BG Group share price: Q2 profit plummets 65 percent

on Jul 31, 2015
Updated: Oct 21, 2019

BG Group Plc (LON:BG) today updated investors with performance for the three months ended June 30. Following are the highlights from the company’s statement.

• E&P production up 19% at 703 kboed; full year guidance moved to the upper half of 650 – 690 kboed range
• Australia and Brazil average E&P production more than doubled to 80 kboed and 143 kboed, respectively
• QCLNG pipeline disposal completed with gross proceeds of $4.6 billion; Train 2 start-up in July
• Upstream EBITDA down 39% to $1 138 million; lower commodity prices partially offset by higher volumes

• LNG Shipping & Marketing EBITDA down 66% to $263 million; lower margins partially offset by higher volumes
• Business Performance EPS down 65% to 12.6 cents; Total EPS up 63% to 65.2 cents, reflecting profit on disposal of QCLNG pipeline
• Interim dividend declared of 14.38 cents per share (9.22 pence per share)
• Unconditional anti-trust approval of the Shell offer from Brazil in July; one of five pre-conditions to the offer
BG Group’s Chief Executive, Helge Lund said:
“We achieved a number of key milestones during the quarter while continuing to deliver on our cost and efficiency programmes. Production reached record levels, more than doubling in both Australia and Brazil, and we now expect output for the year to be in the upper half of our forecast range. In Australia, we assumed operational control of the first train at QCLNG, which is now operating at plateau, and produced first LNG from the second train earlier this month. In Brazil, our share of production is now exceeding 150 kboed and the sixth FPSO was recently moored on location. Our LNG business has again produced a robust operating performance to deliver 58 cargoes in the quarter.
“This performance reflects our actions to stabilise and de-risk the business and our teams remain focused on delivering our 2015 commitments.”
Second quarter
Revenue and other operating income decreased 28% to $3 979 million, reflecting a significant fall in realised sales prices impacting both the Upstream and LNG Shipping & Marketing segments. The impact of lower prices was partly offset by higher volumes in both segments, with E&P production volumes up 19% and LNG delivered volumes up 17%.
EBITDA decreased 48% to $1 372 million. In the Upstream segment, EBITDA fell 39% to $1 138 million reflecting the lower revenues. In the LNG Shipping & Marketing segment, EBITDA fell 66% to $263 million, driven by lower revenues and a higher proportion of relatively higher cost supply from spot cargoes.
EBIT decreased by $1 332 million to $627 million, reflecting the reduced EBITDA and higher DD&A charges primarily as a result of increased E&P production and the start-up of QCLNG Train 1 in December 2014. Net finance costs of $55 million included foreign exchange losses of $23 million (2014 net finance costs of $7 million included realised foreign exchange hedge gains of $29 million and other foreign exchange gains of $5 million).
The tax charge for the quarter reduced to $143 million and reflects the lower profit before tax and a reduction in the Group’s expected 2015 full year effective tax rate (excluding BG Group’s share of joint ventures and associates’ results and tax) to 35.0%. This is lower than the previous guidance of 40.0% primarily as a result of changes in the expected mix of profits.
Group earnings of $429 million and EPS of 12.6 cents both decreased 65%, with the reduction in EBIT being only partially offset by the reduction in the Group’s effective tax rate.
Net cash flow from operating activities decreased 56% to $926 million, reflecting the lower operating results.
Capital investment on a cash basis was 41% lower at $1 470 million and was entirely in the Upstream segment, consisting of $1 317 million on development and other activities, and $153 million on exploration. The development spend was concentrated primarily in Brazil ($569 million) and Australia ($330 million).
Free cash flow decreased by $156 million to a $663 million outflow, primarily reflecting the decrease in net cash flow from operating activities, largely offset by the reduction in capital investment. The total cash inflow for the quarter was $2 385 million, including $4 597 million gross proceeds from the disposal of the QCLNG pipeline.
As of 07:07 BST, Friday, 31 July, BG Group plc share price is 1,079.50p.

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