bg group fy2012 results presentation
TRANSCRIPT
1 Deepsea Metro I drillship
Tanzania
2012 results presentation 5 February, 2013
2
Welcome
LNG storage tank Curtis Island, Australia
Andrew Gould Chairman
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 2011 and at the Principal Risks section later in this presentation. 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.
Please note that this presentation represents only a summary of BG Group’s Fourth Quarter and Full Year Results for the financial year ended 31 December 2012. It does not contain sufficient information to enable as full an understanding as provided by the BG Group Fourth Quarter and Full Year Results for 2012 and the transcript of the speech given by the Chief Executive and Interim Chief Financial Officer of BG Group that accompany this presentation. This presentation should therefore be read in conjunction with those additional documents available from BG Group’s website, www.bg-group.com.
3
FPSO 2 Cidade de São Paulo departure Brazil
Chris Finlayson Chief Executive
Introduction
Strategic intent
• Strategy will build on BG Group’s distinctive strengths
– World class exploration
– Unique LNG model
– Commercial agility
• Focused portfolio
– Continual active review
• Industry leading growth in shareholder value
– Significant volume & cash flow growth in 2014 & 2015
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Priorities for 2013
• Relentless focus on safety
• Production delivery in our base assets, in particular Egypt & UK
• Delivery of key projects with clear quarterly milestones
– In Brazil having a third producing FPSO vessel onstream in Q2
– In Australia having first gas to start commissioning QCLNG around year end
– 7 major projects onstream
• Continued emphasis on exploration: increased budget to $1.6 bn
• Tight cost management
• Completion of current portfolio rationalisation programme
6
7 Main pipeline network
Narrows crossing, Queensland, Australia
Full year results Den Jones Interim Chief Financial Officer
Reporting segment changes
8
E&P Liquefaction Shipping & Marketing T&D
Upstream LNG Shipping & Marketing
Old segment split
New segment split
T&D discontinued
E&P LNG T&D
Financial highlights: Q4 2012
9
Q4 2012
Q4 2011 Δ YOY
Upstream
LNG Shipping & Marketing
Cash generated by operations
Total operating profit
$1 169m $1 334m -12%
$658m $784m -16%
$2 248m $2 655m -15%
$1 831m $2 089m -12%
Earnings $1 030m $1 456m -29%
Upstream segment includes E&P and liquefaction activities
* Q4 2011 restated to exclude $277m one-off tax credit
Underlying earnings* $1 030m $1 179m -13%
Financial highlights: 2012
10
2012 2011 Δ YOY
Upstream
LNG Shipping & Marketing
Cash generated by operations
Total operating profit
$5 464m $5 440m -
$2 577m $2 282m +13%
$10 715m $9 773m +10%
$8 047m $7 732m +4%
Earnings $4 395m $4 251m +3%
Dividend per share 26.14 cents 23.76 cents +10%
Upstream segment includes E&P and liquefaction activities
352 334
158
534
18
5149 5118
291 346
0
2000
4000
6000
8000
2011 Volume Price Opex DD&A Other 2012
E&P
Liquefaction Liquefaction
E&P
5440 5464
Upstream operating profit
11
Year on year Upstream operating profit change ($m)
12
E&P unit cost performance
12
Annual unit DD&A cost ($/boe)
BG Group Peer Group includes Super Majors and US and European Integrated Majors Source (2009-2011): Evaluate Energy 2012
0 10 20
Annual unit opex cost ($/boe)
0 20 40
Peer 2011
BG Group 2012 BG Group 2011
Peer 2011
BG Group 2012 BG Group 2011
176%
217%
0%
50%
100%
150%
200%
250%
1 year SEC proved RRR
3 year SEC proved RRR 0% 100% 200% 300%
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Strong reserves replacement
13
BG Group 2009-2011
Peer 2009-2011
