Wednesday, May 18, 2011

BG’s Q1 2011 E&P Production hit by civil unrest in North Africa, flooding in Australia, and shutdowns in the North Sea; Will BG ramp up to achieve the Group’s long-term rate of 6-8% to 2020?

Natural Gas giant, BG has challenging first quarter for O&G operations. The group’s production for the period was down 5% from 61.3 mmboe to 58.2 mmboe over the same period last year. This is due to unrest in North Africa, flooding in Australia, an increase in UK tax and a shutdown in the North Sea. The North Sea's effect on the company was exacerbated by the temporary shutdown, largely for maintenance, of the Everest and Lomond platforms. This contributed to a 5% fall in production volumes. In Tunisia, the restart of the Hasdrubal plant was delayed, and in Egypt there was significant disruption to normal patterns of gas demand. In addition, production volumes in the quarter were affected by extreme weather conditions and extensive flooding in Queensland, Australia. However, BG pointed to advances in Brazil and the signing of two sales agreements in Japan as reasons to be optimistic.

BG’s Performance in 2010 compared to Peer Groups:

HIGHLIGHTS of the Quarter:
Production at the first permanent module on Lula Sul increased to some 25 000 boepd, and construction of the next two FPSO modules advanced to around 50% complete, in line with plans.
In April 2011, conclusion of a Drill Stem Test (DST) on the Guará Norte well (3-SPS-69) in Block BM-S-9 in the Santos Basin was done. The DST confirmed high productivity of some 6 000 bopd of light oil (approx 30° API) with flow rates constrained by test facility capacity.
In March 2011, successful completion of drilling on the Iara Horst well in the BM-S-11 concession in the Santos Basin. The well encountered good quality oil (28° API) in a thick reservoir section. Further evaluation activity continues.
In February 2011, a new discovery of oil (approximately 26° API) in Block BM-S-10 in the Santos Basin. The discovery well, known as Macunaíma, is located in a water depth of 2,134m, approximately 244 kms off the coast of Rio de Janeiro state. Further evaluation of the discovery continues.
BG Group's shale gas operations continued to gather momentum, with 46 wells spudded and 22 drilling rigs operating in the Haynesville shale during the quarter. Seven wells were drilled in the Marcellus shale.
In April 2011, the company announced its third Tanzanian gas discovery. The Chaza-1 well is located in Block 1 approximately 18 kms offshore southern Tanzania in a water depth of around 950m. It is intended that a second drilling campaign will commence in late 2011.
In March 2011, the company signed a Heads of Agreement with the Kenyan government to acquire a 40% equity interest in the exploration block L10A and a 45% interest in block L10B, subject to negotiation of Production Sharing Contracts. BG Group would operate both blocks.
In April 2011, a consortium led by BG Group (50% and operator), was identified as the qualifying bidder for an exploration block (MB-DWN-2010/1) offshore the west coast of India. The block is approximately 350 kms from the coast, covering an area of 7,963 sq kms and in water depths in excess of 2,000m. The award of the contract will be subject to final confirmation from the government of India and regulatory approvals.
In the 21st licensing round held in April, the Norwegian government awarded BG Group a 40% interest in and operatorship of licence PL599, located in the Norwegian Sea.
"We now expect modest production growth in 2011. The plans for a ramp-up in production in 2012 and 2013, as well as our 2020 goals, are unaffected and are supported by significant progress with our growth projects in Brazil, the US and Australia, as well as further exploration and appraisal success in Brazil and Tanzania.", Mr. Chapman,  BG Group’s Chief Executive added.

BG's Strategic Acquisitions in 2010 and 2011

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