BG GroupInvestor update - September 2014
BG Group – Investor update
Legal notice
The following presentation contains forward-looking statements concerning BG Group plc’s strategy, operations, financial performance or condition, outlook, growth opportunities or circumstances in the countries, sectors or markets in which BG Group plc operates. By their nature, forward-looking statements involve uncertainty because they depend on future circumstances, and relate to events, not all of which can be controlled or predicted. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Actual results could differ materially from the guidance given in this presentation for a number of reasons. For a detailed analysis of the factors that may affect our business, financial performance or results of operations, we urge you to look at the “Principal risks and uncertainties” included in the BG Group plc Annual Report & Accounts 2013. Nothing in this presentation should be construed as a profit forecast and no part of this presentation constitutes, or shall be taken to constitute, an invitation or inducement to invest in BG Group plc or any other entity, and must not be relied upon in any way in connection with any investment decision. BG Group plc undertakes no obligation to update any forward-looking statements.
No representation or warranty, express or implied, is or will be made in relation to the accuracy or completeness of the information in this presentation and no responsibility or liability is or will be accepted by BG Group plc or any of its respective subsidiaries, affiliates and associated companies (or by any of their respective officers, employees or agents) in relation to it.
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BG Group – Investor update
BG Group - high growth E&P & LNG company• Strong growth in E&P and LNG volumes
• Proportion of production with cash margins >$50/boe to triple
• Earnings to grow faster than production
• Capital expenditure to fall from $11.2 bn in 2013 to $8-10 bn for 2015/16
• Positive free cash flow in 2015
• Increasing return on capital employed
• Active portfolio management to deliver value
• Maintain strong balance sheet; invest in further growth, return cash to shareholders
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BG Group – Investor update
Our strategy
World class exploration & unique LNG
business
Actively manage
our portfolio to reinvest in
growthPrioritise
value over production
Focus on areas where
we have competitive advantage
Focused portfolio of 10-15 high
quality assets
Lean & agile organisation
BG GroupHigh growth E&P and LNG company
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BG Group – Investor update
Flexible and scalable strategy
Drive free cash flow from operating
assets
Actively manage portfolio to
crystallise value
Reinvest in high value projects; risk
management through strategic
partnerships
Return residual cash to
shareholders in medium term
Commitment to strong balance sheet and objective of long-term mid single A credit rating
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BG Group – Investor update
Global presence
BG Group presence
Trinidad &Tobago Egypt
KazakhstanUK
India
Uruguay
Bolivia Brazil
USA TunisiaThailand
Singapore
Areas of PA
Norway
China
MadagascarChile
AustraliaTanzaniaKenya
Honduras
Colombia
Canada
MyanmarAruba
Japan
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BG Group – Investor update
E&P and LNG volumes
UK Kazakhstan
Trinidad and Tobago
Brazil
Egypt
BoliviaUSA
Thailand
Tunisia
Australia
India
Norway
E&P production (H1 2014)
0
10
20
30
40
50
60
70
80
90
100
LNG supply bysource
Column3 LNG sales byregion
Num
ber o
f car
goes
Spot purchases
Equatorial Guinea
Nigeria
Egypt
Trinidad & Tobago
South America
North America
Europe & other
Asia
LNG supply & sales (H1 2014)
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BG Group – Investor update
Large resource base, 3 yr RRR of 179%
3 247 3 431 3 322 3 538
3 939 3 758 3 618 3 452
6 160 6 739 6 041 6 041
3 7844 583
4 740 4 740
0
50
100
150
200
250
0
5000
10000
15000
20000
25000
2011 SEC 2012 SEC 2013 SEC 2013 SPEPRMS
RR
R (%
)
Res
erve
s &
reso
urce
s (m
mbo
e)
Proved Reserves Probable ReservesDiscovered Resources Risked ExplorationOrganic 3 yr RRR (RHS)
17 13018 511 17 721 17 771
• Monetise via production or sale up to 50% of discovered resources in 10 years
• >1 000 mmboe reserves and resources monetised in 2013• ~231 mmboe produced• ~860 mmboe disposals
• Organic RRR (SEC) :• 1 year 115%• 3 year 179%
• Adopted SPE PRMS from 2013
* From 2013, BG Group adopted the Petroleum Resources Management System published by the Society of Petroleum Engineers (SPE PRMS) for reserves reporting. Reserves (proved and probable) as at 31 Dec 2013 are shown under SPE PRMS, together with the estimates under SEC definitions which was the previous basis for measurement.