BG Group 2010-2012
Peer group includes Super Majors and US and European Integrated Majors
3 year total reserves replacement
Source: Evaluate Energy 2012
BG Group’s reserves replacement
2923 217 512
2282
2577
0
1000
2000
3000
2011 Margin & Mix Shipping 2012 Old LNG segment
Year on year LNG Shipping & Marketing operating profit change ($m)
LNG* operating profit
14
Liquefaction
* LNG Shipping & Marketing
15
5.7 5.6
6.2 6.1
1.5 1.0
0
5
10
15
2011 2012
1.8 1.3
6.8 7.7
2.7 2.6
1.5 0.5
0.6 0.6
0
5
10
15
2011 2012
Sources loaded (mtpa) Destinations delivered (mtpa)
Operated production
Long-term third-party purchases
South America
USA
Asia
Europe
Ship use 13.4
12.7
Long-term contracts (11.6 mtpa)
Short-term third-party purchases
13.4 12.7
LNG sources and destinations
Sales volume (12.1 mtpa)
2013 LNG outlook
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• 11.3 mtpa of LNG volumes* from our long-term contracted supply
– Reduction of 0.3 mtpa from 2012 principally due to Egypt
– Minimal spot volumes
• Singapore LNG to start commercial operations in Q2 2013
• Portfolio substantially unhedged
• Chile has switched to a predominantly HH linked basis
• Operating profit LNG shipping & marketing $2.5-2.7 bn**
– Equivalent to LNG operating profit of $2.9-3.1 bn** on old segment basis
* Loaded volumes
** At current market conditions
10.7
2.9
0.6 1.2
10.4
2.7
1.4
0
4
8
12
16
Sources Uses
2012: sources and uses of funds
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• Net cash inflow of $0.9 bn
– Net additional borrowings of $1.2 bn
– Net cash outflow $0.3 bn before borrowings
• Capital investment: $10.4 bn (cash basis)
• 94% cash disbursements self-funded
– Strong operating cash flow
– $2.9 bn through sale of non-core businesses
($bn)
15.4 14.5
Other
Operating cash flow
Disposals
Borrowings
Tax
Capex
Dividends & interest
2012-13: cash capex split
18
5.0 5.5
1.6
2.7
2.7
3.0 1.1
0.8 0.8 0.3
0
5
10
15
2012 Q1 guidance Australia Other 2012 2013
10.4
12.0
Base assets
Australia*
Other
Brazil
11.5
($bn)
* 2013 cash capex in Australia assumes the part disposal of the QCLNG project to CNOOC completes in mid-2013
Base assets includes Bolivia, Egypt, India, Kazakhstan, Norway, Thailand, Trinidad and Tobago, Tunisia, UK
Portfolio rationalisation progress
• Portfolio refocused to E&P and LNG
• Capital release of $8.1 bn by end 2013
• Significantly exceed $5 bn target
• Key milestones in Q4
– QCLNG sell-down: HOA signed
– Comgás disposal: completed
– Gujarat Gas disposal: SPA signed
– Quintero LNG disposal: part completed
– Bolivia-Brazil pipeline disposal: SPA signed
– BG Italia Power disposal: completed
– MetroGAS disposal: SPA signed
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3.8
8.1
4.3
0
5
10
2012 2013
Total capital release ($bn)
End 2013 target
Completed Agreed*
* Includes $0.5bn of cash capex saving in 2013
Financial structure & liquidity
20
0%
10%
20%
30%
0
1000
2000
3000
4000
5000
2010 2011 2012
• Maintain a robust financial structure
• Gearing fell from 27% to 24% (2011-12)
– Cash balance increased to $4.4 bn
• Diversifying & extending funding sources
– Average gross debt maturity up to 17 years
– Cash & undrawn committed bank facilities: $9.6 bn
Cash ($m) and gearing (%)
Gearing Cash balance
Armada UK
Excellence in execution
0.0
0.5
1.0
1.5
2.0
2.5
2008 2010 2012
2012 safety performance
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• Two fatalities in 2012
– Lessons learned shared around Group
• Majority of Group** met TRCF target
– Top quartile performance***
• QGC missed target
– Improving contractor management
• Focus on process safety & asset integrity
Group
Group excluding QGC
2012 Group target
TRCF* (per million work hours)
