26th Jul 2012 07:00
Second Quarter Key Points
·; Cash flow from operations up 21% to $3 121 million, earnings down 4% to $1 073 million
·; E&P production up 4% to 61.3 mmboe
·; Interim dividend per share increased 10% to 11.88 cents (7.64 pence)
·; $1.3 billion non-cash post-tax impairment on US shale gas assets, based on lower price premise(a)
·; 2012 production exit rate lowered from 750 to 720 kboed, driven by Elgin, Jasmine and USA
·; 2012 LNG total operating profit now expected at the upper end of $2.6 billion to $2.8 billion range
·; Continuing good progress in execution of the funding plan; gearing reduced to 24.9%
·; $4.5 billion FPSO topside contracts approved in Brazil; tenders for additional FPSO announced
·; Latest contract awards and drilling improvements affirm BG Group's capex estimates for Brazil
·; Fifth successive gas discovery in Tanzania
Second Quarter | Half Year | ||||||
2012$m | 2011$m | Business Performance(b) | 2012$m | 2011$m |
| ||
1 976 | 2 152 | -8% |
| Total operating profit including share of pre-tax operating results from joint ventures and associates | 4 349 | 4 117 | +6% |
1 073 | 1 120 | -4% |
| Earnings for the period | 2 340 | 1 939(c) | +21% |
31.6c | 33.1c | -5% |
| Earnings per share | 68.9c | 57.2c | +20% |
11.88c | 10.80c | +10% |
| Interim dividend per share | 11.88c | 10.80c | +10% |
|
|
|
| Total results for the period (including disposals,re-measurements and impairments) |
|
|
|
550 | 2 245 | -76% |
| Operating profit before share of results from joint ventures and associates | 2 736 | 3 671 | -25% |
668 | 2 365 | -72% |
| Total operating profit including share of pre-tax operating results from joint ventures and associates | 2 985 | 3 917 | -24% |
31 | 1 245 | -98% |
| Earnings for the period continuing operations | 1 250 | 1 840(c) | -32% |
0.9c | 36.8c | -98% |
| Earnings per share continuing operations | 36.8c | 54.3c | -32% |
a) BG Group reference conditions changed for US Henry Hub real from $5.00 per mmbtu to $4.25 per mmbtu from 2015.
b) 'Business Performance' excludes disposals, certain re-measurements and impairments as exclusion of these items provides a clear and consistent presentation of the underlying operating performance of the Group's ongoing business. Total results include a post-tax charge of $1 042 million (2011 $123 million gain) in respect of disposals, re-measurements and impairments for the second quarter, and a post-tax charge of $1 086 million for the half year (2011 $100 million). This includes anon-cash post-tax charge of $1.3 billion recognised in the second quarter as a result of the impairment of certain assets associated with the shale gas business in the USA following the weaker outlook for US natural gas prices. For further information see Presentation of Non-GAAP measures (page 23) and notes 1 to 3 (pages 34 to 36). Unless otherwise stated, the results discussed in this release relate to BG Group's Business Performance.
c) Includes a charge in respect of prior period taxation (Business Performance $195 million, Total results $148 million) arising on the revision of deferred tax balances at1 January 2011 due to changes in UK taxation rates.
BG Group's Chief Executive, Sir Frank Chapman said:
"Cash flow from operations grew by 21% to $3.1 billion, in a quarter where higher E&P costs, including an exploration charge of $203 million, resulted in an 8% fall in total operating profit to $2 billion.
"For the half year, cash flow from operations was up 32%, operating profit was 6% higher, and earnings grew by 21%, on the back of a 4% production increase and a 25% growth in LNG profits. The interim dividend was increased by 10% to 11.88 cents per share."
Sir Frank noted that: "During the quarter, BG Group reached key project delivery milestones and delivered further exploration success across the portfolio.
"In Brazil, Petrobras, the operator of the 'big five' discoveries where we have very material interests, presented its latest business plan, which confirmed its commitment to the fast-track development of the first-phase of our joint interests in the pre-salt Santos Basin, in line with BG Group's own plans.
"The second FPSO, destined for Sapinhoá in 2013, is 92% complete and the third FPSO, also to be installed in 2013 at Lula NE, is 85% complete and has arrived in Brazil for topsides integration. FPSOs 4 and 5 are on schedule at some 25% complete. Earlier this month, the BM-S-9 and 11 partners approved contracts worth $4.5 billion for the first six topside modules and integration packages for the Brazilian constructed FPSOs. The BM-S-11 partners have also issued tenders for an additional chartered FPSO, expected onstream in 2015.
"A substantial proportion of our first-phase facilities is now under contract and this, alongside continuing improvements to drilling durations, affirms our capital cost estimates for Brazil and our expectation of more than 600 000 boe per day (boed) production net to BG Group by 2020.
"In Australia, we continue to make progress towards first LNG in 2014. We drilled around 80 wells in the quarter and continued to build an extensive inventory of drilling locations, supporting the acceleration of upstream execution in the second half of this year. Further, the Argyle field compression station is undergoing final commissioning. At the LNG plant on Curtis Island, tank and jetty construction progressed and the first shipment of production modules has departed from Thailand.
"In the US, as a result of a lower long-term Henry Hub price premise, BG Group recorded a $1.3 billion non-cash post-tax impairment charge against our shale gas business. In keeping with our new US gas price premise, we have further reduced our rig count to six. Our efforts in the US business are now focused on progressing our significant opportunities for the export of LNG from North America to BG Group's global customers.
"In Egypt, Phase 8b of the West Delta Deep Marine development started gas production, and new facilities at the Margarita and Bongkot South fields in Bolivia and Thailand continued their ramp-up. In Kazakhstan, completion of the comprehensive agreement paves the way to unlock the substantial remaining potential of the giant Karachaganak field.
"Offshore Tanzania, we made a fifth consecutive gas discovery with the Mzia-1 well, and our first in the deeper Cretaceous section of the basin, opening an extensive new play fairway in our acreage. Meanwhile, a new gas discovery was made in the Egypt El Burg concession and the fourth Bowen tight gas sands well reached total depth in Australia and is under evaluation. Alongside this, we saw further successful appraisal in Brazil."
Sir Frank continued: "Although upstream production continued to grow this year, the long-term shut down at the Elgin/Franklin field, the deferral of the Jasmine field start-up to 2013, and the scaling back of drilling operations in the US, are expected in aggregate to reduce the year-end production rate by some 50 000 boed. Opportunities elsewhere in the portfolio are expected to offset some 40% of this impact. The net result is that we expect production at year-end to be some 720 000 boed. The full resumption of Elgin/Franklin production and the start-up of Jasmine are expected during 2013.
"In LNG, the quarter's performance was consistent with our expectations, and we now believe that total operating profit for the full year will be at the upper end of our $2.6 billion to $2.8 billion guidance."
Concluding his comments, Sir Frank said: "I am pleased that during the quarter we have continued to generate strong cash flow; bring new resources onstream; and make material progress with our major growth projects in Brazil and Australia; alongside delivering further exploration success."
Business Review - Group
Second Quarter |
|
|
| Half Year |
|
| ||||
2012$m |
| 2011$m |
|
| Business Performance | 2012$m |
| 2011$m |
|
|
5 594 |
| 5 115 |
| +9% | Revenue and other operating income | 11 370 |
| 9 918 |
| +15% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 261 |
| 1 420 |
| -11% | Exploration and Production | 2 710 |
| 2 678 |
| +1% |
594 |
| 553 |
| +7% | Liquefied Natural Gas | 1 406 |
| 1 123 |
| +25% |
109 |
| 167 |
| -35% | Transmission and Distribution | 227 |
| 312 |
| -27% |
12 |
| 12 |
| - | Other activities | 6 |
| 4 |
| +50% |
1 976 |
| 2 152 |
| -8% | Total operating profit including share of pre-tax results from joint ventures and associates | 4 349 |
| 4 117 |
| +6% |
|
|
|
|
|
|
|
|
|
|
|
(38) |
| (59) |
| -36% | Net finance costs | (79) |
| (138) |
| -43% |
(851) |
| (942) |
| -10% | Taxation for the period | (1 900) |
| (1 986)(b) |
| -4% |
1 073 |
| 1 120 |
| -4% | Earnings for the period | 2 340 |
| 1 939 |
| +21% |
|
|
|
|
|
|
|
|
|
|
|
31.6c |
| 33.1c |
| -5% | Earnings per share (cents) | 68.9c |
| 57.2c |
| +20% |
|
|
|
|
|
|
|
|
|
|
|
3 121 |
| 2 581 |
| +21% | Cash generated by operations | 5 766 |
| 4 380 |
| +32% |
|
|
|
|
|
|
|
|
|
|
|
2 385 |
| 2 751 |
| -13% | Capital investment on a cash basis(a) | 4 890 |
| 5 157 |
| -5% |
a) For a definition of capital investment on a cash basis see Glossary (page 48). For a reconciliation between capital investment on a cash basis and total capital investment see Supplementary Information (page 45).
b) Includes a charge of $195 million in respect of prior period taxation arising on the revision of deferred tax balances at 1 January 2011 due to changes in UK taxation rates.
Second quarter
Revenue and other operating income increased by 9% to $5 594 million, reflecting a 4% increase in E&P production volumes and strong demand for the Group's LNG cargoes.
Total operating profit decreased by 8% to $1 976 million as the increase in revenue and other operating income was more than offset by higher costs in the E&P segment.
Cash generated by operations increased by 21% to $3 121 million, primarily as a result of a higher working capital cash inflow.
As at 30 June 2012, the Group's net debt was $10 240 million. The gearing ratio decreased from 26.6% to 24.9% over the quarter resulting from progress on the Group's portfolio rationalisation programme. The average maturity of the Group's gross borrowings increased to around 17 years following the successful issuance of $2.07 billion of hybrid bonds maturing in 2072.
Net finance costs of $38 million included foreign exchange gains of $18 million (2011 net finance costs of $59 million including foreign exchange gains of $7 million).
Capital investment (excluding acquisitions and on a cash basis) of $2 385 million comprised investment in E&P ($1 589 million), LNG ($720 million) and T&D ($76 million). This investment was focused primarily on the Group's major projects in Australia, Brazil and the UK. Further details on project developments are provided in the second quarter business highlights section.
Half year
Revenue and other operating income increased by 15% to $11 370 million, reflecting the benefit of higher realised prices, continued strong demand for the Group's LNG cargoes, particularly from Asia, and a 4% increase in E&P production volumes compared to the same period in 2011.
Total operating profit increased by 6% to $4 349 million, as the increase in revenue and other operating income was partly offset by higher operating costs and depreciation in the E&P segment. Cash generated by operations increased sharply by 32% to $5 766 million, reflecting the combined result of the strong business performance and the continued reversal of prior period margin calls on the Group's hedged LNG contracts.
The Group's effective tax rate (including BG Group's share of joint venture and associates' tax) for the full year is expected to be 44.5%, slightly lower than the underlying rate of 45% for 2011, excluding the $195 million prior period charge in 2011, primarily resulting from the increase in UK North Sea taxation.
Net finance costs of $79 million included $21 million of interest received on tax refunds and foreign exchange gains of $9 million (2011 net finance costs of $138 million including foreign exchange losses of $15 million).
Capital investment (excluding acquisitions and on a cash basis) of $4 890 million comprised investment in E&P ($3 395 million), LNG ($1 333 million) and T&D ($162 million), and represented a 3% increase compared with 2011. This is consistent with the Group's 2012 guidance of $11.5 billion at reference conditions.
The Board has approved the payment of an interim dividend of 11.88 cents per share. This is half of the 2011 total dividend, in accordance with the Board's established policy. The interim dividend has been converted to Sterling at the average of the daily spot rates for the three business days prior to the business day before this announcement and will be paid on 7 September 2012 as 7.64 pence per share to shareholders on the register as at 3 August 2012.
Disposals, re-measurements and impairments
Total results included a post-tax charge of $1 042 million (2011 $123 million gain) for the second quarter in respect of disposals, re-measurements and impairments, and a post-tax charge of $1 086 million for the half year (2011 $100 million). The second quarter included a non-cash, post-tax charge of $1 295 million in respect of the impairment of certain assets associated with the shale gas business in the USA resulting primarily from a change to the Group's long-term US natural gas price premise; a post-tax gain of $152 million associated with the disposal of various assets in the E&P and LNG segments; and a post-tax gain of $135 million (2011 $121 million gain) in relation to mark-to-market movements on long-term commodity contracts and economic hedges. For further information see Presentation of Non-GAAP measures (page 23) and notes 1 to 3 (pages 34 to 36).
Second quarter business highlights
Australia
The Queensland Curtis LNG (QCLNG) project continues to make good progress. A further $1.3 billion was invested during the second quarter, bringing total capital expenditure for the first half of 2012 to $2.4 billion.
In the upstream, around 80 wells were drilled in the quarter. BG Group continued to build an extensive inventory of drilling locations ahead of the planned acceleration of upstream execution in the second half of this year. Drilling activities will continue to ramp up as the rig count increases from the current 8 to 12 by year end. Exploration activity also continues in Australia where the Group completed its fourth Bowen Basin tight gas sands well and results are now under evaluation.
Good progress has been made on key water treatment plants, the Argyle field compressor station, the 340-kilometre export pipeline to Curtis Island and the 200-kilometre gas collection header. The entire gas collection header has been welded and trenching is ongoing. Clearance and grading along the export pipeline's right of way is approximately 40% complete and the pipe-joints are being laid down along the route.
Tank and jetty construction continues at the LNG plant on Curtis Island, and the first shipment of six production modules has departed from the fabrication yard in Thailand, where 80 modules in total are being constructed for the two LNG trains.
Brazil
The development of the 'big five' Santos Basin discoveries is progressing according to plan. Floating production, storage and offloading vessel (FPSO) 1 has been producing at a rate of 115 000 boed from just four wells. Also on FPSO 1, work on the first water alternating gas (WAG) well has started.
An extended well test (EWT) in the Iracema area of BM-S-11 is producing at a steady rate of 11 500 bopd, constrained by facilities. It is planned that the EWT will be extended until October 2012.
