Description
The financial reporting framework that has been applied in their preparation is applicable law and IFRS as adopted by the European Union and, as regards the parent Company Financial statements, as applied in accordance with the provisions of the Companies Act 2006.
FINANCIAL
STATEMENTS
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
KARACHAGANAK PROCESSING COMPLEX,
KAZAKHSTAN.
BG Group is joint operator of the giant
Karachaganak ?eld in north-west Kazakhstan.
The ?eld covers an area of more than
280 square kilometres where some 395 wells
have been drilled. Only 10% of the hydrocarbons
initially in place have been produced to date.
84 Independent auditor’s report
88 Principal accounting policies
92 Primary statements
92 – Consolidated income statement
93 – Consolidated statement of comprehensive
income
94 – Balance sheets
96 – Statements of changes in equity
97 – Cash ?ow statements
98 Notes to the accounts
132 Supplementary information –
gas and oil (unaudited)
137 Historical production (unaudited)
138 Five-year ?nancial summary (unaudited)
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83
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF BG GROUP PLC
3. Our approach to planning our audit 1. Our opinion on the Financial statements
In our opinion:
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the Financial statements give a true and fair
view of the state of the Group’s and of the
parent Company’s affairs as at 31 December
2014 and of the Group’s loss for the year
then ended;
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the Group’s Financial statements have
been properly prepared in accordance with
International Financial Reporting Standards
(IFRS) as adopted by the European Union;
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the parent Company Financial statements
have been properly prepared in accordance
with IFRS as adopted by the European
Union and as applied in accordance with the
provisions of the Companies Act 2006; and
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the Financial statements have been prepared
in accordance with the requirements of
the Companies Act 2006 and, as regards the
Group’s Financial statements, Article 4
of the IAS Regulation.
2. What we have audited
We have audited the Financial statements of
BG Group plc for the year ended 31 December
2014, which comprise:
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the Consolidated income statement, the
Consolidated statement of comprehensive
income, the Consolidated and parent Company
balance sheets, the Consolidated and parent
Company statements of changes in equity,
the Consolidated and parent Company cash
?ow statements; and
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the Principal accounting policies and the
related notes 1 to 25.
The ?nancial reporting framework that has
been applied in their preparation is applicable
law and IFRS as adopted by the European Union
and, as regards the parent Company Financial
statements, as applied in accordance with
the provisions of the Companies Act 2006.
OUR OPINIONS AND CONCLUSIONS ARISING FROM OUR AUDIT
UNDERSTANDING
BG GROUP’S BUSINESS
Understand BG Group’s business,
strategy and business model
We obtain an understanding of BG Group
and the environment in which it operates
by review, enquiry, analytical procedures,
observation and inspection.
RISK OF MATERIAL
MISSTATEMENT
Identify and assess the risks
of material misstatement
We perform risk assessment procedures
to provide a basis for the identi?cation
and assessment of risks of material
misstatement, including those relating
to signi?cant risks (see section 4).
MATERIALITY
Determine materiality and
performance materiality
When establishing our overall audit
strategy, we determine materiality for
the ?nancial statements as a whole.
In so doing, we make judgements about
the size of misstatements that will be
considered material (see section 5)
SCOPE
Determine the scope of our audit
Our scope is tailored to the particular
circumstances of our audit of BG Group
and is in?uenced by our assessed risks of
material misstatement and determination
of materiality (see section 6).
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BG GROUP PLC
RISKS OUR RESPONSE TO THESE RISKS WHAT WE REPORTED TO THE AUDIT COMMITTEE
The recent decline in crude oil prices has had a
signi?cant impact on the Group Financial statements
and disclosures. The lower outlook has resulted
in material impairments of assets.
A signi?cant judgement is oil price assumptions,
both in the short and long-term.
Commodity price assumptions impact many areas
of ?nancial reporting, including estimation of oil
and gas reserve volumes, impairment assessment
and decommissioning provision estimates.
In 2014, around three quarters of the output of BG Group’s
gas assets was sold under contracts linked to oil prices.
We therefore focused our analysis principally on oil prices.
In assessing the appropriateness of management’s
oil price assumptions, we have compared their price
assumptions with the latest market evidence available,
including forward curves, broker’s estimates and other
long-term price forecasts.
The available market evidence shows that there is
a wide range of expectations as to the oil price over
the next 5 years.
Beyond 2020 brokers expect prices to recover, although
not to levels experienced over the last three years.
BG Group’s oil price assumptions are comfortably
within the range of analyst expectations and
other market data, including the range of what we
understand other market participants are considering
as a long-term oil price.
Estimation of oil and gas reserves requires
signi?cant judgement and assumptions by
management and engineers. These estimates
have a material impact on the Financial statements,
particularly: impairment testing; depreciation,
depletion and amortisation (DD&A); decommissioning
provisions; and going concern.
There is technical uncertainty in assessing reserve
quantities and complex contractual arrangements
dictating BG Group’s share of reserves, particularly
the Production Sharing Contracts (PSCs) and joint
venture arrangements in place. This technical
uncertainty is even higher in the case of
unconventional hydrocarbons.
Our audit procedures have focused on management’s
estimation process, including whether bias exists
in the determination of reserves and resources.
Our procedures included:
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assessing the competence and objectivity of both
internal and external specialists involved in the
estimation process;
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ensuring that signi?cant additions or reductions in proved
reserves were compliant with BG Group’s Reserves
and Resources Technical Standards and Guidelines;
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testing group-wide controls over the reserves
review process; and
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discussing and ensuring that any reserve revisions
were consistent with our understanding.
Based on our procedures we consider that the reserves
estimations are a reasonable basis for estimating
reserves in-place for impairment testing, calculating
DD&A, the determination of decommissioning
dates and in considering going concern.