*Total recordable case frequency (includes employees & contractors working on operated assets)
** Excludes QGC *** OGP industry benchmark 2011
Top Quartile***
Industry Average***
-30
-20
-10
0
10
Kaz
akhs
tan
Trin
idad
Thai
land
Indi
a
Tuni
sia
Nor
way
Bol
ivia
Egy
pt
UK
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• 2012 base asset production
– Majority producing close to expectations
• 2008-12 (excluding UK and Egypt)
– 550 mmboe produced
– 89% production efficiency
– No production decline (post-investment)
• UK and Egypt
– Major driver of production shortfall
Variance to 2012 budget (kboed)
Base asset production performance
24
0%
25%
50%
75%
100%
0
40
80
120
160
2008 2010 2012
• Two producing assets (Rosetta & WDDM)
• Rosetta producing to plan
• WDDM
– Good production efficiency of >90%
– Recent decline due to water breakthrough
• 2012 WDDM development phase
– 9 new wells & compression
– Added production
– Wells performed close to expectations
– Higher water production & lower gas volumes
Egypt: WDDM production performance
Production (kboed) & PE* (%)
WDDM Budget WDDM PE%
* Production efficiency
• Improve predictability of field performance
• Increase production from existing well stock
– Workovers & acid stimulations
• Sanctioned next phase of WDDM development subject to partner approval
– Commence drilling Q2 2013
– Onstream in 2014
– Plan for 18 new development wells (2 tcf gross)
• Target near field exploration prospects close to existing infrastructure
– 2 exploration wells in 2013
• Production decline until new development wells onstream in 2014
25
Egypt: WDDM recovery plan
UK: production performance
• Significant value 2008-2012
– ca $12 bn operating profit
– Added ~200 mmboe of reserves & resources
• Non-operated assets; 2/3 of 2012 shortfall
– Elgin/Franklin well integrity: 45% of shortfall
– Buzzard shut-down extended
• Operated assets
– Limited accommodation
– Safety critical maintenance carried out
– Unable to complete all maintenance improvements to fully recover PE in 2012
26
0%
25%
50%
75%
100%
0
50
100
150
200
2008 2010 2012
UK other Elgin hub
UK other PE%
Budget
Elgin hub PE%*
Production (kboed) & PE (%)
* Elgin/Franklin PE @ full year 2012
UK: improving production efficiency
• Armada; step change in maintenance
– PE increased to 82% over 4 years
• Applying Armada knowledge
– Maintenance campaigns: Everest & Lomond
– Flotels to provide additional accommodation
– Significant reserves & development potential
– Working closely with Buzzard operator
• 2013 production higher than 2012
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Buzzard platform UK
2013 production outlook
• 7 projects coming onstream
• Elgin/Franklin restart
• Growth projects offset by
– Strategic decision to lower production in US
– Natural decline in Egypt
– Maintenance shutdown in Karachaganak
– Reduced equity in QCLNG
• 2013 production outlook: 630-660 kboed
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Q2 Brazil FPSO 3 onstream Karachaganak planned shutdown
Q3 Bongkot N Ph 3K onstream Itau Ph 2 onstream UK shutdowns
Q1 Brazil FPSO 2 onstream Everest East expansion onstream Elgin/Franklin production restart
Quarterly milestones
✓
Q4 Jasmine onstream Margarita Ph 2 onstream
Kenya water treatment plant Australia
Excellence in execution
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Current status
Wells 148 drilled Q4 2012, total 1160
New field compressor stations (FCS) 2 operating, 6 under construction
Ruby central processing plant 25% complete, all compressors delivered
Gas collection header 100% welded, 75% in the ground, crossing and tie-ins progressing
Export pipeline 74% welded, 45% in the ground