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BG Group – Investor update
Unique LNG business model
• Strong presence and expertise across the LNG supply chain
• Growing portfolio - multiple new LNG supply options under development
• Deep market knowledge and customer relationships
• Flexibility to supply markets from multiple sources
• Underpinned by safe, reliable fleet of approximately 25 LNG ships
• Track record of LNG project execution - 6 LNG trains delivered, 2 in construction
• A global LNG business - 26 countries supplied; sourced LNG from 15 countries
Diversified & flexible LNG supply
Flexible portfolio
Extensive customernetwork
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BG Group – Investor update
FPSO 2 Cidade de São Paulo departureBrazil
Brazil updateGrowth programme
FPSO 2 & 3, Santos Basin, Brazil
BG Group – Investor update
BG Group – Investor update
Brazil - development underway
• Significant resource base
• 4-6-8 bn boe of reserves/resources net to BG
• 5 fields under development
• Operator’s 15 FPSO programme contracted
• 2.6 mmboed gross capacity by end-2018
• On schedule and budget
• Low unit cost development
• Excellent reservoir characteristics
• High capital efficiencies
• High margin production (>$50 EBITDA/boe)
• Break-even below $40/bbl
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BG Group – Investor update
Brazil – production ramping up
0
10
20
30
40
50
60
70
80
Q412 Q113 Q213 Q313 Q413 Q114 Q214
Production (kboed) • Flow rates exceeding expectations
• 25-35 kbopd per well
• Fewer wells needed to reach plateau
• Current gross production ~300 kboed
• FPSO 1 (Lula) at ~100 kboed
• Producing close to capacity from just 4 wells
• FPSO 2 (Sapinhoá South) at ~130 kboed
• Producing at capacity from just 4 wells
• FPSO 3 (Lula North East) at ~70 kboed
• 3 wells connected
• Plateau by year-end, from just 5 wells
• FPSOs 4 & 5 onstream by year-end
• 23 producer & injector wells pre-drilled for FPSOs 4-6
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BG Group – Investor update
Australia – QCLNG project• Upstream:
• >6 000 CSG wells over project life
• 27 field compression stations (FCSs)
• 6 central processing plants (CPPs)
• 2 major water treatment facilities
• Pipeline:
• 200 km gas collection header
• 340 km export and narrows pipeline
• LNG plant: 2 trains, 8.5 mtpa
• 80 modules, 2 LNG storage tanks
• On track to meet $20.4 bn Phase 1 budget (2011-14)
• First LNG Q4 2014
Chinchilla
Dalby
Toowoomba
Curtis IslandQCLNG plant
Gladstone
Gas collection headerExport pipelineQGC development
QGC exploration
0Kilometers
30 60 90
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BG Group – Investor update
QCLNG increased cash flow in 2015• Development well advanced
• 2 150 wells drilled as at end Q2, c.1 100 available for production or de-watering
• Ruby Jo CPP & 6 FCSs operational
• Pipeline and gas collection header complete
• LNG plant - commissioning gas turbine generators
• 250 kboed gross production on plateau - LNG and domestic supply
• Mainly equity production
• 3rd-party gas secured to manage ramp phase
• High cash flow generation
• High margin production (>$50 EBITDA/boe) across the integrated project
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BG Group – Investor update
Future LNG growth options
Lake Charles: 15 mtpa Tanzania: ~10 mtpa Prince Rupert: ~14 mtpa
• Energy Transfer to own & finance proposed LNG facility
• DOE permits received
• FERC application filed
• FEED underway
• Joint project developmentwith Block 2 partners
• Site proposed to government
• Pre-FEED contract awarded
• NEB LNG export licence received
• Pipeline JV with Spectra Energy, permitting underway
• Continue evaluation of upstream opprtunities
Sabine Pass: 5.5 mtpa
• Offtaker of first US LNG exports
• LNG project under construction
• Expected onstreamlate 2015
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BG Group – Investor update
Exploration and appraisal activities
Existing hubs
New basin entry
BrazilBolivia
Trinidad &Tobago
UK
Norway
Thailand
Uruguay
Kenya
Tanzania
Madagascar
Australia
Honduras
Brazil(Barreirinhas)
Aruba
MyanmarColombia
Leverage current positions – existing infrastructure, local knowledge of geology, relationships with government/stakeholders
Leverage exploration skills to access – target low cost, early entry, focus on finding new giant discoveries
