9th Feb 2006 07:01
BG GROUP plc09 February 2006 BG GROUP PLC2005 FOURTH QUARTER AND FULL YEAR RESULTS HIGHLIGHTS ---------------------------------------------------------------------------------- Fourth Quarter Full Year 2005 2004 Business Performance(i) 2005 2004 £m £m £m £m Revenue and other operating 2 098 1 161 +81% income 5 664 4 063 +39% Total operating profit including share of pre-tax operating results from joint 858 435 +97% ventures and associates 2 380 1 513 +57% 504 236 +114% Earnings 1 357 829 +64% 14.2p 6.7p +112% Earnings per share 38.3p 23.5p +63% 4.09p 2.08p +97% Dividend per share 6.00p 3.81p +57% ---------------------------------------------------------------------------------- Total results for the period (including disposals and re-measurements) Revenue and other operating 1 995 1 161 +72% income 5 424 4 063 +33% Operating profit before share of results from joint ventures 698 388 +80% and associates 2 344 1 407 +67% Total operating profit including share of pre-tax operating results from joint 772 435 +77% ventures and associates 2 586 1 600 +62% 463 236 +96% Earnings 1 528 886 +72% 13.0p 6.7p +94% Earnings per share 43.2p 25.1p +72%---------------------------------------------------------------------------------- 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 12 and Results Presentation, page 3. BG Group plc 1 PERFORMANCE HIGHLIGHTS BG Group's Chief Executive, Frank Chapman said: "BG Group has increased full year earnings by 64%, driven by strong underlyingvolume growth. "During the course of 2005 we brought a number of material new projects intooperation. These projects add to an already substantial asset base which isdistinctive in terms of its production life and provides a firm base for BG wellbeyond 2010. In addition, we are working on significant expansions and newopportunities, combining to make the outlook for future growth very positive. "As a result of this step change in our business, the Board is recommending a57% increase in the full year dividend to 6 pence per share". • Earnings up by 114% for the quarter and 64% for the full year. • Full year dividend increased by 57% to 6.0 pence per share. • E&P production increased by 21% for the quarter and 10% for the full year to 184 mmboe. • LNG operating profit increased by 276% for the quarter and 87% for the full year. • T&D operating profit increased by 45% for the quarter and 43% for the full year. • Atlantic LNG Train 4 in Trinidad, commenced production. • Entry into Nigeria and Libya upstream. • Entered into MoU to purchase 2 mtpa LNG from Brass, Nigeria. • Three year average unit finding and development cost(i) was $7.07/boe. • Three year average proved reserve replacement rate was 152%. The one year proved reserve replacement rate was 120% at year end prices and 174% on an underlying basis. (ii) • Three exploration discoveries in the fourth quarter and 14 for the full year. • New exploration licences in Brazil, Canada, Egypt, India, Libya, Norway and the UK. i) and ii) See page 34 for an explanation of how these ratios are calculated. BG Group plc 2 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 included in Business Performance discussed on pages 4 to 11. Thetables below set out the amounts related to joint ventures and associates,re-measurements under IAS 39 and profits on disposal and impairment ofnon-current assets and businesses. -------------------------------------------------------------------------------- Fourth Quarter Full Year 2005 2004 2005 2004 £m £m £m £m Operating profit for the period before share of results from joint 698 388 ventures and associates 2 344 1 407 Share of pre-tax operating results from joint ventures and 74 47 associates 242 193------- ------- ------- ------- Operating profit for the period including share of pre-tax results from joint ventures and 772 435 associates 2 586 1 600------- ------- ------- ------- Disposals and re-measurements: 103 - Re-measurements - IAS 39(i) 240 -------- ------- ------- ------- Profits and losses on disposals (17) - and impairments (446) (87)------- ------- ------- ------- Business Performance - total 858 435 operating profit for the period 2 380 1 513-------------------------------------------------------------------------------- Fourth Quarter Full Year 2005 2004 2005 2004 £m £m £m £m Earnings for the period - including disposals and 463 236 re-measurements 1 528 886 Disposals and re-measurements - 86 - before finance costs and tax (206) (87) Disposals and re-measurements - (4) - finance costs (15) - Tax and minority interest on disposals and re-measurements (41) - Earnings - excluding disposals 50 30------- ------- ------- ------- 504 236 and re-measurements 1 357 829-------------------------------------------------------------------------------- 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 12. BG Group plc 3 BUSINESS REVIEW The results discussed in this Business Review (pages 4 to 11) relate to BGGroup's performance excluding disposals and re-measurements. For the impact anda description of these items, see the consolidated income statement (pages 14and 15) and Note 2 of the accounts (page 22). Results at constant US$/UK£exchange rates and upstream prices are also quoted. See Presentation of Non-GAAPmeasures (page 12) for an explanation of these metrics. GROUP -------------------------------------------------------------------------------- Fourth Quarter Business Performance Full Year 2005 2004 2005 2004 £m £m £m £m Revenue and other operating 2 098 1 161 +81% income 5 664 4 063 +39% Total operating profit including share of pre-tax results from joint ventures and associates ------- ------ ------- ------ 729 360 +103% Exploration and Production 1 942 1 189 +63% 79 21 +276% Liquefied Natural Gas 172 92 +87% 45 31 +45% Transmission and 211 148 +43% Distribution 35 34 +3% Power Generation 113 116 -3% (30) (11) +173% Other activities (58) (32) +81%------- ------ ------- ------ 858 435 +97% 2 380 1 513 +57% (13) (20) -35% Net finance costs(i) (51) (67) -24% (347) (177) +96% Taxation(ii) (941) (589) +60% 504 236 +114% Earnings 1 357 829 +64%14.2p 6.7p +112% Earnings per share 38.3p 23.5p +63% 408 509 -20% Capital investment 1 516 1 894 -20% -------------------------------------------------------------------------------- Fourth quarter Total operating profit increased by 97% (£423 million) to £858 millionreflecting E&P volume growth of 21%, higher prices and strong organic growth inthe LNG and T&D segments. Net finance costs were £7 million lower due to reduced average net debt levels.The effective tax rate (including BG Group share of tax attributable to jointventures and associates) was unchanged at 40%. The recent increase in North Seataxation is expected to add approximately 4% to the Group's effective rate in2006. The impact of the North Sea tax on the Group's tax rate will varyaccording to the level of profit in the North Sea but is expected to diminishover time as more of the Group's profits come from outside the UK. In additionthere will be a one-off adjustment in 2006 to reflect the increased North Seatax on opening deferred tax balances, reflecting a credit of £61 million torestate the deferred tax asset associated with mark-to-market balances and acharge of £38 million for other deferred tax balances.Earnings rose by 114% due to strong operating performances, higher prices andlower finance costs. i) Includes Group share of net finance costs from joint ventures and associates for the quarter of £13 million (2004 £8 million) and for the full