FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the month of May
BG Group plc
100 Thames Valley Park Drive
Reading RG6 1PT
ENGLAND
(Address of principal executive offices)
The registrant files annual reports under cover of Form 20-F. By furnishing
the information contained in this Form the reigistrant is not also furnishing
the information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.
BG GROUP PLC
2007 FIRST QUARTER RESULTS
- --------------------------------------------------------------------------------
BG Group's Chief Executive, Frank Chapman said:
"BG has delivered a good operating performance against a background of softer
commodity prices and a weaker US dollar. In addition, the ramping up of
production from Buzzard, a new LNG supply agreement from Nigeria and the award
of an initial FEED contract for the Karachaganak Phase III expansion represent
solid progress against our long-term growth programme."
HIGHLIGHTS
First Quarter
Business Performance(i) 2007 2006
GBPm GBPm
Revenue and other operating income 1 980 1 972 -
Total operating profit including share of
pre-tax operating results from joint ventures and
associates 823 958 -14%
Earnings for the period 448 563 -20%
Earnings per share 13.1p 16.0p -18%
Total results for the period
(including disposals, re-measurements and
impairments)
Revenue and other operating income 1 947 1 996 -2%
Operating profit before share of results from joint
ventures and associates 734 912 -20%
Total operating profit including share of pre- tax
operating results from joint ventures and
associates 789 982 -20%
Earnings for the period 432 578 -25%
Earnings per share 12.7p 16.4p -23%
i) '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. For further explanation of Business Performance and the
presentation of results from joint ventures and associates, see
Presentation of Non-GAAP measures, page 10 and Results Presentation, page
3. Unless otherwise stated, the results discussed in this release relate to
BG Group's Business Performance.
HIGHLIGHTS
-Earnings were GBP448 million for the first quarter.
-At constant US$/UKGBP exchange rates and upstream prices, total operating
profit would have increased by 3% for the first quarter.
-LNG managed volumes increased by 25%.
-Agreed to acquire Masspower power plant, USA.
-Sale of selected Canadian exploration and production assets.
-Sale and Purchase Agreement signed with Nigeria LNG for the acquisition
of 2.25 mtpa from Train 7 for a 20 year term.
-Shareholders' Agreement signed for OKLNG, Nigeria.
-Shareholders' Agreement signed for Quintero LNG, Chile.
-Signed a Production Sharing Contract for a 45% interest in Block
KG-OSN-2004/1 in the Krishna-Godavari basin, India.
-Capital investment of GBP869 million included the acquisitions of the Lake
Road and Serene power plants.
RESULTS PRESENTATION
The presentation of BG Group's results under IFRS separately identifies the
effect of:
- The re-measurement of certain financial instruments.
- Profits and losses on the disposal and impairment of non-current assets
and businesses.
These items 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.
Under IFRS the results of joint ventures and associates are presented net of
finance costs and tax (see page 12). Given the relevance of these businesses
within BG Group, the results of joint ventures and associates are presented both
before interest and tax, and after tax. The pre-interest and tax result is
included in Business Performance discussed on pages 4 to 9. The table below sets
out the amounts related to joint ventures and associates, re-measurements under
IAS 39 and profits on disposal and impairment of non-current assets and
businesses.
Disposals,
First Quarter Business re-measurements Total
Performance and impairments(i) Result
2007 2006 2007 2006 2007 2006
GBPm GBPm GBPm GBPm GBPm GBPm
Operating profit before
share of results from
joint ventures and
associates 768 888 (33) 24 735 912
Profits and losses on
disposal of non-current
assets and impairments - - (1) - (1) -
Operating profit before
share of results from
joint ventures
and associates 768 888 (34) 24 734 912
Pre-tax share of
operating results
of joint ventures
and associates 55 70 - - 55 70
Total operating profit 823 958 (34) 24 789 982
Net finance costs
Finance income 33 36 5 3 38 39
Finance costs (30) (19) (4) (3) (34) (22)
Share of joint
ventures and
associates (12) (16) - - (12) (16)
(9) 1 1 - (8) 1
Taxation
Taxation (357) (368) 17 (10) (340) (378)
Share of joint ventures
and associates 1 (16) - - 1 (16)
(356) (384) 17 (10) (339) (394)
Profit for the period 458 575 (16) 14 442 589
Profit attributable to:
Shareholders (earnings) 448 563 (16) 15 432 578
Minority interest 10 12 - (1) 10 11
458 575 (16) 14 442 589
i) Re-measurements excluded from Business Performance
The IAS 39 re-measurements reflect movements in external market prices and
exchange rates. Financial instruments include certain long-term UK gas
contracts which are classified as derivatives under IAS 39 due to the nature
of the contract terms and are therefore required to be marked-to-market. This
treatment has no impact on the ongoing cashflows of the business and these
unrealised mark-to-market movements are best presented separately from
underlying business performance. For an explanation of Non-GAAP measures see
page 10.