The assessment of the existence of any indicators
of impairment of the carrying amount of non-current
exploration and production assets is judgemental.
In the event that indicators are identi?ed, the
assessment of the recoverable amounts of the assets
is also judgemental. Overall there has been a material
impairment charge that has been recognised during
2014. The impairment charge has primarily been
driven by the signi?cant reduction in commodity
prices and reduced outlook for the long-term
assumed oil and gas prices.
The principal indicator of impairment was the decline
in the oil price. We engaged our business modelling
and valuation specialists to assist us in the audit of
the impairment charge.
Separately, we audited the inputs to impairment models,
including the commodity prices, production pro?les,
cash ?ow projections, capital expenditure, operating
expenditure, risk weightings and discount rates.
Our procedures included:
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understanding the variations in future production
to historical data;
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comparing future operating expenditure to historical
expenditure and ensuring that variations are in line
with our expectations;
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comparing the in?ation and exchange rate
assumptions to external market data; and
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an independent assessment of the discount rate.
Based on our procedures, we believe the impairment
charge is appropriate and well within an acceptable
range. Furthermore, based on our audit procedures,
we believe that the cash ?ow projections estimated
are reasonable, the assumptions are supportable
and the range of economic conditions that could
exist over the remaining useful lives of the assets
have appropriately been considered.
The overdue amount from the Egyptian government
at the year end was $0.7 billion. Given the political
and economic uncertainty in Egypt we continue to
focus on the recoverability of this overdue amount.
We challenged management’s assessment as to
the recoverability of the receivable. We gained an
understanding of the local environment in Egypt and
monitored its impact on operations. We con?rmed the
receivables balance and agreed the receipts to supporting
documentation. We critically evaluated management’s
assessment of the recoverability of asset balances.
We considered cash received during the year, average
grid take for the year, the status of price re-negotiations
with the Egyptian government, general developments in
Egypt, the anticipated time over which the outstanding
amount is expected to be repaid and the currency
that those payments are anticipated to be made in.
Based on the overall balance of the quantitative
and qualitative factors, we believe that the overdue
Egyptian receivable of $0.7 billion remains
recoverable. In forming our view we have taken
into account the signi?cant lump sum cash
payments that have been received during the year
and the positive developments that have taken
place during the year on price re-negotiation.
We consider the pre-tax charge of $100 million
relating to the downward re-measurement of
the receivable to re?ect the time value of money
to be appropriate.
There are material deferred tax assets recognised
as at the balance sheet date. These assets primarily
relate to tax losses and are recognised on the basis
that there will be taxable pro?t within the Group
to utilise these losses. The assets are primarily
in Australia, the US and the UK. The Australian
element was previously unrecognised.
We have audited the forecast taxable pro?ts that
underpin the recognition of the deferred tax assets,
in particular the taxable pro?ts of the Australian,
US and UK businesses.
Our procedures included:
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understanding the income sources supporting the
future taxable pro?ts;
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ensuring that the assumptions are consistent with
those tested as part of the impairment testing; and
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con?rming as to whether the tax losses are restricted
against the source of future pro?ts or are required
to be utilised within a certain timeframe.
We are satis?ed there is suf?cient certainty over
the ability of the company to utilise these losses and
that recognition of the related deferred tax assets
is appropriate.
4. Our assessment of risk of material misstatement
We identi?ed the following risks that have had the greatest effect on: our overall audit strategy; our allocation of resources in the audit; and directing
the efforts of the engagement team.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BG GROUP PLC > CONTINUED
RISKS OUR RESPONSE TO THESE RISKS WHAT WE REPORTED TO THE AUDIT COMMITTEE
The Group has a number of material uncertain
tax positions, which are subject to judgement in
relation to interpretation of tax regulations and
estimation in recording a provision for any
potential cash out?ow.
We considered management’s interpretation and
application of relevant tax law and challenged the
appropriateness of management’s assumptions and
estimates in relation to uncertain tax positions.
To assist us in assessing a number of uncertain tax
positions, we engaged our tax specialists to advise us
on the tax technical issues in order to form a view of
the risk of challenge to certain tax treatments adopted.
We believe that the amount provided by
management is appropriate and well within
an acceptable range.
Going concern assessment, particularly in light
of the recent oil price decline and decrease in
forward prices.
Our audit procedures included:
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agreeing the assumed cash ?ows to the business
plan, walking through the business planning process
and testing the central assumptions to external data;
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considering the impact of any delays in the receipt
of cash proceeds from the Group’s asset disposals;
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con?rming, through enquiry, the consistent application
of the cash ?ow at risk methodology to assess the
sensitivity of the underlying assumptions used
in the going concern review; and
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agreeing the standby facilities to underlying
agreements and assessing the concentration risk.
Based on the results of our procedures, we are of
the opinion that the Group has prepared a robust
assessment that has considered appropriate sensitivities
and stress scenarios, in particular a delay in receiving
the cash from anticipated disposals. In assessing the
robustness of the assessment, we have taken assurance
from the level to which oil prices would have to fall
for a sustained period for the stressed scenario to
become a reality.
We consider the decision to prepare the Financial
statements on a going concern basis is appropriate.
5. Our application of materiality
We apply the concept of materiality both
in planning and performing our audit, and
in evaluating the effect of misstatements
on our audit and on the Financial statements.
For the purposes of determining whether the
Financial statements are free from material
misstatement we de?ne materiality as the
magnitude of misstatement that makes it
probable that the economic decisions of a
reasonably knowledgeable person, relying
on the Financial statements, would be
changed or in?uenced.
We initially determined materiality for the
Group to be $300 million (2013: $375 million),
which is approximately 5% (2013: 5%) of
Business Performance* pro?t before tax, and
approximately 1% (2013: 1%) of total equity.
