (boepd in thousands) 64 60 47 - oil 58 53 95 85 75 - liquids 84 82 463 445 428 - gas 459 369 622 590 550 - total 601 504 LNG cargoes 13 11 14 - Lake Charles, USA 51 36 14 14 16 - Elba Island, USA 53 50 23 13 13 - Europe, Asia and other USA 78 31 50 38 43 - total 182 117 £31.57 £33.36 £38.48 Average realised oil price per barrel £35.85 £30.60($60.13) ($58.55) ($71.43) ($65.54) ($55.96) £24.36 £26.87 £31.00 Average realised liquids price per barrel £28.82 £22.84($46.40) ($47.17) ($57.56) ($52.68) ($41.77) 34.41p 38.89p 25.50p Average realised UK gas price per produced therm 31.89p 27.30p 16.69p 21.43p 16.83p Average realised International gas price per produced 17.23p 17.27p therm 21.28p 26.11p 18.52p Average realised gas price per produced therm 20.68p 20.15p £1.51 £1.09 £1.45 Lifting costs per boe £1.34 £1.19 ($2.88) ($1.92) ($2.69) ($2.45) ($2.17) £2.53 £2.19 £2.36 Operating expenditure per boe £2.29 £2.21 ($4.82) ($3.85) ($4.39) ($4.18) ($4.04) 201 188 229 Development expenditure (£m) 721 683 Gross exploration expenditure (£m) 129 89 65 - capitalised expenditure 396 225 51 42 38 - other expenditure 159 111 180 131 103 - gross expenditure 555 336 i) Includes fuel gas for the fourth quarter of 1.05 mmboe and 4.25 mmboe for the full year. 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. Additional information: Exploration and Production - reserves/resource data As at 31 Dec 31 Dec 2006 2005 mmboe mmboe Proved 2 149 2 184Probable 1 383 1 236Unbooked resources 1 772 1 211Risked exploration 2 713 2 440Total reserve/resource base 8 017 7 071 Total additions and revisions to proved reserves during the year were 184.2mmboe. This includes revisions due to new data and improved reservoirperformance (114.9 mmboe), new developments and sales agreements (125.7 mmboe)and the net effect of price movements (56.4 mmboe decrease). Proved Reserve Replacement Rate (RRR): The three/one year average proved reserve replacement rate is the total netproved reserves changes over the three/one year period including purchases andsales (excluding production) divided by the total net production for that periodcalculated at year end prices. For information: 3 year 1 year Underlying performance(i) 118% 110%SEC data(ii) 108% 84% Finding & Development Cost (F&D): The three year average unit finding & development cost is calculated by dividingthe total exploration, development and unproved acquisition costs incurred overthe period by the total changes in net proved reserves (excluding purchases,sales and production) for that period at year end. For information: 3 year 1 year Underlying performance(i) $10.5/boe $9.7/boeSEC data(ii) $11.5/boe $12.7/boe (i) Underlying performance includes reserves revisions and new developments and is calculated at constant prices.(ii) SEC data includes all reserves revisions and is calculated at year end prices. 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 Gasm millionmmboe million barrels of oil equivalentmmbtu million british thermal unitsmmcfd million cubic feet per daymmcmd million cubic metres per daymmscfd million standard cubic feet per daymmscm million standard cubic metresmmscmd million standard cubic metres per dayMoU Memorandum of understandingmtpa million tonnes per annumMW megawattNet Comprise cash, current asset investments, finance leases, currencyborrowings/ and interest rate derivative financial instruments and short- andfunds long-term borrowingsNGL Natural gas liquidsPSA production sharing 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 3951e-mail: [email protected] e-mail: [email protected] Financial Calendar Ex-dividend date for 2006 final dividend 11 April 2007 Record date for 2006 final dividend 13 April 2007 Announcement of 2007 first quarter results 4 May 2007 Payment of 2006 final dividend: Shareholders 25 May 2007 American depositary receipt holders 4 June 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:
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