BUSINESS REVIEW
The results discussed in this Business Review (pages 4 to 9) relate to BG
Group's performance excluding disposals, re-measurements and impairments. For
the impact and a description of these items, see the consolidated income
statement (page 12) and Note 2 of the accounts (page 17). Results at constant
US$/UKGBP exchange rates and upstream prices are also quoted. See Presentation
of Non-GAAP measures (page 10) for an explanation of these metrics.
GROUP
Business Performance First Quarter
2007 2006
GBPm GBPm
Revenue and other operating income 1 980 1 972 -
Total operating profit including share of pre-tax
results from joint ventures and associates
Exploration and Production 626 726 -14%
Liquefied Natural Gas 121 138 -12%
Transmission and Distribution 50 65 -23%
Power Generation 38 39 -3%
Other activities (12) (10) -20%
823 958 -14%
Net finance costs (9) 1 -
Taxation (356) (384) -7%
Earnings 448 563 -20%
Earnings per share 13.1p 16.0p -18%
Capital investment 869 386 +125%
Revenue and other operating income was broadly in line with the prior year.
Increased volumes in all segments were offset by lower prices in the E&P and LNG
segments and the weaker US$/UKGBP exchange rate.
Total operating profit of GBP823 million reflected a 4% increase in E&P
production volumes, offset by lower commodity prices and a weaker US$/UKGBP
exchange rate. At constant US$/UKGBP exchange rates and upstream prices,
underlying total operating profit would have increased by 3%.
The increase in the Group's effective tax rate (including BG Group's share of
joint ventures and associates) from 40% to 43.7% reflects the increase in the
North Sea tax rate which became effective from the second quarter 2006.
Cash conversion remained strong with cash generated by operations of GBP1 086
million.
Capital investment in the quarter of GBP869 million included power plant
acquisitions of GBP431 million in the USA and Italy, E&P acquisitions of GBP67
million in the UK, and continuing investment in North America and the Caribbean
(GBP110 million), Europe and Central Asia (GBP113 million), Mediterranean Basin
and Africa (GBP93 million), Asia Pacific (GBP36 million) and South America
(GBP19 million).
As at 31 March 2007, the Group had returned GBP105 million to shareholders as
part of the share repurchase programme announced on 8 February 2007. As at 31
March 2007, net borrowings were GBP27 million.
EXPLORATION AND PRODUCTION
Business Performance First Quarter
2007 2006
GBPm GBPm
Production volumes (mmboe) 58.2 55.8 +4%
Revenue and other operating income 1 027 1 073 -4%
Total operating profit 626 726 -14%
Capital investment 359 271 +32%
Additional operating and financial data are given on page 23.
E&P total operating profit of GBP626 million reflected a 4% increase in volumes,
offset by lower commodity prices and a weaker US$/UKGBP exchange rate. At
constant US$/UKGBP exchange rates and upstream prices, total operating profit
would have increased by 6%.
Production volumes increased by 4% principally due to Atlantic/Cromarty and the
start-up of the Buzzard field in the UK.
Unit operating expenditure was up 33 pence to GBP2.51 per boe reflecting the
start-up of new fields in the UK and maintenance activity.
The exploration charge of GBP56 million is GBP12 million higher than 2006
reflecting the increased exploration activities across the Group.
The Group's average realised international gas price was 16.3 pence (2006 18.4
pence) per produced therm reflecting lower Henry Hub prices and a weaker
US$/UKGBP exchange rate. In the UK, the average realised price per produced
therm was 37.0 pence (2006 38.8 pence).
Capital investment of GBP359 million included expenditure in Egypt (GBP28
million), India (GBP31 million), Trinidad and Tobago (GBP21 million), Tunisia
(GBP63 million) and the UK (GBP141 million).
First quarter business highlights
In February, Stage 1 of the Front-End Engineering and Design contract for Phase
III of the development of the Karachaganak Processing Complex in Kazakhstan was
awarded.
On 2 March, BG Group announced that, together with Oil and Natural Gas
Corporation Limited, it had signed a Production Sharing Contract (PSC) with the
Government of India for Block KG-OSN-2004/1, awarded in the NELP VI licensing
round. BG Group has a 45% interest in the shallow water block, which covers an
area of approximately 1 131 square kilometres and is located in the
Krishna-Godavari basin off the east coast of India.
On 6 March, BG Group announced that it had signed a Sale and Purchase Agreement
for the sale of producing assets in Canada - Bubbles, Ojay and Copton/Lynx - for
a final consideration of C$516 million (approximately US$437 million). BG Group
retains exploration prospects in Canada and Alaska. The sale completed on 2
April.
