BG Group plc today reported its 2011 First Quarter Results.
First Quarter Key Points
• Higher UK North Sea tax reduces earnings by $265 million
• LNG operating profit for 2011 expected towards upper end of $1.9 to $2.2 billion range
• Significant progress on long-term growth programme
• Positive appraisal results on the Guará and Iara discoveries in Brazil
• LNG sales agreements signed with Tokyo Gas and Chubu Electric
• Third exploration success offshore Tanzania
Revenue and other operating income increased by 7% to $4 803 million, reflecting the benefit of higher realised prices, partially offset by lower E&P production volumes.
Total operating profit of $1 965 million was 1% higher, as the increase in revenue and other operating income was offset by a higher exploration charge and lower profits from the LNG segment.
Cash generated by operations of $1 799 million was in line with fourth quarter 2010, but 28% lower than last year, principally reflecting changes in working capital associated with margin calls on the Group’s hedged LNG contracts. The cash outflow associated with margin calls will reverse in future periods when the underlying LNG contracts settle.
Net finance costs of $79 million (2010 $10 million) included foreign exchange losses of $22 million (2010 $51 million gains).
The Group’s effective tax rate (including BG Group’s share of joint venture and associates’ tax) for 2011 increased to 45% (2010 42%) primarily as a result of the recently announced change in UK North Sea taxation. This increase in UK taxation led to an additional charge of $265 million, consisting of a $62 million charge for the quarter in addition to a one-off tax charge of $203 million in respect of the revision of opening deferred tax balances. Taking into account this tax rate change, the Group’s effective tax rate is expected to be 43% to 44% in the near term and trend downwards thereafter as more of the Group’s profits are generated from outside of the North Sea.
As at 31 March 2011, the Group’s net debt was $8 510 million, with an average maturity of around 9 years, and the gearing ratio was 23%. The increase in the gearing ratio has been largely driven by investment in the Group’s major growth projects. In the quarter, capital expenditure was 21% higher at $2 296 million (including acquisitions of $319 million) and comprised investment in E&P ($1 826 million), LNG ($399 million) and T&D ($71 million).
BG Group’s Chief Executive, Frank Chapman said:
“ It was a challenging quarter for our E&P operations, with civil unrest in North Africa, flooding in Australia, an increase in UK tax and a shutdown in the North Sea. We now expect modest production growth in 2011. The plans for a ramp-up in production in 2012 and 2013, as well as our 2020 goals, are unaffected and are supported by significant progress with our growth projects in Brazil, the USA and Australia, as well as further exploration and appraisal success in Brazil and Tanzania .”
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Source: BG, May 10, 2011;