Narrows crossing 50% welded, dredging complete
LNG modules 24 on Curtis Island, further 25 in transit from Thailand
Good progress on QCLNG
Upstream
Pipeline*
LNG
* Progress percentages apply to mainline pipelines and exclude crossings / tie-ins
2013 2014
Q1 Q2 Q3 Q4 H1 H2
Ups
tream
P
ipel
ine
LNG
QCLNG on track for 2014 LNG sales
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First major water facility (Kenya)
Central processing plant (Ruby)
Six FCSs (for Ruby)
Gas collection header
Export pipeline
Narrows crossing
Modules delivered*:
LNG sales
Gas in plant - start commissioning
>2000 wells 1750 1600 1450 Wells: 1290
T1 & common facilities T2
* 80 modules in total (62 for train 1 and common facilities)
• Two-train project 51% complete*
• Scope to fill 1st train >60% complete
• Contracts & other agreements: 94%
• Project on schedule
• Confident in $20.4 bn budget (2011-14)
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QCLNG on budget
* Value of work done
Tank construction, QCLNG Curtis Island, Australia
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• Exceptional reservoir performance
– Production to date >65 mmboe (gross)
– Reserves & resources: 4-6-8 bn boe*
• FPSOs increased from 13 to 15
– ca 2.5 mmboed capacity by 2018
• Strong project execution
– 18 wells drilled & 21 well tests completed
– Up to 12 rigs drilling simultaneously
– 2 EWTs performed
– Sapinhoá commercial production (FPSO 2)
– FPSO 3 on schedule for Q2 2013
• Costs on track within budget
– 2012: gross capex commitments $14.3 bn
* Independently certified report commissioned by BG Group, not the view of the operator or relevant consortia
FPSO 2 Santos Basin, Brazil
Brazil: good progress
FPSO 1 performing better than expected
• 50 mmboe gross production to date
• Sustained exceptional well deliverability
– >20 mmboe from single well
– >100 kboed from 4 wells
– 1st horizontal producer onstream Q2 2013
• 1st water alternating gas injector online
– Water injection started October 2012
– Pressure support from water injection
– Switch to gas injection in Q1
– 2nd water alternating gas injector: Q1 2013
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FPSO Cidade de Angra dos Reis Santos Basin, Brazil
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Continuously improving execution
• Large number of FPSOs and wells
– Continuous improvement as processes are repeated
• Wells: ~50% capex
– ~25% reduction in drill times* in 2012
– Potential for further cost reduction
– >100 Christmas trees contracted
• FPSOs: ~20% of capex
– Flexibility to add FPSOs to secure schedule & expand project scope
• Confidence in delivering projects on schedule & budget
* Spud to total depth
36 Deepsea Metro I drillship
Tanzania
Exploration
Continued E&A success in 2012
• 18 out of 19 E&A wells were successful
• Delivered additional 800 mmboe of discovered resources
• Matured 350 mmboe of resources to reserves
• Tanzania ca 10 tcf gross including giant Jodari discovery
• Iara appraisal confirmed previous estimates, volumes in place similar to Lula
• Australia successfully tested Bowen coal seam gas & deep gas sands plays
• Prospect inventory grown by 21%
– 4.6 bn boe net risked resources
– New licences acquired in Uruguay, Trinidad and Tobago, India & Egypt
37
Exploration in 2013
• Key wells
– Exploration: Egypt (Notus), Brazil (Sagittario), UK HPHT (Thunderer & Jade S)
– First Kenya well around year end
– Appraisal: Australia plays & Tanzania
– Iara: 2 appraisal wells; test well designs for field development
• Major seismic programmes
– Uruguay, Kenya, Tanzania, Egypt
• Sign new licences (gross 44000 sq km)
– Honduras, Bolivia, Norway & UK
38
Algeria
Bolivia
Global 2013 E&A operations