During the quarter, a development well on Sapinhoá was drilled in just 43 days. This represents the best performance to total depth so far in the pre-salt Santos Basin. This development well will be connected to FPSO 2 next year.
Good progress continues with work on the FPSO fleet. FPSO 2 is now 92% complete and start-up in Sapinhoá is expected early in 2013. FPSO 3 is 85% complete and the vessel has arrived in Brazil for the integration of topsides ahead of deployment on Lula NE in 2013. Hull conversion is ongoing in China for FPSOs 4 and 5, which are both around 25% complete. In addition, the BM-S-11 partners have decided to tender for an additional chartered FPSO as part of the first-phase development, expected onstream in 2015.
BG Group, together with its Santos Basin partners, approved contracts totalling $4.5 billion for the construction of the first six topside modules and integration packages of the eight FPSOs which are being constructed in Brazil for blocks BM-S-9 and BM-S-11. The next two topside modules and integration package contracts for the eight FPSOs are expected to be awarded within the next 18 months.
BG Group has approved the investment (25%) in the Cabiúnas gas pipeline. The pipeline will be approximately 380 kilometres long and will connect the Lula field to the Cabiúnas terminal, 180 kilometres north-east of Rio de Janeiro. The pipeline represents the next major phase of gas export infrastructure providing capacity for up to four FPSOs.
Egypt
In June, gas production from the Phase 8b deepwater development project began in the West Delta Deep Marine Concession. Phase 8b is an extension of the existing deep water sub-sea infrastructure and will tie-in eight new sub-sea wells. This latest development is located approximately 90 kilometres offshore the Nile Delta.
In July, BG Group drilled a successful well in the El Burg Offshore concession (BG Group 70% and operator). The Harmattan Deep discovery is located in shallow water, 2 kilometres from the coast.
Second quarter business highlights continued
Kazakhstan
In June, BG Group and the other contracting companies in the Karachaganak gas condensate field completed an agreement with the Republic of Kazakhstan (the Republic) that allows all parties to move forward with the development of this important resource.
Under the terms of the agreement, the Republic has acquired a 10% interest in the Karachaganak Final Production Sharing Agreement (FPSA) from the consortium for $2.0 billion cash and $1.0 billion non-cash consideration (pre-tax) including the final and irrevocable settlement of all cost recovery claims. Tax of $1.0 billion is payable on the gain arising on the disposal. BG Group's interest in the project is now 29.25% (previously 32.5%). The Republic's interest in the Karachaganak FPSA is now held by a subsidiary of the national oil company, KazMunaiGas.
The consideration under the agreement also includes the allocation of an additional 2 million tonnes per year capacity in the Caspian Pipeline Consortium export pipeline over the remaining life of the FPSA with an initial capacity of 0.5 million tonnes rising to 2 million tonnes over the next three years. Completion of the agreement also provides for exemption from export custom duties for the Karachaganak project until 2038 and final agreement on all tax and customs matters up to the end of 2009.
Nigeria
BG Group notified the Nigeria National Petroleum Corporation and its partners of its intention to relinquish its interests in blocks OPL 286-DO and OPL 284-DO. Also, the Group has given notice of its withdrawal from the Olokola LNG project, while earlier this year it withdrew from the OPL 332-DO production sharing contract.
Norway
Following the oil discovery in December 2011 of Jordbær West in production license PL373S, BG Group sanctioned the Knarr West project in June. This will form part of the Knarr Integrated Project (Central and West combined) with initial production expected in 2014.
Tanzania
In May, BG Group announced its fifth consecutive Tanzania gas discovery with the Mzia-1 exploration well located in Block 1, offshore southern Tanzania. Mzia-1 is BG Group's first discovery within the deeper Cretaceous section and opens an extensive new play fairway by de-risking a number of Cretaceous prospects within the Group's offshore acreage in Blocks 1, 3 and 4 to complement the now proven Tertiary fairway.
Thailand
In June, BG Group completed a performance test on Bongkot South marking the end of the commissioning period and the commencement of firm sales under the Bongkot South Gas Sales Agreement. During this test, the Bongkot concession passed the significant milestone of producing more than 1 billion cubic feet of sales gas per day from the Bongkot North and Bongkot South fields combined.
USA
A post-tax charge of $1.3 billion was recognised in the second quarter as a result of the non-cash impairment of certain assets associated with the shale gas business, following a change to the Group's long-term US natural gas price premise to $4.25 per mmbtu. The Group will continue to monitor long-term US gas prices to reassess the carrying value of its E&P assets in the USA in future periods.
In line with BG Group's plan to reduce drilling activity due to low natural gas prices, the Group has further reduced the rig count to five operating in the Haynesville and one in the Marcellus.
Second quarter business highlights continued
Portfolio rationalisation and funding plan
In May, BG Group announced that it had signed a definitive binding agreement with Cosan S.A. Indústria e Comércio (Cosan) for the sale of the Group's entire 60.1% holding in Comgás for Brazilian Reais 3.4 billion in cash, or approximately $1.7 billion at prevailing exchange rates. The transaction, which is subject to regulatory approval, is expected to complete by the end of 2012. As such, the Group's interest in Comgás is now disclosed within 'Assets classified as held for sale', which has reduced net debt by approximately $1.0 billion.
In light of the agreement to sell Comgás and the ongoing portfolio rationalisation programme, BG Group plans to review the structure and constituent parts of its operating business segments.
In May, BG Group announced it had reached agreement to sell its 40% equity interest in two gas-fired power plants in the Philippines to its partner in the facilities, First Gen Corporation, for net cash proceeds of $360 million. The sale and purchase agreement was completed on signing and covers the 1 000 megawatt Santa Rita power plant and the 500 megawatt San Lorenzo power plant, both on the Island of Luzon.
In June, BG Group issued three tranches of hybrid bonds totalling $2.07 billion, maturing in 2072, another step in the execution of the Group's funding plan to support its investment programme. All three issues were well supported by investors and demonstrate BG Group's ability to diversify its types of capital. Details of the terms and conditions of each issue can be found in the relevant prospectus as published and filed with the UK Listing Authority.
In June, all three major credit rating agencies reaffirmed their mid-single A credit rating and stable outlook for BG Energy Holdings Ltd. The ratings are Standard & Poor's A, Moody's A2 and Fitch A.
Exploration and Production (E&P)
Second Quarter |
|
|
| Half Year |
|
| ||||
2012$m |
| 2011$m |
|
| Business Performance | 2012$m |
| 2011$m |
|
|
61.3 |
| 58.9 |
| +4% | Production volumes (mmboe) | 122.2 |
| 117.1 |
| +4% |
|
|
|
|
|
|
|
|
|
|
|
2 963 |
| 2 787 |
| +6% | Revenue and other operating income | 5 789 |
| 5 297 |
| +9% |
|
|
|
|
|
|
|
|
|
|
|
1 464 |
| 1 540 |
| -5% | Total operating profit before exploration charge | 3 025 |
| 2 982 |
| +1% |
(203) |
| (120) |
| +69% | Exploration charge | (315) |
| (304) |
| +4% |
1 261 |
| 1 420 |
| -11% | Total operating profit | 2 710 |
| 2 678 |
| +1% |
|
|
|
|
|
|
|
|
|
|
|
1 589 |
| 1 901 |
| -16% | Capital investment on a cash basis | 3 395 |
| 3 634 |
| -7% |
Additional operating and financial data is given on page 45.
Second quarter
Revenue and other operating income increased by 6% to $2 963 million, reflecting a 4% increase in production volumes and favourable changes in the production mix. The 4% production increase came from improved performance in the UK, the continued ramp-up of production in Brazil and Australia, and from new developments in Bolivia, Norway and Thailand. However, primarily as a result of the loss of non-operated production resulting from the long-term shutdown at Elgin/Franklin and the deferral of the Jasmine field start-up to 2013, combined with the scaling back of drilling operations in the US, BG Group's 2012 production exit rate is now expected to be around 720 kboed.
The Group's average realised gas price per produced therm increased by 4% to 44.25 cents, International gas price realisations were 5% higher at 41.08 cents per produced therm, and the average UK realised gas price was in line with 2011 at 44.61 pence per produced therm.
Total operating profit was 11% lower as the increase in revenue and other operating income was more than offset by higher costs.
The exploration charge of $203 million was $83 million higher than the second quarter of 2011 as a result of the $164 million write-off for the Corcovado-1 well in Brazil following expiry of the BM-S-52 licence. Gross exploration expenditure of $224 million included spend in Tanzania ($73 million), Egypt ($42 million), the UK ($40 million), Australia ($33 million) and Brazil ($17 million).
Unit operating expenditure increased to $9.71 per barrel of oil equivalent, principally reflecting the impact of higher lagged commodity prices on royalty costs, changes in the production mix and higher tariff and maintenance costs. The unit depreciation charge of $9.18 per barrel of oil equivalent was higher as new producing assets came onstream, and as a result of changes in the production mix.
Capital investment on a cash basis of $1 589 million included investment in Australia ($558 million), Brazil ($292 million), the UK ($259 million) and Egypt ($118 million).
Half year
Revenue and other operating income increased by 9% to $5 789 million, reflecting higher realised gas and liquids prices and a 4% increase in production volumes. Total operating profit was 1% higher as the increase in revenue and other operating income was largely offset by higher operating costs and depreciation charges.
The Group's average realised gas price per produced therm increased by 4% to 42.70 cents, reflecting generally higher market prices and changes in the production mix.
Unit operating expenditure increased to $9.63 per barrel of oil equivalent, principally reflecting the impact of higher commodity prices on royalty costs, and higher maintenance and tariff costs. The unit depreciation charge increased to $8.86 per barrel of oil equivalent as a combined result of changes in the production mix and the impact of new assets coming on-stream.
Capital investment on a cash basis of $3 395 million included investment in Australia ($1 049 million), Brazil ($605 million), the UK ($557 million), Egypt ($291 million) and the USA ($242 million).
Liquefied Natural Gas (LNG)
Second Quarter |
|
|
| Half Year |
|
| ||||
2012$m |
| 2011$m |
|
| Business Performance | 2012$m |
| 2011$m |
|
|
1 906 |
| 1 808 |
| +5% | Revenue and other operating income | 4 206 |
| 3 541 |
| +19% |
|
|
|
|
|
|
|
|
|
|
|
556 |
| 494 |
| +13% | Shipping and marketing | 1 304 |
| 995 |
| +31% |
78 |
| 81 |
| -4% | Liquefaction | 171 |
| 168 |
| +2% |
(40) |
| (22) |
| +82% | Business development and other | (69) |
| (40) |
| +73% |
594 |
| 553 |
| +7% | Total operating profit | 1 406 |
| 1 123 |
| +25% |
|
|
|
|
|
|
|
|
|
|
|
720 |
| 766 |
| -6% | Capital investment on a cash basis | 1 333 |
| 1 365 |
| -2% |
Additional operating and financial data is given on page 45.
Second quarter
LNG total operating profit increased by 7% to $594 million due to a 13% increase in Shipping and marketing operating profit, reflecting continuing favourable market conditions and strong demand for cargo deliveries, particularly from Japan.
These results reflected seven fewer cargo deliveries than the first quarter of 2012, mainly as a result of scheduled maintenance at EGLNG, but were in line with the expected seasonal phasing. The Group now expects total operating profit to be at the upper end of its $2.6 billion to $2.8 billion guidance for 2012.
BG Group delivered 91% of cargoes (2011 84%) to global markets outside the USA including 27 to Asia, 14 to South America and one to Europe (2011 20 Asia, 13 South America and 8 Europe). Deliveries to Japan increased from 7 to 16 as LNG imports remained at record high levels.
BG Group's share of operating profit from liquefaction activities reduced by 4% to $78 million.
Capital investment on a cash basis of $720 million was primarily associated with the development of the QCLNG project.
Half year
LNG total operating profit of $1 406 million was 25% higher than last year as a result of favourable market conditions, with continuing strong demand for cargo deliveries outside of the USA, particularly from Asia.
BG Group delivered 91% of cargoes (2011 84%) to global markets outside the USA including 61 to Asia, 26 to South America and 3 to Europe (2011 41 Asia, 23 South America and 19 Europe). Deliveries to Japan increased from 11 to 32, reflecting record demand as a result of the combined effects of further nuclear units going offline and stronger economic performance. As a consequence of these additional deliveries to Japan, fewer cargoes were delivered to Europe.
BG Group's share of total operating profit from liquefaction activities increased by 2% to $171 million.
Capital investment on a cash basis of $1 333 million was primarily associated with the development of the QCLNG project.
Transmission and Distribution (T&D)
Second Quarter |
|
|
| Half Year |
|
| ||||
2012$m |
| 2011$m |
|
| Business Performance | 2012$m |
| 2011$m |
|
|
|
|
|
|
|
|
|
|
|
|
|
663 |
| 625 |
| +6% | Comgás | 1 296 |
| 1 172 |
| +11% |
272 |
| 243 |
| +12% | Other | 542 |
| 481 |
| +13% |
935 |
| 868 |
| +8% | Revenue and other operating income | 1 838 |
| 1 653 |
| +11% |
|
|
|
|
|
|
|
|
|
|
|
143 |
| 150 |
| -5% | Comgás before gas cost recovery | 252 |
| 251 |
| - |
(80) |
| (44) |
| +82% | Comgás gas cost recovery | (114) |
| (65) |
| +75% |
63 |
| 106 |
| -41% | Comgás | 138 |
| 186 |
| -26% |
46 |
| 61 |
| -25% | Other | 89 |
| 126 |
| -29% |
109 |
| 167 |
| -35% | Total operating profit | 227 |
| 312 |
| -27% |
|
|
|
|
|
|
|
|
|
|
|
76 |
| 84 |
| -10% | Capital investment on a cash basis | 162 |
| 158 |
| +3% |
Additional operating and financial data is given on page 45.
Second quarter
Revenue and other operating income increased by 8% to $935 million, principally reflecting an 11% increase in volumes at Comgás in Brazil and higher prices at Gujarat Gas in India.
