BG GROUP: UP 22%
Second Quarter Key Points:
- Business Performance EPS up 22% to 35.5 cents; Total EPS up 64% to 40.1 cents
- Interim dividend increased 10% to 14.38 cents per share (8.47 pence per share)
- E&P production down 10% at 591 kboed; primarily declines in Egypt and the USA
- LNG segment operating profit up 44%; additional cargo deliveries and favourable realised prices
- Excellent flow rates in Brazil; FPSO 2 at plateau; gross production around 300 kboed in July
- QCLNG remains on track; commissioning of the gas turbine generators underway
- CATS infrastructure asset sale for up to $961 million completed in July
BG Group's interim Executive Chairman, Andrew Gould said:
"We have delivered a good set of results for the second quarter. E&P performance reflects the growing proportion of oil in the portfolio, principally from Brazil, and the deferral of maintenance shutdown activity in the UK to later in the year. LNG performance reflects additional cargo deliveries and favourable realised prices. There is no change to our full year E&P production volume and LNG operating profit guidance, with lower E&P volumes and fewer LNG cargoes expected in the second half of 2014.
"We also continued to deliver important milestones for our key growth projects. In Brazil, new wells were connected with flow rates exceeding expectations. In Australia, commissioning of the gas turbine generators at the QCLNG liquefaction plant has begun and, subject to the current risk of industrial action on Curtis Island, we remain on track for first LNG by the end of the year."
Revenue and other operating income increased 26% to $5 501 million. LNG delivered volumes were 29% higher, with higher realised prices in Asian and South American markets. While E&P production volumes were lower, revenues benefited from a material increase in oil volumes, particularly from Brazil, combined with higher oil and liquids prices.
Total operating profit increased 11% to $1 992 million, reflecting higher revenues, partly offset by higher operating costs in the Upstream segment and lower LNG cargo margins as a result of an increase in spot purchases.
Net finance costs of $10 million included realised foreign exchange hedge gains of $29 million and other foreign exchange gains of $5 million (2013 net finance costs of $26 million included foreign exchange gains of $18 million).
The tax charge for the quarter reflects a reduction in the Group's expected 2014 effective tax rate (including BG Group's share of joint venture and associates' tax) to 40% from previous guidance of 41%, reflecting certain changes in tax positions in a number of jurisdictions.
Group earnings of $1 209 million and EPS of 35.5 cents increased by 23% and 22% respectively as a result of the increase in total operating profit, combined with the decrease in net finance costs and the reduction in the Group's tax charge.
The Brent oil hedges entered into in the first quarter of 2014 have not materially impacted the results.
Free cash flow improved by $95 million to $(507) million primarily as a result of a $128 million reduction in capital investment.
Net cash flow from operating activities of $2 125 million decreased by $30 million with lower working capital cash inflow as a result of higher LNG cargo receivables, offset by an increase in operating profit and a reduction in cash tax paid. Net debt was 7% lower at $10 377 million and gearing has reduced to 23.0%, following the sale of six LNG ships.
Capital investment on a cash basis of $2 476 million was almost entirely in the Upstream segment ($2 475 million) and concentrated primarily on the Group’s key growth projects in Australia and Brazil.
Revenue and other operating income increased 14% to $10 562 million. While E&P production volumes were lower, revenues benefitted from a material increase in oil volumes, particularly from Brazil, combined with lower hedging losses and higher realised prices in the LNG Shipping & Marketing segment.
Total operating profit increased 2% to $4 001 million, reflecting the higher revenues, partly offset by higher operating costs in the Upstream segment and lower LNG cargo margins as a result of an increase in spot purchases.
Net finance costs of $66 million included realised foreign exchange hedge gains of $17 million and other foreign exchange gains of $4 million (2013 net finance costs of $61 million included foreign exchange gains of $23 million).
Group earnings of $2 361 million and EPS of 69.3 cents both increased 9% as a result of the increase in total operating profit and the lower tax charge.
Free cash flow improved by $589 million to $(354) million primarily reflecting a $481 million reduction in capital investment. Net cash flow from operating activities increased by $105 million as a result of a higher working capital cash inflow.
Capital investment on a cash basis of $4 759 million was almost entirely in the Upstream segment ($4 746 million) and concentrated primarily on the Group's key growth projects in Australia and Brazil.
The Board has approved the payment of an interim dividend of 14.38 cents per share. This is half of the 2013 total dividend, in accordance with the Board's established policy. The interim dividend has been converted to Sterling at the average of the daily spot rates for the three business days prior to the business day before this announcement and will be paid on 12 September 2014 as 8.47 pence per share to shareholders on the register as at 15 August 2014.
Total Results (including disposals, re-measurements and impairments)
Total earnings for the second quarter of 2014 were $1 367 million (40.1 cents per share) and included a post-tax gain of $158 million in respect of disposals, re-measurements and impairments, including a gain of $170 million arising from the sale of six LNG vessels. Total earnings in the second quarter of 2013 were $833 million (24.5 cents per share) and included a post-tax loss of $153 million in respect of disposals, re-measurements and impairments.
Total earnings for the half year of 2014 were $2 469 million (72.5 cents per share) and included a post-tax gain of $108 million in respect of disposals, re-measurements and impairments, including a gain of $170 million arising from the sale of six LNG vessels, partly offset by exceptional restructuring costs of $65 million. Total earnings in the half year of 2013 were $2 041 million (60.0 cents per share) and included a post-tax loss of $128 million in respect of disposals, re-measurements and impairments.
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IMF - Within the next few years, the U.S. economy is expected to enter its longest expansion in recorded history. The Tax Cuts and Jobs Act and the approved increase in spending are providing a significant boost to the economy. We forecast growth of close to 3 percent this year but falling from that level over the medium-term. In my discussions with Secretary Mnuchin he was clear that he regards our medium-term outlook as too pessimistic. Frankly, I hope he is right. That would be good for both the U.S. and the world economy.
IMF - The near-term outlook for the U.S. economy is one of strong growth and job creation. Unemployment is already near levels not seen since the late 1960s and growth is set to accelerate, aided by a near-term fiscal stimulus, a welcome recovery of private investment, and supportive financial conditions. These positive outturns have supported, and been reinforced by, a favorable external environment with a broad-based pick up in global activity. Next year, the U.S. economy is expected to mark the longest expansion in its recorded history. The balance of evidence suggests that the U.S. economy is beyond full employment.
U.S. FRB - Industrial production edged down 0.1 percent in May after rising 0.9 percent in April. Manufacturing production fell 0.7 percent in May, largely because truck assemblies were disrupted by a major fire at a parts supplier. Excluding motor vehicles and parts, factory output moved down 0.2 percent. The index for mining rose 1.8 percent, its fourth consecutive month of growth; the output of utilities moved up 1.1 percent. At 107.3 percent of its 2012 average, total industrial production was 3.5 percent higher in May than it was a year earlier. Capacity utilization for the industrial sector decreased 0.2 percentage point in May to 77.9 percent, a rate that is 1.9 percentage points below its long-run (1972–2017) average.
IMF - South Africa’s potential is significant, yet growth over the past five years has not benefitted from the global recovery. The economy is globally positioned, sophisticated, and diversified, and several sectors—agribusiness, mining, manufacturing, and services—have capacity for expansion. Combined with strong institutions and a young workforce, opportunities are vast. However, several constraints have held growth back. Policy uncertainty and a regulatory environment not conducive to private investment have resulted in GDP growth rates that have not kept up with those of population growth, reducing income per capita, and hurting disproportionately the poor.