BG’s 2015 budget ‘significantly lower than 2014’

BG Group plans capital expenditures on a cash basis of $6-7 billion in 2015, a range it says is “significantly lower than 2014” due to “a lower oil price environment.”

Based on recent forward commodity price curves, BG expects its effective tax rate to be about 45% in 2015. However, given the volatility in commodity prices, it’s currently anticipated that the rate may be subject to movements during the year and could therefore outturn in the range 40-50%.

BG’s sensitivity to a $1/bbl movement in the oil price is expected to be between $60-70 million at an earnings level, and between $70-80 million on posttax operating cash flow, both on an annualized basis for 2015 only.

Andrew Gould, BG’s interim executive chairman, explained that the “sharp deterioration in commodity prices in the second half of the year” has led the company “to recognize significant asset impairment charges in the fourth quarter.”

However, he said that the company is “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.”

Operations  

BG’s production volumes in 2015 are expected reach 650,000-690,000 boe/d, excluding any further changes to the portfolio, as continued growth in Brazil and Australia more than offsets lower net volumes elsewhere, primarily in Egypt, Kazakhstan, the UK, and Trinidad and Tobago.

In Australia, Train 1 at the Group’s QCLNG project is expected to reach plateau output of 4 million tonnes/year in the second quarter, with Train 2 expected to come on stream in the third quarter (OGJ Online, June 27, 2014).

Plateau production from both trains of around 8 million tpy should be reached by mid-2016. Up to 20% of gas for the two trains will be supplied by third-party contracts during the ramp-up phase.

In Brazil, the fourth and fifth floating production, storage, and offloading vessels—Cidade de Ilhabela and Cidade de Mangaratiba, respectively—will continue to ramp-up during 2015 with additional well connections (OGJ Online, Aug. 18, 2014; Nov. 21, 2014). The operator expects the sixth FPSO—Cidade de Itaguai—on stream in the fourth quarter.

LNG shipping and marketing supply volumes are expected to be slightly lower than in 2014, excluding the purchase of spot cargoes and the impact of new volumes from QCLNG. The majority of the contribution from QCLNG will be reported in the upstream segment of the business.

Based on recent forward commodity price curves, BG expects the segment’s total operating profit to be between $700 million to $1 billion in 2015.

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