BG Group CEO reports 1Q earnings, speaks on pending purchase by Shell

BG Group Chief Executive Officer Helge Lund commented on the pending acquisition of his company by Royal Dutch Shell PLC during the company’s first-quarter earnings webcast (OGJ Online, Apr. 8, 2015).

“The attractive offer is now subject to regulatory and shareholder approvals and completion is expected in early 2016,” Lund said, reaffirming his commitment to the company during the time leading up to completion “to help secure a smooth transition to Shell.”

He noted that “BG and Shell will remain independent companies until closing” and “will operate on that basis,” adding that although BG will have teams working with Shell on planning integration activities, “the implementation of any decisions arising from the integration planning will not occur until after completion.”

Lund stated that a primarily goal of his is to “position BG people to compete on an equal basis for roles in the new group.” He explained further, “I have already introduced a new operating model ensuring that everyone understands their key accountabilities and the way we will work, and I have announced my new leadership team.

“This includes a mix of the existing senior team and new members from within BG Group, along with external appointments,” he said. “This new team and way of operating will help underpin our performance during the year.”

BG earnings

BG reported first-quarter profits decreased 21% to $3.99 billion, reflecting a significant decline in realized commodity prices in its upstream segment, partially offset by higher delivered volumes in its LNG shipping and marketing business.

Total earnings for the quarter were $233 million and included a post-tax loss of $332 million in respect of disposals, remeasurements, and impairments. Total earnings in first-quarter 2014 were $1.1 billion and included a post-tax loss of $50 million in respect of disposals, remeasurements, and impairments.

Net cash flow from operating activities decreased 59% to $958 million, reflecting the lower operating results partially offset by favorable working capital movements. Capital investment on a cash basis of $1.65 billion was entirely in the upstream segment and consisted of $1.51 billion on development and other activities, and $143 million on exploration.

Development spend was concentrated primarily on the company’s key growth projects in Brazil, $695 million; and Australia, $366 million, together with investments in the UK, $109 million; Kazakhstan, $61 million; and Trinidad and Tobago, $54 million.

Revenue and other operating income decreased 38% to $2.01 billion, reflecting significantly lower commodity prices, particularly with oil and liquids. Revenues also included a gain of $24 million in respect of the group’s 2014 commodity hedging program, which completed in January.

Company production totaled 638,000 boe/d, up 1% from first-quarter 2014. Production in both Australia and Brazil more than doubled year-over-year to 56,000 boe/d in Australia and 123,000 boe/d in Brazil. Growth in these areas was primarily offset by the UK, down to 77,000 boe/d, as Armada, Everest, Lomond, and Erskine fields were shut-in for the quarter as a result of the asset integrity program on Lomond and repairs to a valve on the CATS Riser Tower that shut-in the main gas export route.

Production was also lower in Trinidad and Tobago at 59,000 boe/d, and in Egypt at 52,000 boe/d. Production in Kazakhstan was flat year-on-year, although it benefited from a higher than planned production-sharing contract entitlement.

The LNG shipping and marketing segment during the quarter supplied 3.8 million tonnes via 61 cargoes, 21 more than first-quarter 2014, which totaled 2.4 million tonnes. This included eight additional spot cargoes, seven cargoes from QCLNG, and six additional cargoes from long-term supply contracts in Equatorial Guinea, Trinidad and Tobago, and Nigeria. Of the 61 cargoes, 43 were supplied to Asian markets, up from 26 in 2014.

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