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BG Group Investor update - September 2014
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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.

2

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

3

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

4

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

5

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

6

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)

7

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.

8

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

9

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

11

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

12

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

13

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

14

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

15

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

16

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

17

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

18

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

19

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

21

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

22

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

23

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%

24

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

25

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

26

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

27

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

29

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.

31

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

32

BG Group – Investor updateBG Group – Investor update

BG GroupInvestor update - September 2014


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