We have calculated materiality with reference
to the Group’s Business Performance as
we consider this to be one of the principal
considerations for members of the Company
in assessing the ?nancial performance of
the Group. This is on the basis that Business
Performance excludes one-off items and fair
value measurement of commodity contracts.
It is the key earnings measure discussed when
the Group presents the ?nancial results.
This provided a basis for determining the
nature, timing and extent of risk assessment
procedures, identifying and assessing the risk
of material misstatement and determining
the nature, timing and extent of further audit
procedures. Our evaluation of materiality
requires professional judgement and
necessarily takes into account qualitative
as well as quantitative considerations
implicit in the de?nition.
The oil price declined signi?cantly during the
course of our audit. The signi?cant decline
was in the fourth quarter of the year and did
not have a signi?cant impact on the full year
Business Performance. However, there have
been a number of material impairments, which
have been audited individually and in full.
On the basis of our risk assessments, together
with our assessment of the Group’s overall
control environment, our judgement was
that overall performance materiality (i.e. our
tolerance for misstatement in an individual
account or balance) for the Group should be
50% (2013: 50%) of planning materiality, namely
$150 million (2013: $187 million). Our objective
in adopting this approach was to ensure
that total uncorrected and undetected audit
differences in all accounts did not exceed
our materiality level of $300 million.
Audit work at individual components is
undertaken based on a percentage of our total
performance materiality. The performance
materiality set for each component is based
on the relative size of the component and
our view of the risk of misstatement at that
component. In the current year the range
of performance materiality allocated to
components was $30 million to $113 million.
This is set out in more detail in section 6 below.
We agreed with the Audit Committee
that we would report to the Committee all
audit differences in excess of $15 million
(2013: $18 million), as well as differences below
that threshold that, in our view, warranted
reporting on qualitative grounds.
We evaluate any uncorrected misstatements
against both the quantitative measures of
materiality discussed above and in the light
of other relevant qualitative considerations.
6. An overview of the scope of our audit
Our assessment of audit risk, our evaluation
of materiality and our allocation of that
materiality determined our audit scope. The
factors that we considered when assessing
the scope of the Group audit and the level
of work to be performed at each location
included the following: the ?nancial signi?cance
and speci?c risks of the location; and the
effectiveness of the control environment and
monitoring activities, including Group-wide
controls and recent internal audit ?ndings.
Following our assessment of the risk of
material misstatement to the Group Financial
statements, we selected seven components
(2013: seven) which represent the principal
business units within the Group’s two
reportable segments and account for
78% (2013: 80%) of the Group’s total assets
and 75% (2013: 75%) of the Group’s Business
Performance pre-tax pro?t.
The components selected, together with
the allocated performance materiality,
were as follows:
Location and allocated performance materiality $ million
Australia (full audit) 113
Brazil (speci?c audit procedures) 30
Egypt (speci?c audit procedures) 30
UK & Norway (full audit) 56
GEMS (full audit) 90
Kazakhstan (full audit) 56
Treasury (speci?c audit procedures) 98
Four of these locations were subject to a full
audit (2013: four), whilst at the remaining three
(2013: three) speci?c audit procedures were
performed, including full audit of the accounts
that were impacted by our assessed risks of
material misstatement. For the remaining
components, we performed other procedures
to con?rm there were no signi?cant risks of
material misstatement in the Group Financial
statements. For those items excluded from
Business Performance, primarily impairment
charges, we applied a similar approach
whereby our in-scope component audit
* ‘Business Performance’ excludes discontinued operations,
disposals, certain re-measurements and impairments and
certain other exceptional items.
4. Our assessment of risk of material misstatement continued
86
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
67% Full audit
8% Speci?c audit procedures
25% Other procedures
BUSINESS PERFORMANCE:
PROFIT BEFORE TAX
(%)
TOTAL ASSETS
(%)
49% Full audit
29% Speci?c audit procedures
22% Other procedures
FINANCIAL STATEMENTS | INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BG GROUP PLC > CONTINUED
teams performed audit procedures on items
generated at the locations including Australia,
Egypt and North Sea pre-tax impairment
charges. The Group audit team performed
procedures on the remaining items including
the US and Tunisia pre-tax impairment
charges and tax items.
The charts below illustrate the coverage
obtained from the work performed by
our component teams:
The Group audit team continued to follow
a programme of planned visits that has been
designed to ensure that the Senior Statutory
Auditor visits each of the locations where
the Group audit scope was focused at least
once every two years and the most signi?cant
of them at least once a year. For all full audit
components, in addition to the location visit,
the Group audit team reviewed key working
papers and participated in the component
team’s planning, including the component
team’s discussion of fraud and error.
7. Our opinion on other matters prescribed
by the Companies Act 2006
In our opinion:
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the part of the Directors’ Remuneration
report to be audited has been properly
prepared in accordance with the Companies
Act 2006; and
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the information given in the Strategic report
and the Directors’ report for the ?nancial
year for which the Financial statements
are prepared is consistent with the
Financial statements.
8. Matters on which we are required
to report by exception
We have nothing to report in respect
of the following:
Under International Standards on Auditing (ISAs)
(UK and Ireland) we are required to report to
you if, in our opinion, information in the
Annual Report and Accounts is:
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materially inconsistent with the information
in the audited Financial statements; or
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apparently materially incorrect based
on, or materially inconsistent with, our
knowledge of the Group acquired in the
course of performing our audit; or
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is otherwise misleading.
In particular, we are required to consider
whether we have identi?ed any inconsistencies
between our knowledge acquired during the
audit and the directors’ statement that they
consider the annual report is fair, balanced and
understandable and whether the annual report
appropriately discloses those matters that we
communicated to the audit committee which
we consider should have been disclosed.
