BG Group’s chief executive, Frank Chapman said: “The strength of BG Group’s integrated gas business is reflected in the distinctive resilience of our profits and cash flow in this challenging economic environment. We have also continued to make progress in key growth areas of our business, with the acquisition of Pure Energy in Australia, continued exploration success in Brazil and the development of projects across the portfolio.”

Total operating profit of GBP1275 million was 9% lower than 2008. This resilient performance, in the face of challenging economic conditions, reflects the strength of BG Group’s integrated gas business model. LNG and T&D posted strong profits and in E&P, firmer gas prices, improved sales mix and favorable USD/GBP exchange rates mitigated the effect of lower oil prices, a higher exploration charge and lower production volumes.

Cash generated by operations of GBP1,392 million covered capital investment of GBP1,311 million; which included the acquisition of Pure Energy Resources Limited (Pure Energy). At the end of the quarter, the gearing ratio of the group was 9%.

Net finance costs were GBP36 million higher principally due to lower cash balances and interest rates. The group’s effective tax rate (including BG Group’s share of joint venture and associates’ tax) was 42.5% (2008 43%) for the quarter.

Capital investment in the quarter of GBP1,311 million included GBP464 million on the acquisition of Pure Energy, and continuing investment in E&P (GBP711 million), LNG (GBP104 million), T&D (GBP29 million) and Power (GBP3 million).

First quarter business highlights

On March 27, 2009 BG Group completed the acquisition of Queensland Gas Company Limited (QGC).

During the quarter, BG Group Australia was established as a new region within BG Group’s organization, and Catherine Tanna was appointed as executive vice president and managing director, Australia. The region covers all of BG Group’s interests in Australia, including the development of QGC’s coal seam gas resources, domestic gas marketing and the Queensland Curtis LNG export facility.

In April, BG Group announced it had acquired over 99% of the ordinary share capital of Pure Energy under its recommended all cash takeover offer. The offer at AUD8.25 per share valued Pure Energy’s ordinary equity at GBP464 million. BG Group is in the process of completing the compulsory acquisition of the remaining Pure Energy shares. The acquisition of Pure Energy brings additional coal seam gas reserves and resources to BG Group at a low cost, located adjacent to key QGC licenses in the Surat basin. In addition, the acquisition brings large tracts of prospective coal seam gas acreage in Queensland’s Bowen Basin. In total, BG Group now owns interests in onshore concessions in Australia covering more than 130000 square kilometers.

Exploration and Production (E&P)

First quarter

E&P total operating profit was GBP583 million. Excluding the exploration charge, total operating profit was 27% lower at GBP760 million. The resilience of this performance, in the face of sharply lower oil prices, was due to firmer gas price realizations, BG Group’s success in improving its sales mix and the translation effect of a stronger US dollar.

Volumes were 2.8 mmboe lower principally due to the expected depletion of Atlantic/Cromarty in the UK and lower local demand in Kazakhstan, Thailand and Brazil.

Production guidance for the year is unchanged at 680,000 barrels of oil equivalent per day based on new projects due on stream later in the year and other production opportunities in the portfolio. Unit operating expenditure fell to $5.44 per barrel of oil equivalent. The exploration charge of GBP177 million is GBP80 million higher than 2008, principally due to the phasing of exploration activity and the impact of the USD/GBP exchange rate on costs.

Capital investment of GBP1175 million included expenditure in Australia (GBP511 million including GBP464 million on the acquisition of Pure Energy), Egypt (GBP114 million), UK (GBP102 million), Tunisia (GBP93 million) and Brazil (GBP77 million).

First quarter business highlights

In Thailand, BG Group has agreed to acquire all the shares of Petroleum Resources (Thailand) Pty Limited (PRT). PRT holds a 16.67% participating interest in the blocks 7, 8 and 9 concession (B789) and a 16.67% interest in an overriding royalty agreement (ORRA) covering production from block 9a in the Gulf of Thailand. Prior to this transaction, BG Group held a 50% interest in B789 (and operatorship) and a 50% interest in the ORRA.

In Brazil, the Tupi field flowed oil on April 25, 2009 as BG Group and partners began commissioning in preparation for first commercial production, expected imminently. A second well, Tupi P1, which commences drilling in June 2009, will also be tied back to the FPSO. The extended well test is scheduled to last for 15 months and production is expected to peak at around 15,000 barrels per day.

In April, BG Group and its partners made a new discovery in the pre-salt Santos basin, offshore Brazil. The exploration well, known as Iguacu, has proven the presence of another accumulation of light oil, in the BM-S-9 concession. This is the third discovery by BG Group and partners in the BM-S-9 concession.

Further evaluation of the discovery will continue in line with the National Petroleum Agency approved evaluation plan.

In April 2009, BG Group encountered hydrocarbons in a pre-salt reservoir with the Corcovado-1 exploration well (BM-S-52 concession – Santos basin). The well has reached its target depth and logging operations are ongoing. BG Group will move operations to Corcovado-2 on completion of the current well. BG Group is the operator of the BM-S-52 concession during the exploration phase and has a 40% interest in the concession, alongside partner Petrobras with a 60% interest. In Egypt, BG Group was awarded block 1, North Gamasa Offshore (BG Group 100%) in the latest licensing round of blocks by the Egyptian National Gas Holding Company.

Liquefied Natural Gas (LNG)

First quarter

LNG total operating profit increased by GBP183 million to GBP578 million. Shipping and marketing performed well in a seasonally strong quarter with total operating profit increasing by GBP160 million to GBP543 million principally due to higher realizations and the impact of a stronger USD.

BG Group’s share of operating profit from liquefaction activities increased by GBP35 million to GBP61 million reflecting a 13% increase in volumes, the impact of the stronger USD/GBP exchange rate and higher operating profits at Egyptian LNG.

BG Group’s guidance for LNG segment operating profit is unchanged at GBP1.4 to GBP1.5 billion for 2009 and GBP1.2 to GBP1.3 billion for 2010.

Capital investment of GBP104 million in the quarter included GBP69 million relating to LNG vessels, GBP17 million in Chile and GBP12 million in Australia.

First quarter business highlights:

On February 3, 2009 BG Group entered into an agreement with the Queensland Government to acquire a 270 hectare site at North China Bay on Curtis Island, the site of the proposed Queensland Curtis LNG project near Gladstone. The project remains on track for a final investment decision in 2010.

In February, BG Group successfully launched its first new-generation LNG carrier at the Samsung shipyard in Korea. The ship, to be delivered in 2010, will be the first of four 170,000 m3 LNG carriers for BG Group with dual-fuel diesel electric (DFDE) propulsion.