BG Group Conforms to Sector Trend of Weaker Earnings

| About: BG Group (BRGXF)

BG Group (OTCQX:BRGXF) continued the Q3 energy sector theme articulated by both BP and Royal Dutch Shell (NYSE:RDS.A).

Total operating profit including share of pre-tax operating results from joint ventures and associates fell 38% from £1.38bn (Q3/08) to £0.856bn (Q3/09). Earnings per share, excluding disposals, certain re-measurements and impairments, fell 39% from 23.2p to 14.1p over the same time scale.

Production for the quarter, at 56.6 mmboe (Million Barrels of Oil Equivalent), was up 5% on Q3 2008. This was around 2 mmboe below BG’s prediction for the quarter, predominantly due to a delay in the start-up of the Hasdrubal facility in Tunisia. Hasdrubal is expected to commence operations by 30 November and the impact of this delay on planned fourth quarter production is expected to be 1.2 mmboe. The average realized gas price per produced therm in the UK fell by 4.8 pence to 30.8 pence and International gas realizations fell by 7.8 pence to 16.0 pence per produced therm, both principally due to the impact of lower commodity market prices.

Looking forward, BG’s production is to be boosted following the exploration and appraisal success in the Santos Basin pre-salt. In September, BG Group announced that the Guará discovery (BM-S-9, BG Group 30%) is estimated to contain recoverable volumes of 1.1 to 2.0 billion boe. Also on BM-S-9, BG Group announced a new discovery known as Abaré West, which proved the presence of an accumulation of oil and natural gas. The well will be fully analyzed and the forward plan for this discovery will be incorporated into one of the two evaluation plans for BM-S-9 approved by ANP. Abaré West is the fourth consecutive BM-S-9 discovery following Carioca, Guará and Iguaçu.

BG Group’s Chief Executive, Frank Chapman, commented: “These results demonstrate once again the strength of BG Group’s integrated gas business and this, together with current production levels around 700 000 barrels per day, up 12% on Q4 2008, provides us with confidence in the outlook for the Group’s performance. BG Group has assembled an array of material, long-life projects, and we are now entering a period where we can look forward to these projects driving exceptional growth to the end of the next decade.”

Disclosure: No interest.