T&D total operating profit of $109 million was 35% lower, primarily as a result of the timing effect of gas cost recovery at Comgás. In the quarter, $80 million was passed back to customers compared with $44 million in 2011. At the end of the quarter, the cost of gas to be recovered from customers in future periods was $180 million.
Excluding the timing effect of gas cost recovery, total operating profit at Comgás was 5% lower, with higher volumes offset primarily by adverse foreign exchange movements and sales mix. The increase in volumes at Comgás was driven by higher demand from power customers following a temporary reduction in hydro-electric power generation capacity in Brazil.
Other T&D activities' operating profit decreased by $15 million principally as a result of higher gas costs at Gujarat Gas.
Half year
Revenue and other operating income increased by 11% to $1 838 million, principally as a result of higher prices and volumes at Comgás in Brazil and higher prices at Gujarat Gas in India.
T&D total operating profit decreased by 27% to $227 million. Total operating profit at Comgás of $138 million was 26% lower as a result of the timing effect of gas cost recovery. In the first half of the year, $114 million was passed back to customers compared with $65 million passed back to customers in 2011. Excluding this timing effect, total operating profit at Comgás was in line with 2011.
The $37 million reduction in Other T&D activities' operating profit included the impact of adverse foreign exchange movements and higher gas costs at Gujarat Gas.
Capital investment on a cash basis of $162 million mainly represents the development of the Comgás pipeline network.
Interim Management Report
This results announcement also represents BG Group's half-yearly financial report for the purposes of the Disclosure and Transparency Rules (DTR) made by the UK Financial Services Authority. In order to comply with the requirements of the DTR, this announcement must contain an interim management report which must include (a) an indication of the important events that have occurred during the first six months of the financial year, and their impact on the condensed set of financial statements, and (b) a description of the principal risks and uncertainties for the remaining six months of the financial year. The principal risks and uncertainties for the remaining six months of the financial year are set out on pages 15 to 18. The important events that occurred during the first six months of the year are set out on pages 1 to 10 and should be read in conjunction with the important events that occurred during the first quarter of the year as set out in BG Group's First Quarter Results released on 3 May 2012. The relevant sections of the Group's First Quarter Results are repeated below without amendment. Where necessary, further updates have been provided in the Second Quarter Business Highlights on pages 5 to 7. Together with the Principal Risks and Uncertainties on pages 15 to 18 they form BG Group's interim management report for the purposes of the DTRs.
First Quarter Business Highlights AustraliaThe Queensland Curtis LNG (QCLNG) project progressed well as some $1.1 billion was invested during the first quarter in the parallel projects of upstream development of gas and water treatment facilities, the 540 kilometre pipeline network, and the first phase two-train LNG plant. In the upstream, three further petroleum leases were granted in the quarter taking the total number of leases held to22 in the core Surat Basin acreage. The remaining seven petroleum leases required for first LNG in 2014 are expected to be granted during the remainder of 2012, in line with BG Group's plan. Over 70 wells were delivered in the quarter (31 in March), as drilling capacity increased in line with plans. Drilling activities will continue to ramp up as the rig count increases from the current six to 11 rigs in the second half of the year. Some 800 wells have been drilled to date. The first water treatment plant, at Windibri, was commissioned and treated water is being provided to the Condamine power station. The Windibri plant has a capacity of some six million litres per day. Field compressor station (FCS) construction activities progressed at Argyle and Bellevue and a significant contract was awarded for six further FCSs and one central processing plant (CPP). Further, the award of an additional13 FCSs and 3 CPPs is currently being evaluated. All of the 42" gas collection header, totalling almost 200 kilometres, has now been strung out along the pipeline route, welding is advancing and pipeline trenching and laying has commenced. Way-leave clearance continued for the 340 kilometre main trunkline to Curtis Island. Construction of the LNG plant is moving ahead well, with work continuing in both Thailand and on Curtis Island. In Thailand, construction of 47 modules progressed well with piping, mechanical and cable ladder construction underway. The first module is on schedule for delivery in the second half of 2012. On Curtis Island, notable achievements included completion of dredging in and around the jetty berth, delivery of the first shipment of the LNG tank roof plates and completion of pile driving on the heavy lift dock. The first quarter also saw ongoing construction of the two LNG storage tanks and the completion of the QCLNG site offices on Curtis Island and subsequent construction team relocation. QCLNG is therefore making good progress towards first LNG in 2014, in a busy Australian construction environment. Increasing costs for local goods and services, although mitigated through early implementation and contracting strategies, are clearly evident from ongoing upstream tendering. BG Group now estimates that the QCLNG sanctioned investment of $15 billion1 will increase by 19% due to local market effects, increased costs of compliance with regulatory processes and some scope change. This underlying cost increase, combined with the 20% appreciation of the Australian dollar, yields a revised QCLNG investment of $20.4 billion2 and an upstream unit capex of $9 per boe3. 1. 2011 to 2014 capex at the 2011 BG Group reference exchange rate of US$1:A$1.2 as announced on 8 February 2011. 2. At the 2012 BG Group reference exchange rate of US$1:A$1. 3. Reference $8 per boe presented in QCLNG economics summary in 9 February 2012 Strategy Presentation. |
First Quarter Business Highlights continued BoliviaIn May, BG Group announced the start-up of production from Margarita Phase I. This development phase represents a key milestone in the continued development of the Caipipendi block. Margarita is expected to produce some 40 000 barrels of oil equivalent per day (boed) net to BG Group by the end of 2014, following completion of the Phase II project sanctioned in July 2011. BrazilIn Brazil, all aspects of developing the 'big five' Santos Basin fields are progressing according to plans. This progress, as well as strategic objectives and future outlook, was presented during a February analyst/investor visit to Rio de Janeiro hosted by BG Group. The visit also included third-party supplier site visits and presentations from partners. Key messages included: the stable business environment in Brazil; fast track developments with production already underway; field development plans in place, with substantial opportunities for enhancement as experience is gained; improved drilling performance and significant economies of scale; gas evacuation optimisation to enhance oil recovery; local content requirements being exceeded with quality and depth from local suppliers; very strong partner alignment; and BNDES support for BG Group's Santos Basin investments. Strong progress continues with the floating production, storage and offloading vessels (FPSOs). A fourth producing well has been connected to FPSO 1. FPSOs 2 to 5 are on schedule with the latest FPSOs exhibiting lower unit costs than previous vessels. FPSO 2 is now over 85% complete, in line with plans and expected to start up in the first half of 2013. The hull conversion for FPSO 3 has been completed in Singapore; this vessel is now 75% complete and is due to sail to Brazil for integration of topsides in the second quarter, in line with plans to bring the unit onstream in 2013. Hull conversion is ongoing in China for FPSOs 4 and 5, which are both around 15% complete, and integration activities will take place in Brazil ahead of planned start-up in 2014. The fabrication of hulls for FPSOs 6 to 13 continues in the Rio Grande de Sul shipyard in Brazil. In March, BG Group announced the start of a new extended well test (EWT) in the Iracema area of the BM-S-11(BG Group 25%) concession. The EWT is expected to span approximately a six month period, gathering technical information on reservoir behaviour and production performance. The well has been producing around12 000 barrels of oil per day (bopd), constrained by facilities. The information gathered will support the development of the permanent 150 000 bopd capacity FPSO Cidade de Mangaratiba, planned to be in operation in 2014. In April, BG Group announced the completion of drilling at the Iara West appraisal well in the BM-S-11 concession. Good quality oil samples were encountered and the results confirmed the westerly extension of the Iara accumulation in the pre-salt Santos Basin and demonstrate the high potential of the reservoirs within that area. Iara West is the third well drilled in the Iara area and is part of the fast-track programme to develop the Santos Basin discoveries. BG Group and its partners will continue to appraise the area, including production tests to evaluate reservoir performance. NorwayIn April, BG Group announced the start-up of production from the Gaupe field (BG Group 60% and operator) located in the Norwegian North Sea. Gaupe marks BG Group's first production from the Norwegian Continental Shelf and the project has been delivered on budget and just four years after the declaration of commerciality. The Gaupe field is a cross-border sub-sea tie-back to the BG Group-operated Armada infrastructure located in the UK central North Sea. Production from Gaupe is expected to reach a plateau rate of around 15 000 boed gross during the third quarter of 2012. TanzaniaIn March, BG Group announced its fourth Tanzanian gas discovery with the Jodari-1 (BG Group 60% and operator) exploration well located in Block 1, 39 kilometres offshore southern Tanzania. Preliminary evaluation of the well results indicates gross recoverable resources are in the range of 2.5 to 4.4 trillion cubic feet (tcf) of gas. This is the fourth consecutive successful well drilled in Tanzania, resulting in mean total gross recoverable resources estimated to be approaching some 7 tcf of gas. The Jodari-1 well is the first of a three-to-four well exploration programme, which also includes the acquisition of 2 500 square kilometres of 3D seismic data in Block 1. The next target, currently drilling, is the Mzia-1 location in Block 1, 23 kilometres to the north of Jodari-1. First Quarter Business Highlights continued ThailandIn April, BG Group announced the start of production from the Greater Bongkot South field (BG Group 22.22%) in the Gulf of Thailand, 70 kilometres south of the existing Bongkot North development. Greater Bongkot South has new standalone facilities with processing capacity of 350 million cubic feet of gas and 15 000 barrels of condensate per day. Once plateau production is achieved, Greater Bongkot South will deliver some 14 000 boed net toBG Group. Production is expected to reach plateau in the second quarter of 2012. This development represents a key milestone in the continued development of the Greater Bongkot area. UKOn 25 March, production at Elgin/Franklin (BG Group 14.11%, non-operated) was shut-in due to a well control issue on the Elgin platform. BG Group production up to 25 March had reached 1.3 mmboe. In the Group's business plan for 2012, the total expected production was 6.4 mmboe. In April, the operator of the Jasmine field (BG Group 30.5%, non-operated) advised that production start-up is not now expected until 2013. UruguayIn April, BG Group successfully bid for three offshore blocks (8, 9 and 13) in the licensing round held by the Republic of Uruguay. The bid commits BG Group to a seismic work programme of 13 000 square kilometres intended to evaluate the awarded blocks in the first three year exploration phase. USAIn April, a proposal for a LNG liquefaction project at Lake Charles in Louisiana was filed with the Federal Energy Regulatory Commission (FERC). The project is at a design and permitting stage and is planned to export up to15 million tonnes per annum (mtpa) of LNG. BG Group has previously received US Department of Energy (DOE) authorisation for LNG export from the Lake Charles terminal to countries with which the USA has a free trade agreement (FTA). BG Group is also awaiting authorisation from the DOE on an application for LNG export from Lake Charles to non-FTA countries. In April, FERC granted the operator approval to construct and operate facilities for the liquefaction and export of LNG from the Sabine Pass liquefaction terminal in the USA. Significantly, the Sabine Pass terminal, from whichBG Group has an agreement to purchase 5.5 mtpa of LNG, now has the key approvals required from the DOE and FERC which will allow the project to proceed. LNG exports from the Sabine Pass facility are expected to commence in 2015. As planned, given the weak pricing environment in the USA, the Group continues to reduce its rig count and had11 rigs in operation as at the end of April. Capital expenditure and funding planFollowing the update on costs for the QCLNG project (page 5) and refinements to the Group's portfolio rationalisation programme, BG Group now expects its capital expenditure to increase from $10.6 billion to$11.5 billion in 2012, and from $11.4 billion to $12.0 billion in 2013 on a cash basis. In aggregate, this equates to a 7% increase in the Group's capital expenditure programme for the 2012 to 2013 period. During the first few months of 2012, BG Group made significant progress in the execution of its funding plan. In May, and as part of its portfolio rationalisation programme, BG Group signed a Memorandum of Understanding withCosan S.A. Indústria e Comércio for the sale of BG Group's 60.1% interest in Comgás, Brazil's largest gas distribution company, for Brazilian Reais 3.4 billion (some $1.8 billion at the current exchange rate). In addition, net borrowings attributable to Comgás as at 31 March 2012 were $1.1 billion; this transaction therefore would lead to some $2.9 billion reduction in the Group's net debt. In April, BG Group announced that subject to certain consents and regulatory approvals, it had entered into an agreement to sell the Group's 40% share in GNL Quintero S.A. (GNLQ) for up to $352 million. In May, BG Group sold its entire shareholding of 73.9 million shares (8%) in Senex Energy Limited in Australia for a total of A$75 million ($78 million). BG Group has also further advanced negotiations on the sale of the Group's interests in two gas-fired power generation plants in the Philippines, Santa Rita and San Lorenzo, with expected completion in 2012. In March, BG Group announced it had received initial approval from BNDES for up to $1.8 billion of long-term finance to fund part of the Group's interests in the pre-salt Santos Basin, offshore Brazil. The funding will be allocated to BG Group's share of local procurement and construction costs for the eight FPSOs that will be owned First Quarter Business Highlights continued Capital expenditure and funding plan continued
by BG Group and its partners, as part of the wider first phase Santos Basin development programme that is expected to deliver 2.3 mmboe capacity by 2017. In April, BG Group announced that it had signed a $500 million credit agreement with Export Development Canada. These agreements are in line with the Group's objective of further diversifying BG Group's international funding sources and help underpin the delivery of the Group's global growth programme. The progress made so far in the implementation of the Group's funding plan is consistent with the target to release around $5 billion in 2012 and 2013 and the objective to achieve further diversification of long-term funding options.