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BG Group – Investor update
Pipeline of opportunities
2013 2015 2018 2021 2024 2026 2029
LulaAlto
LulaCentral
IracemaNorte Lula
North
LulaExtremo
Sul
LulaSouth
IaraNW
IaraHorst
LulaWest
Lapa
SapinhoaNorte
IracemaSul
Brazil
Bounty
Jackdaw
KGKPh3
KGK Ph2
KGKPh1
T&TDeepWater
Bear
Existing / Emerging hub exploration
BoliviaCaipipendi
Kenya
Madag-ascar
Uruguay
BrazilBarreirinhas
BoliviaHuacareta
Myanmar
Colombia
Honduras
Frontier exploration
Legend PotentialResources
DiscoveredResources
LNG Projects
QCLNGLake
CharlesExport
AustraliaCooper /
TGS
SabinePass
Prince Rupert
LNG
Tanzania LNG
LakeCharlesExport
Short term: QCLNG & Brazil drive volume growth
Medium term: LNG options to continue growthLong term: Exploration to deliver
1st Production Date
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BG Group – Investor update
Active portfolio management to monetise value
Our goal Track record
• Exited non-core T&D and power businesses
• Released $9.5 bn capital in 2012- 2014
• Realise value from E&P and LNG assets
• Balanced portfolio of 10-15 high quality assets
Focus areas
Infrastructure assets
BG not the natural ownerReleases tied-up capital
Mature assets
Late life or domestic market focused assets
Growth assets
To demonstrate value
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BG Group – Investor update
BG Group - high growth E&P & LNG company• Strong growth in E&P and LNG volumes
• Proportion of production with cash margins >$50/boe to triple
• Earnings to grow faster than production
• Capital expenditure to fall from $11.2 bn in 2013 to $8-10 bn for 2015/16
• Positive free cash flow in 2015
• Increasing return on capital employed
• Active portfolio management to deliver value
• Maintain strong balance sheet; invest in further growth, return cash to shareholders
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BG Group – Investor updateBG Group – Investor update
Appendix
BG Group – Investor update
2014/15 goals
Project
Production outlook
Unit costs
Cash flow
First LNG exports QCLNG Q4 2014Continued ramp up of production in BrazilDecline in capital expenditure
2014 : 590 – 630 kboed (lower end)Brazil & Australia strong year on year growth
2014 unit operating costs range $15.50 – 16.25/boe
Expect to be FCF positive 2015
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BG Group – Investor update
2014 milestonesQ1
• Brazil - FPSO 2 second well connected • Thailand - Bongkot South Phase 4b
Q2
• Brazil - FPSO 3 second well connected • QCLNG - commissioning of gas turbine generators
Q3
• Egypt - WDDM Phase 9a• Brazil - FPSO 4 onstream
Q4
• QCLNG - first LNG• UK - West Franklin Phase 2 start-up• Trinidad - Starfish onstream• Norway - Knarr onstream• Brazil - FPSO 5 onstream
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BG Group – Investor update
Egypt remains challenging
• Domestic demand/supply balance constrained• Strong domestic demand supported by high level of subsidies
• Lower supply from BG’s West Delta Deep Marine field
• Domestic take above contractual arrangements and lower LNG volumes
• H1 production down 47% to 61 kboed, only one LNG cargo lifted in H1• Deteriorating reservoir performance and continued high domestic diversions
• Phase 9a development will only temporarily offset underlying production declines
• Domestic receivables increased to $1.5 billion; $1.2 billion overdue• Note only 10% of production, 6% of earnings• Outlook - base case is domestic only business, but further investment needs:
– Receivables balance paid down– Higher domestic gas price
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BG Group – Investor update
Financial highlights H1 2014
H1 2014 H1 2013 Δ YOY
Total operating profit $4 001m $3 935m +2%
Upstream $2 556m $2 682m -5%
LNG Shipping& Marketing $1 441m $1 263m +14%
Net cash inflow from operating activities $4 485m $4 380m +2%
Business Performance EPS 69.3 cents 63.8 cents +9%
Total EPS 72.5 cents 60.0 cents +21%
Interim DPS 14.38 cents 13.07 cents +10%
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BG Group – Investor update
Free cash flow H1 2014
H1 2014 H1 2013
Net cash flow from operations 4 485 4 380
Cash flow from investing activities (4 588) (5 085)
Net interest (251) (238)
Free cash flow (354) (943)
Disposals 56 492
Dividends (543) (474)
