At its annual strategy presentation to analysts
and investors, BG Group plc will today confirm
that the company is on schedule to meet its key
growth objectives and will announce changes to
some of its published targets.
The company will reaffirm that its strategy remains
robust and contains opportunities for long-term
growth. It will also introduce changes in investment
emphasis and a re-basing of the Transmission and
Distribution segment to reflect South American
market realities.
Chief Executive Frank Chapman will say:
"BG's strategy remains one of strong growth and good returns, rooted in
our expertise across the gas chain, and with E&P remaining our centre of
gravity. Alongside our determination to achieve our targets, we are developing
a rich portfolio of options to drive our growth well beyond 2006."
The Group will confirm it is on schedule to meet
its key targets for Exploration and Production
volumes in 2003 and 2006, and will reaffirm its
2003 finding and development cost target at $3.20
boe. BG will also revise its 2003 opex target to
$2.75 boe, targeting an industry leading full-cycle
cost of less than $6 per barrel.
In its Downstream businesses, BG will increase its 2003
target for LNG from 1.9 mtpa to 2.3 mtpa, and confirm
its 2006 target of 6 mtpa. In Power, the 2003 target
has been achieved ahead of schedule and a new target
of 2.7 gigawatts will be announced for 2006. Transmission & Distribution
targets for 2003 and 2006 are being reduced to 11.7 bcmpa
and 14.0 bcmpa respectively. This reflects the impact
of the adverse economic conditions in South America.
BG will confirm all of its downstream cost targets.
BG will state that, based on its performance to
date and its future plans, it is confident that
it will reach its 2003 ROACE target of 10-11%.
In May 2002, however, the company said it would
be reviewing the 2006 ROACE target in light of
the North Sea tax increase. Reflecting this and
the economic weakness of Argentina and Brazil,
the 2006 target is now to be revised downwards
from 14% to 13%.
BG will also announce that it remains on track
with its planned capital investment of £5.6
billion between 1999 and 2003, and £3 billion
between 2004 and 2006. BG's gearing is expected
to remain at less than 25%.
In addition to previously announced fields, contribution
to fulfillment of the 2006 E&P volume target
is also expected from the Atlantic and Glenelg
fields, interests in which were included in BG's
recent swap with BP, the Artemis field, which is
expected to be developed as part of the Juno project,
and the Panda field in the Sicily Channel, which
was discovered in 2002.
The 2003 targets are now as follows (with the
new figures in bold and the previously published
figures in parentheses):
-
Exploration and Production volumes of 440,000
barrels of oil equivalent per day;
-
Liquefied Natural Gas volumes of 2.3 (1.9)
million tonnes per annum;
-
Transmission and Distribution volumes of 11.7 (15.3)
billion cubic metres per annum;
-
Power capacity of 2.5 gigawatts;
The 2006 targets are now as follows:
-
Exploration and Production volumes of 530,000
barrels of oil equivalent per day;
-
Liquefied Natural Gas volumes of 6 million
tonnes per annum;
-
Transmission & Distribution volumes of 14 (20)
billion cubic metres per annum;
-
A new Power capacity target of 2.7 gigawatts.
The financial framework for 2006 is:
Notes to Editors
BG Group plc-The Integrated Gas Major-works across
the spectrum of the gas chain. Active on five continents
in some 20 countries, BG operates four business
segments - Exploration & Production, LNG, Transmission & Distribution
and Power. BG is a significant holder of hydrocarbon
reserves on the UK Continental Shelf, where it
operates the Blake, Armada and Easington Catchment
Area fields. Internationally, BG's operational
strategy is to develop gas markets and construct
infrastructure in tandem with its exploration interests.
BG's core areas are the UK, Egypt, Kazakhstan,
South America, India and Trinidad & Tobago.
KEY ASSUMPTIONS 2003 AND 2006 TARGETS
-
Brent Oil price of US$16 per barrel real
(base 2000) until the end of 2003 and US$17
per barrel nominal thereafter
-
Exchange rates of US$1.55:UK£1
-
US/ UK inflation rates of 2.5% per annum
-
UK corporation tax rates of 30%, except
E&P upstream 40% 2002 onwards
-
UK uncontracted gas prices 22 pence a therm
in 2001: 18 pence a therm in 2002 and 17
pence a therm thereafter.
PRINCIPAL RISKS 2003 AND 2006 TARGETS
-
Major recession or significant political
upheaval in the major markets in which we
operate
-
Failure to ensure the safe operation of
BG Group's assets world-wide
-
Implementation risk, being the challenges
associated with delivering capital intensive
projects on time and on budget, including
the need to retain and motivate staff
-
Commodity risk, being the risk of a significant
fluctuation in oil and/or gas prices from
those assumed
-
Foreign exchange risk, in particular the
US$/UK£ exchange rate being significantly
different to that assumed
-
Technical, commercial, economic, regulatory
and country risk.
For a detailed discussion of these and other risk
factors, please refer to the Risk Factors included
in BG Group's Annual Report and Accounts 2001.
Actual performances could differ materially
from the targets. Accordingly, no assurances
can be given that such targets will be achieved.
This announcement includes "forward-looking information" within
the meaning of Section 27A of the US Securities Act of
1933, as amended, and Section 21E of the US Securities
Exchange Act of 1934, as amended. Certain statements
included in this announcement, including without limitation
those concerning (i) BG Group's strategy, outlook and
growth opportunities; (ii) the 2002 objectives and 2003
and 2006 long term growth targets including certain financial
targets; (iii) cost targets; (iv) the projects expected
to contribute to the fulfillment of the growth targets;
(v) commercialisation and project delivery activities;
(vi) BG Group's positioning to deliver its future plans
and to realise its potential for growth; (vii) future
reserves; (viii) the economic outlook for the gas and
oil industries; (ix) demand for gas as a source of energy;
and (x) statements preceded by "believes", "expects", "anticipates", "plans", "intends" or
similar expressions, contain certain forward looking
information concerning BG Group's operations, economic
performance and financial performance. Although BG Group
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. Accordingly, results could differ materially
from those set out in the forward looking statements,
as a result of, among other factors, (i) changes in economic,
market and competitive conditions, including oil and
gas prices; (ii) success of implementing business and
operating initiatives; (iii) changes in the regulatory
environment and other government actions, including UK
and international corporation tax rates; (iv) the failure
to ensure the safe operation of BG Group's assets worldwide;
(v) implementation risk, being the challenges associated
with delivering capital intensive projects on time and
on budget, including the need to retain and motivate
staff; (vi) commodity risk, being the risk of significant
fluctuations in gas and/or oil prices from those assumed;
(vii) a major recession or significany upheaval in the
major markets in which BG Group operates; (viii) risks
encountered in the gas and oil exploration and production
sector in general; (ix) fluctuations in exchange rates;
(x) business risk management; and (xi) the Risk Factors
included in BG Group's Annual Report and Accounts 2001.
This announcement does not constitute or contain,
and shall not be taken to constitute or contain,
an invitation or inducement to any person to
underwrite, subscribe for, otherwise acquire
or dispose of or invest in BG Group plc or any
other entity, nor does it advise any person to
do any of the foregoing.
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