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Principal Risks and Uncertainties This section forms part of the interim management review for the purposes of the Disclosure and Transparency rules made by the UK Financial Services Authority. BG Group's business, results and financial condition could be affected by a broad range of risks and uncertainties. BG Group's risk profile continually evolves over time as a result of changes in both the external environment and the continued growth and development of the Group's portfolio. The principal risks and uncertainties for the remaining six months of the financial year are unchanged from those stated on pages 46 to 51 of the BG Group 2011 Annual Report and Accounts (ARA). These are summarised below. This summary is not intended, and should not be used, as a substitute for reading the appropriate pages of the ARA which include further commentary on the risks and the Group's management of them. The risks shown below are in alphabetical order and no order of relative magnitude of the risks, or current level of Group exposure to them, is implied. Asset Integrity, Safety, Health and Security Oil and gas exploration and production activities carry significant inherent risks, especially deep-water drilling and operations in high pressure/high temperature wells. Major accidents or incidents and/or the failure to manage these risks could result in injury or loss of life, damage to the environment, and/or loss of certain facilities, with an associated loss or deferment of exploration, production and revenues, as well as costs associated with mitigation, recovery and compensation. BG Group is also subject to health and safety laws in numerous jurisdictions around the world. Failure to comply with such laws could significantly impact the Group's reputation, which could have a subsequent effect upon the willingness of stakeholders to work with the Group. Any new laws and regulations may result in BG Group having to curtail or cease certain operations or implement temporary shutdowns of facilities, which could diminish its productivity and materially and adversely impact the results of operations, including the Group's profits. BG Group also faces security threats. Acts of terrorism, piracy or civil unrest which may affect BG Group's plants and offices, pipelines, transportation or computer systems could severely disrupt its business and could cause harm to people. Information security breaches may also result in the loss of BG Group's commercially sensitive data. Capital requirements, liquidity and interest rates BG Group has substantial capital expenditure requirements in its business and operations. The Group's capital requirements depend on a broad range of factors (including, for example, commodity prices, currency exchange rates, acquisitions and proceeds realised from disposals), some of which are outside the Group's control and may cause capital requirements to vary materially from planned levels. Increases in BG Group's capital requirements could adversely affect the Group's business and financial performance, and BG Group's ability to access finance on attractive terms may be limited. A credit crisis affecting banks, financial markets and/or the economy more generally could affect the Group's ability to raise capital. BG Group is also exposed to liquidity risks, including risks associated with refinancing borrowings as they mature and the risk that financial assets cannot readily be converted to cash without loss of value. BG Group's financing costs may be significantly affected by interest rate volatility. Climate change Policies and initiatives at national and international level to address climate change are likely to affect business conditions and demand for various types of energy sources in the medium to long term. Worldwide policy and regulatory actions are driving targeted reductions in greenhouse gas emissions which will in turn influence the future of the energy industry. Policy approaches that promote the use of alternative energy sources (such as renewable and nuclear power) may affect the Group's ability to maintain its position in key markets. New regulatory regimes intended to establish emissions trading schemes could alter hydrocarbon production economics.
Principal Risks and Uncertainties continued Commodity prices BG Group's cash flows and profitability are sensitive to commodity prices for natural gas, crude oil, liquefied natural gas (LNG) and other hydrocarbons. The Group's exposure to commodity prices varies according to a number of factors, including the mix of production and sales. While industry costs tend to rise or fall with commodity prices in the long term, there is no guarantee that movements in sales prices and costs would align in any year. This can put pressure on investment and project economics, which depend in part upon the degree and timing of commitments to particular cost structures. The Group does not as a matter of course hedge all commodity prices, but may hedge certain LNG contracts and other revenue streams from time to time. In marketing its energy portfolio, BG Group undertakes commodity hedging and trading activities, including the use of futures contracts, financial and physical, forward-based contracts and swap contracts. The stand-alone value of hedges can move significantly, potentially increasing the volatility of cash required for margin calls and the accounting profit recognised within a particular quarter. Demand for LNG, both domestic and international, is dependent upon a number of macro-economic factors, and LNG prices can vary significantly depending upon the supply and demand balance in the market. Credit BG Group's exposure to credit risk takes the form of a loss that would be recognised if counterparties (including sovereign entities) failed, or were unable, to meet their payment or performance obligations. These risks may arise in all forms of commercial agreements and in certain agreements relating to amounts owed for physical product sales, the use of derivative instruments, and the investment of surplus cash balances. The Group is also exposed to political and economic risk events that exacerbate country risk and which may cause non-payment of foreign currency obligations to BG Group by governments or government-owned entities, or which may otherwise impact successful project delivery and implementation. The impact of credit issues could also lead to the failure of companies in the sector, potentially including partners, contractors and suppliers. Delivery of projects Delivery of projects (including in the pre-sanction phase) may be subject to: sub-surface uncertainties; cost and time overruns; HSSE risks; technical (mechanical and engineering), commercial, legal or regulatory compliance failures; equipment shortages; insufficient availability or capability of employees or contractors; unscheduled outages; stakeholder risks; a deterioration of macro-economic conditions; and gas pipeline system constraints. Drilling and completing or operating wells is often uncertain and may be subject to delays, curtailment or cancellation due to a variety of factors including unexpected drilling conditions, pressure or irregularities in geological formations; equipment failures; accidents; adverse weather conditions; and compliance with governmental or regulatory requirements. These events could result in a failure to successfully deliver sanctioned projects in line with final investment decisions. Failure to select the most suitable development concept based on full-lifecycle understanding of the project can expose projects to additional cost and risks and may contribute to lower than estimated production in future. In some cases, the cause of delay or cost overrun in project implementation can be the misalignment of partner objectives. BG Group has a number of partner-operated joint ventures in which it participates. The Group's ability to influence the operations of those joint ventures may be limited. The Group faces the risk that actions or omissions on the part of the operators of those joint ventures expose the Group to reputational or legal risk, as well as liabilities. Political factors can also often be a significant risk to project delivery. Unconventional gas, operating in deep water carbonate reservoirs and the inherent complexity of some projects, given their scale and the number and range of stakeholders, all present further challenges to successful project delivery. Environment BG Group's activities may affect the environment. The potential environmental consequences of the Group's activities include the impact of wells, pipelines and other infrastructure on onshore or marine ecological habitats, with a resulting effect on biodiversity. Measures undertaken to tackle loss of biodiversity, together with policies intended to protect local habitats, may limit access to gas and oil in areas deemed to be biologically sensitive.
Principal Risks and Uncertainties continued Environment continued Following BG Group's investments in the USA and Australia, water-related issues are more prominent for the Group. In particular, the Group is required to manage numerous issues related to both the disposal of water produced from coal seam gas production and securing and disposing of water related to the hydraulic fracturing process required in the extraction of shale gas. There is a range of stakeholder concerns related to the production of unconventional gas. These include the potential for contamination or depletion of local water sources, the long-term impact upon the environment and the possibility that unconventional operations may cause minor seismic events. In addition, local communities may raise concerns in relation to the impact on their land and property rights. There is a risk that the Group may be subject to new laws or regulations in this area which may be costly to the business, attract adverse publicity and ultimately restrict or prohibit the successful delivery of those projects reliant upon hydraulic fracturing. Other potential environmental consequences of BG Group's operations include, for example, the release of hydrocarbons or chemicals onto land or into water; noise pollution; the visual impact of gas and oil infrastructure; and the emission of pollutants that affect air quality. Exchange rates The Group reports its financial results in US Dollars. Although a large percentage of the Group's business activity is conducted in US Dollars, a significant portion of the Group's operating cashflows, capital expenditure, operating expenses and income taxes accrue in (and asset and liability positions are held in) other currencies, including the Australian Dollar, Brazilian Real and Pound Sterling. Consequently, the Group's results and financial position may be significantly affected by exchange rate fluctuations. Insurance Risks associated with the energy industry include: exposure to personal injury and loss of life; asset failures; loss of containment of hydrocarbons; environmental issues; and natural disasters together with associated consequential losses, any of which may have an adverse effect on business performance. The transfer of risks to the insurance market may be affected and influenced by constraints on the availability of cover, market appetite and capacity, pricing and the decisions of regulatory authorities. Some of the major risks associated with BG Group's activities cannot or may not be reasonably or economically insured. BG Group may incur losses from different types of risks that are not covered by insurance. Operational Performance BG Group's production volumes (and therefore revenues) are dependent on the continued operational performance of its producing assets. The Group's producing assets are subject to a number of operational risks including: reduced availability of those assets due to planned activities such as maintenance or shutdowns; unplanned outages which may, for example, be due to equipment or human failure; asset integrity and HSSE incidents; adverse reserves recovery; the performance of joint venture partners; the performance of the Group's contractors; and exposure to natural hazards, such as extreme weather events. Each of these factors could adversely affect the Group's ability to deliver operational business and financial performance. Organisational capacity BG Group's performance, operating results and future growth depend to a large extent on its continued ability to attract, retain, motivate and organise appropriately qualified personnel with the level of expertise and knowledge necessary to conduct BG Group's operations. Competition for talented, suitably experienced and qualified management and employees is intense for specialists in oil and gas.
Principal Risks and Uncertainties continued Political context and stakeholder relationships BG Group faces a range of political risks. For instance, governments may alter fiscal or other terms governing oil and gas industry operations, especially where they face financial pressures, or may act (or fail to act) in a way which delays project schedules or increases costs, thus eroding value. In addition, BG Group needs to work with governments and national oil companies in order to secure access to new resources and ensure the successful monetisation of existing resources. In such cases, political considerations can influence decision making. In recent years, some governments and state-owned enterprises have exercised greater authority and imposed more stringent conditions on companies pursuing exploration and production activities in host countries, thereby increasing the costs and uncertainties of business operations. This trend may continue. Previously disenfranchised or disengaged populations have also become more active and are able, using new channels like social media, to mobilise to pressurise governments in a way that was impossible in the past. These developments have increased the possibility of unforeseen regime, as well as legal and regulatory, changes as governments and authorities respond to public pressure. BG Group also faces increased risk if it does not recognise, and take account of, the interests of the communities in the areas where it operates, or if it operates in an unethical manner in its relationships with those communities.BG Group's operations will only be sustainable and successful over the long-term if its local stakeholders see benefit from them and support the Group's presence. Regulation and legislation BG Group's business activities are conducted in many different countries and are therefore subject to a broad range of legislation and regulations. Any non-compliance by the Group with applicable laws and/or regulations could lead to legal or regulatory sanctions, as well as reputational damage. The need to comply with any new or revised laws or regulations (or new or changed interpretations or enforcement of existing laws or regulations) may have a material impact on the Group's business and financial position. Compliance with such laws and regulations may impose additional costs on the Group's business and could potentially prohibit its business practices and/or operations. In addition, in some countries Governments are facing greater pressure on public finances, leading to a risk of increased taxation. If BG Group employees, or anyone working on its behalf, violate laws and regulations in jurisdictions in which the Group operates (including US or UK laws and regulations with extraterritorial application), the Group may face reputational damage and be subject to significant penalties, including fines or loss of operating licences. Resources discovery, estimation and development Delivery of production growth depends upon a number of factors, including: successful discovery and development of hydrocarbon resources; the acquisition of sufficient new resource opportunities; sufficient field appraisal; reservoir quality and performance; accurate interpretation of received data; drilling conditions or costs; rig availability; and the availability of adequate human or technical resources. Competition for exploration and development rights, and accessing gas and oil resources, is intense. A failure to secure appropriate new resources could impact upon the Group's production growth prospects beyond the next decade. Gas and oil reserves and resources cannot be measured exactly since estimation of reserves and resources involves subjective judgments, may not align with the estimates of total reserves and resources of BG Group's joint venture partners (including operators), and may be subject to downward revision. Factors which may lead to such revisions include: a decline in the price of oil or gas which may make reserves and/or resources uneconomic to develop and therefore not classifiable under current reporting requirements; changes in gas and oil prices in fields subject to Production Sharing Contracts which may result in changes to entitlements, and therefore reserves; the quality and quantity of the Group's geological, technical and economic data may prove to be inaccurate; and the Group's ability to interpret that data appropriately may be limited. In addition actual production performance from reservoirs may be lower than estimated. Changes in tax rules and other government regulations may result in reserves or resources becoming uneconomic. |