Under the Companies Act 2006 we are
required to report to you if, in our opinion:
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adequate accounting records have not
been kept by the parent Company, or
returns adequate for our audit have not been
received from branches not visited by us; or
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the parent Company Financial statements
and the part of the Directors’ Remuneration
report to be audited are not in agreement
with the accounting records and returns; or
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certain disclosures of Directors’ remuneration
speci?ed by law are not made; or
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we have not received all the information
and explanations we require for our audit.
Under the Listing Rules we are required
to review:
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the Directors’ statement, set out on
page 81, in relation to going concern; and
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the part of the Corporate Governance
Statement relating to the Company’s
compliance with the nine provisions of the
UK Corporate Governance Code speci?ed
for our review.
9. The scope of our report
This report is made solely to the Company’s
members, as a body, in accordance with Chapter
3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we
might state to the Company’s members those
matters we are required to state to them in
an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone
other than the Company and the Company’s
members as a body, for our audit work, for this
report, or for the opinions we have formed.
10. The scope of our audit of the
Financial statements
An audit involves obtaining evidence about
the amounts and disclosures in the Financial
statements suf?cient to give reasonable
assurance that the Financial statements are
free from material misstatement, whether
caused by fraud or error. This includes an
assessment of: whether the accounting
policies are appropriate to the Group’s and the
parent Company’s circumstances and have
been consistently applied and adequately
disclosed; the reasonableness of signi?cant
accounting estimates made by the Directors;
and the overall presentation of the Financial
statements. In addition, we read all the
?nancial and non-?nancial information in
the Annual Report and Accounts to identify
material inconsistencies with the audited
Financial statements and to identify any
information that is apparently materially
incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the
course of performing the audit. If we become
aware of any apparent material misstatements
or inconsistencies we consider the implications
for our report.
11. The respective responsibilities
of Directors and auditor
As explained more fully in the Statement
of Directors’ Responsibilities set out on
page 81, the Directors are responsible for the
preparation of the Financial statements
and for being satis?ed that they give a true
and fair view. Our responsibility is to audit
and express an opinion on the Financial
statements in accordance with applicable
law and lSAs (UK and Ireland). Those standards
require us to comply with the Auditing Practices
Board’s Ethical Standards for Auditors.
ALLISTER WILSON
SENIOR STATUTORY AUDITOR
for and on behalf of Ernst & Young LLP,
Statutory Auditor
London
18 March 2015
Notes:
1. The maintenance and integrity of the BG Group plc web site
is the responsibility of the Directors; the work carried out
by the auditor does not involve consideration of these
matters and, accordingly, the auditor accepts no responsibility
for any changes that may have occurred to the Financial
statements since they were initially presented on the web site.
2. Legislation in the United Kingdom governing the preparation
and dissemination of ?nancial statements may differ from
legislation in other jurisdictions.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS
PRINCIPAL ACCOUNTING POLICIES
Reserves, commodity prices,
impairment and depreciation
One factor that affects the calculation of
depreciation and impairment in particular is
the estimation of hydrocarbon reserves and
resources. BG Group’s estimates of reserves
and resources of gas and oil are reviewed and,
where appropriate, updated quarterly. They
are also subject to periodic review by external
petroleum engineers. A number of factors
impact on the amount of gas and oil reserves
and resources, including the available reservoir
data, commodity prices and future costs, and
the amount is subject to periodic revision as
these factors change. BG Group estimates that
a 1% change throughout 2014 in the estimation
of proved, proved developed and proved plus
probable reserves associated with producing
?elds would have changed the 2014 depreciation
charge by $24 million.
BG Group uses a range of short and long-term
assumptions to determine the net present value
of future cash ?ows for use in impairment
reviews unless short-term market assumptions
are more appropriate to the asset under review.
Particular assumptions that impact the
calculations are commodity prices, reserves
estimates, exchange rates, discount rates
and the value of risked exploration acreage.
Pages 34 to 41 include further detail in relation
to commodity prices and reserves estimates.
In 2014, the Group recognised a pre-tax
impairment charge of $9.0 billion (post-tax
$5.9 billion) relating to Upstream activities
in Australia, Egypt and certain other assets.
Of the total pre-tax impairment of $9.0 billion,
$5.5 billion (post-tax $3.4 billion) resulted
predominately from commodity price declines,
$2.7 billion (post-tax $1.8 billion) related to
the QCLNG Pipeline Pty Limited disposal
and $0.8 billion (post-tax $0.7 billion) related
primarily to reserves downgrades.
In Australia, the total pre-tax non-cash
impairment charge was $6.8 billion (post-tax
$4.5 billion) driven mainly by a reduction in the
Group’s assumptions of future commodity prices
and the disposal of QCLNG Pipeline Pty Limited.
The impairment is sensitive to assumptions
including commodity prices, foreign exchange
(movements in the Australian Dollar relative
to the US Dollar), timely ramp up of production,
third-party gas purchases required to maintain
full LNG production in both QCLNG trains,
successful exploration of intangible assets
and the discount rate applied to cash ?ow
projections. Any adverse changes in these
assumptions could result in an additional
impairment in the next ?nancial year.
In Egypt, the total pre-tax non-cash impairment
charge was $0.8 billion (post-tax $0.7 billion),
principally driven by further reserve downgrades
re?ecting underlying reservoir performance.
The impairment is sensitive to assumptions
including the level of domestic gas diversions,
the sanctioning of future investment projects,
the continued repayment of the domestic
receivables and the discount rate applied to
cash ?ow projections. Any adverse changes in
these assumptions could result in an additional
impairment in the next ?nancial year.
Elsewhere, the reduction in the Group’s
assumptions of future commodity prices
resulted in pre-tax non-cash impairment
charges in the North Sea of $0.6 billion
(post-tax $0.2 billion), Tunisia of $0.5 billion
(post-tax $0.3 billion) and the USA of $0.2 billion
(post-tax $0.1 billion). These impairments
are sensitive to assumptions including
commodity prices.