On 8 March, the PSC in Nigeria for offshore Block OPL 286 was completed by BG
Group and partners (BG Group 66% and operator).
On 30 March, BG Group completed the acquisition of a further 11.45% of Armada
and 1.0134% of Everest fields in the UKCS.
In March, the Venezuela and Trinidad and Tobago governments signed a framework
agreement on sharing cross-border reserves in the Plataforma Deltana which
includes the Manatee discovery (BG Group 50%).
LIQUEFIED NATURAL GAS
Business Performance First Quarter
2007 2006
GBPm GBPm
Revenue and other operating income 697 653 +7%
Total operating profit
Shipping and marketing 115 126 -9%
Liquefaction 25 30 -17%
Business development and other (19) (18) +6%
121 138 -12%
Capital investment 60 88 -32%
Additional operating and financial data are given on page 23.
LNG total operating profit fell by GBP17 million to GBP121 million as higher
volumes were more than offset by the lower Henry Hub price and the weaker
US$/UKGBP exchange rate.
In shipping and marketing, total operating profit of GBP115 million was down 9%,
reflecting the weaker US$ and lower Henry Hub price. At constant US$/UKGBP
exchange rates, shipping and marketing underlying total operating profit would
have increased by 2%.
Managed volumes were up 25% due to increased long-term contracted supply and
higher spot cargo availability.
BG Group's share of operating profit from liquefaction activities decreased by
GBP5 million to GBP25 million, principally due to lower Henry Hub prices.
Capital investment includes GBP43 million relating to LNG vessels, GBP6 million
relating to regasification development projects and GBP9 million in Atlantic
LNG.
First quarter business highlights
On 12 February, BG Group announced that it had signed a Sale and Purchase
Agreement with Nigeria LNG for the acquisition of 2.25 million tonnes per annum
(mtpa) of LNG for a 20 year term from the planned Train 7 project in Finima,
Bonny Island, Nigeria.
On 22 March, BG Group and its partners signed the Shareholders' Agreement for
the OKLNG project in Nigeria (BG Group 13.5%). The Agreement governs the OKLNG
Free Zone Enterprise, and the development of the OKLNG Project.
During the first quarter, BG Group signed the Shareholders' Agreement for GNL
Quintero S.A., (BG Group 40%). GNL Quintero has been formed to construct, own
and operate an LNG import facility in Quintero Bay, Chile.
In February, work was suspended at the Brindisi LNG site following allegations
regarding the permitting process for the project. Further details of this post
balance sheet event, were included in the 2006 Annual Report and Accounts.
TRANSMISSION AND DISTRIBUTION
Business Performance First Quarter
2007 2006
GBPm GBPm
Revenue and other operating income
Comgas 174 168 +4%
Other 46 35 +31%
220 203 +8%
Total operating profit
Comgas 40 50 -20%
Other 10 15 -33%
50 65 -23%
Capital investment 16 25 -36%
T&D total operating profit for the quarter was GBP50 million.
At Comgas, in Brazil, total operating profit of GBP40 million was down GBP10
million as the 7% increase in volumes was offset by the adverse effect of the
Brazilian Real (BRL) exchange rate, movements in the regulatory current account
and higher costs. Operating profit in the quarter includes GBP2 million (2006
GBP5 million) to be passed back to customers in future periods. At the end of
the quarter, the total to be passed back to customers in future periods is GBP8
million.
Profits derived from Interconnector capacity were GBP5 million lower reflecting
lower differentials between UK and European gas prices.
Capital investment mainly represents the development of the Comgas pipeline
network.
POWER GENERATION
Business Performance First Quarter
2007 2006
GBPm GBPm
Revenue and other operating income 96 92 +4%
Total operating profit 38 39 -3%
Capital investment 433 1 -
The increase in revenue is primarily due to the pass through of gas costs. Total
operating profit of GBP38 million in the quarter was broadly in line with 2006.
This includes a one-off contribution from the settlement of a contractual
dispute at Premier Power, and lower profits at Seabank where one-off insurance
proceeds arose in 2006.
Capital investment relates primarily to the acquisitions of the Lake Road power
plant in the USA and the remaining equity (66.3%) of Serene S.p.A in Italy.
First quarter business highlights
The acquisition of the Lake Road power plant, located in Connecticut, USA
completed on 13 March and the acquisition of the remaining equity in the Serene
power plants, Italy completed on 14 February.
On 2 April, BG Group announced that it had signed a Sale and Purchase Agreement
to acquire the Masspower power plant, a 262 MW gas- and oil-fired combined cycle
facility located in Indian Orchard, Massachusetts, USA for US$150 million. The
purchase completed on 1 May 2007.
Presentation of Non-GAAP measures
Business Performance
'Business Performance' excludes 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 in the UK and US. 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 impairments
BG Group's commercial arrangements for marketing gas include the use of
long-term gas sales contracts. Whilst the activity surrounding these contracts
involves the physical delivery of gas, certain UK 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.