Statement of Directors' responsibilities
The Directors' confirm that this condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Statements' as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by the Disclosure and Transparency Rules 4.2.7 and 4.2.8. The Directors of BG Group plc are listed in the 2011 Annual Report and Accounts. Since the publication of the 2011 Annual Report and Accounts on 4 April 2012 the following changes have taken place: Sir Robert Wilson stood down as Chairman and from the Board of BG Group plc at the conclusion of the Annual General Meeting held on 16 May 2012. Andrew Gould was appointed as Chairman of BG Group plc on 16 May 2012. By order of the Board
Sir Frank ChapmanChief Executive
Fabio Barbosa Chief Financial Officer |
Legal Notice
Certain statements included in these results contain forward-looking information concerning BG Group's strategy, operations, financial performance or condition, outlook, growth opportunities or circumstances in the countries, sectors or markets in which BG Group operates. By their nature, forward-looking statements involve uncertainty because they depend on future circumstances, and relate to events, not all of which are within BG Group's control or can be predicted by BG Group. Although BG Group believes that the expectations and opinions reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations and opinions will prove to have been correct. Actual results and market conditions could differ materially from those set out in the forward-looking statements. For a detailed analysis of the factors that may affect our business, financial performance or results of operations, we urge you to look at the 'Principal risks and uncertainties' included in BG Group plc's Annual Report and Accounts 2011. No part of these results constitutes, or shall be taken to constitute, an invitation or inducement to invest in BG Group plc or any other entity, and must not be relied upon in any way in connection with any investment decision. BG Group undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent legally required. |
Going Concern
The Directors are satisfied that the Group's activities are sustainable for the foreseeable future, and that the business is a going concern and the financial statements have therefore been prepared on this basis. |
Related Parties
Information on related party transactions is provided in note 12, page 44. |
Presentation of Non-GAAP measures
Business Performance'Business Performance' excludes discontinued operations and disposals, certain re-measurements and impairments (see below) as exclusion of these items provides a clear and consistent presentation of the underlying operating performance of the Group's ongoing business. BG Group uses commodity instruments to manage price exposures associated with its marketing and optimisation activity. This activity enables the Group to take advantage of commodity price movements. It is considered more appropriate to include both unrealised and realised gains and losses arising from the mark-to-market of derivatives associated with this activity in 'Business Performance'. Disposals, certain re-measurements and impairmentsBG Group's commercial arrangements for marketing gas include the use of long-term gas sales contracts. Whilstthe activity surrounding these contracts involves the physical delivery of gas, certain gas sales contracts are classified as derivatives under the rules of IAS 39 and are required to be measured at fair value at the balance sheet date. Unrealised gains and losses on these contracts reflect the comparison between current market gas prices and the actual prices to be realised under the gas sales contract and are disclosed separately as 'disposals,re-measurements and impairments'. BG Group also uses commodity instruments to manage certain price exposures in respect of optimising the timing and location of its physical gas and LNG sales commitments. These instruments are also required to be measuredat fair value at the balance sheet date under IAS 39 and where practical have been designated as formal hedges. However, IAS 39 does not always allow the matching of fair values to the economically hedged value of the related commodity, resulting in unrealised movements in fair value being recorded in the income statement. These movements in fair value, together with any unrealised gains and losses associated with discontinued hedge accounting relationships that continue to represent economic hedges, are disclosed separately as 'disposals,re-measurements and impairments'. BG Group also uses financial instruments, including derivatives, to manage foreign exchange and interest rate exposure. These instruments are required to be recognised at fair value or amortised cost on the balance sheet in accordance with IAS 39. Most of these instruments have been designated either as hedges of foreign exchange movements associated with the Group's net investments in foreign operations, or as hedges of interest rate risk. Where these instruments represent economic hedges but cannot be designated as hedges under IAS 39, unrealised movements in fair value, together with foreign exchange movements associated with the underlying borrowings, are recorded in the income statement and disclosed separately as 'disposals, re-measurements and impairments'. Realised gains and losses relating to the instruments referred to above are included in Business Performance. This presentation best reflects the underlying performance of the business since it distinguishes between the temporary timing differences associated with re-measurements under IAS 39 rules and actual realised gains and losses. BG Group has also separately identified profits and losses associated with the disposal of non-current assets, impairments of non-current assets and certain other exceptional items, as they require separate disclosure in order to provide a clearer understanding of the results for the period. For a reconciliation between the overall results and Business Performance and details of disposals,re-measurements and impairments, see the consolidated income statement (page 26), note 2 (page 35) and note 3 (page 36). Joint ventures and associatesUnder IFRS the results from jointly controlled entities (joint ventures) and associates, accounted for under the equity method, are required to be presented net of finance costs and tax on the face of the income statement. Given the relevance of these businesses within BG Group, the results of joint ventures and associates are presented before interest and tax, and after tax. This approach provides additional information on the source of BG Group's operating profits. For a reconciliation between operating profit and earnings including and excluding the results of joint ventures and associates, see note 3 (page 36). Net borrowingsBG Group provides a reconciliation of net borrowings and an analysis of the amounts included within net borrowings as this is an important liquidity measure for the Group. |
Independent review report to BG Group plc
Introduction
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2012, which comprises the consolidated income statement, consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in equity, consolidated cash flow statement and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRS as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
PricewaterhouseCoopers LLP
Chartered Accountants26 July 2012London
a) The maintenance and integrity of the BG Group website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Consolidated Income Statement
Second Quarter
|
|
| 2012 |
| 2011 |
| ||||
|
| Notes | Business Perform-ance(a)$m | Disposals, re-measure-ments and impairments(Note 2)(a)$m | TotalResult$m |
| Business Perform-ance(a)$m | Disposals,re-measure-ments and impairments(Note 2)(a)$m | TotalResult$m |
|
| Group revenue |
| 5 567 | - | 5 567 |
| 5 116 | - | 5 116 |
|
| Other operating income | 2 | 27 | 203 | 230 |
| (1) | 189 | 188 |
|
| Group revenue and other operating income | 3 | 5 594 | 203 | 5 797 |
| 5 115 | 189 | 5 304 |
|
| Operating costs |
| (3 736) | - | (3 736) |
| (3 083) | - | (3 083) |
|
| Profits and losses on disposal of non-current assets and impairments | 2 | - | (1 511) | (1 511) |
| - | 24 | 24 |
|
| Operating profit/(loss)(b) | 3 | 1 858 | (1 308) | 550 |
| 2 032 | 213 | 2 245 |
|
| Finance income | 2, 4 | 29 | 131 | 160 |
| 20 | (4) | 16 |
|
| Finance costs | 2, 4 | (58) | (123) | (181) |
| (63) | (26) | (89) |
|
| Share of post-tax results from joint venturesand associates | 3 | 80 | - | 80 |
| 75 | - | 75 |
|
| Profit/(loss) before tax |
| 1 909 | (1 300) | 609 |
| 2 064 | 183 | 2 247 |
|
| Taxation | 2, 5 | (822) | 258 | (564) |
| (913) | (60) | (973) |
|
| Profit/(loss) for the period from continuing operations | 3 | 1 087 | (1 042) | 45 |
| 1 151 | 123 | 1 274 |
|
| Profit/(loss) for the period from discontinued operations | 6 | - | 252 | 252 |
| - | (2) | (2) |
|
| Profit/(loss) for the period |
| 1 087 | (790) | 297 |
| 1 151 | 121 | 1 272 |
|
| Attributable to: |
|
|
|
|
|
|
|
|
|
| BG Group shareholders (earnings) |
| 1 073 | (790) | 283(c) |
| 1 120 | 123 | 1 243(c) |
|
| Non-controlling interest |
| 14 | - | 14 |
| 31 | (2) | 29 |
|
|
|
| 1 087 | (790) | 297 |
| 1 151 | 121 | 1 272 |
|
| Earnings per share continuing operations - basic | 7 | 31.6c | (30.7c) | 0.9c |
| 33.1c | 3.7c | 36.8c |
|
| Earnings per share discontinued operations - basic |
| - | 7.4c | 7.4c |
| - | (0.1c) | (0.1c) |
|
| Earnings per share continuing operations - diluted | 7 | 31.4c | (30.5)c | 0.9c |
| 32.8c | 3.7c | 36.5c |
|
| Earnings per share discontinued operations - diluted |
| - | 7.4c | 7.4c |
| - | (0.1c) | (0.1c) |
|
| Total operating profit/(loss) including share of pre-tax operating results from joint ventures and associates(d) | 3 | 1 976 | (1 308) | 668 |
| 2 152 | 213 | 2 365 |
|
a) See Presentation of Non-GAAP measures (page 23) for an explanation of results excluding disposals, certain re-measurements and impairments and presentation of the results of joint ventures and associates.
b) Operating profit/(loss) is before share of results from joint ventures and associates.
c) Comprises earnings from continuing operations of $31 million (2011 $1 245 million) and from discontinued operations of $252 million (2011 $(2) million).
d) This measurement is shown by BG Group as it is used as a means of measuring the underlying performance of the business.
The notes on pages 34 to 44 form an integral part of these condensed financial statements.
Consolidated Income Statement
Half Year
|
|
| 2012 |
| 2011 |
| ||||
|
| Notes | Business Perform-ance(a)$m | Disposals, re-measure-ments and impairments(Note 2)(a)$m | TotalResult$m |
| Business Perform-ance(a)$m | Disposals,re-measure-ments and impairments(Note 2)(a)$m | TotalResult$m |
|
| Group revenue |
| 11 347 | - | 11 347 |
| 9 909 | - | 9 909 |
|
| Other operating income | 2 | 23 | 150 | 173 |
| 9 | (219) | (210) |
|
| Group revenue and other operating income | 3 | 11 370 | 150 | 11 520 |
| 9 918 | (219) | 9 699 |
|
| Operating costs |
| (7 270) | - | (7 270) |
| (6 047) | - | (6 047) |
|
| Profits and losses on disposal of non-current assets and impairments | 2 | - | (1 514) | (1 514) |
| - | 19 | 19 |
|
| Operating profit/(loss)(b) | 3 | 4 100 | (1 364) | 2 736 |
| 3 871 | (200) | 3 671 |
|
| Finance income | 2, 4 | 78 | 149 | 227 |
| 39 | 70 | 109 |
|
| Finance costs | 2, 4 | (133) | (146) | (279) |
| (147) | (95) | (242) |
|
| Share of post-tax results from joint ventures and associates | 3 | 161 | - | 161 |
| 154 | - | 154 |
|
| Profit/(loss) before tax |
| 4 206 | (1 361) | 2 845 |
| 3 917 | (225) | 3 692 |
|
| Taxation | 2, 5 | (1 836) | 275 | (1 561) |
| (1 924) | 125 | (1 799) |
|
| Profit/(loss) for the period from continuing operations | 3 | 2 370 | (1 086) | 1 284 |
| 1 993 | (100) | 1 893 |
|
| Profit/(loss) for the period from discontinued operations | 6 | - | 254 | 254 |
| - | - | - |
|
| Profit/(loss) for the period |
| 2 370 | (832) | 1 538 |
| 1 993 | (100) | 1 893 |
|
| Attributable to: |
|
|
|
|
|
|
|
|
|
| BG Group shareholders (earnings) |
| 2 340 | (836) | 1 504(c) |
| 1 939 | (99) | 1 840(c) |
|
| Non-controlling interest |
| 30 | 4 | 34 |
| 54 | (1) | 53 |
|
|
|
| 2 370 | (832) | 1 538 |
| 1 993 | (100) | 1 893 |
|
| Earnings per share continuing operations - basic | 7 | 68.9c | (32.1c) | 36.8c |
| 57.2c | (2.9c) | 54.3c |
|
| Earnings per share discontinued operations - basic |
| - | 7.5c | 7.5c |
| - | - | - |
|
| Earnings per share continuing operations - diluted | 7 | 68.5c | (31.9c) | 36.6c |
| 56.9c | (2.9c) | 54.0c |
|
| Earnings per share discontinued operations - diluted |
| - | 7.4c | 7.4c |
| - | - | - |
|
| Total operating profit/(loss) including share of pre-tax operating results from joint ventures and associates(d) | 3 | 4 349 | (1 364) | 2 985 |
| 4 117 | (200) | 3 917 |
|
a) See Presentation of Non-GAAP measures (page 23) for an explanation of results excluding disposals, certain re-measurements and impairments and presentationof the results of joint ventures and associates.
b) Operating profit/(loss) is before share of results from joint ventures and associates.
c) Comprises earnings from continuing operations of $1 250 million (2011 $1 840 million) and from discontinued operations of $254 million (2011 $nil).
d) This measurement is shown by BG Group as it is used as a means of measuring the underlying performance of the business.
The notes on pages 34 to 44 form an integral part of these condensed financial statements.
For information on dividends paid in the period, see note 9 (page 43).
Consolidated Statement of Comprehensive Income
Second Quarter |
|
| Half Year | ||
2012$m | 2011$m |
|
| 2012$m | 2011$m |
297 | 1 272 |
| Profit for the period | 1 538 | 1 893 |
|
|
|
|
|
|
(19) | 96 |
| Hedge adjustments net of tax(a) | 108 | (248) |
(54) | (2) |
| Fair value movements on 'available-for-sale' assets net of tax(b) | (9) | (3) |
(543) | 308 |
| Currency translation adjustments | (585) | 269 |
(616) | 402 |
| Other comprehensive income/(expense), net of tax | (486) | 18 |
|
|
|
|
|
|
(319) | 1 674 |
| Total comprehensive income/(expense) for the period | 1 052 | 1 911 |
|
|
|
|
|
|
|
|
| Attributable to: |
|
|
(308) | 1 637 |
| BG Group shareholders | 1 037 | 1 849 |
(11) | 37 |
| Non-controlling interest | 15 | 62 |
(319) | 1 674 |
|
| 1 052 | 1 911 |
a) Income tax relating to hedge adjustments is a $7 million credit for the quarter (2011 $36 million charge) and a $50 million charge for the half year (2011 $77 million credit).
b) Income tax relating to fair value movements on 'available-for-sale' assets is a $24 million credit for the quarter (2011 $1 million credit) and a $4 million credit for the half year (2011 $2 million credit).
The notes on pages 34 to 44 form an integral part of these condensed financial statements.
Consolidated Balance Sheet
| As at 30 Jun2012$m | As at31 Dec2011 $m | As at 30 Jun2011$m |
Assets |
|
|
|
Non-current assets |
|
|
|
Goodwill | 26 | 752 | 879 |
Other intangible assets | 4 545 | 6 159 | 7 934 |
Property, plant and equipment | 38 974 | 37 316 | 31 269 |
Investments | 2 335 | 3 044 | 2 914 |
Deferred tax assets | 1 040 | 589 | 612 |
Trade and other receivables | 894 | 695 | 254 |
Commodity contracts and other derivative financial instruments | 379 | 366 | 401 |
| 48 193 | 48 921 | 44 263 |
Current assets |
| ||
Inventories | 722 | 768 | 724 |
Trade and other receivables | 6 656 | 7 375 | 8 136 |
Current tax receivable | 140 | 141 | 296 |
Commodity contracts and other derivative financial instruments | 223 | 331 | 441 |
Cash and cash equivalents | 5 332 | 3 601 | 2 203 |
| 13 073 | 12 216 | 11 800 |
Assets classified as held for sale(a) | 3 097 | 245 | 193 |
Total assets | 64 363 | 61 382 | 56 256 |
|
| ||
Liabilities |
| ||
Current liabilities |
| ||
Borrowings | (600) | (1 160) | (3 247) |
Trade and other payables | (5 330) | (5 342) | (5 605) |
Current tax liabilities | (1 483) | (1 238) | (1 848) |
Commodity contracts and other derivative financial instruments | (889) | (1 345) | (1 671) |
| (8 302) | (9 085) | (12 371) |
Non-current liabilities |
| ||
Borrowings | (15 031) | (13 977) | (8 805) |
Trade and other payables | (181) | (72) | (80) |
Commodity contracts and other derivative financial instruments | (754) | (696) | (924) |
Deferred income tax liabilities | (4 309) | (3 961) | (3 645) |
Retirement benefit obligations | (135) | (214) | (278) |
Provisions for other liabilities and charges | (3 624) | (3 603) | (1 876) |
| (24 034) | (22 523) | (15 608) |
Liabilities associated with assets classified as held for sale(a) | (1 702) | (99) | (101) |
Total liabilities | (34 038) | (31 707) | (28 080) |
Net assets | 30 325 | 29 675 | 28 176 |
Equity |
| ||
Total shareholders' equity | 30 031 | 29 384 | 27 855 |
Non-controlling interest in equity | 294 | 291 | 321 |
Total equity | 30 325 | 29 675 | 28 176 |
a) As at 30 June 2012 assets classified as held for sale include Comgás in Brazil and GNL Quintero S.A. in Chile.