year of £41 million (2004 £34 million).ii) Includes Group share of taxation from joint ventures and associates for the quarter of £20 million (2004 £6 million) and for the full year of £41 million (2004 £34 million). BG Group plc 4 Cash generated by operations increased by £268 million to £703 million primarilydue to the increase in operating profit, partially offset by increased workingcapital associated with higher volumes and commodity prices. Capital investment of £408 million comprised continuing investment in Europe(£120 million), Mediterranean Basin and Africa (£95 million), North America andthe Caribbean (£94 million), South America (£57 million) and Asia and MiddleEast (£42 million). Full year Total operating profit increased by 57% to £2 380 million reflecting higher E&Pvolumes and margins together with strong growth from the LNG and T&D segments. Net finance costs were £16 million lower primarily due to reduced average netdebt levels and higher investment income following the receipt of cash proceedsfrom the sale of the Group's interest in the North Caspian Sea PSA. Theeffective tax rate (including BG Group share of tax attributable to jointventure and associates) was 40%. Earnings for the full year increased by 64% (£528 million) to £1 357 million. Capital investment of £1 516 million included £29 million for the acquisition ofthe remaining 50% of Brindisi LNG SpA in Italy and continuing investment inEurope (£418 million), North America and the Caribbean (£403 million),Mediterranean Basin and Africa (£312 million), Asia and Middle East(£194 million) and South America (£160 million). Cash generated by operations increased by £907 million to £2 489 millionprimarily due to higher operating profit. As at 31 December 2005, net funds were£253 million and now exclude net debt attributable to MetroGAS which wasdeconsolidated in December 2005. On 8 November 2005, the Group announced a sharebuy back of up to £1 billion of ordinary shares. In considering the dividend level, the Board takes account of the outlook forearnings growth, cash flow generation and financial gearing. The Group's cashflows are becoming more substantial and durable as a number of material, longerlife assets come into operation. Given this strong financial position andoutlook the Board believes it is now appropriate to rebase the dividend. TheBoard recommends a final dividend of 4.09 pence per share bringing the full yeardividend to 6.00 pence per share, an increase of 57% compared with last year. Following the rebasing of the dividend, it is the intention of the Board tocontinue to increase the dividend in line with underlying growth in earnings. BG Group plc 5 EXPLORATION AND PRODUCTION Business Performance Fourth Quarter Full Year 2005 2004 2005 2004 £m £m £m £m 54.3 45.0 +21% Production volumes (mmboe) 183.8 166.8 +10% Revenue and other operating 1 093 650 +68% income 3 074 2 148 +43% 729 360 +103% Total operating profit 1 942 1 189 +63% 290 420 -31% Capital investment 935 1 380 -32% Supplementary operating and financial data is given on page 33. Fourth quarter E&P total operating profit increased by 103% to £729 million due primarily tohigher prices and volumes partially offset by the cost of increased explorationactivity. At constant US$/UK£ exchange rates and prices, total E&P operatingprofit increased by 15%. Production volumes increased by 21%, primarily driven by West Delta Deep Marine(WDDM) in Egypt following the early start up of Egyptian LNG Trains 1 and 2. TheGroup's average realised UK gas price per produced therm was 38.9 pence as shortterm prices rose sharply. Average international gas prices were 21.4 pence perproduced therm reflecting the benefit of new production into high value marketsand higher international commodity prices. The exploration charge of £80 million is £21 million higher reflecting theplanned increase in exploration activities across the Group. Capital investment of £290 million included expenditure in the UK (£85 million),Egypt (£34 million) and Mauritania (£20 million). Full year E&P operating profit increased by 63% to £1 942 million primarily due to the 10%increase in production volumes and higher prices, partially offset by a higherexploration charge. The increase in production was primarily due to higher volumes from WDDM andincreased liquids exports from the Karachaganak field in Kazakhstan. Unit operating expenditure was up 20 pence to £2.21 ($4.04) per boe, principallydue to the impact of higher upstream prices on input costs, tariffs androyalties. Capital investment of £935 million includes expenditure of £277 million in theUK, including £81 million on the Buzzard field, and expenditure in WDDM in Egyptof £161 million. BG Group plc 6 Fourth quarter business highlights In the fourth quarter, three discoveries were made in the UK (2) and Mauritania(1). On 2 December, BG Group reached agreement with ONGC to operate jointly threeoffshore deepwater exploration blocks on the east coast of India. Subject toagreeing farm-in arrangements and Government approval, BG Group and ONGC willeach own a 50% participating interest in these blocks. On December 8, BG Group signed concession agreements for the three blocksawarded in October's Libyan licensing round. BG Group was successful in the 2005 Norwegian licensing round in December. Theawards cover three licences in the North Tampen Area (northern North Sea) andone in the Haltenbanken Area (Norwegian Sea). BG Group will be operator in allof the licences. On 19 January, BG Group acquired a 45% interest in, and operatorship of,deepwater Block 332, offshore Nigeria. In 2005, BG Group completed 29 exploration and appraisal wells of which 14 havebeen successful. Discoveries were made in Canada (8), Egypt (1), Mauritania (2),Trinidad (1), and the UK (2). Three discoveries made since the start of 2006: In the UK CNS (2) and in India(1). BG Group plc 7 LIQUEFIED NATURAL GAS Business Performance Fourth Quarter Full Year 2005 2004 2005 2004 £m £m £m £m Revenue and other operating 771 296 +160% income 1 631 1 098 +49% Total operating profit ---------------------- ----------------------- 67 16 +319% Shipping and marketing 111 51 +118% 36 16 +125% Liquefaction 111 65 +71% Business development and (24) (11) +118% other costs (50) (24) +108% ---------------------- ----------------------- 79 21 +276% 172 92 +87% 66 56 +18% Capital investment 422 417 +1% Supplementary operating and financial data are given on page 33. Fourth quarter Total operating profit was up £58 million reflecting significantly highervolumes and realisations in the shipping and marketing business and the positiveimpact of an expanded liquefaction business. In shipping and marketing, total operating profit increased by £51 million to£67 million, primarily due to exceptionally high realisations and the newcontracted supplies from Egypt. BG Group's share of operating profit from liquefaction activities increased by£20 million to £36 million, principally due to higher margins at Atlantic LNG(ALNG) Train 1, the early start-up of exports from Egyptian LNG (ELNG) Trains 1and 2 and the start-up of ALNG Train 4. Increased business development and other costs include BG Group's activity inprogressing opportunities in the USA, Nigeria and elsewhere.Capital investment primarily relates to LNG vessels in construction due fordelivery in 2006 and 2007. Full year Total operating profit increased by £80 million to £172 million reflectingincreased realisations achieved in the shipping and marketing business,including a total of 31 