BG Group Profit Slips on Lower Upstream & LNG Volumes

BG Group, British oil and gas exploration and production company, today reported its 3Q 2013 earnings fell down 4% to $1.1 billion

Revenue and other operating income decreased 6% to $4 397 million, reflecting a 10% decrease in E&P production  volumes and fewer LNG cargo deliveries, partly offset by favourable changes in the product mix.

Total operating profit decreased 15% to $1 773 million, reflecting the lower volumes combined with higher operating  costs and depreciation in the Upstream segment.  Net finance costs of $63 million included foreign exchange losses of $24 million (2012 net finance costs of $42 million included foreign exchange losses of $18 million).

BG Group’s Chief Executive Chris Finlayson said:
“Earnings in the quarter were down 4% to $1.1 billion, largely as a result of lower volumes in both the Upstream and LNG segments. The primary driver for the decline in Upstream volumes is the US, where BG Group has reduced its rig count in line with its strategy of pursuing value over volume. We will see production recover in the fourth quarter with the completion of our North Sea maintenance shutdowns and new projects coming onstream,  most notably Jasmine.

Upstream

As for the Upstream segment of the BG Group business, revenue and other operating income decreased 6% to $2 783 million, reflecting a 10% decrease in production  volumes, partly offset by an increased proportion of oil in the portfolio. Around half of the volume decline resulted from  the Group’s decision to reduce activity in the USA, with other major effects being reservoir decline in Egypt and the  impact of planned shutdowns, partially offset by new developments coming onstream.  The Group’s average realised oil price increased 4% to $111.72 per barrel and the liquids price increased 1% to  $96.42 per barrel. The Group’s average realised gas price decreased 5% to 45.42 cents per therm. International gas  price realisations were 5% lower at 43.87 cents per therm, reflecting generally lower market prices. The average  realised UK gas price increased 7% to 44.61 pence per therm as a result of higher UK market prices and increased spot sales.
Total E&P operating profit of $1 114 million was 17% lower as a result of the decrease in revenue and other operating  income combined with higher operating costs and depreciation. Unit operating expenditure increased to $13.36 per  barrel of oil equivalent (boe), principally due to higher royalties and lifting costs from new developments in Brazil and  Bolivia, higher lifting costs in the UK which include the impact of increased maintenance activity, and lower overall  volumes.

The unit depreciation charge increased to $10.91 per boe due to a combination of new developments coming onstream  and the impact of minor reserves revisions in previous quarters.  Gross exploration expenditure of $586 million included spend in Brazil ($288 million), Tanzania ($108 million),  Australia ($85 million), Egypt ($41 million) and the UK ($18 million).  Business development costs of $29 million were incurred in progressing the Group’s potential integrated LNG projects  in western Canada and Tanzania.  Capital investment on a cash basis of $2 787 million included investment in Australia ($1 428 million),  Brazil ($608 million), Egypt ($184 million) and the UK ($145 million).

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October 31, 2013