Borrowing and other financing (422) 1 126
Net increase/(decrease) in cash/cash equivalents (1 263) 201
Cash/cash equivalents 4 968 4 705
Net debt 10 377 11 198
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BG Group – Investor update
Capex, capital structure and dividend
• Capital expenditure focus: 70% for Australia and Brazil in 2014
• 2014 capital expenditure to be lower than 2013
• 2015-2016 capital expenditure expected to fall to $8-10 bn
• Gearing 23.0% at 30 June 2014
• Capital and funding priorities• Maintain strong balance sheet; long-term objective for mid-single A rating
• Invest in further growth
• Return excess cash to shareholders
• Dividend policy – to increase dividends in line with long-term underlying USD earnings growth
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BG Group – Investor update
Liquidity position
• $5.0 bn cash and cash equivalents*
• Undrawn committed facilities
• $5.2 bn stand-by bank facilities
• $2.2 bn expires in 2016; $3.0 bn expires in 2017
• $1.8 bn US EXIM facility
• Average maturity of debt c.15 years
• CP programmes unutilised
• EMTN programme; $9 bn unutilised
• Access to US S144A and hybrid markets
• FCF positive from 2015*As at 30 June 2014
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BG Group – Investor update
Capital markets maturities at 30 June 2014
Well distributed maturity profile, multiple currencies
0
500
1000
1500
USD GBP EUR HKD
Millions*
Capital market maturity profile
* Graph depicts maturities in ‘millions’ in their respective issuance currency28
BG Group – Investor update
2013-14 portfolio management $4.8 billion of transactions closed in 2013
Key transactions:
• QCLNG sell down to CNOOC (Australia)
• Gujarat Gas (India)
• TGGT (US)
• Quintero LNG (Chile)
• Cotton Valley (US)
• Bream (Norway)
$1 billion of transactions closed in 2014
Key transaction:
• CATS pipeline (UK)
$9.5 billion of capital released from 2012 - 2014 transactions
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BG Group – Investor update
LNG trade outlook to 2025
Existing
Under construction
2013 to 2025CAGR(%) = 4.3 to 5.7
ExternalLNG trade forecasts*
Supply gap: up to ~150 mtpa
Supply:existingand under construction
Global LNG supply delivered (mtpa)
Sources: Supply (existing and under construction): BG Group interpretation of Wood Mackenzie data (Q1 2014)*Trade: various research house views; (2014): Wood Mackenzie, Poten & Partners, FACTS Global Energy, Gas Strategies, PIRA (2013): IHS CERA, PFC Energy 30
BG Group – Investor update
Key assumptions
Reference Conditions– Brent Oil price real (1/1/2014): 2014 and 2015: $100/bbl– US Henry Hub real (1/1/2014): 2014: $4.0/mmbtu; 2015 $4.25/mmbtu– US/UK exchange rates of $1.55:£1– US/AUD exchange rates of $1:$A1.05– US/BRL exchange rates of $1:BRL2.10– Prepared under International Financial Reporting Standards– All production includes fuel gas
Principal Risks– Asset Integrity and HSSE– Capital requirements, liquidity and interest rates– Climate change– Commodity prices– Credit– Delivery of projects– Environment– Exchange rates– Licence to operate and the political context
− Operational performance− Organisational capacity− Regulation, legislation and litigation− Resources discovery, estimation and development
For a detailed discussion of these and other risk factors, please refer to the Principal risks and uncertainties included in BG Group’s Annual Report and Accounts.
Actual performance could differ materially from that shown. Accordingly, no assurances can be given that such performance will be achieved.
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BG Group – Investor update
BG Group has established a sponsored Level I ADR programme in the US. The ADRs trade on the premier tier of theOver-The-Counter (“OTC”) market in the US. Details are as follows:
• Ticker Symbol BRGYY
• CUSIP 055434203
• Ratio 1 ADR : 1 Ordinary Shares
• ADR depositary Deutsche Bank
• Share price information www.adr.db.com or www.otcqx.com
Please contact the Deutsche Bank’s dedicated ADR broker desks:
• New York Tel: +1 212 250 9100
• London Tel: +44 20 7547 6500
• Email: [email protected]
Sponsored ADR Programme
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BG Group – Investor updateBG Group – Investor update
BG GroupInvestor update - September 2014
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