cargoes (2004 18 cargoes) re-directed to higher value markets, higher profits from ALNG and the contribution from ELNG following the early start-up of exports. The increase in business development cost reflects the higher levels of activityacross the segment including the development of the OK LNG project in Nigeria. Capital investment of £422 million includes £245 million relating to LNG shipsunder construction, £29 million relating to the acquisition of the remaining 50% of Brindisi LNG SpA (Italy) and continuing investment at LNG projects in Egypt, Italy, Trinidad and the UK. BG Group plc 8 Fourth quarter business highlights On 16 December, BG Group (28.89%) and partners announced the start-up of ALNGTrain 4. On 22 December, BG Group and the owners of the Elba Island regasificationterminal announced plans for an expansion, increasing BG Group's vapourisationcapacity rights from 446 mmscfd to 1.17 bcfd, with completion expected by 2012. On 23 January, BG Group took delivery at Lake Charles of its first LNG cargounder its long-term contract with Nigeria LNG. On 30 January, BG Group announced an MoU with Nigeria's Brass LNG to purchase 2mtpa of LNG for 20 years on an ex-ship basis. Initial deliveries are likely tostart during 2010 to Lake Charles and Elba Island but the contract allows fordestination flexibility. BG Group plc 9 TRANSMISSION AND DISTRIBUTION Business Performance Fourth Quarter Full Year 2005 2004 2005 2004 £m £m £m £m Revenue and other operating income -------- ------ -------- ------- 158 107 +48% Comgas 532 397 +34% 32 34 -6% MetroGAS 164 150 +9% 29 24 +21% Other 112 97 +15% -------- ------ -------- ------- 219 165 +33% 808 644 +25% Total operating profit -------- ------ -------- ------- 37 26 +42% Comgas 147 96 +53% 1 - - MetroGAS 26 20 +30% 7 5 +40% Other 38 32 +19% -------- ------ -------- ------- 45 31 +45% 211 148 +43% 47 23 +104% Capital investment 136 66 +106% Fourth quarter T&D total operating profit increased by 45% to £45 million. At Comgas, in Brazil, operating profit increased by £11 million to £37 million,primarily due to a 14% increase in volumes and a favourable Brazilian Real (BRL)exchange rate. As anticipated, operating profit included the net cost (£3million) of passing back to customers the reduced gas costs experienced earlierin the year. Capital investment mainly represents the development of the Comgas pipelinenetwork. In December 2005, GASA (the parent company of MetroGAS) reached agreement withits creditors for a comprehensive restructuring whereby creditors receive equityin exchange for debt in both MetroGAS and GASA. This agreement results in BGGroup's equity interest in MetroGAS reducing to approximately 26%. Full year Total operating profit rose by 43% (£63 million) to £211 million, reflecting a£51 million increase in operating profit reported by Comgas, due to 14% volumegrowth, stronger exchange rates and lower gas costs. The operating profit ofComgas included a net benefit from lower gas costs of £13 million which will bepassed back to customers through lower tariffs in the future. Gujarat Gas, in India, contributed £5 million to the increase in operatingprofit, driven by higher distribution volumes from the industrial and retailsectors. BG Group plc 10 POWER GENERATION Business Performance Fourth Quarter Full Year 2005 2004 2005 2004 £m £m £m £m 59 55 +7% Revenue and other operating 227 187 +21% income 35 34 +3% Total operating profit 113 116 -3% - 2 - Capital investment 3 3 - Fourth quarter and full year The increase in revenue is primarily due to the pass through of gas costs.Operating profit for the quarter and full year is broadly in line with lastyear. Operating profit includes insurance income relating to operating income lostfollowing the failure of a steam turbine in June 2005, which continues to affectSeabank Power. OTHER ACTIVITIES Full year Other activities principally comprise corporate costs and business developmentexpense. In the year, the net cost of other activities was £58 million comparedto £32 million in the prior year. The increase is primarily attributable toadditional industry insurance premiums. BG Group plc 11 -------------------------------------------------------------------------------- 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. 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 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 economically hedged value ofthe related gas in storage (taking account of gas prices based on the forwardcurve or expected delivery destination and the associated storage and capacitycosts). 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. Management considers that thispresentation best reflects the underlying performance of the business since itdistinguishes between the temporary timing differences associated withre-measurements under IAS 39 rules and actual realised gains and losses.BG Group has also separately identified profits and losses associated with thedisposal of non-current assets as they are considered by management to be itemswhich require separate disclosure in order to provide a clearer understanding ofthe 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,pages 14 to 15 and note 2 to the accounts, page 23. 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 provides additional information on the source of BGGroup's operating profits. For a reconciliation between operating profit andearnings including and excluding the results of joint ventures and associates,see Note 3 to the accounts, page 24. 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 management believes thatthis is an important liquidity measure for the Group. -------------------------------------------------------------------------------- BG Group plc 12 -------------------------------------------------------------------------------- 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 revised 2006 targets, (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 2004. 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 ExchangeCommission permits oil and gas companies, in their filings with the SEC, todisclose only proved reserves that a company has demonstrated by actualproduction or conclusive formation tests to be economically and legallyproducible under existing economic and operating conditions. We use certainterms in this press release, such as "Probable reserves", "Unbooked Resources","Risked Exploration" and "total reserve/resource base" that the SEC's guidelinesstrictly prohibit us from including in filings with the SEC. US investors areurged to consider closely the disclosure in our Form 20-F, File No. 1-09337,available from us at BG Group, 100 Thames Valley Park Drive, Reading RG6 1PT.You may read and copy this information at the SEC's public reference room,located at 100 F Street N.E., Room 1580 Washington, D.C. 20549. Please call theSEC at 1-800-SEC-0330 for further information on the public reference room. Thisfiling is also available at the internet website maintained by the SEC at http://www.sec.gov. -------------------------------------------------------------------------------- BG Group plc 13 CONSOLIDATED INCOME STATEMENT FOURTH QUARTER ------------------------------ ------------------------------------- 2005 2004 Busi- Disposals Total Busi- Disposals Total ness and re- Result ness and re Result Perfor- measure- Perfor- measure- mance(i) ments mance (i) ments (Note 2)(i) (Note 2)(i) Notes £m £m £m £m £m £m Group revenueand otheroperatingincome 2, 3 2 098 (103) 1 995 1 161 - 1 161Operatingcosts (1 