The notes on pages 34 to 44 form an integral part of these condensed financial statements.
Consolidated Statement of Changes in Equity
|
| Called up share capital$m | Share premium account $m | Hedging reserve$m | Translation reserve$m | Other reserves$m | Retained earnings$m | Total$m | Non-con-trolling interest$m | Total$m |
| Equity as at 31 December 2011 | 577 | 584 | (642) | 2 508 | 2 710 | 23 647 | 29 384 | 291 | 29 675 |
| Total comprehensive income for the period | - | - | 161 | (619) | - | 1 495 | 1 037 | 15 | 1 052 |
| Issue of shares | - | 19 | - | - | - | - | 19 | - | 19 |
| Purchase of own shares | - | - | - | - | - | (16) | (16) | - | (16) |
| Adjustment in respect of employee share schemes | - | - | - | - | - | 50 | 50 | - | 50 |
| Dividends on ordinary shares | - | - | - | - | - | (443) | (443) | - | (443) |
| Dividends to non-controlling interest | - | - | - | - | - | - | - | (12) | (12) |
| Equity as at 30 June 2012 | 577 | 603 | (481) | 1 889 | 2 710 | 24 733 | 30 031 | 294 | 30 325 |
|
|
|
|
|
|
|
|
|
|
|
|
| Called up share capital$m | Share premium account $m | Hedging reserve$m | Translation reserve$m | Other reserves$m | Retained earnings$m | Total$m | Non-con-trolling interest$m | Total$m |
| Equity as at 31 December 2010 | 576 | 537 | (457) | 2 877 | 2 710 | 20 085 | 26 328 | 356 | 26 684 |
| Total comprehensive income for the period | - | - | (312) | 324 | - | 1 837 | 1 849 | 62 | 1 911 |
| Issue of shares | 1 | 26 | - | - | - | - | 27 | - | 27 |
| Purchase of own shares | - | - | - | - | - | (25) | (25) | - | (25) |
| Adjustment in respect of employee share schemes | - | - | - | - | - | 77 | 77 | - | 77 |
| Dividends on ordinary shares | - | - | - | - | - | (401) | (401) | - | (401) |
| Dividends to non-controlling interest | - | - | - | - | - | - | - | (97) | (97) |
| Equity as at 30 June 2011 | 577 | 563 | (769) | 3 201 | 2 710 | 21 573 | 27 855 | 321 | 28 176 |
The notes on pages 34 to 44 form an integral part of these condensed financial statements.
Consolidated Cash Flow Statement
Second Quarter |
|
| Half Year | ||
2012$m | 2011 $m |
|
| 2012$m | 2011 $m |
|
|
| Cash flows from operating activities |
|
|
861 | 2 245 |
| Profit before tax(a) | 3 100 | 3 693 |
(80) | (75) |
| Share of post-tax results from joint ventures and associates | (161) | (154) |
673 | 593 |
| Depreciation of property, plant and equipment and amortisation of intangible assets | 1 314 | 1 133 |
(181) | (141) |
| Fair value movements in commodity based contracts | (176) | 253 |
1 257 | (23) |
| Profits and losses on disposal of non-current assets and impairments(b) | 1 259 | (19) |
163 | 40 |
| Unsuccessful exploration expenditure written off | 203 | 123 |
(33) | (28) |
| Decrease in provisions | (110) | (66) |
(158) | (15) |
| Finance income | (227) | (110) |
181 | 89 |
| Finance costs | 279 | 242 |
20 | 19 |
| Share-based payments | 40 | 40 |
418 | (123) |
| Decrease/(increase) in working capital | 245 | (755) |
3 121 | 2 581 |
| Cash generated by operations | 5 766 | 4 380 |
(729) | (550) |
| Income taxes paid | (1 322) | (1 367) |
2 392 | 2 031 |
| Net cash inflow from operating activities | 4 444 | 3 013 |
|
|
| Cash flows from investing activities |
|
|
35 | 84 |
| Dividends received from joint ventures and associates | 52 | 95 |
1 089 | 97 |
| Proceeds from disposal of property, plant and equipment, intangible assets and investments | 1 089 | 195 |
(2 305) | (2 696) |
| Purchase of property, plant and equipment and intangible assets | (4 734) | (4 956) |
(10) | (38) |
| Loans to joint ventures and associates | (11) | (88) |
55 | 7 |
| Repayments from joint ventures and associates | 354 | 50 |
(70) | (17) |
| Investments in subsidiaries, joint ventures and associates | (145) | (113) |
(325) | - |
| Other loan advances | (325) | - |
(1 531) | (2 563) |
| Net cash outflow from investing activities | (3 720) | (4 817) |
|
|
| Cash flows from financing activities |
|
|
(179) | (72) |
| Net interest paid(c) | (229) | (128) |
(447) | (405) |
| Dividends paid | (448) | (406) |
(12) | (35) |
| Dividends paid to non-controlling interest | (13) | (37) |
1 688 | 2 044 |
| Net proceeds from issue and repayment of borrowings | 1 787 | 2 052 |
8 | 9 |
| Issue of shares | 19 | 27 |
- | 1 |
| Purchase of own shares | (16) | (25) |
1 058 | 1 542 |
| Net cash inflow from financing activities | 1 100 | 1 483 |
1 919 | 1 010 |
| Net increase/(decrease) in cash and cash equivalents(d) | 1 824 | (321) |
3 496 | 1 159 |
| Cash and cash equivalents at beginning of period(e) | 3 601 | 2 551 |
(35) | 35 |
| Effect of foreign exchange rate changes | (45) | (26) |
5 380 | 2 204 |
| Cash and cash equivalents at end of period(e) | 5 380 | 2 204 |
a) Includes profit/(loss) before tax from discontinued operations for the quarter of $252 million (2011 $(2) million) and for the half year of $255 million (2011 $1 million).
b) Includes profit on disposal of discontinued operations for the quarter of $254 million (2011 $(1) million) and for the half year of $255 million (2011 $nil).
c) Includes capitalised interest for the quarter of $106 million (2011 $38 million) and for the half year of $205 million (2011 $67 million).
d) Cash and cash equivalents comprise cash and short-term liquid investments that are readily convertible to cash.
e) The balance at 30 June 2012 includes cash and cash equivalents of $5 332 million (31 December 2011 $3 601 million; 30 June 2011 $2 203 million) and cash included within assets held for sale of $48 million (31 December 2011 $nil; 30 June 2011 $1 million).
The notes on pages 34to 44form an integral part of these condensed financial statements.
Notes
1. Basis of preparation
These primary statements are the condensed financial statements ('the financial statements') of BG Group plc for the quarter ended and the half year ended 30 June 2012. The financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006, and should be read in conjunction with the Annual Report and Accounts for the year ended 31 December 2011 which have been prepared in accordance with IFRS as adopted by the EU, as they provide an update of previously reported information. The latest statutory accounts delivered to the registrar were for the year ended 31 December 2011 which were audited by BG Group's statutory auditors PricewaterhouseCoopers LLP and on which the Auditors' Report was unqualified and did not contain statements under Sections 498(2) or 498(3) of the UK Companies Act 2006. These financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU, the requirements of the Disclosure and Transparency Rules issued by the Financial Services Authority and the accounting policies, methods of computation and presentation as set out in the 2011 Annual Report and Accounts. These financial statements have been reviewed, not audited, by PricewaterhouseCoopers LLP.
The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amount of revenues, expenses, assets and liabilities at the date of the financial statements. If in the future such estimates and assumptions, which are based on management's best judgement at the date of the financial statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the year in which the circumstances change.
Presentation of results
The presentation of BG Group's results separately identifies the effect of:
·; The re-measurement of certain financial instruments; and
·; Profits and losses on the disposal and impairment of non-current assets and businesses and certain other exceptional items.
These items, which are detailed in note 2 to the financial statements (page 35), are excluded from Business Performance in order to provide readers with a clear and consistent presentation of the underlying operating performance of the Group's ongoing businesses.
New accounting standards and interpretations
A number of amendments to accounting standards issued by the IASB are applicable from 1 January 2012. They have not had a material impact on the Group's financial statements for the half year ended 30 June 2012.
2. Disposals, re-measurements and impairments
Second Quarter |
|
| Half Year | ||
2012$m | 2011$m |
|
| 2012$m | 2011$m |
203 | 189 |
| Revenue and other operating income - re-measurements of commodity based contracts | 150 | (219) |
(1 511) | 24 |
| Profits and losses on disposal of non-current assets and impairments | (1 514) | 19 |
8 | (30) |
| Net finance income/(costs) - re-measurements of financial instruments | 3 | (25) |
258 | (60) |
| Taxation | 275 | 125 |
(1 042) | 123 |
|
| (1 086) | (100) |
- | 2 |
| Non-controlling interest | (4) | 1 |
(1 042) | 125 |
| Impact on earnings - continuing operations | (1 090) | (99) |
Second quarter and half year: Revenue and other operating income
Re-measurements included within revenue and other operating income amount to a credit of $203 million for the quarter (2011 $189 million credit), of which a credit of $95 million (2011 $48 million credit) represents non-cash mark-to-market movements on certain long-term gas contracts. For the half year, a credit of $150 million in respect of re-measurements is included within revenue and other operating income (2011 $219 million charge), of which a credit of $72 million represents non-cash mark-to-market movements on certain long-term gas contracts (2011 $3 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. In addition, re-measurements include a $108 million credit for the quarter (2011 $141 million credit) and a $78 million credit for the half year (2011 $216 million charge) representing unrealised mark-to-market movements associated with economic hedges.
Second quarter and half year: Disposals and impairments of non-current assets
The second quarter included a pre-tax charge of $1 800 million (post-tax $1 295 million charge) in respect of the impairment of certain assets associated with the shale gas business in the USA, as a result of the weaker outlook for US natural gas prices.
In June 2012, the Group disposed of 10% of its interest in the Karachaganak gas-condensate project for $651 million in cash, additional capacity in the CPC pipeline, and the final settlement of cost recovery and other claims. This resulted in the recognition of a pre-tax profit on disposal of $391 million (post-tax $155 million).
Other disposals and impairments in 2012 resulted in a pre-tax charge to the income statement of $102 million in the second quarter (post-tax $43 million charge) and a pre-tax charge of $105 million in the half year (post-tax $45 million charge).
In April 2011, BG Group signed and completed a Sale and Purchase Agreement (SPA) with its partners in Genting Sanyen Power in Malaysia for them to acquire the Group's 20% interest in the power plant. This resulted in a pre and post-tax profit of $28 million in the second quarter of 2011. Other disposals and write-offs resulted in a pre and post-tax charge of $4 million in the second quarter of 2011 and a pre-tax charge of $9 million in the first half of 2011 (post-tax $4 million credit).
Second quarter and half year: Net finance costs
Re-measurements presented in net finance costs include foreign exchange movements on certain borrowings, partly offset by certain derivatives used to hedge foreign exchange and interest rate risk.
Second quarter and half year: Taxation
During the first half of 2011, taxation included a $47 million credit which primarily relates to the impact of the increase in UK North Sea taxation on re-measurement balances.
3. Segmental analysis
Profit for the period | Business Performance | Disposals,re-measurements and impairments | Total Result | |||
Analysed by operating segment | ||||||
Second Quarter | 2012$m | 2011 $m | 2012$m | 2011$m | 2012$m | 2011 $m |
Group revenue |
|
|
|
|
|
|
Exploration and Production | 2 951 | 2 785 | - | - | 2 951 | 2 785 |
Liquefied Natural Gas | 1 900 | 1 811 | - | - | 1 900 | 1 811 |
Transmission and Distribution | 926 | 868 | - | - | 926 | 868 |
Less: intra-group sales | (210) | (348) | - | - | (210) | (348) |
Group revenue | 5 567 | 5 116 | - | - | 5 567 | 5 116 |
Other operating income(a) | 27 | (1) | 203 | 189 | 230 | 188 |
Group revenue and other operating income | 5 594 | 5 115 | 203 | 189 | 5 797 | 5 304 |
Operating profit/(loss) before share of results from jointventures and associates | ||||||
Exploration and Production | 1 258 | 1 413 | (1 402) | 68 | (144) | 1 481 |
Liquefied Natural Gas | 498 | 458 | 96 | 117 | 594 | 575 |
Transmission and Distribution | 90 | 149 | (2) | 28 | 88 | 177 |
Other activities | 12 | 12 | - | - | 12 | 12 |
| 1 858 | 2 032 | (1 308) | 213 | 550 | 2 245 |
Share of pre-tax operating results from joint ventures andassociates | ||||||
Exploration and Production | 3 | 7 | - | - | 3 | 7 |
Liquefied Natural Gas | 96 | 95 | - | - | 96 | 95 |
Transmission and Distribution | 19 | 18 | - | - | 19 | 18 |
| 118 | 120 | - | - | 118 | 120 |
Total operating profit/(loss) |
|
|
|
|
|
|
Exploration and Production | 1 261 | 1 420 | (1 402) | 68 | (141) | 1 488 |
Liquefied Natural Gas | 594 | 553 | 96 | 117 | 690 | 670 |
Transmission and Distribution | 109 | 167 | (2) | 28 | 107 | 195 |
Other activities | 12 | 12 | - | - | 12 | 12 |
| 1 976 | 2 152 | (1 308) | 213 | 668 | 2 365 |
Net finance (costs)/income |
|
|
|
|
|
|
Finance income | 29 | 20 | 131 | (4) | 160 | 16 |
Finance costs | (58) | (63) | (123) | (26) | (181) | (89) |
Share of joint ventures and associates | (9) | (16) | - | - | (9) | (16) |
| (38) | (59) | 8 | (30) | (30) | (89) |
Taxation |
|
|
|
|
|
|
Taxation | (822) | (913) | 258 | (60) | (564) | (973) |
Share of joint ventures and associates | (29) | (29) | - | - | (29) | (29) |
| (851) | (942) | 258 | (60) | (593) | (1 002) |
Profit/(loss) for the period from continuing operations | 1 087 | 1 151 | (1 042) | 123 | 45 | 1 274 |
Attributable to: |
|
|
|
|
|
|
BG Group shareholders (earnings) | 1 073 | 1 120 | (1 042) | 125 | 31 | 1 245 |
Non-controlling interest | 14 | 31 | - | (2) | 14 | 29 |
| 1 087 | 1 151 | (1 042) | 123 | 45 | 1 274 |
a) Business Performance Other operating income is attributable to segments as follows: E&P $12 million (2011 $2 million), LNG $6 million (2011 $(3) million) and T&D$9 million (2011 $nil).