Egypt receivables
The Egyptian government continues
to demonstrate its commitment to repay
outstanding debts to the energy industry. After
partial repayments of the Group’s outstanding
debt during 2014, the amount owed by Egypt
General Petroleum Corporation (EGPC) in
respect of domestic gas sales as at 31 December
2014 was $0.9 billion (2013: $1.2 billion), of which
$0.7 billion (2013: $0.5 billion) was overdue.
The Group considers that the current receivable
balance remains fully recoverable as cash
payments from EGPC continue to be received,
however in 2014 a $100 million pre-tax
(post-tax $79 million) charge was recognised
relating to the downward re-measurement of
the receivable balance to re?ect the time value
of money associated with the outstanding
debt based on a revised assumed repayment
pro?le. The recoverability of the receivable
balance depends on the business environment
in Egypt, the Group’s continued investment
plans and the volume of gas available for
export, together with the outcome of ongoing
negotiations with EGPC.
Exploration expenditure
Expenditure on unproved gas and oil reserves
within intangible assets is reviewed at least
annually to con?rm the Group’s continued
right and intent to explore, develop or
otherwise realise value from these assets. As
at 31 December 2014 BG Group held a balance
of $3 014 million (2013: $3 752 million) relating
to expenditure on unproved gas and oil reserves
within intangible assets. Capitalised exploratory
well costs included within this total amounted
to $2 525 million (2013: $3 058 million). Unsuccessful
exploration expenditure written off to the
income statement in 2014 was $237 million
(2013: $394 million). Capitalised exploratory
well costs relate to areas where further work
is being undertaken on geological and geophysical
assessment, development design and
commercial arrangements.
BASIS OF PREPARATION
The Financial statements for the year ended
31 December 2014 have been prepared in
accordance with International Financial
Reporting Standards (IFRS), and IFRS Interpretations
Committee (IFRIC) interpretations as adopted by
the European Union. In addition, the Financial
statements have been prepared in accordance
with those parts of the Companies Act 2006
applicable to companies reporting under IFRS.
The Financial statements have been prepared
primarily using historical cost principles except
that, as disclosed in the accounting policies
below, certain items, including derivatives,
are measured at fair value.
BASIS OF CONSOLIDATION
The Financial statements comprise a consolidation
of the accounts of the Company and its subsidiary
undertakings and incorporate the results of its
share of joint ventures and associates using the
equity method of accounting. All inter-company
transactions are eliminated on consolidation.
Consistent accounting policies have been used
to prepare the consolidated Financial statements.
Most of BG Group’s exploration and production
(E&P) activity is conducted through joint
operations. The Group recognises its own share of
the assets, liabilities, revenues, expenses and cash
?ows associated with these joint operations.
The results of undertakings acquired or disposed
of are consolidated from or to the date when
control passes to or from the Company. For the
Company Financial statements only, investments
in subsidiary undertakings are stated at cost
less any provision for impairment.
PRESENTATION OF RESULTS
BG Group presents its results in the income
statement to separately identify the contribution
of disposals, certain re-measurements,
impairments and certain other exceptional
items in order to provide readers with a clear
and consistent presentation of the underlying
operating performance of the Group’s ongoing
business; see note 1, page 98 and note 9,
page 110.
SIGNIFICANT ACCOUNTING
JUDGEMENTS AND ESTIMATES
The preparation of ?nancial statements in
conformity with IFRS requires management to
make judgements and assumptions that affect
the reported amounts of assets and liabilities
and disclosure of contingencies at the date
of the ?nancial statements and the reported
revenues and expenses during the reporting
period. Actual results could differ from
these estimates. BG Group believes that the
accounting policies associated with reserves,
impairment, depreciation, exploration
expenditure, decommissioning costs and tax
are the policies where changes in estimates
and assumptions could have a signi?cant
impact on the Financial statements.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | PRINCIPAL ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES
Exploration expenditure
BG Group uses the ‘successful efforts’ method
of accounting for exploration expenditure.
Exploration expenditure, including licence
acquisition costs, is capitalised as an intangible
asset when incurred and certain expenditure,
such as geological and geophysical exploration
costs, is expensed. A review of each licence
or ?eld is carried out, at least annually, to
ascertain whether commercial reserves have
been discovered.
For conventional E&P activities, intangible
exploration and appraisal expenditure is
reclassi?ed to property, plant and equipment
on the determination of proved reserves. This
is the point when exploration and appraisal
activities become a development project
and re?ects the importance of individual well
performance and reserves to conventional
E&P projects. By comparison, unconventional
coal seam and shale gas activities have a
relatively short exploration and appraisal
phase and are more focused on the average
deliverability of a large number of wells over
an entire licence area rather than the performance
and reserves associated with individual wells.
Accordingly, BG Group uses the determination
of proved plus probable reserves as the point
at which exploration and appraisal expenditure
on unconventional E&P activities is reclassi?ed
to property, plant and equipment. This
approach is consistent with the methodology
used to depreciate assets associated with
these activities.
Exploration expenditure transferred to
property, plant and equipment is subsequently
depreciated on a unit of production basis.
Exploration expenditure deemed to be
unsuccessful is written off to the
income statement.
Depreciation and amortisation
Freehold land is not depreciated. Other property,
plant and equipment, except exploration
and production assets, is depreciated on a
straight-line basis at rates suf?cient to write
off the historical cost less residual value of
individual assets over their estimated useful
economic lives. Asset lives and residual
values are reassessed annually.
The depreciation periods for the principal
categories of assets are as follows:
Freehold and leasehold buildings up to 50 years
Plant and machinery 5 to 40 years
Motor vehicles and of?ce equipment up to 10 years
Exploration and production assets associated
with conventional activities are depreciated
from the commencement of commercial
production in the ?elds concerned, using
the unit of production method based on the
proved developed reserves of those ?elds,
except that a basis of total proved reserves
is used for acquired interests and for facilities.