314) - (1 314) (773) - (773)Profits andlosses ondisposal ofnon-currentassets andimpairments 2 - 17 17 - - - ------------------------------ ------------------------------------- Operatingprofit/(loss)before shareof resultsfrom jointventures andassociates 3 784 (86) 698 388 - 388 ------------------------------ ------------------------------------- Finance income 4 24 - 24 9 - 9Finance costs 2, 4 (24) 4 (20) (21) - (21)Share ofpost-taxresults fromjoint venturesand associates 3 41 - 41 33 - 33 ------------------------------ -------------------------------------Profit/(loss)before tax 825 (82) 743 409 - 409Taxation 2, 5 (327) 44 (283) (171) - (171) ------------------------------ -------------------------------------Profit for theperiod 498 (38) 460 238 - 238 ------------------------------ -------------------------------------Attributable to: BG Groupshareholders (earnings) 504 (41) 463 236 - 236 Minorityinterest (6) 3 (3) 2 - 2 ------------------------------ ------------------------------------- 498 (38) 460 238 - 238 ------------------------------ ------------------------------------- Earnings pershare - basic 6 14.2p (1.2)p 13.0p 6.7p - 6.7pEarnings pershare -diluted 6 14.2p (1.2)p 13.0p 6.7p - 6.7p ------------------------------ ------------------------------------- -----------------------------------------------------------------------------------------------------Totaloperatingprofitincludingshare ofpre-taxoperatingresults fromjoint venturesandassociates(ii) 3 858 (86) 772 435 - 435----------------------------------------------------------------------------------------------------- i) See Presentation of Non-GAAP measures, page 12, for an explanation of resultsexcluding disposals and re-measurements and presentation of the results of jointventures and associates.ii) This measurement is shown by BG Group as it is used by management as a meansof measuring the underlying performance of the business. BG Group plc 14 CONSOLIDATED INCOME STATEMENT FULL YEAR ------------------------------ ------------------------------------- 2005 2004 Busi- Disposals Total Busi- Disposals Total ness and re- Result ness and re Result Perfor- measure- Perfor- measure- mance(i) ments mance (i) ments (Note 2)(i) (Note 2)(i) Notes £m £m £m £m £m £m Group revenueand otheroperatingincome 2, 3 5 664 (240) 5 424 4 063 - 4 063Operatingcosts (3 526) - (3 526) (2 743) - (2 743) ------------------------------ -------------------------------------Profits andlosses ondisposal ofnon-currentassets andimpairments 2 - 446 446 - 87 87 ------------------------------ -------------------------------------Operatingprofit/(loss)before shareof resultsfrom jointventures andassociates 3 2 138 206 2 344 1 320 87 1 407 ------------------------------ -------------------------------------Finance income 4 75 - 75 42 - 42Finance costs 2, 4 (85) 15 (70) (75) - (75)Share ofpost-taxresults fromjoint venturesand associates 3 160 - 160 125 - 125 ------------------------------ -------------------------------------Profit/(loss)before tax 2 288 221 2 509 1 412 87 1 499Taxation 2, 5 (900) (41) (941) (555) (30) (585) ------------------------------ -------------------------------------Profit/(loss)for the period 1 388 180 1 568 857 57 914 ------------------------------ -------------------------------------Attributable to: BG Groupshareholders (earnings) 1 357 171 1 528 829 57 886Minorityinterest 31 9 40 28 - 28 ------------------------------ ------------------------------------- 1 388 180 1 568 857 57 914 ------------------------------ ------------------------------------- Earnings pershare - basic 6 38.3p 4.9p 43.2p 23.5p 1.6p 25.1pEarnings pershare -diluted 6 38.2p 4.8p 43.0p 23.4p 1.6p 25.0p ------------------------------ ------------------------------------- ------------------------------------------------------------------------------------------------------Totaloperatingprofitincludingshare ofpre-taxoperatingresults fromjoint venturesandassociates(ii) 3 2 380 206 2 586 1 513 87 1 600----------------------------------------------------------------------------------------------------- i) See Presentation of Non-GAAP measures, page 12, for an explanation of resultsexcluding disposals and re-measurements and presentation of the results of jointventures and associates.ii) This measurement is shown by BG Group as it is used by management as a meansof measuring the underlying performance of the business. BG Group plc 15 CONSOLIDATED BALANCE SHEET FOURTH QUARTER -------------------------------------------------------------------------------- As at 31 Dec 31 Dec 2005 2004 £m £mAssetsNon-current assetsGoodwill 342 272Other intangible assets 682 585Property, plant and equipment 5 567 4 509Investments 1 124 1 050Deferred tax assets 84 68Trade and other receivables 52 46Derivative financial instruments 84 --------------------------------------------------------------------------------- 7 935 6 530Current assetsInventories 185 99Trade and other receivables 1 674 1 190Commodity contracts and other derivative financialinstruments 10 -Cash and cash equivalents 1 516 340-------------------------------------------------------------------------------- 3 385 1 629Assets classified as held for sale 10 530--------------------------------------------------------------------------------Total assets 11 330 8 689-------------------------------------------------------------------------------- LiabilitiesCurrent liabilitiesBorrowings (71) (577)Trade and other payables (1 308) (976)Current tax liabilities (409) (264)Commodity contracts and other derivative financialinstruments (711) --------------------------------------------------------------------------------- (2 499) (1 817)Non-current liabilitiesBorrowings (1 224) (762)Trade and other payables (68) (89)Derivative financial instruments (2) -Deferred income tax liabilities (733) (907)Retirement benefit obligations (154) (135)Provisions for other liabilities and charges (367) (325)-------------------------------------------------------------------------------- (2 548) (2 218)Liabilities associated with assets classified asheld for sale (3) (67) --------------------------------------------------------------------------------Total liabilities (5 050) (4 102) --------------------------------------------------------------------------------Net assets 6 280 4 587-------------------------------------------------------------------------------- Attributable to:BG Group equity shareholders 6 182 4 567Minority interests 98 20--------------------------------------------------------------------------------Total equity 6 280 4 587-------------------------------------------------------------------------------- BG Group plc 16 STATEMENT OF CHANGES IN EQUITY Fourth Quarter Full Year 2005 2004 2005 2004 £m £m £m £m Equity as at start of period 5 593 4 440 BG Group shareholders' funds 4 567 3 924 48 16 Minority interest 20 (9)--------------------------------------------------------------------------------5 641 4 456 4 587 3 915 - - Effect of adoption of IAS 39 (238) ---------------------------------------------------------------------------------5 641 4 456 Equity as at start of period 4 349 3 915 460 238 Profit for the financial period 1 568 914 6 5 Issue of shares 34 13 (39) (1) Purchase of own shares (43) (1) 9 2 Adjustment in respect of employee 20 11 share schemes Tax in respect of employee share 10 - schemes 10 - Derecognition of minority interest on 55 - disposal 55 - - - Dividends on ordinary shares (142) (127) (6) - Dividends paid to minority interest (29) (2) Currency