BG Group also uses commodity instruments to manage certain price exposures in
respect of optimising the timing of its gas sales associated with contracted
UK storage and pipeline capacity. These instruments are also required to be
measured at fair value at the balance sheet date under IAS 39. However, IAS 39
does not allow the matching of these fair values to the economically hedged
value of the related gas in storage (taking account of gas prices based on the
forward curve or expected delivery destination and the associated storage and
capacity costs).
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 cannot be designated as hedges under IAS 39, unrealised
movements in fair value are recorded in the income statement.
Unrealised gains and losses in respect of long-term gas sales contracts and
derivatives associated with gas in UK storage and pipeline facilities and
interest rate and foreign exchange exposure in respect of financial
instruments which cannot be designated as hedges under IAS 39 are disclosed
separately as 'disposals, re-measurements and impairments'. Realised gains and
losses relating to these instruments 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, closures and impairments, as they are items
which 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 12 and note 2 to the accounts, page 17.
Joint ventures and associates
Under 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 to the accounts, page 18.
Exchange rates and prices
BG Group also discloses certain information, as indicated, at constant
US$/UKGBP exchange rates and upstream prices. The presentation of results in
this manner is intended to provide additional information to explain further
the underlying trends in the business.
Net borrowings/funds
BG Group provides a reconciliation of net borrowings/funds and an analysis of
the amounts included within net borrowings/funds as this is an important
liquidity measure for the Group.
LEGAL NOTICE
These results include "forward-looking information" within the meaning of
Section 27A of the US Securities Act of 1933, as amended and Section 21E of the
US Securities Exchange Act of 1934, as amended. Certain statements included in
these results, including without limitation, those concerning (i) strategies,
outlook and growth opportunities, (ii) positioning to deliver future plans and
to realise potential for growth, (iii) delivery of the performance required to
achieve BG Group's growth programme, (iv) development of new markets, (v) the
development and commencement of commercial operations of new projects, (vi)
liquidity and capital resources, (vii) plans for capital and investment
expenditure and (viii) statements preceded by "expected", "scheduled",
"targeted", "planned", "proposed", "intended" or similar statements, contain
certain forward-looking statements concerning operations, economic performance
and financial condition. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, no assurance can be
given that such expectations will prove to have been correct. Accordingly,
results could differ materially from those set out in the forward-looking
statements as a result of, among other factors, (i) changes in economic, market
and competitive conditions, including oil and gas prices, (ii) success in
implementing business and operating initiatives, (iii) changes in the regulatory
environment and other government actions, including UK and international
corporation tax rates, (iv) a major recession or significant upheaval in the
major markets in which BG Group operates, (v) the failure to ensure the safe
operation of assets worldwide, (vi) implementation risk, being the challenges
associated with delivering capital intensive projects on time and on budget,
including the need to retain and motivate staff, (vii) commodity risk, being the
risk of a significant fluctuation in oil and/or gas prices from those assumed,
(viii) fluctuations in exchange rates, in particular the US$/UKGBP exchange rate
being significantly different to that assumed, (ix) risks encountered in the gas
and oil exploration and production sector in general, (x) business risk
management and (xi) the Risk Factors included in BG Group's Annual Report and
Accounts 2006. BG Group undertakes no obligation to update any forward-looking
statements.
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.
CONSOLIDATED INCOME STATEMENT
FIRST QUARTER
2007 2006
Business Disposals, Total Business Disposals, Total
Performance re-measurements Result Performance re-measurements Result
(i) and impairments (i) and impairments
(Note 2)(i) (Note 2)(i)
Notes GBPm GBPm GBPm GBPm GBPm GBPm
Group revenue 1 943 - 1 943 1 931 - 1 931
Other operating income 2 37 (33) 4 41 24 65
Group revenue and other
operating income 3 1 980 (33) 1 947 1 972 24 1 996
Operating costs (1 212) - (1 212) (1 084) - (1 084)
Profits and losses on disposal
of non-current assets and
impairments 2 - (1) (1) - - -
Operating profit/(loss)
before share of results
from joint ventures and
associates 3 768 (34) 734 888 24 912
Finance income 2, 4 33 5 38 36 3 39
Finance costs 2, 4 (30) (4) (34) (19) (3) (22)
Share of post-tax results
from joint ventures and
associates 3 44 - 44 38 - 38
Profit/(loss) before tax 815 (33) 782 943 24 967
Taxation 2, 5 (357) 17 (340) (368) (10) (378)
Profit for the period 458 (16) 442 575 14 589
Attributable to:
BG Group shareholders
(earnings) 448 (16) 432 563 15 578
Minority interest 10 - 10 12 (1) 11
458 (16) 442 575 14 589
Earnings per share - basic 6 13.1p (0.4p) 12.7p 16.0p 0.4p 16.4p
Earnings per share -
diluted 6 13.0p (0.4p) 12.6p 15.9p 0.4p 16.3p
Total operating profit
including share of pre-tax
operating results from joint
ventures and associates(ii) 3 823 (34) 789 958 24 982
i) See Presentation of Non-GAAP measures, page 10, for an explanation of
results excluding disposals, re-measurements and impairments and
presentation of the results of joint ventures and associates.
ii) This measurement is shown by BG Group as it is used as a means of measuring
the underlying performance of the business.