3. Segmental analysis continued
| Business Performance | Disposals,re-measurements and impairments | Total Result | |||
Half Year | 2012$m | 2011 $m | 2012$m | 2011$m | 2012$m | 2011 $m |
Group revenue(a) |
|
|
|
|
|
|
Exploration and Production | 5 781 | 5 303 | - | - | 5 781 | 5 303 |
Liquefied Natural Gas | 4 201 | 3 526 | - | - | 4 201 | 3 526 |
Transmission and Distribution | 1 828 | 1 653 | - | - | 1 828 | 1 653 |
Less: intra-group sales | (463) | (573) | - | - | (463) | (573) |
Group revenue | 11 347 | 9 909 | - | - | 11 347 | 9 909 |
Other operating income(b) | 23 | 9 | 150 | (219) | 173 | (210) |
Group revenue and other operating income | 11 370 | 9 918 | 150 | (219) | 11 520 | 9 699 |
Operating profit/(loss) before share of results from jointventures and associates | ||||||
Exploration and Production | 2 695 | 2 664 | (1 429) | (2) | 1 266 | 2 662 |
Liquefied Natural Gas | 1 201 | 926 | 69 | (226) | 1 270 | 700 |
Transmission and Distribution | 198 | 277 | (4) | 28 | 194 | 305 |
Other activities | 6 | 4 | - | - | 6 | 4 |
| 4 100 | 3 871 | (1 364) | (200) | 2 736 | 3 671 |
Share of pre-tax operating results from joint ventures andassociates | ||||||
Exploration and Production | 15 | 14 | - | - | 15 | 14 |
Liquefied Natural Gas | 205 | 197 | - | - | 205 | 197 |
Transmission and Distribution | 29 | 35 | - | - | 29 | 35 |
| 249 | 246 | - | - | 249 | 246 |
Total operating profit/(loss) |
|
|
|
|
|
|
Exploration and Production | 2 710 | 2 678 | (1 429) | (2) | 1 281 | 2 676 |
Liquefied Natural Gas | 1 406 | 1 123 | 69 | (226) | 1 475 | 897 |
Transmission and Distribution | 227 | 312 | (4) | 28 | 223 | 340 |
Other activities | 6 | 4 | - | - | 6 | 4 |
| 4 349 | 4 117 | (1 364) | (200) | 2 985 | 3 917 |
Net finance (costs)/income |
|
|
|
|
|
|
Finance income | 78 | 39 | 149 | 70 | 227 | 109 |
Finance costs | (133) | (147) | (146) | (95) | (279) | (242) |
Share of joint ventures and associates | (24) | (30) | - | - | (24) | (30) |
| (79) | (138) | 3 | (25) | (76) | (163) |
Taxation |
|
|
|
|
|
|
Taxation | (1 836) | (1 924) | 275 | 125 | (1 561) | (1 799) |
Share of joint ventures and associates | (64) | (62) | - | - | (64) | (62) |
| (1 900) | (1 986) | 275 | 125 | (1 625) | (1 861) |
Profit/(loss) for the period from continuing operations | 2 370 | 1 993 | (1 086) | (100) | 1 284 | 1 893 |
Attributable to: |
|
|
|
|
|
|
BG Group shareholders (earnings) | 2 340 | 1 939 | (1 090) | (99) | 1 250 | 1 840 |
Non-controlling interest | 30 | 54 | 4 | (1) | 34 | 53 |
| 2 370 | 1 993 | (1 086) | (100) | 1 284 | 1 893 |
a) External sales are attributable to segments as follows: E&P $5 464 million (2011 $4 730 million), LNG $4 055 million (2011 $3 526 million) and T&D $1 828 million(2011 $1 653 million). Intra-group sales are attributable to segments as follows: E&P $317 million (2011 $573 million) and LNG $146 million (2011 $nil).
b) Business Performance Other operating income is attributable to segments as follows: E&P $8 million (2011 $(6) million), LNG $5 million (2011 $15 million) and T&D$10 million (2011 $nil).
3. Segmental analysis continued
| Business Performance | Disposals,re-measurements and impairments | Total Result | |||
Second Quarter | 2012$m | 2011$m | 2012$m | 2011$m | 2012$m | 2011$m |
Total operating profit/(loss) |
|
|
|
|
|
|
Exploration and Production | 1 261 | 1 420 | (1 402) | 68 | (141) | 1 488 |
Liquefied Natural Gas | 594 | 553 | 96 | 117 | 690 | 670 |
Transmission and Distribution | 109 | 167 | (2) | 28 | 107 | 195 |
| 1 964 | 2 140 | (1 308) | 213 | 656 | 2 353 |
Other activities | 12 | 12 | - | - | 12 | 12 |
| 1 976 | 2 152 | (1 308) | 213 | 668 | 2 365 |
Less: Share of pre-tax operating resultsfrom joint ventures and associates |
|
|
|
| (118) | (120) |
Add: Share of post-tax results fromjoint ventures and associates |
|
|
|
| 80 | 75 |
Net finance costs |
|
|
|
| (21) | (73) |
Profit before tax |
|
|
|
| 609 | 2 247 |
Taxation |
|
|
|
| (564) | (973) |
Profit for the period from continuing operations |
|
|
|
| 45 | 1 274 |
| Business Performance | Disposals,re-measurements and impairments | Total Result | |||
Half Year | 2012$m | 2011$m | 2012$m | 2011$m | 2012$m | 2011$m |
Total operating profit/(loss) |
|
|
|
|
|
|
Exploration and Production | 2 710 | 2 678 | (1 429) | (2) | 1 281 | 2 676 |
Liquefied Natural Gas | 1 406 | 1 123 | 69 | (226) | 1 475 | 897 |
Transmission and Distribution | 227 | 312 | (4) | 28 | 223 | 340 |
| 4 343 | 4 113 | (1 364) | (200) | 2 979 | 3 913 |
Other activities | 6 | 4 | - | - | 6 | 4 |
| 4 349 | 4 117 | (1 364) | (200) | 2 985 | 3 917 |
Less: Share of pre-tax operating resultsfrom joint ventures and associates |
|
|
|
| (249) | (246) |
Add: Share of post-tax results fromjoint ventures and associates |
|
|
|
| 161 | 154 |
Net finance costs |
|
|
|
| (52) | (133) |
Profit before tax |
|
|
|
| 2 845 | 3 692 |
Taxation |
|
|
|
| (1 561) | (1 799) |
Profit for the period from continuing operations |
|
|
|
| 1 284 | 1 893 |
4. Net finance (costs)/income
Second Quarter |
|
| Half Year | ||
2012$m | 2011$m |
|
| 2012$m | 2011$m |
(113) | (55) |
| Interest payable(a) | (236) | (128) |
(26) | (27) |
| Interest on obligations under finance leases | (52) | (53) |
106 | 38 |
| Interest capitalised | 205 | 67 |
(25) | (19) |
| Unwinding of discount on provisions(b) | (50) | (33) |
(123) | (26) |
| Disposals, re-measurements and impairments(c) | (146) | (95) |
(181) | (89) |
| Finance costs | (279) | (242) |
29 | 20 |
| Interest receivable(a) | 78 | 39 |
131 | (4) |
| Disposals, re-measurements and impairments(c) | 149 | 70 |
160 | 16 |
| Finance income | 227 | 109 |
(21) | (73) |
| Net finance (costs)/income(d) | (52) | (133) |
a) In 2012, interest receivable includes foreign exchange gains of $18 million for the quarter and foreign exchange gains of $9 million for the half year. In 2011, interest payable includes foreign exchange gains of $7 million for the quarter and foreign exchange losses of $15 million for the half year.
b) Relates to the unwinding of the discount on provisions and amounts in respect of pension obligations which represent the unwinding of discount on the plans' liabilities offset by the expected return on the plans' assets.
c) Net finance (costs)/income in disposals, re-measurements and impairments for the quarter of $8 million (2011 $(30) million) and for the half year of $3 million(2011 $(25) million) is included in note 2 (page 35) and principally reflects foreign exchange movements on certain borrowings, partly offset by mark-to-market movements on certain derivatives used to hedge foreign exchange and interest rate risk.
d) Excludes Group share of net finance costs from joint ventures and associates for the quarter of $9 million (2011 $16 million) and for the half year of $24 million(2011 $30 million).
5. Taxation
The tax charge for the second quarter was as follows: | Business Performance | Disposals,re-measurements and impairments | Total Result | |||
| ||||||
Second Quarter | 2012$m | 2011$m | 2012$m | 2011$m | 2012$m | 2011$m |
Tax charge/(credit) for the period excluding share of taxation from joint ventures and associates | 822 | 913 | (258) | 60 | 564 | 973 |
Share of taxation from joint ventures and associates | 29 | 29 | - | - | 29 | 29 |
Total including share of taxation from joint ventures and associates | 851 | 942 | (258) | 60 | 593 | 1 002 |
5. Taxation continued
The tax charge for the half year was as follows: | Business Performance | Disposals,re-measurements and impairments | Total Result | |||
| ||||||
Half Year | 2012$m | 2011$m | 2012$m | 2011$m | 2012$m | 2011$m |
Tax charge/(credit) for the period | 1 836 | 1 729 | (275) | (78) | 1 561 | 1 651 |
Prior period taxation(a) | - | 195 | - | (47) | - | 148 |
Total excluding share of taxation from joint ventures and associates | 1 836 | 1 924 | (275) | (125) | 1 561 | 1 799 |
Share of taxation from joint ventures and associates | 64 | 62 | - | - | 64 | 62 |
Total including share of taxation from joint ventures and associates | 1 900 | 1 986 | (275) | (125) | 1 625 | 1 861 |
a) Prior period taxation relates to the revision of deferred tax balances at 1 January 2011, primarily as a result of the increase in UK North Sea taxation announced inMarch 2011.
Business Performance taxation for the half year, excluding prior period taxation but including share of taxation from joint ventures and associates, was $1 900 million (2011 $1 791 million).The effective tax rate of 44.5% for the half year is based on the best estimate of the weighted average annual income tax rate expected for the full year.
6. Discontinued operations
The post-tax profit/loss of the businesses comprising discontinued operations, including profits and losses on disposals and impairments, was a $252 million gain for the second quarter (2011 $2 million loss) and a $254 million gain for the half year (2011 $nil).
In May 2012, the Group disposed of its 40% equity interest in two gas-fired power generation plants in the Philippines to its partner, First Gen Corporation, for net cash proceeds of $360 million. The sale and purchase agreement, completed on signing, covers the 1 000 megawatt Santa Rita power plant and the 500 megawatt San Lorenzo power plant, both on the island of Luzon. This resulted in a pre and post-tax profit of $252 million in the second quarter of 2012.
7. Earnings per ordinary share - continuing operations
Second Quarter |
|
| Half Year | ||||||
2012 | 2011 |
|
| 2012 | 2011 | ||||
$m | cents per share | $m | cents per share |
|
| $m | cents per share | $m | cents per share |
1 073 | 31.6 | 1 120 | 33.1 |
| Earnings - continuing operations excluding disposals, re-measurements and impairments | 2 340 | 68.9 | 1 939 | 57.2 |
(1 042) | (30.7) | 125 | 3.7 |
| Disposals, re-measurementsand impairments (after tax and non-controlling interest) | (1 090) | (32.1) | (99) | (2.9) |
31 | 0.9 | 1 245 | 36.8 |
| Earnings - continuing operations | 1 250 | 36.8 | 1 840 | 54.3 |
Basic earnings per share calculations in 2012 are based on the weighted average number of shares in issue of 3 395 million for the quarter and half year.
The earnings figure used to calculate diluted earnings per ordinary share is the same as that used to calculate earnings per ordinary share given above, divided by 3 415 million for the quarter and half year, being the weighted average number of ordinary shares in issue during the period as adjusted for dilutive equity instruments.
8. Reconciliation of net borrowings(a) - Half Year
| $m |
Net borrowings as at 31 December 2011 | (11 336) |
Net increase in cash and cash equivalents | 1 824 |
Cash inflow from changes in borrowings | (1 787) |
Inception of finance lease liabilities/assets | 2 |
Foreign exchange and other re-measurements | 69 |
Net borrowings classified as held for sale | 988 |
Net borrowings as at 30 June 2012 | (10 240) |
Net borrowings attributable to Comgás as at 30 June 2012 were $nil (31 December 2011 $963 million) with$998 million included in assets and liabilities classified as held for sale.
As at 30 June 2012, BG Group's share of the net borrowings in joint ventures and associates amounted to approximately $1.5 billion, including BG Group shareholder loans of approximately $1.1 billion. These net borrowings are included in BG Group's share of the net assets in joint ventures and associates which are consolidated in BG Group's accounts.
a) Net borrowings are defined on page 48.
Net borrowings comprise:
| As at30 Jun2012 $m | As at31 Dec2011 $m |
Amounts receivable/(due) within one year |
|
|
Cash and cash equivalents | 5 332 | 3 601 |
Overdrafts, loans and finance leases | (600) | (1 160) |
Derivative financial instruments(a) | 3 | (45) |
| 4 735 | 2 396 |
Amounts receivable/(due) after more than one year |
|
|
Loans and finance leases(b) | (14 836) | (13 784) |
Derivative financial instruments(a) | (139) | 52 |
| (14 975) | (13 732) |
Net borrowings | (10 240) | (11 336) |
a) These items are included within commodity contracts and other derivative financial instrument balances on the balance sheet.
b) Includes finance lease receivable of $195 million (2011 $193 million) included within non-current assets on the balance sheet.