translation and hedge 144 (113) adjustments net of tax 458 (136)-------------------------------------------------------------------------------- Net changes in equity for the 639 131 financial period 1 931 672 Equity as at 31 December6 182 4 567 BG Group shareholders' funds 6 182 4 567 98 20 Minority interest 98 20--------------------------------------------------------------------------------6 280 4 587 6 280 4 587-------------------------------------------------------------------------------- BG Group plc 17 CONSOLIDATED CASH FLOW STATEMENT Fourth Quarter Full Year 2005 2004 2005 2004 £m £m £m £m Cash flows from operating activities 698 388 Profit from operations 2 344 1 407 Depreciation of property, plant and equipment and amortisation of 142 116 intangible assets 492 443 Fair value movements in commodity 116 - contracts 253 - Profit and losses on disposal of (17) - non-current assets and impairments (446) (87) Unsuccessful exploration expenditure 38 29 written off 70 52 7 23 (Decrease)/increase in provisions 7 21 9 4 Share based payments 20 8 Decrease/(increase) in working (290) (125) capital (251) (262)-------------------------------------------------------------------------------- 703 435 Cash generated by operations 2 489 1 582 (340) (124) Income taxes paid (883) (387)-------------------------------------------------------------------------------- Net cash inflow from operating 363 311 activities 1 606 1 195-------------------------------------------------------------------------------- Cash flows from investing activities Dividends received from joint 33 43 ventures and associates 93 81 Proceeds from disposal of subsidiary (93) - undertakings and investments (67) 32 Proceeds from disposal of property, plant and equipment and intangible 1 (1) assets 950 142 Purchase of property, plant and (171) (387) equipment and intangible assets (1 064) (1 022) Loans (to)/from joint ventures and 59 (21) associates 65 (4) Purchase of subsidiary undertakings (26) (22) and investments(i) (39) (364)-------------------------------------------------------------------------------- Net cash (outflow) from investing (197) (388) activities (62) (1 135)-------------------------------------------------------------------------------- Cash flows from financing activities 7 10 Net interest paid(ii) (11) (12) - (1) Dividends paid (142) (124) (6) (1) Dividends paid to minority (29) (3) Net increase/(decrease) in 15 42 short-term borrowings (238) 167 Net increase/(decrease) in long-term 23 8 borrowings 23 (68) 6 5 Issue of shares 34 13 (33) - Purchase of own shares (37) --------------------------------------------------------------------------------- Net cash inflow/(outflow) from 12 63 financing activities (400) (27)-------------------------------------------------------------------------------- Net increase/(decrease) in cash and 178 (14) cash equivalents 1 144 33 Cash and cash equivalents at 1 335 350 beginning of period 340 313 Effect of foreign exchange rate 3 4 changes 32 (6)-------------------------------------------------------------------------------- Cash and cash equivalents at end of 1 516 340 period(iii) 1 516 340-------------------------------------------------------------------------------- i) Includes cash acquired of £18 million (2004 £10 million) on the purchase of a subsidiary undertaking.ii) Includes capitalised interest for the fourth quarter of £11 million (2004 £5 million), and for the full year of £30 million (2004 £13 million).iii) Cash and cash equivalents comprise cash and short-term liquid investments that are readily convertible to cash. BG Group plc 18 RECONCILIATION OF NET BORROWINGS/FUNDS(i) - FULL YEAR £mNet borrowings as at 31 December 2004(i) (ii) (999)Adoption of IAS 39 (6)-------------------------------------------------------------------------------- (1 005) Net increase in cash and cash equivalents 1 144Cash outflow from changes in gross borrowings 215Inception of finance leases (215)Effect of disposals 186Foreign exchange and other re-measurements (72)--------------------------------------------------------------------------------Net funds as at 31 December 2005(i) (ii) 253-------------------------------------------------------------------------------- Net borrowings attributable to Comgas were £189 million (31 December 2004 £98million). As at 31 December 2005, BG Group's share of the net borrowings in joint venturesand associates amounted to approximately £1.2 billion, including BG Groupshareholder loans of approximately £500 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/funds are defined on page 35.ii) Net borrowings/funds comprise: As at 31 Dec 31 Dec 2005 2004 £m £mAmounts receivable/(due) within one yearCash and cash equivalents 1 516 340Overdrafts, loans and finance leases (71) (577)Derivative financial instruments (50)(iii) --------------------------------------------------------------------------------- 1 395 (237)Amounts receivable/(due) after more than one yearLoans and finance leases (1 224) (762)Derivative financial instruments 82 --------------------------------------------------------------------------------- (1 142) (762)--------------------------------------------------------------------------------Net funds/(borrowings) 253 (999)-------------------------------------------------------------------------------- iii) These items are included within commodity contracts and other derivativefinancial instrument balances on the balance sheet. BG Group plc 19 RECONCILIATION OF NET BORROWINGS - FULL YEAR (Continued) LIQUIDITY AND CAPITAL RESOURCES All the information below is as at 31 December 2005. The Group's principal borrowing entities are; BG Energy Holdings Limited,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 a $1.0 billion US Commercial Paper Programme, which was unutilised, anda$1.0 billion Eurocommercial Paper Programme, of which $965.2 million wasunutilised. BGEH also had a $2.0 billion Euro Medium Term Note Programme, ofwhich $1.452 billion was unutilised. BGEH had aggregate committed multicurrency revolving borrowing facilities of$1.105 billion, of which $552 million matures in August 2006 and $553 millionmatures in April 2009. There are no restrictions on the application of fundsunder these facilities, which were undrawn. BGEH is also lessee under a number of LNG ship charters which constitute financeleases. The total unutilised facility amounts under these finance leasesamounted to $433 million, such amounts being available exclusively to fund theconstruction of certain LNG ships. In addition, BGEH had uncommitted multicurrency borrowing facilities of £621million, of which £601 million was unutilised. Comgas had committed borrowing facilities of BRL 1 242.5 million, of whichBRL 441.1 million was unutilised and uncommitted borrowing facilities of BRL574.9 million, of which BRL 381.5 million was unutilised. Gujarat Gas Company Limited had committed borrowing facilities of Indian Rupees(INR) 1 500 million, of which INR 780 million was unutilised. BG Group plc 20 Notes 1. Basis of preparation These primary statements are the unaudited consolidated financial statements ofBG Group plc for both the quarter ended and the year ended 31 December 2005. Thefinancial information does not comprise statutory accounts within the meaning ofSection 240 of the Companies Act 1985, and should be read in conjunction withthe Annual Report and Accounts for the year ended 31 December 2004, as theyprovide an update of previously reported information. From 1 January 2005, BG Group was 