CONSOLIDATED BALANCE SHEET
As at
31 Mar 31 Dec 31 Mar
2007 2006(i) 2006
GBPm GBPm GBPm
Assets
Non-current assets
Goodwill 339 328 361
Other intangible assets 665 694 797
Property, plant and equipment 6 535 5 960 5 835
Investments 1 094 1 086 1 203
Deferred tax assets 70 74 90
Trade and other receivables 48 49 51
Commodity contracts and other derivative
financial instruments 402 273 95
9 153 8 464 8 432
Current assets
Inventories 228 247 170
Trade and other receivables 1 828 1 854 1 837
Commodity contracts and other derivative
financial instruments 247 575 12
Cash and cash equivalents 1 705 1 463 1 697
4 008 4 139 3 716
Assets classified as held for sale 224 85 10
Total assets 13 385 12 688 12 158
Liabilities
Current liabilities
Borrowings (66) (103) (47)
Trade and other payables (1 711) (1 618) (1 529)
Current tax liabilities (513) (357) (466)
Commodity contracts and other derivative
financial instruments (507) (741) (658)
(2 797) (2 819) (2 700)
Non-current liabilities
Borrowings (1 768) (1 559) (1 507)
Trade and other payables (19) (21) (63)
Commodity contracts and other derivative
financial instruments (196) (90) -
Deferred income tax liabilities (1 171) (1 146) (774)
Retirement benefit obligations (145) (167) (159)
Provisions for other liabilities and charges (402) (387) (375)
(3 701) (3 370) (2 878)
Liabilities associated with assets classified as
held for sale (27) (34) (3)
Total liabilities (6 525) (6 223) (5 581)
Net assets 6 860 6 465 6 577
Attributable to:
BG Group equity shareholders 6 747 6 363 6 464
Minority interest 113 102 113
Total equity 6 860 6 465 6 577
(i) Restated as a result of post balance sheet events as detailed in the 2006
Annual Report and Accounts.
CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
First Quarter
2007 2006
GBPm GBPm
Profit for the period 442 589
Hedge adjustments net of tax 13 22
Currency translation adjustments 26 (29)
Net gains/(losses) recognised directly in equity 39 (7)
Total recognised income for the period 481 582
Attributable to:
Minority interests 11 15
Shareholders 470 567
481 582
CONSOLIDATED CASH FLOW STATEMENT
First Quarter
2007 2006
GBPm GBPm
Cash flows from operating activities
Profit before taxation 782 967
Share of post-tax results from joint ventures and
associates (44) (38)
Depreciation of property, plant and equipment and
amortisation of intangible assets 168 149
Fair value movements in commodity contracts 72 (41)
Profit and losses on disposal of non-current assets and
impairments 1 -
Unsuccessful exploration expenditure written off 10 11
(Decrease)/increase in provisions (20) 4
Finance income (38) (39)
Finance costs 34 22
Share-based payments 7 6
Decrease/(increase) in working capital 114 (54)
Cash generated by operations 1 086 987
Income taxes paid (184) (285)
Net cash inflow from operating activities 902 702
Cash flows from investing activities
Dividends received from joint ventures and associates 24 11
Proceeds from disposal of subsidiary undertakings and
investments 80 4
Purchase of property, plant and equipment and intangible
assets (374) (349)
Loans (to)/from joint ventures and associates (15) (16)
Business combinations and investments (406) (2)
Net cash (outflow)/inflow from investing activities (691) (352)
Cash flows from financing activities
Net interest received/(paid)(i) (2) 8
Net proceeds from issue of new borrowings 137 16
Repayment of borrowings (16) (48)
Issue of shares 7 6
Purchase of own shares (96) (147)
Net cash inflow/(outflow) from financing activities 30 (165)
Net increase in cash and cash equivalents 241 185
Cash and cash equivalents at beginning of period 1 463 1 516
Effect of foreign exchange rate changes 1 (4)
Cash and cash equivalents at end of period(ii) 1 705 1 697
i) Includes capitalised interest for the first quarter of GBP11 million (2006
GBP14 million).
ii) Cash and cash equivalents comprise cash and short-term liquid investments
that are readily convertible to cash.