Exploration and production assets associated
with unconventional activities, including
coal seam and shale gas, are depreciated from
the commencement of commercial production
in the ?elds concerned, using the unit of
production method based on proved plus
probable reserves, together with the estimated
future development expenditure required
to develop those reserves.
Intangible assets in respect of contractual
rights are recognised at cost less amortisation.
They are amortised on a straight-line basis
over the term of the related contract.
Changes in depreciation and amortisation
estimates are dealt with prospectively.
Decommissioning costs
Where a legal or constructive obligation
has been incurred, provision is made for the
net present value of the estimated cost of
decommissioning at the end of the producing
lives of assets.
When this provision gives access to future
economic bene?ts, an asset is recognised
and then subsequently depreciated in line
with the life of the underlying producing
asset, otherwise the costs are charged to
the income statement. The unwinding of
the discount on the provision is included in
the income statement within ?nance costs.
Any changes to estimated costs or discount
rates are dealt with prospectively.
Impairment of non-current assets
Non-current assets subject to depreciation
or amortisation are reviewed for impairments
whenever events or other changes in
circumstances indicate that the carrying
amount may not be recoverable. Expenditure
on unproved gas and oil reserves is assessed
for impairment when facts and circumstances
suggest that its carrying amount exceeds
its recoverable amount.
Any impairment of non-current assets
(excluding ?nancial assets) is calculated as
the difference between the carrying values
of cash-generating units (including associated
goodwill) and their recoverable amount,
being the higher of the estimated value in
use or fair value less costs of disposal at
the date the impairment charge is recognised.
Value in use represents the net present value
of expected future cash ?ows discounted
on a pre-tax basis. Fair value less costs of
disposal is based on the best evidence available
to the Group, and may include appropriate
valuation techniques, market data or sales
of comparable assets.
Decommissioning costs
The recognition and measurement of
decommissioning provisions involves the use
of estimates and assumptions. These include:
the existence of a legal or constructive obligation
to decommission, based on current legislation,
contractual or regulatory requirements or best
practice; the risk-free discount rate used to
determine the net present value of the liability;
the estimated cost of decommissioning based
on internal and external engineering estimates
and reports; and the payment dates of expected
decommissioning costs which are uncertain
and are based on economic assumptions
surrounding the useful economic lives of the
?elds concerned. Actual costs could differ from
estimated costs due to changes in legislation,
regulations, technology, price levels and the
expected date of decommissioning.
On the basis that all other assumptions
in the calculation remain the same as at
31 December 2014, a 10% increase in the cost
estimates used to assess the ?nal decommissioning
obligations would result in an increase to the
decommissioning provision of circa $450 million,
and a 1% increase in the discount rate would
result in a decrease to the decommissioning
provision of circa $800 million. These changes
would be principally offset by a change in the
value of the associated asset, resulting in no
material change to the consolidated net assets.
Current and deferred tax
BG Group is subject to income taxes in
numerous jurisdictions. There are transactions
and calculations for which the ultimate tax
determination is uncertain. The Group periodically
evaluates situations in which applicable tax
regulation is subject to interpretation and
establishes provisions where appropriate based
on amounts expected to be paid to the tax
authorities. In estimating these provisions
consideration is taken of the strength of the
technical arguments, the local statute of
limitations, likely scope for double tax relief,
and whether penalties and interest could apply.
Deferred tax assets are recognised for
deductible temporary differences, unutilised
tax losses and unused tax credits to the extent
that realisation of the related tax bene?t
through future taxable income is probable.
To determine the future taxable income,
reference is made to the latest available pro?t
forecasts. This requires assumptions regarding
future pro?tability and is therefore inherently
uncertain. Signi?cant items where the Group
has relied on estimates of future taxable income
include a deferred tax asset in respect of the
US tax group amounting to $1 298 million
(2013: $1 056 million) and a deferred tax asset
relating to the Australian tax group amounting
to $2 167 million (2013: $nil).
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | PRINCIPAL ACCOUNTING POLICIES > CONTINUED
These contracts are recognised on the balance
sheet at fair value with movements in fair
value recognised in the income statement.
The Group uses various commodity-based
derivative instruments to manage some of the
risks arising from ?uctuations in commodity
prices. Such contracts include physical and
net-settled forwards, futures, swaps and
options. Where these derivatives have been
designated as cash ?ow hedges of underlying
commodity price exposures, certain gains and
losses attributable to these instruments are
deferred in other comprehensive income and
recognised in the income statement when
the underlying hedged transaction crystallises
or is no longer expected to occur.
All other commodity contracts within the
scope of IAS 39 are measured at fair value
with gains and losses taken to the income
statement. Gas and oil contracts and related
derivative instruments associated with the
physical purchase and re-sale of third-party
gas are presented on a net basis within
other operating income.
Revenue recognition
Revenue associated with E&P sales (of natural
gas, crude oil and petroleum products) is
recorded when title passes to the customer.
Revenue from the production of natural gas
and oil in which BG Group has an interest
with other producers is recognised based on
the Group’s working interest and the terms
of the relevant production sharing contracts
(entitlement method).
Sales of LNG and associated products are
recognised when title passes to the customer.
LNG shipping revenue is recognised over the
period of the relevant contract.
All other revenue is recognised when title
passes to the customer.
Current and deferred income tax
The tax expense for the period comprises
current and deferred tax, determined using
currently enacted or substantively enacted
tax laws.
Deferred income tax is provided in full, using
the liability method, on temporary differences
arising between the tax bases of assets and
liabilities and their carrying amounts in the
Financial statements. Deferred tax assets are
recognised to the extent that it is probable
that future taxable pro?t will be available,
against which the temporary differences can
be utilised.