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 statement has been prepared inaccordance with the accounting policies under IFRS published on page 110 of the2004 Annual Report and Accounts. The preparation of the financial statements requires management to makeestimates and assumptions that affect the reported amount of revenues, expenses,assets and liabilities 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 thefinancial statements, deviate from the actual circumstances, the originalestimates and assumptions will be modified as appropriate in the year in whichthe circumstances change. BG Group plc 21 2. Disposals and re-measurements Fourth Quarter Full Year 2005 2004 2005 2004 £m £m £m £m Revenue and other operating income - (103) -(i) re-measurements of commodity contracts (240) -(i) Profits and losses on disposal of 17 - non-current assets and impairments 446 87 Finance costs - re-measurements of 4 -(i) financial instruments 15 -(i) 44 - Taxation (41) (30) (3) - Minority interest (9) --------------------------------------------------------------------------------- (41) - Impact on earnings 171 57-------------------------------------------------------------------------------- i) BG Group adopted IAS 39 from 1 January 2005, figures for 2004 do not contain any non-cash re-measurements. 2005 fourth quarter and full year: Revenue and other operating income Re-measurements included within revenue and other operating income amount to acharge of£103 million for the quarter, £111 million of which represents non-cashmark-to-market movements on certain long-term UK gas contracts. Whilst theactivity surrounding these contracts involves the physical delivery of gas, thecontracts fall within the scope of IAS 39 and meet the definition of aderivative instrument. Re-measurements in respect of the above for the full yearwas a £224 million charge. 2005 fourth quarter and full year: Disposals of non-current assets New BusinessesDuring the fourth quarter, management committed to withdraw from the non-coretelecoms business. This resulted in a pre-tax charge to the income statement of£32 million in the quarter. MetroGAS and Gasoducto Cruz Del Sur During the fourth quarter of 2005 BG Group signed a Master RestructuringAgreement with the other shareholder and creditors of Gas Argentino (GASA), theparent company of MetroGAS. This agreement sets out the way in which the debtand equity of the company will be restructured, resulting in a reduction of BGGroup's control over GASA (and therefore MetroGAS). This restructuring is due tocomplete in 2006, subject to Regulator approval. Having assessed the status ofthe transaction in the light of the requirements of IAS 27, BG Group believes itis appropriate to deconsolidate GASA and MetroGAS. This deconsolidation andreduction in economic interest has resulted in a gain on disposal of £56 million(representing the Group's share of net liabilities deconsolidated and including£6 million of currency translation gains released from the translation reserve).As at 31 December 2005 these companies are accounted for under the equity methodand recognised at nil value in the Group's financial statements. In the light of the MetroGAS restructuring described above, during the fourthquarter BG Group reviewed its planning assumptions associated with itsinvestment in the Uruguayan pipeline business, Gasoducto Cruz Del Sur S.A.. Gassupply and demand uncertainties in Argentina and Uruguay, combined with thereduced presence of BG Group in Argentina and the reduced control of GASA, havemeant that the value in use of this investment is lower than the carryingamount. Accordingly, an impairment charge of £8 million has been recognised. North Caspian 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. BG Group plc 22 2. Disposals and re-measurements (continued) Other disposals During the fourth quarter of 2005, BG Group disposed of its interest in a NorthSea asset resulting in a gain of £1 million. 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 fourth quarter and full year: Disposals of non-current assets Profits on disposal of non-current assets during the second quarter of 2004included the disposal ofBG 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. During the second quarter, £1 million of pre- and post-tax expenditure wasincurred relating to a prior year 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 fourth quarter and full year: 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. BG Group plc 23 3. Segmental analysis Group revenue and Busi- Disposals Total Busi- Disposals Totalother operating ness and re- ness and re-income Perfor- measure- Perfor- measure- mance ments mance mentsFourth Quarter 2005 2005 2005 2004 2004 2004 £m £m £m £m £m £m Explorationand Production 1 093 (118) 975 650 - 650LiquefiedNatural Gas 771 15 786 296 - 296Transmissionand Distribution 219 - 219 165 - 165Power Generation 59 - 59 55 - 55Other activities 5 - 5 2 - 2Less: intra-group sales (49) - (49) (7) - (7)---------------------------------------------------------------------------------------- 2 098 (103) 1 995 1 161 - 1 161---------------------------------------------------------------------------------------- Group revenue and Busi- Disposals Total Busi- Disposals Totalother operating ness and re- ness and re-income Perfor- measure- Perfor- measure- mance ments mance mentsFull Year 2005 2005 2005 2004 2004 2004 £m £m £m £m £m £m Explorationand Production 3 074 (239) 2 835 2 148 - 2 148LiquefiedNatural Gas 1 631 (1) 1 630 1 098 - 1 098Transmissionand Distribution 808 - 808 644 - 644Power Generation 227 - 227 187 - 187Other activities 15 - 15 8 - 8Less: intra-group sales (91) - (91) (22) - (22)---------------------------------------------------------------------------------------- 5 664 (240) 5 424 4 063 - 4 063---------------------------------------------------------------------------------------- BG Group plc 24 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 associates associates(i) ventures and associates Fourth Quarter 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 £m £m £m £m £m £m £m £m £m £m Explorationand Production 612 360 - - 612 360 117 - 729 360LiquefiedNatural Gas 58 5 36 16 94 21 (15) - 79 21Transmissionand Distribution 82 22 11 9 93 31 (48) - 45 31Power Generation 8 12 27 22 35 34 - - 35 34Other activities (62) (11) - - (62) (11) 32 - (30) (11)---------------------------------------------------------------------------------------- Operating profit 698 388 74 47 772 435 86 - 858 435---------------------------------------------------------------------------------------- ------------ ------------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 associates associates(i) ventures and associatesFull Year 2005 2004 2005 2004 2005 2004 2005 2004 2005 2004 £m £m £m £m £m £m £m £m £m £m Explorationand Production 2 120 1 235 - - 2 120 1 235 (178) (46) 1 942 1 189 LiquefiedNatural Gas 60 46 111 65 171 111 1 (19) 172 92Transmissionand Distribution 230 108 42 40 272 148 (61) - 211 148Power Generation 24 28 89 88 113 116 - - 113 116Other activities (90) (10) - - (90) (10) 32 (22) (58) (32)---------------------------------------------------------------------------------------- Operating profit 2 344 1 407 242 193 2 586 1 600 (206) (87) 2 380 1 513 ---------------------------------------------------------------------------------------- i) 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 £41 million (2004 £33 million), and for the full year is £160 million (2004 £125 million).ii) Business Performance