RECONCILIATION OF NET BORROWINGS/FUNDS(i) - FIRST QUARTER
GBPm
Net borrowings as at 31 December 2006(i) (ii) (103)
Net increase in cash and cash equivalents 241
Cash inflow from changes in gross borrowings (121)
Inception of finance leases (16)
Effect of acquisitions (40)
Foreign exchange and other re-measurements 12
Net borrowings as at 31 March 2007(i) (ii) (27)
Net borrowings attributable to Comgas were GBP265 million (31 December 2006
GBP242 million).
As at 31 March 2007, BG Group's share of the net borrowings in joint ventures
and associates amounted to approximately GBP1 billion, including BG Group
shareholder loans of approximately GBP0.6 billion. These net borrowings are
included in BG Group's share of the net assets in joint ventures and associates
which are consolidated in BG Group's accounts.
i) Net borrowings/funds are defined on page 25.
ii) Net borrowings/funds comprise:
As at
31 Mar 2007 31 Dec 2006
GBPm GBPm
Amounts receivable/(due) within one year
Cash and cash equivalents 1 705 1 463
Overdrafts, loans and finance leases (66) (103)
Derivative financial instruments(iii) (7) -
1 632 1 360
Amounts receivable/(due) after more than one year
Loans and finance leases (1 768) (1 559)
Derivative financial instruments(iii) 109 96
(1 659) (1 463)
Net borrowings (27) (103)
iii) These items are included within commodity contracts and other derivative
financial instrument balances on the balance sheet.
Notes
1. Basis of preparation
These primary statements are the unaudited interim consolidated financial
statements of BG Group plc for the quarter ended 31 March 2007. The financial
information does not comprise statutory accounts within the meaning of Section
240 of the Companies Act 1985, and should be read in conjunction with the Annual
Report and Accounts for the year ended 31 December 2006, as they provide an
update of previously reported information.
The preparation of the interim 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 interim financial statements. If in
the future such estimates and assumptions, which are based on management's best
judgment at the date of the interim 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.
2. Disposals, re-measurements and impairments
First Quarter
2007 2006
GBPm GBPm
Revenue and other operating income - (33) 24
re-measurements of commodity contracts
Profits and losses on disposal of non-current assets and
impairments (1) -
Net finance income - re-measurements of financial instruments 1 -
Taxation 17 (10)
Minority interest - 1
Impact on earnings (16) 15
First quarter: Revenue and other operating income
Re-measurements included within revenue and other operating income amount to a
charge of GBP33 million for the quarter (2006 GBP24 million credit), of which a
GBP3 million charge (2006 GBP19 million credit) represents non-cash
mark-to-market movements on certain long-term UK gas contracts. 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.
Net finance costs
Re-measurements presented in net finance costs relate primarily to certain
derivatives used to hedge foreign exchange and interest rate risk which have not
been designated as hedges under IAS 39, partly offset by foreign exchange
movements on certain borrowings in a subsidiary.
2007 first quarter: Disposal of non-current assets
During the first quarter, BG Group disposed of its Mauritanian interests. This
resulted in a loss on disposal of GBP1 million. No tax arose on the disposal.
3. Segmental analysis
Group revenue and Business Disposals, Total Business Disposals, Total
other operating income Performance re-measurements Result Performance re-measurements Result
and impairments and impairments
First Quarter 2007 2007 2007 2006 2006 2006
GBPm GBPm GBPm GBPm GBPm GBPm
Exploration and Production 1 027 (33) 994 1 073 24 1 097
Liquefied Natural Gas 697 - 697 653 - 653
Transmission and Distribution 220 - 220 203 - 203
Power Generation 96 - 96 92 - 92
Other activities 2 - 2 3 - 3
Less: intra-group sales (62) - (62) (52) - (52)
1 980 (33) 1 947 1 972 24 1 996
Business Disposals, Total Result
Performance(i) re-measurements
and impairments(i)
First Quarter 2007 2006 2007 2006 2007 2006
GBPm GBPm GBPm GBPm GBPm GBPm
Total operating profit
before share of results
from joint ventures and
associates
Exploration and Production 626 726 (34) 24 592 750
Liquefied Natural Gas 96 108 - - 96 108
Transmission and Distribution 40 54 - - 40 54
Power Generation 18 10 - - 18 10
Other activities (12) (10) - - (12) (10)
768 888 (34) 24 734 912
Pre-tax share of operating
results of joint ventures
and associates(ii)
Liquefied Natural Gas 25 30 - - 25 30
Transmission and Distribution 10 11 - - 10 11
Power Generation 20 29 - - 20 29
55 70 - - 55 70
Total operating profit
including share of results
from joint ventures and
associates
Exploration and Production 626 726 (34) 24 592 750
Liquefied Natural Gas 121 138 - - 121 138
Transmission and Distribution 50 65 - - 50 65
Power Generation 38 39 - - 38 39
Other activities (12) (10) - - (12) (10)
823 958 (34) 24 789 982
i) Business Performance excludes disposals, certain re-measurements and
impairments. See Note 2, page 17 and Presentation of Non-GAAP measures,
page 10.
ii) Share of results in joint ventures and associates in the table above is
before finance costs and taxation. The share of results after finance
costs and taxation for the quarter is GBP44 million (2006 GBP38 million).
