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BG Group posts profit ahead of Shell takeover

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By Tara Cunningham, Business Reporter: 9:16AM GMT 05 Feb 2016

In its final results ahead of its landmark merger with Shell, BG Group has reported a pre-tax profit of $2.98bn, compared with a $2.3bn loss the previous year.

FTSE 100-listed BG is due to be absorbed into the Anglo-Dutch giant by the middle of the month after its shareholders voted overwhelmingly in favour of a £40bn takeover.

Screen Shot 2016-02-05 at 11.21.44In its last year as standalone company, BG managed to limit the impact from plunging oil prices to a 16pc drop in revenue for the year, racking up sales of $16.2bn.

It also grew its output by 16pc, beating its own forecasts by producing 704,000 barrels of oil equivalent per day. BG was helped by a ramp-up in its oilfields in Australia, Brazil and Norway.

BG boss Helge Lund, who will step down on completion of the merger, said the group had delivered “an excellent operational performance” in 2015, ahead of market expectations.

“The ramp-up of both liquefied natural gas (LNG) trains at our QCLNG project in Australia and the ramp-up in Brazil drove a strong exploration and production operational performance.”

BG Group is a specialist in LNG, a form of gas that is converted into liquid form for transport. Its expertise in this field and its offshore assets in Brazil are among the reasons why Shell is acquiring the company.

However, the oil price crash weighed heavily on its LNG arm and its upstream division, which produces oil and gas. Profits in these businesses tumbled 46pc and 35pc respectively.

In common with its peers in the sector, BG has continued to slash costs. Capital expenditure fell 32pc to $6.4bn, while the group exceeded its $330m cost savings target.

For the final quarter of the year, BG made a loss of $1.2bn, but this was down significantly on the $8.3bn it lost in the same quarter of 2014.

“The addition of new low-cash cost volumes in Brazil and Australia and delivery of our operating and capital cost savings has helped to partly mitigate the impact of lower commodity prices,” Mr Lund said.

“This strong operational performance is the result of the capability and commitment of our teams across the organisation and we will deliver a high-performing business into the combination with Shell.”

There will be no final dividend for last year as a result of the takeover by Shell, which is scheduled to be completed by February 15. Instead, BG shareholders will receive a dividend from Shell, which has been announced as 47 cents per share.

Yesterday Shell reported its sharpest decline in income in 13 years and it confirmed 10,000 jobs would be axed.

At least 2,500 jobs will go as a result of the merger, with BG likely to lose its headquarters in Reading.

Shell chief executive Ben Van Beurden said: “The completion of the BG transaction, which we are expecting in a matter of weeks, marks the start of a new chapter in Shell, rejuvenating the company, and improving shareholder returns.”

SOURCE

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