Egypt 2 wells
1-2 wells
Tanzania 1 well
1-2 wells
Brazil 3 wells 1 well
Australia 30-40 wells
2 wells
Kenya 1 well
Thailand 9 wells
UK 3 wells
USA 2-3 wells
Appraisal / near term production
New plays Play extenders
SEC Proved Reserves Probable Reserves* Discovered Resources** Risked Exploration
Total reserves & resources (mmboe)
2459 2600 2893 3247 3431
3383 3530 3823 3939 3758
3722 4931
5757 6160 6739
3562 3433
3707 3784
4583
0
5000
10000
15000
20000
2008 2009 2010 2011 2012
13126 14494
16180 17130
18511
Total reserves & resources
39 *Adopted SEC definition for Probable reserves in 2009; Discovered resources called Unbooked resources until 2009
Total reserves & resources as at year end
Summary
• Significant milestones to deliver in 2013
– Major growth assets & base assets
• Australia & Brazil are on budget and schedule
– Significant volume & cash flow growth in 2014 & 2015
• Exploration remains core to our strategy
– Significant E&A programme in 8 countries
• Strategy & longer term outlook beyond 2013 in May
40
41 Deepsea Metro I drillship
Tanzania
2012 results presentation 5 February, 2013
REFERENCE CONDITIONS • Brent Oil price real (1/1/2013): 2013: $100/bbl • US Henry Hub real (1/1/2013): 2013: $3.5/mmbtu • US/UK exchange rates of $1.6:£1 • US/AUD exchange rates of $1:$A1 • US/BRL exchange rates of $1:BRL1.90 • Prepared under International Financial Reporting Standards • All production includes fuel gas PRINCIPAL RISKS • Major recession, significant political upheaval or terrorist attacks in the major markets in which we operate • Failure to ensure the safe and secure operation of our assets worldwide • Operational performance including shut-down, asset integrity, natural hazards, reservoir and well performance • Implementation risk, being the challenges associated with delivering capital intensive projects on time and on budget
Commodity risk, being the risk of significant fluctuation in oil and/or gas prices from those assumed • Foreign exchange risk, exchange rates maybe being significantly different to those assumed • Interest rate, liquidity and credit risk • Technical, environmental, commercial, economic, legal, litigation, regulatory, political and country risk • Risks associated with successful discoveries, estimation, appraisal and development of reserves
42
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.
Key assumptions
mmboe Million barrels of oil equivalent mmboed Million barrels of oil equivalent per day mmbtu Million British thermal units mtpa Million tonnes per annum OGP Oil and Gas Producers Association Opex Operating expenditure Ph Phase PE Production efficiency QCLNG Queensland Curtis LNG QGC QGC Pty Limited RRR Reserves Replacement Ratio (SEC data) SEC US Securities and Exchange Commission SPA Sale and Purchase Agreement sq km Square kilometres T&D Transmission & Distribution T1 Train 1 T2 Train 2 tcf Trillion cubic feet TRCF Total Recordable Case Frequency UK United Kingdom US or USA United States of America WDDM West Delta Deep Marine YOY Year on Year
Definitions
∆ Increase or (decrease) $ United States dollar $A Australian dollar > Greater than ~ Approximately AUD Australian dollar bbl Barrel of oil bn One thousand million boe Barrels of oil equivalent BRL Brazilian Real ca Circa Capex Capital expenditure CNOOC China National Offshore Oil Corporation DD&A Depletion, Depreciation & Amortization E&A Exploration and Appraisal E&P Exploration and Production EWT Extended Well Test FCS Field Compressor Station FPSO Floating Production Storage and Offloading HH Henry Hub HOA Heads of Agreement HPHT High Pressure High Temperature kboed Thousand barrels of oil equivalent per day LNG Liquefied Natural Gas
43