3. Segmental analysis (continued)
Total Result Operating profit before Share of results in Total Result
share of results from joint joint ventures and
ventures and associates associates
First Quarter 2007 2006 2007 2006 2007 2006
GBPm GBPm GBPm GBPm GBPm GBPm
Exploration and Production 592 750 - - 592 750
Liquefied Natural Gas 96 108 16 12 112 120
Transmission and Distribution 40 54 15 6 55 60
Power Generation 18 10 13 20 31 30
Other activities (12) (10) - - (12) (10)
734 912 44 38 778 950
Net finance income 4 17
Taxation (340) (378)
Profit for the period 442 589
4. Net finance costs
First Quarter
2007 2006
GBPm GBPm
Interest payable (23) (18)
Interest on obligations under finance leases (13) (12)
Interest capitalised 11 14
Unwinding of discount on provisions(i) (5) (3)
Disposals, re-measurements and impairments (Note 2) (4) (3)
Finance costs (34) (22)
Interest receivable 33 36
Disposals, re-measurements and impairments (Note 2) 5 3
Finance income 38 39
Net finance income(ii) 4 17
i) Relates to the unwinding of the discount on provisions in respect of
decommissioning 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.
ii) Excludes Group share of net finance costs from joint ventures and
associates for the quarter of GBP12 million (2006 GBP16 million).
5. Taxation
The taxation charge for the quarter before disposals, re-measurements and
impairments was GBP357 million (2006 GBP368 million) and the taxation charge
including disposals, re-measurements and impairments was GBP340 million (2006
GBP378 million).
The Group share of taxation from joint ventures and associates for the quarter
was GBP1 million credit (2006 GBP16 million charge).
6. Earnings per ordinary share
First Quarter
2007 2006
GBPm Pence GBPm Pence
per per
share share
Earnings 432 12.7 578 16.4
Re-measurements (after tax and minority interest) 15 0.4 (15) (0.4)
Profits and losses on disposals (after tax) 1 - - -
Earnings - excluding disposals, re-measurements
and impairments 448 13.1 563 16.0
Basic earnings per share calculations in 2007 are based on shares in issue of 3
407 million for the quarter.
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 3 437 million for the quarter, being the weighted average number of ordinary
shares in issue during the quarter as adjusted for share options.
7. Capital investment: geographical analysis
First Quarter
2007 2006
GBPm GBPm
Europe and Central Asia 260 104
South America 19 73
Asia Pacific 36 23
North America and the Caribbean 461 109
Mediterranean Basin and Africa 93 77
869 386
8. Quarterly information: earnings and earnings per share
2007 2006 2007 2006
GBPm GBPm pence pence
First quarter
- including disposals, re-measurements and impairments 432 578 12.7 16.4
- excluding disposals, re-measurements and impairments 448 563 13.1 16.0
Second quarter
- including disposals, re-measurements and impairments 418 12.0
- excluding disposals, re-measurements and impairments 325 9.3
Third quarter
- including disposals, re-measurements and impairments 394 11.5
- excluding disposals, re-measurements and impairments 342 10.0
Fourth quarter
- including disposals, re-measurements and impairments 389(i) 11.4(i)
- excluding disposals, re-measurements and impairments 410 12.0
Full year
- including disposals, re-measurements and impairments 1 779(i) 51.4(i)
- excluding disposals, re-measurements and impairments 1 640 47.4
(i) Restated as a result of post balance sheet events as detailed in the 2006
Annual Report and Accounts.
