BG Group sees profit jump in second quarter

British energy company BG Group, soon to be taken over by Shell in a $70 billion deal, has seen its profit rise in the second quarter of 2015. 

Namely, BG Group reported that its total earnings for the second quarter of 2015 were $2 225 million compared to $1 367 million in the second quarter of 2014.

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.

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).

However, BG Group’s total earnings for the first half of 2015 were $2 458 million compared to $2 469 million for the first half of 2014.

Production

E&P production was 703 thousand barrels of oil equivalent per day (kboed), up 19% from the second quarter of 2014, with production for the first half of 2015 averaging 671 kboed, up 10%. Growth in the second quarter was driven by Australia and Brazil, where volumes in both more than doubled to an average of 80 kboed for Australia and 143 kboed for Brazil, along with the ramp-up at Knarr in Norway and a higher net entitlement in Kazakhstan. This growth was partially offset by declines in Egypt, down 13 kboed to 44 kboed, the UK, down 10 kboed to 102 kboed, and the USA, down 7 kboed to 33 kboed.

In July, BG Group achieved record net production from the Santos Basin, reaching 159 kboed. Gross production from FPSO 4 (Cidade de Ilhabela) has averaged around 88 kbopd with three producer wells and one injector well and FPSO 5 (Cidade de Mangaratiba) has averaged around 130 kbopd from four producer and three injector wells. The company says that production will continue to increase from both FPSOs through 2015 as additional wells are connected.

The 150 kbopd Cidade de Itaguaí (FPSO 6) for Iracema North is now moored on location with well connection activity underway. BG says that the operator expects start-up in the third quarter of 2015. FPSO 7 is in the Brasa shipyard in Brazil and final integration works have started, FPSO 8 is completing its current integration phase in China and is due to sail away in the coming weeks, while FPSO 9 integration works continue in Singapore. FPSOs 7 to 9 are due onstream in 2016.

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.”

Outlook

According to its report, BG Group now expects 2015 E&P production volumes to be in the upper half of the 650 – 690 kboed range, excluding any changes to the portfolio.

The Group expects third quarter production to be broadly similar to the average for the first half of 2015, with continued growth in Brazil and Australia being offset by a lower net entitlement in Kazakhstan and planned shutdowns, before increasing again in the fourth quarter.

The company said that with cash capital expenditure of $3.1 billion in the first half of the year, 2015 will be significantly lower than 2014, as projects complete and the Group reacts to a lower oil price environment. BG concluded that capital expenditure on a cash basis is still expected to be around 30% lower than 2014 at between $6 – 7 billion in 2015.

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