Deferred income tax is provided on temporary
differences arising on investments in subsidiaries,
joint ventures and associates, except where
the timing of the reversal of the temporary
difference can be controlled and it is probable
that the temporary difference will not reverse
in the foreseeable future.
OTHER ACCOUNTING POLICIES
Property, plant and equipment
excluding decommissioning assets
All property, plant and equipment is carried
at depreciated historical cost. Additions
represent new, or replacements of speci?c
components of property, plant and equipment.
Finance costs associated with borrowings
used to ?nance major capital projects are
capitalised up to the point at which the
asset is ready for its intended use.
Inventories
Inventories, including inventories of gas,
LNG and oil held for sale in the ordinary course
of business, are stated at weighted average
historical cost less provision for deterioration and
obsolescence or, if lower, net realisable value.
Foreign currencies
The currency in which the Group presents its
consolidated and parent Company Financial
statements is US Dollars. The functional
currency of the Company is Pounds Sterling.
The exchange rates of US Dollar to Pound
Sterling over the periods included in this
Annual Report and Accounts are as follows:
US$/UK£
exchange rate 2014 2013 2012 2011 2010
Closing rate 1.5593 1.6563 1.6255 1.5541 1.5657
Average rate 1.6545 1.5640 1.5848 1.6079 1.5489
On consolidation, assets and liabilities
denominated in currencies other than US Dollars
are translated into US Dollars at closing rates
of exchange. Non-US Dollar trading results of
the parent Company, subsidiary undertakings,
jointly controlled entities and associates are
translated into US Dollars at average rates
of exchange. Differences resulting from the
retranslation of the opening net assets and
the results for the year are recognised in
other comprehensive income.
Any differences arising from 1 January 2003,
the date of transition to IFRS, are presented
as a separate component of equity.
Share capital, share premium and other
reserves are translated into US Dollars at
the historical rates prevailing at the date
of the transaction.
Exchange differences on monetary assets
and liabilities arising in individual entities are
taken to the income statement, including
those in respect of inter-company balances
unless related to exchange differences on
items that form part of a net investment
in a foreign operation. These differences
are taken to reserves until the related
investment is disposed of. All other exchange
movements are dealt with through the
income statement.
For the purposes of impairment testing,
exploration and production assets may be
aggregated into appropriate cash-generating
units based on considerations including
geographical location, the use of common
facilities and marketing arrangements.
Financial instruments
Derivative ?nancial instruments are initially
recognised and subsequently re-measured
at fair value.
Derivative ?nancial instruments utilised
by BG Group’s treasury operations include
interest rate swaps, foreign currency swaps,
cross-currency interest rate swaps, forward rate
agreements and forward exchange contracts.
Certain derivative ?nancial instruments are
designated as hedges in line with the Group’s
risk management policies. Gains and losses
arising from the re-measurement of these
?nancial instruments are either recognised
in the income statement or deferred in other
comprehensive income depending on the
type of hedging relationship. When a hedging
instrument is sold or expires, any cumulative
gain or loss previously recognised in other
comprehensive income remains in other
comprehensive income until the hedged
transaction is recognised in the income
statement or is no longer expected to occur.
Movements in the fair value of derivative
?nancial instruments not included in
hedging relationships are recognised in the
income statement.
Loans held by the Group are initially measured
at fair value and subsequently carried at
amortised cost, except where they form the
underlying transaction in an effective fair
value hedge relationship when the carrying
value is adjusted to re?ect fair value
movements associated with the hedged
risks. Such adjustments are reported in
the income statement.
Other ?nancial instruments such as receivable
balances are measured at amortised cost
less impairments.
Commodity instruments
Within the ordinary course of business
BG Group routinely enters into sale and
purchase transactions for commodities.
The majority of these transactions take the
form of contracts that were entered into and
continue to be held for the purpose of receipt
or delivery of the commodity in accordance
with the Group’s expected sale, purchase
or usage requirements. Such contracts are
not within the scope of IAS 39.
Certain commodity contracts have pricing
terms that bring them into the scope of IAS 39.
In addition, commodity instruments are used
to manage certain price exposures in respect
of optimising the timing and location of
physical gas, LNG and oil commitments.
90
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | PRINCIPAL ACCOUNTING POLICIES > CONTINUED
ACCOUNTING DEVELOPMENTS DURING 2014
IFRS 10 ‘Consolidated Financial Statements’
The IASB issued IFRS 10 in May 2011. The standard
builds on existing principles by identifying
the concept of control as the determining factor
in whether an entity should be consolidated.
The standard also provides additional
guidance to assist in the determination of
control. Adoption of this standard has not
had a material impact on the Group’s
Financial statements.
IFRS 11 ‘Joint Arrangements’
The IASB issued IFRS 11 in May 2011. The standard
aims to provide a more substance-based
re?ection of joint arrangements in the
?nancial statements by focusing on the rights
and obligations of the arrangement rather
than the legal form. Adoption of this standard
has not had a material impact on the Group’s
Financial statements.
IFRS 12 ‘Disclosure of Interests in Other Entities’
The IASB issued IFRS 12 in May 2011. The
standard introduces new and comprehensive
disclosure requirements for all forms of interests
in other entities, including joint arrangements,
associates and structured entities. New and
revised disclosures in accordance with this
standard are presented in note 13 on page 113
and note 25 on page 130.
Other amendments
A number of other amendments to accounting
standards issued by the IASB are applicable
from 1 January 2014. They have not had
a material impact on the Group’s Financial
statements for the year ended 31 December 2014.
ACCOUNTING DEVELOPMENTS
NOT YET ADOPTED
The following standards and amendments
have been issued by the IASB up to the date
of this report and in some cases have not
yet been endorsed by the European Union.