Supplementary information: Operating and financial data
First Quarter Fourth
Quarter
2007 2006 2006
Production volumes (mmboe)
- oil 6.5 5.6 5.9
- liquids 8.8 7.4 8.7
- gas 42.9 42.8 42.6
- total 58.2 55.8 57.2
Production volumes (kboed)
- oil 72 62 64
- liquids 98 82 95
- gas 477 476 463
- total 647 620 622
LNG cargoes
- Lake Charles, USA 18 2 13
- Elba Island, USA 15 9 14
- Europe, Asia and other USA 19 29 23
- total 52 40 50
LNG managed volumes (thousand mmbtu) 144 752 115 812 139 763
Average realised oil price per barrel GBP29.60 GBP35.74 GBP31.57
($58.13) ($62.53) ($60.13)
Average realised liquids price per barrel GBP23.21 GBP28.68 GBP24.36
($45.57) ($50.17) ($46.40)
Average realised UK gas price per produced
therm 37.03p 38.84p 34.41p
Average realised International gas price per
produced therm 16.31p 18.40p 16.69p
Average realised gas price per produced therm 21.50p 23.69p 21.28p
Lifting costs per boe GBP1.51 GBP1.19 GBP1.51
($2.97) ($2.08) ($2.88)
Operating expenditure per boe GBP2.51 GBP2.18 GBP2.53
($4.92) ($3.82) ($4.82)
Development expenditure (GBPm) 291 131 201
Gross exploration expenditure (GBPm)
- capitalised expenditure 59 136 129
- other expenditure 46 33 51
- gross expenditure 105 169 180
Supplementary information: Operating and financial data (continued)
BG Group's exposure to the oil price varies according to a number of factors
including the mix of production and sales. Management estimates that, other
factors being constant, a $1.00 rise (or fall) in the Brent price would increase
(or decrease) operating profit in 2007 by approximately GBP40 million to
GBP50 million.
BG Group's exposure to the US$/UKGBP exchange rate varies according to a number
of factors including commodity prices and the timing of US Dollar revenues and
costs including capital expenditure. Management estimates that in 2007, other
factors being constant, a 10 cent strengthening (or weakening) in the US Dollar
would increase (or decrease) operating profit by approximately GBP140 million to
GBP160 million.
Glossary
In BG Group's results some or all of the following definitions are used:
bcf billion cubic feet
bcfd billion cubic feet per day
bcmpa billion cubic metres per annum
boe barrels of oil equivalent
boed barrels of oil equivalent per day
bopd barrels of oil per day
CCGT combined cycle gas turbine
DCQ daily contracted quantity
E&P Exploration and Production
EPC engineering, procurement and construction
EPIC engineering, procurement, installation and commissioning
FEED front end engineering design
FERC Federal Energy Regulatory Commission
Gearing net borrowings as a percentage of total shareholders' funds
ratio (excluding the re-measurement of commodity financial instruments and
associated deferred tax) plus net borrowings
GW gigawatt
IAS 39 International Accounting Standard 39 (Financial Instruments)
IFRS International Financial Reporting Standards
kboed thousand barrels of oil equivalent per day
LNG Liquefied Natural Gas
Managed Comprises all LNG volumes contracted for purchase and having related
volumes revenue and other operating income recognised in the applicable
period
m million
mmboe million barrels of oil equivalent
mmbtu million british thermal units
mmcfd million cubic feet per day
mmcmd million cubic metres per day
mmscfd million standard cubic feet per day
mmscm million standard cubic metres
mmscmd million standard cubic metres per day
MoU Memorandum of understanding
mtpa million tonnes per annum
MW megawatt
Net Comprise cash, current asset investments, finance leases, currency
borrowings/ and interest rate derivative financial instruments and short- and
funds long-term borrowings
NGL Natural gas liquids
PSA production sharing agreement
T&D Transmission and Distribution
Total Group operating profit plus share of pre-tax operating results of
operating joint ventures and associates
profit
UKCS United Kingdom Continental Shelf
UKCNS United Kingdom central North Sea
Unit Production costs and royalties incurred over the period divided by
operating the net production for the period. Production costs and royalties
expenditure (other operating costs) for the period are disclosed under "results
per boe of operations" in the Supplementary information - Oil and Gas
disclosures in BG Group's Annual Report & Accounts for the period.
This measure does not include the impact of depreciation and
amortisation costs and exploration costs as they are not considered
to be costs associated with the operation of producing assets.
Unit Unit operating expenditure as defined above, excluding royalty,
lifting tariff and insurance costs incurred over the period divided by the
costs per net production for the period. Unit lifting costs as used in this
boe ratio do not represent "Production (Lifting) Costs" as defined by
FAS 19 and FAS 69.
Enquiries
Enquiries relating to BG Group's General enquiries about shareholder
results, business and financial matters should be made to:
position should be made to:
Investor Relations Department Lloyds TSB Registrars
BG Group plc The Causeway
Thames Valley Park Drive Worthing
Reading West Sussex
Berkshire BN99 6DA
RG6 1PT
Tel: 0118 929 3025 Tel: 0870 600 3951
e-mail: invrel@bg-group.com e-mail: bg@lloydstsb-registrars.co.uk
Financial Calendar
Payment of 2006 final dividend:
Shareholders 25 May 2007
American depositary receipt holders 4 June 2007
Announcement of 2007 second quarter and
half year results 27 July 2007
BG Group plc website: www.bg-group.com
Registered office
100 Thames Valley Park Drive, Reading RG6 1PT
Registered in England No. 3690065
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BG Group plc
Date: 4 May 2007 By: ___Ben Mathews___
Ben Mathews
Company Secretary