excludes certain disposals and re-measurements. See Note 2, page 22 and Presentation of Non-GAAP measures, page 12. BG Group plc 25 3. Segmental analysis (continued) Total Result Operating profit Share of results Total before share of in joint ventures Result results from joint and associates ventures and associatesFourth Quarter 2005 2004 2005 2004 2005 2004 £m £m £m £m £m £m Explorationand Production 612 360 - - 612 360LiquefiedNatural Gas 58 5 28 13 86 18Transmissionand Distribution 82 22 4 7 86 29Power Generation 8 12 9 13 17 25Other activities (62) (11) - - (62) (11)-------------------------------------------------------------------------------- 698 388 41 33 739 421 Net financeincome/(costs) 4 (12)Taxation (283) (171)--------------------------------------------------------------------------------Profit for theperiod 460 238-------------------------------------------------------------------------------- Total Result Operating profit Share of results Total before share of in joint ventures Result results from joint and associates ventures and associatesFull Year 2005 2004 2005 2004 2005 2004 £m £m £m £m £m £m Explorationand Production 2 120 1 235 - - 2 120 1 235 LiquefiedNatural Gas 60 46 86 45 146 91Transmissionand Distribution 230 108 26 24 256 132Power Generation 24 28 48 56 72 84Other activities (90) (10) - - (90) (10)-------------------------------------------------------------------------------- 2 344 1 407 160 125 2 504 1 532 Net financeincome/(costs) 5 (33)Taxation (941) (585)--------------------------------------------------------------------------------Profit for the period 1 568 914-------------------------------------------------------------------------------- BG Group plc 26 4. Net finance costs Fourth Quarter Full Year 2005 2004 2005 2004 £m £m £m £m (23) (20) Interest payable (82) (66) Interest on obligations under finance (7) (2) leases (19) (10) 11 5 Interest capitalised 30 13 (5) (4) Unwinding of discount on provisions(i) (14) (12) 4 - Disposals and re-measurements (Note 2) 15(ii) --------------------------------------------------------------------------------- (20) (21) Finance costs (70) (75) 24 9 Finance income 75 42-------------------------------------------------------------------------------- 4 (12) Net finance income/(costs)(iii) 5 (33)-------------------------------------------------------------------------------- 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) Re-measurements of financial instruments as at 31 December 2005 comprises income (£30 million) and costs (£15 million) presented net within finance costs.iii) Excludes Group share of net finance costs from joint ventures and associates for the quarter of £13 million (2004 £8 million), and for the full year of £41 million (2004 £34 million). 5. Taxation The taxation charge for the quarter before disposals and re-measurements was£327 million (2004 £171 million), and the taxation charge including disposalsand re-measurements was £283 million (2004 £171 million). For the full year, the taxation charge before disposals and re-measurements was£900 million (2004 £555 million). The taxation charge including disposals andre-measurements was £941 million (2004 £585 million), including £671 million (2004 £283 million) in respect of overseas tax. The Group share of taxation from joint ventures and associates for the quarterwas £20 million (2004 £6 million) and for the full year was £41 million (2004£34 million). BG Group plc 27 6. Earnings per ordinary share Fourth Quarter Full Year 2005 2004 2005 2004-------------------------------------------------------------------------------- £m Pence £m Pence £m Pence £m Pence per per per per share share share share-------------------------------------------------------------------------------- 463 13.0 236 6.7 Earnings 1 528 43.2 886 25.1 Re-measurements (after tax and 58 1.6 - - minority interest) 138 3.9 - - Profit and losses on disposals and impairments (after (17) (0.4) - - tax) (309) (8.8) (57) (1.6)-------------------------------------------------------------------------------- Earnings - excluding disposals and 504 14.2 236 6.7 re-measurements 1 357 38.3 829 23.5-------------------------------------------------------------------------------- Basic earnings per share calculations in 2005 are based on shares in issue of 3547 million for the quarter and 3 540 million for the 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 3 565 million for the quarter and 3 557 million for the year, being theweighted average number of ordinary shares in issue during the year as adjustedfor share options. BG Group plc 28 7. Capital investment - geographical analysis Fourth Quarter Full Year 2005 2004 2005 2004 £m £m £m £m 120 104 Europe 447 247 57 30 South America 160 102 42 77 Asia and the Middle East 194 302 94 58 North America and the Caribbean 403 664 95 240 Mediterranean Basin and Africa 312 579-------------------------------------------------------------------------------- 408 509 1 516 1 894-------------------------------------------------------------------------------- 8. Quarterly information: earnings and earnings per share 2005 2004 2005 pence 2004 £m £m pence First quarter - including disposals and re-measurements 260 207 7.3 5.9 - excluding disposals and re-measurements 270 187 7.6 5.3 Second quarter - including disposals and re-measurements 484 229 13.7 6.5 - excluding disposals and re-measurements 275 192 7.8 5.4Third quarter - including disposals and re-measurements 321 214 9.1 6.1 - excluding disposals and re-measurements 308 214 8.7 6.1Fourth quarter - including disposals and re-measurements 463 236 13.0 6.7 - excluding disposals and re-measurements 504 236 14.2 6.7--------------------------------------------------------------------------------Full year - including disposals and re-measurements 1 528 886 43.2 25.1 - excluding disposals and re-measurements 1 357 829 38.3 23.5-------------------------------------------------------------------------------- BG Group plc 29 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 of equity at the transition date (1 January 2003), 31 December 2003, 31 December 2004 and 1 January 2005, the date of adoption of IAS 32 and IAS 39. This document also provides details of the impact of the adoption of IAS 32 and IAS 39 from 1 January 2005, details of the reconciling items, BG Group's principal accounting policies under IFRS and the exemptions taken by BG Group in accordance with IFRS 1 on transition to IFRS. In order to comply with IFRS 1, in this preliminary statement BG Group is alsopresenting a reconciliation from UK GAAP to IFRS of the profit for thecomparable financial period (the quarter and year ended 31 December 2004),together with the equity at the end of the comparable period (31 December 2004)as follows: Reconciliation of earnings between UK GAAP and IFRS Fourth Full Notes Quarter Year 2004 2004 £m £m Profit attributable to shareholders (earnings) underUK GAAP 249 904Effect of transition to IFRS: Pensions 1 (1) (6) Premier Power CCGT Project 2 - (3) Goodwill amortisation 3 4 16 Regulatory current account 4 (8) (1) Share-based payments 5 (3) (6) Tax 6 (5) (13) Profit on disposal of non-current assets 7 - (5)--------------------------------------------------------------------------------Profit attributable to shareholders (earnings) underIFRS 236 886-------------------------------------------------------------------------------- Reconciliation of equity between UK GAAP and IFRS 31 December Notes 2004 £m Total equity under UK GAAP 4 590Effect of