BG Group responds to low oil prices. Reduces capex
- Business & Finance
BG Group, one of UK’s largest energy companies will reduce its capital expenditure for 2015, as a response to a lower oil price environment.
The company has said that planned capital expenditure on a cash basis in 2015 will fall to between $6 – 7 billion in 2015. For comparison, capital investment in 2014 was $9.4 billion, almost entirely spent in the Upstream segment ($9 387 million) and concentrated primarily on BG’s key growth projects in Australia and Brazil.
In the fourth quarter 2014 the Group recorded a non-cash impairment charge of $8.9 billion pre-tax ($5.9 billion post-tax). This was driven mainly by the significant fall in global commodity prices and reflects a recent forward Brent price curve for five years, reverting to the Group’s long-term price assumption for impairment testing of $90 real from 1 January 2020, BG Group has explained.
As for the earnings, for the 4Q, the company recorded a loss of $5.03 billion due to the $5.9 billion of post-tax impairments mentioned above, partially offset by $449 million of exceptional one-off and prior period taxation credits.
BG Group’s interim Executive Chairman, Andrew Gould said that the “sharp deterioration in commodity prices in the second half of the year has led us to recognise significant asset impairment charges in the fourth quarter. In the new environment we are well placed to manage the downturn as we are reaching the end of a high capital expenditure cycle and will continue to add further production in 2015 from Brazil and Australia.”
He added:“We will proactively manage our costs, both capital and operating, to adapt to the new business circumstances. We look forward to welcoming Helge Lund as our new Chief Executive shortly.”