OilVoice - BG Group Reports Fourth Quarter and Full Year Results

BG Group Reports Fourth Quarter and Full Year Results

Friday, February 05, 2010

BG Group plc has reported its 2009 fourth quarter and full year results.

Full Year Highlights
• Production volumes up 4%
• LNG total operating profit of £1.55 billion
• Earnings per share of 67.3p despite challenging economic environment
• Strong cash flow from operations of £4.9 billion
• Full year dividend increased by 10% to 12.35p
• Total reserves and resources increased by 10% to 14.5 billion boe
• Excellent progress in Brazil, Australia and the USA

BG Group's Chief Executive, Frank Chapman said:
'BG Group has delivered a solid performance this year despite the challenging economic environment. The results reflect the benefit of integration across the gas chain combined with a particular focus on markets - the hallmarks of BG Group's long-term strategy. The LNG business delivered a very strong result, while excellent progress continues to be made in Brazil, Australia and the USA, underpinning our confidence in the Group's growth outlook to 2020.'

Fourth quarter
Weaker prices caused a decline in revenue and other operating income of 10%. The fall in prices was partially offset by the positive effects of 8% growth in E&P production volumes and the recovery of past gas costs at Comgás, in Brazil, resulting in a 3% fall in total operating profit to £1 108 million.

Cash generated by operations was £1 329 million (2008 £1 922 million). Net finance costs for the quarter were £36 million.

Capital investment in the quarter of £1 093 million reflected continuing investment in E&P (£724 million), LNG (£172 million), T&D (£49 million) and Power (£148 million).

Full year
Lower gas and oil prices resulted in an 18% fall in revenue and other operating income. Despite a 37% drop in Brent oil prices and a 53% fall in Henry Hub gas prices, total operating profit was 21% lower as these price declines were partially offset by a 4% increase in E&P production volumes, a strong performance from the LNG segment, the recovery of past gas costs at Comgás and the effect of a stronger US Dollar.

Net finance costs were £144 million and included foreign exchange gains of £25 million.

The Group's effective tax rate (including BG Group's share of joint ventures and associates tax) was 42.0% (2008 42.5%) for the full year.

Cash generated by operations was £4 895 million (2008 £6 274 million). As at 31 December 2009, net debt was £2 956 million and the gearing ratio of the Group was 17%.

Earnings per share were 67.3 pence.

Capital investment (including acquisitions) in the year was £5 205 million and comprised investment in E&P (£4 226 million), LNG (£653 million), T&D (£151 million) and Power (£175 million).

In considering the dividend level the Board takes account of the outlook for earnings growth, cash flow and financial gearing. Taking these factors into account, the Board has recommended a final dividend of 6.73 pence per share, bringing the full year dividend to 12.35 pence per share, an increase of 10% compared with last year.

Exploration and Production (E&P)

Fourth quarter business highlights
Brazil - In November, BG Group announced that the Iracema appraisal well on BM-S-11 (BG Group 25%) confirmed the presence of an excellent oil and gas bearing reservoir. The well in-flow performance recorded during the tests was the highest so far achieved in BG Group's Santos Basin interests. Development well flow rates of up to 50 000 boed are anticipated; these rates being constrained by production facilities. Further evaluation of the well data is on-going and work on field development options has been initiated.

The Tupi North-East appraisal well on BM-S-11 encountered hydrocarbons in November and reinforces the partners' estimates that the Tupi accumulation holds five to eight billion boe of gross reserves and resources. Also on BM-S-11, formation tests on the Iara well confirmed the presence of producible light oil.

In January 2010, BG Group and its partners, Petrobras and Repsol, signed a Letter of Intent for the construction and leasing of a Floating, Production, Storage and Off-Loading (FPSO) vessel for the Guará development on BM-S-9 in the Santos Basin. The FPSO, with a production capacity of 120 000 bopd of oil and 175 mmscfd of gas, is expected to start up in early 2013. The lease is for a 20-year term.

Tunisia - Hasdrubal (BG Group 50%) came onstream in December, later than anticipated due to the commissioning of onshore plant systems taking longer than expected. Hasdrubal gas and butane will be sold to the domestic market, with condensate, oil and propane being exported. Hasdrubal production is now ramping up towards full capacity.

China - In December, BG Group signed a further PSC with China National Offshore Oil Corporation (CNOOC) covering Block 63/16, offshore China. Under the terms of the PSC, BG Group will be the operator and have a 100% interest during the exploration phase. In the event of a commercial discovery, CNOOC has an option to take an interest in the field. The agreement is subject to final government approval. BG Group will commence an extensive 3D seismic acquisition programme in the first half of 2010. Block 63/16 is BG Group's third block in the South China Sea and strengthens BG Group's interest in a prospective basin close to the southern China market.

Liquefied Natural Gas (LNG)

Fourth quarter business highlights
In November, BG Group announced a joint venture agreement to study a Floating Liquefied Natural Gas (FLNG) vessel as an additional option to commercialise the material associated natural gas reserves in the Santos Basin pre-salt, offshore Brazil. Further to the agreement, Front-End Engineering and Design (FEED) contracts have been awarded to three consortia for a FLNG vessel. The consortia will prepare FEED proposals through 2010 and a Final Investment Decision is anticipated in 2011. The partners in the joint venture are Petrobras (51.1%) and BG Group, Galp Energia and Repsol (all 16.3%).

The FLNG vessel will operate close to the planned Santos Basin FPSO vessels. The 3 mtpa LNG produced would be shipped either to Petrobras-operated regasification terminals at Pecém and Guanabara Bay to supply the Brazilian domestic market or exported to international markets.