8. Reconciliation of net borrowings - Half Year continued
Liquidity and Capital Resources
All the information below is as at 30 June 2012
The Group's principal borrowing entities are: BG Energy Holdings Limited (BGEH), including wholly owned subsidiary undertakings, the majority of whose borrowings are guaranteed by BG Energy Holdings Limited (collectively BGEH), and Comgás and Gujarat Gas which conduct their borrowing activities on a stand-alone basis.
BGEH had a $4.0 billion US Commercial Paper Programme, of which $3.92 billion was unutilised, and a $2.0 billion Eurocommercial Paper Programme, which was unutilised. BGEH also had a $15.0 billion Euro Medium Term Note Programme, of which $7.98 billion was unutilised.
BGEH had aggregate committed revolving borrowing facilities of $5.0 billion, of which $2.32 billion expires in 2013, $2.18 billion in 2016 and $0.5 billion in 2017. There are no restrictions on the application of funds under these facilities, which were undrawn.
In addition, BGEH had uncommitted borrowing facilities including multicurrency lines, overdraft facilities of £45 million and credit facilities of $20 million, all of which were unutilised.
Comgás had committed borrowing facilities of Brazilian Real (BRL) 1 755 million, of which BRL 5 million was unutilised.
9. Dividends
Half Year | ||||
2012 | 2011 | |||
$m | centsper share | $m | centsper share | |
Prior year final dividend, paid in the period | 443 | 12.96 | 401 | 11.78 |
The final dividend of 12.96 cents per ordinary share ($443 million) in respect of the year ended 31 December 2011 was paid on 25 May 2012 to shareholders on the register at the close of business on 13 April 2012. The interim dividend of 11.88 cents per ordinary share ($403 million) in respect of the year ending 31 December 2012 is payable on 7 September 2012 to shareholders on the register as at 3 August 2012.
10. Quarterly information: earnings and earnings per share
| 2012$m | 2011$m | 2012cents per share | 2011cents per share |
First quarter |
|
|
|
|
Total Result - continuing operations | 1 219 | 595 | 35.9 | 17.5 |
Total Result - discontinued operations | 2 | 2 | 0.1 | 0.1 |
Business Performance | 1 267 | 819 | 37.3 | 24.2 |
Second quarter |
|
| ||
Total Result - continuing operations | 31 | 1 245 | 0.9 | 36.8 |
Total Result - discontinued operations | 252 | (2) | 7.4 | (0.1) |
Business Performance | 1 073 | 1 120 | 31.6 | 33.1 |
Third quarter |
|
| ||
Total Result - continuing operations |
| 1 060 |
| 31.3 |
Total Result - discontinued operations |
| (2) |
| (0.1) |
Business Performance |
| 1 021 |
| 30.1 |
Fourth quarter |
|
| ||
Total Result - continuing operations |
| 1 336 |
| 39.4 |
Total Result - discontinued operations |
| - |
| - |
Business Performance |
| 1 477 |
| 43.5 |
Full year |
|
| ||
Total Result - continuing operations |
| 4 236 |
| 125.0 |
Total Result - discontinued operations |
| (2) |
| (0.1) |
Business Performance |
| 4 437 |
| 130.9 |
11. Commitments and contingencies
Details of the Group's commitments and contingent liabilities as at 31 December 2011 can be found in note 24, page 127 of the 2011 Annual Report and Accounts.
There have been no material changes to the Group's commitments in respect of capital expenditure, other commitments or contingent liabilities in the six month period to 30 June 2012.
12. Related party transactions
The Group provides goods and services to, and receives goods and services from, its joint ventures and associates. In addition, the Group provides financing to some of these parties by way of loans. Details of related party transactions for the year ended 31 December 2011 can be found in note 25, page 129 of the 2011 Annual Report and Accounts. There have been no material changes in these relationships in the period ending 30 June 2012. No related party transactions have taken place in the first six months of the current financial year that have materially affected the financial position or the performance of the Group during that period.
Supplementary information: Operating and financial data
Second Quarter | First Quarter |
|
| Half Year | ||
2012 | 2011 | 2012 |
|
| 2012 | 2011 |
|
|
|
| Production volumes (mmboe) |
|
|
8.0 | 6.2 | 8.1 |
| Oil | 16.1 | 12.8 |
8.8 | 8.8 | 8.4 |
| Liquids | 17.2 | 17.5 |
44.5 | 43.9 | 44.4 |
| Gas | 88.9 | 86.8 |
61.3 | 58.9 | 60.9 |
| Total | 122.2 | 117.1 |
|
|
|
| |||
|
| Production volumes (boed in thousands) |
| |||
87 | 68 | 89 |
| Oil | 88 | 71 |
97 | 97 | 92 |
| Liquids | 95 | 97 |
489 | 482 | 488 |
| Gas | 488 | 479 |
673 | 647 | 669 |
| Total | 671 | 647 |
|
|
|
| |||
$109.18 | $117.95 | $116.96 |
| Average realised oil price per barrel | $112.76 | $113.08 |
|
|
|
| |||
$89.95 | $98.32 | $99.78 |
| Average realised liquids price per barrel | $94.76 | $90.88 |
|
|
|
| |||
70.92c | 72.46c | 73.56c |
| Average realised UK gas price per produced therm | 72.16c | 69.94c |
(44.61p) | (44.43p) | (46.59p) |
| (45.54p) | (43.42p) | |
|
|
|
| |||
41.08c | 39.02c | 37.79c |
| Average realised International gas price per produced therm | 39.43c | 37.53c |
|
|
|
| |||
44.25c | 42.75c | 41.15c |
| Average realised gas price per produced therm | 42.70c | 41.12c |
|
|
|
| |||
$5.68 | $5.83 | $6.22 |
| Lifting costs per boe | $5.95 | $5.54 |
|
|
|
| |||
$9.71 | $8.93 | $9.54 |
| Operating expenditure per boe | $9.63 | $8.46 |
|
|
|
| |||
$9.18 | $7.96 | $8.53 |
| Depreciation per boe | $8.86 | $7.59 |
|
|
|
| |||
1 623 | 1 541 | 1 437 |
| Development expenditure (including acquisitions) ($m) | 3 060 | 2 736 |
|
|
|
| |||
|
| Gross exploration expenditure ($m) |
| |||
164 | 238 | 240 |
| Capitalised expenditure (including acquisitions) | 404 | 752 |
60 | 80 | 72 |
| Other expenditure | 132 | 181 |
224 | 318 | 312 |
| Total | 536 | 933 |
|
|
|
| |||
|
| Gross exploration expenditure by country ($m) |
| |||
33 | 27 | 40 |
| Australia | 73 | 53 |
17 | 69 | 74 |
| Brazil | 91 | 144 |
42 | 4 | 12 |
| Egypt | 54 | 7 |
73 | 30 | 97 |
| Tanzania | 170 | 123 |
40 | 22 | 35 |
| UK | 75 | 48 |
19 | 166 | 54 |
| Other | 73 | 558 |
224 | 318 | 312 |
| Total | 536 | 933 |
Supplementary information: Operating and financial data continued
Second Quarter | First Quarter |
| Half Year | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2012 | 2011 | 2012 |
|
| 2012 | 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
a) E&P capital investment on a cash basis includes acquisitions for the second quarter 2012 of $nil (second quarter 2011 $113 million; first quarter 2012 $nil) and for the half year 2012 of $nil (2011 $432 million).
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
| LNG capital investment ($m) |
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
716 | 730 | 603 |
| Australia | 1 319 | 1 293 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4 | 36 | 10 |
| Other | 14 | 72 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
720 | 766 | 613 |
| Capital investment on a cash basis ($m) | 1 333 | 1 365 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
119 | (229) | 263 |
| Other items | 382 | (429) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
839 | 537 | 876 |
| Total capital investment ($m) | 1 715 | 936 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplementary information: Operating and financial data continued
Second Quarter | First Quarter |
| Half Year | |||
2012 | 2011 | 2012 |
|
| 2012 | 2011 |
|
|
| T&D capital investment ($m) |
|
| |
67 | 76 | 79 |
| Brazil | 146 | 144 |
9 | 8 | 7 |
| Other | 16 | 14 |
76 | 84 | 86 |
| Capital investment on a cash basis ($m) | 162 | 158 |
8 | (2) | - |
| Other items | 8 | (5) |
84 | 82 | 86 |
| Total capital investment ($m) | 170 | 153 |
| ||||||
|
|
| Depreciation and amortisation by segment ($m) |
|
| |
600 | 504 | 558 |
| E&P | 1 158 | 958 |
40 | 43 | 39 |
| LNG | 79 | 86 |
32 | 45 | 43 |
| T&D | 75 | 87 |
1 | 1 | 1 |
| Other | 2 | 2 |
673 | 593 | 641 |
| Total | 1 314 | 1 133 |
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| LNG cargo deliveries by country |
|
| |
3 | 3 | 2 |
| Argentina | 5 | 3 |
1 | - | - |
| Brazil | 1 | - |
10 | 10 | 10 |
| Chile | 20 | 20 |
2 | 3 | - |
| China | 2 | 3 |
- | 1 | - |
| France | - | 2 |
3 | 2 | 1 |
| India | 4 | 2 |
16 | 7 | 16 |
| Japan | 32 | 11 |
- | - | 1 |
| Netherlands | 1 | - |
- | - | 1 |
| Portugal | 1 | - |
3 | 3 | 14 |
| South Korea | 17 | 19 |
- | - | - |
| Spain | - | 2 |
3 | 5 | 3 |
| Taiwan | 6 | 6 |
- | 1 | - |
| UAE | - | 1 |
1 | 7 | - |
| UK | 1 | 15 |
4 | 8 | 5 |
| USA | 9 | 16 |
46 | 50 | 53 |
| Total | 99 | 100 |
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| |||
2 957 | 3 061 | 3 203 |
| LNG managed volumes (thousand tonnes) | 6 160 | 6 165 |
Historical supplementary information is available on the BG Group plc website: www.bg-group.com
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Glossary
In BG Group's results some or all of the following definitions are used: | |||
| bcf | billion cubic feet |
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| bcfd | billion cubic feet per day |
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| boe | barrels of oil equivalent |
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| boed | barrels of oil equivalent per day |
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| bopd | barrels of oil per day |
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| CAGR | compound annual growth rate |
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| Capital investment | Comprises expenditure on property, plant and equipment, other intangible assets and investments, including business combinations |
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| Capital investment on a cash basis | Comprises cash flows on purchase of property, plant and equipment and intangible assets, loans to joint ventures and associates and investments in subsidiaries, joint ventures and associates |
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| E&P | Exploration and Production |
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| FPSO | Floating Production Storage and Offloading system |
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| Gearing ratio | net borrowings as a percentage of total shareholders' funds (excluding the re-measurementof commodity financial instruments and associated deferred tax) plus net borrowings |
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| IAS | International Accounting Standard issued by the IASB |
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| IASB | International Accounting Standards Board |
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| IFRIC | International Financial Reporting Interpretations Committee |
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| IFRS | International Financial Reporting Standards |
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| kboed | thousand barrels of oil equivalent per day |
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| LNG | Liquefied Natural Gas |
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| Managedvolumes | Comprises all LNG volumes contracted for purchase and having related revenue and other operating income recognised in the applicable period |
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| m | million |
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| mmboe | million barrels of oil equivalent |
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| mmbtu | million british thermal units |
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| mmcfd | million cubic feet per day |
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| mmcmd | million cubic metres per day |
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| mmscfd | million standard cubic feet per day |
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| mmscm | million standard cubic metres |
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| mmscmd | million standard cubic metres per day |
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| mtpa | million tonnes per annum |
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| Net borrowings | Comprise cash, current asset investments, finance lease liabilities/assets, currency and interest rate derivative financial instruments and short and long-term borrowings. Excludes net borrowings in respect of assets classified as held for sale. |
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| PSC | production sharing contract |
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| SEC | US Securities and Exchange Commission |
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| T&D | Transmission and Distribution |
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| Tbtu | trillion british thermal units |
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| tcf | trillion cubic feet |
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| Total operating profit | Operating profit plus share of pre-tax operating results of joint ventures and associates |
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| UKCS | United Kingdom Continental Shelf |
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| Unit operating expenditureper boe | Production costs and royalties incurred over the period divided by the net production for the period. This measure does not include the impact of depreciation and amortisation costs and exploration costs as they are not considered to be costs associated with the operation of producing assets. |
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| Unit lifting costs per boe | 'Unit operating expenditure' as defined above, excluding royalty, tariff and insurance costs incurred over the period divided by the net production for the period. |
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Enquiries |
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Enquiries relating to BG Group's results, businessand financial position should be made to: | General enquiries about shareholder mattersshould be made to: | |
Investor Relations DepartmentBG Group plcThames Valley Park DriveReadingBerkshireRG6 1PT | Equiniti LimitedAspect HouseSpencer RoadLancingWest SussexBN99 6DA | |
Tel: 0118 929 3025email: [email protected] | Tel: 0871 384 2064e-mail: via https://help.shareview.co.uk | |
Media Enquiries:Neil Burrows Tel: 0118 929 2462 |
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High resolution images are available at www.vismedia.co.uk |
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BG Group is listed on the US over-the-counter market knownas the International OTCQX. Enquiries should be made to: |
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OTC Markets Group Inc.304 Hudson Street3rd FloorNew York, NY 10013USA |
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email: [email protected] |
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Financial Calendar |
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Ex-dividend for 2012 interim dividend | 1 August 2012 | |
Record date for 2012 interim dividend | 3 August 2012 | |
Payment of 2012 interim dividend | 7 September 2012 | |
Announcement of 2012 third quarter results | 1 November 2012 | |
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BG Group plc website: www.bg-group.com |
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Registered office 100 Thames Valley Park Drive, Reading RG6 1PTRegistered in England No. 3690065 |
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Related Shares:
BG..L