transition to IFRS:Pensions 1 (41)Premier Power CCGT Project 2 15Goodwill 3 33Regulatory current account 4 -Deferred tax 6 (81)Dividends 8 74Other (3)--------------------------------------------------------------------------------Total equity under IFRS 4 587-------------------------------------------------------------------------------- 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(commonly referred to as the 'corridor' approach). The charge to operating costsin respect of BG Group plc 30 9. IFRS 1 requirement - Reconciliation of profit and equity to previous GAAP(continued) 1. Pensions (continued) pensions has increased by £2 million for the quarter ended 31 December 2004 (£7million for the year ended 31 December 2004) compared to UK GAAP. The impact onearnings is a reduction of £1 million for the quarter ended 31 December 2004 (£6 million for the year ended 31 December 2004) compared to UK GAAP and the impact on net assets as at 31 December 2004 is a reduction of £41 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 31 December 2004 of £1million (£4 million for the year ended 31 December 2004) and an increase in net assets as at 31 December 2004 of £15 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 31 December 2004 is increased by £33 million and operating costsin respect of goodwill amortisation under UK GAAP for the quarter ended31 December 2004 of £4 million, and for the year ended 31 December 2004 of £16million, 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 an increase in operating costs for the quarter ended31 December 2004 of £11 million and for the year ended 31 December 2004 of £1million with a decrease in earnings for the quarter ended 31 December 2004 of £8million (£1 million for the year ended 31 December 2004). 5. Share-based paymentsOn 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 31 December 2004 of £3 million and for the year ended 31 December 2004 of £6 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. In addition, BG Group recognised deferred tax in an associate inrespect of taxable temporary differences. The effective tax rate under IFRS is40% for the quarter and the year ended 31 December 2004. The impact of theseadjustments is an increase to the deferred tax provision as at 31 December 2004of £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. BG Group plc 31 9. IFRS 1 requirement - Reconciliation of profit and equity to previous GAAP(continued) 8. Dividends UK GAAP requires that any dividends proposed as at the balance sheet date shouldbe recognised as a liability at that date. IAS 10 states that if an entitydeclares a dividend after the balance sheet date, the dividends should not berecognised as a liability at the balance sheet date. The liability reversed at31 December 2004 was £74 million. BG Group plc 32 Supplementary information: Operating and financial data Third Fourth Quarter Quarter Full Year 2005 2004 2005 2005 2004 Production volumes (mmboe) 5.5 5.8 4.6 - oil 19.3 21.4 7.8 7.8 5.8 - liquids 29.7 25.6 41.0 31.4 30.8 - gas 134.8 119.8----------------------------- ------------------- 54.3 45.0 41.2 - total 183.8 166.8----------------------------- ------------------- Production volumes (boepd in thousands) 60 63 50 - oil 53 59 85 85 63 - liquids 82 70 445 341 335 - gas 369 327----------------------------- ------------------- 590 489 448 - total 504 456----------------------------- ------------------- LNG cargoes (standard) 12 9 9 - delivered to Lake Charles 39 62 14 11 15 - delivered to Elba Island 50 40 13 7 7 - re-marketed 31 18----------------------------- ------------------- 39 27 31 - total 120 120----------------------------- ------------------- £33.36 £24.70 £35.25 Average realised oil price £30.60 £21.53($58.55) ($45.58) ($63.02) per barrel ($55.96) ($39.24) £26.87 £16.95 £26.98 Average realised liquids £22.84 £14.21($47.17) ($31.28) ($48.23) price per barrel ($41.77) ($25.90) Average realised UK gas 38.89p 22.59p 20.10p price per produced therm 27.30p 19.64p Average realised International gas price per 21.43p 14.66p 17.92p produced therm 17.27p 13.95p Average realised gas price 26.11p 17.55p 18.42p per produced therm 20.15p 16.18p £1.09 £0.99 £1.42 Lifting costs per boe(i) £1.19 £1.03 ($1.92) ($1.83) ($2.54) ($2.17) ($1.88) £2.19 £1.95 £2.56 Operating expenditure per £2.21 £2.01 ($3.85) ($3.60) ($4.57) boe ($4.04) ($3.66) 188 205 166 Development expenditure (£m) 683 620 Gross exploration expenditure (£m) 89 92 34 - capitalised expenditure 225 262 42 30 31 - other expenditure 111 74----------------------------- ------------------- 131 122 65 - gross expenditure 336 336----------------------------- ------------------- i) Lifting costs are defined as operating expenditure excluding royalties, tariffs and insurance. BG Group plc 33 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 $1.00 rise (or fall) in the Brent price would increase (or decrease) operating profit in 2006 by approximately £40 million to £50 million. BG Group's exposure to the US$/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 2006, otherfactors being constant, a 10 cent strengthening (or weakening) in the US Dollarwould increase (or decrease) operating profit by approximately £120 million to£140 million. Additional information: Exploration and Production - reserves/resource data As at 31 Dec 31 Dec 2005 2004 mmboe mmboe Proved 2 184 2 147Probable 1 236 1 470Unbooked resources 1 211 869Risked exploration 2 440 2 109 ---------------------Total reserve/resource base 7 071 6 595 --------------------- Total additions and revisions to proved reserves during the year were 219 mmboe.This includes revisions due to new data and improved reservoir performance (172mmboe), new developments and sales agreements (146 mmboe), a revision in thetreatment of fuel gas (89 mmboe) and the net effect of increases in prices (188mmboe decrease). The company has for the first time included fuel gas of 89 mmboe in its provedreserves as permitted by SEC rules. In our view this facilitates a greaterdegree of comparability with BG Group's industry peer group. 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 yearUnderlying performance(i) 172% 174%SEC data(ii) 152% 120% 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 yearUnderlying performance(i) $6.23/boe $5.86/boeSEC data(ii) $7.07/boe $8.50/boe (i) Underlying performance includes reserves revisions and new developments but excludes fuel gas and is calculated at constant prices.(ii) SEC data includes all reserves revisions and includes fuel gas and is calculated at year end prices. BG Group plc 34 --------------------------------------------------------------------------------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 CommissionGW gigawattIAS 39 International Accounting Standard 39 (Financial Instruments)IFRS International Financial Reporting StandardsLNG 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 agreementStandard 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 ShelfUKCNS United Kingdom central North Sea -------------------------------------------------------------------------------- BG Group plc 35 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 Ex-dividend date for 2005 final dividend 29 March 2006 Record date for 2005 final dividend 31 March 2006 Announcement of 2006 first quarter results 3 May 2006 Payment of 2005 final dividend: Shareholders 12 May 2006 American depositary receipt holders 19 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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