IFRS 9 ‘Financial Instruments’
The IASB issued the ?nal version of IFRS 9
in July 2014, which re?ects all phases of the
?nancial instruments project. IFRS 9 introduces
new requirements for the classi?cation,
measurement and impairment of ?nancial
instruments and hedge accounting, and will
be adopted by the Group when it becomes
mandatory in the European Union. BG Group
is currently reviewing the standard to
determine the likely impact on the Group’s
Financial statements.
IFRS 15 ‘Revenue from Contracts
with Customers’
The IASB issued IFRS 15 in May 2014. The
standard establishes a ?ve-step model that
will apply to revenue arising from contracts
with customers. Revenue is recognised
when a customer obtains control of a good
or service and thus has the ability to direct
the use and obtain the bene?ts from the
good or service. Revenue is recognised based
on the consideration to which the Group
expects to be entitled. IFRS 15 will be adopted
by the Group when it becomes mandatory
in the European Union. BG Group is currently
reviewing the standard to determine the likely
impact on the Group’s Financial statements.
Amendment to IFRS 11 ‘Joint Arrangements’
The IASB issued an amended IFRS 11 in May
2014. The amendment requires an acquisition
of an interest in a joint operation that is
a business as de?ned in IFRS 3, ‘Business
Combinations’, to apply the relevant IFRS 3
principles for business combinations accounting,
and applies to both the acquisition of an initial
interest in a joint operation and the acquisition
of any additional interest. The amendment
will be applied prospectively by the Group
when it becomes mandatory in the
European Union.
Other revisions and amendments
Other revisions and amendments are not
expected to have a material impact on
the Group’s Financial statements.
Leases
Assets held under ?nance leases are capitalised
and included in property, plant and equipment
at the lower of fair value and the present
value of the minimum lease payments
as determined at the inception of the lease.
The obligations relating to ?nance leases, net
of ?nance charges in respect of future periods,
are determined at the inception of the lease
and included within borrowings. The interest
element of the rental obligation is allocated
to accounting periods during the lease term
to re?ect the constant rate of interest on
the remaining balance of the obligation for
each accounting period.
BG Group has certain long-term arrangements
under which it has acquired all of the capacity
of certain property, plant and equipment. In
circumstances where it is considered that the
Group has the majority of the risks and rewards
of ownership of the plant, the arrangement
is considered to contain a ?nance lease.
Rentals under operating leases are charged
to the income statement on a straight-line
basis over the lease term.
Pensions
The amount recognised on the balance sheet
in respect of liabilities for de?ned bene?t
pension and post-retirement bene?t plans
represents the present value of the obligations
offset by the fair value of plan assets.
The cost of providing retirement pensions
and related bene?ts is charged to the income
statement over the periods bene?ting from
the employees’ services. Current service
costs are re?ected in operating pro?t and net
interest costs are re?ected in ?nance costs
in the period in which they arise. Actuarial
gains and losses are recognised in full as they
occur in other comprehensive income.
Contributions made to de?ned contribution
pension plans are charged to the income
statement when payable.
Share-based payments
The cost of providing share-based payments to
employees is charged to the income statement
over the vesting period of the related share
options or share allocations. The cost is based
on the fair value of the options or shares
allocated and the number of awards expected
to vest. The fair value of each option or share
is determined using either the share price on
the date of the grant or a Monte Carlo projection
model, depending on the type of award.
Market-related performance conditions are
re?ected in the fair value of the share.
Non-market-related performance conditions
are allowed for using a separate assumption
about the number of awards expected to
vest; the ?nal charge made re?ects the
number actually vesting.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December
Note
2014 2013
Business
Performance
$m
Disposals,
re-measurements
and impairments
$m
Total
$m
Business
Performance
$m
Disposals,
re-measurements
and impairments
$m
Total
$m
Group revenue 1 19 289 – 19 289 19 192 – 19 192
Other operating income 1, 4 257 403 660 (91) 210 119
Group revenue and other operating income 1 19 546 403 19 949 19 101 210 19 311
Operating costs 2, 4 (13 391) (181) (13 572) (11 981) 154 (11 827)
Pro?ts and losses on disposal of non-current assets
and impairments 4 – (8 120) (8 120) – (3 817) (3 817)
Operating pro?t/(loss)
(a)
1 6 155 (7 898) (1 743) 7 120 (3 453) 3 667
Finance income 4, 5 153 – 153 104 65 169
Finance costs 4, 5 (262) (644) (906) (283) – (283)
Share of post-tax results from joint ventures and associates 1 222 (56) 166 336 – 336
Pro?t/(loss) before taxation 6 268 (8 598) (2 330) 7 277 (3 388) 3 889
Taxation 4, 6 (2 233) 3 512 1 279 (2 903) 1 219 (1 684)
Pro?t/(loss) for the year from continuing operations 1, 4 4 035 (5 086) (1 051) 4 374 (2 169) 2 205
Pro?t/(loss) for the year from discontinued operations 7 – 7 7 – 245 245
Pro?t/(loss) for the year 4 035 (5 079) (1 044) 4 374 (1 924) 2 450
Pro?t attributable to:
Shareholders (earnings) 1 4 035 (5 079) (1 044)
(b)
4 374 (1 933) 2 441
(b)
Non-controlling interest 1 – – – – 9 9
4 035 (5 079) (1 044) 4 374 (1 924) 2 450
Earnings per ordinary share continuing operations (cents)
Basic 9 118.4 (149.2) (30.8) 128.6 (63.8) 64.8
Diluted 9 118.4 (149.2) (30.8) 128.0 (63.5) 64.5
Earnings per ordinary share discontinued operations (cents)
Basic – 0.2 0.2 – 6.9 6.9
Diluted – 0.2 0.2 – 6.9 6.9
Total earnings per ordinary share (cents)
Basic 118.4 (149.0) (30.6) 128.6 (56.9) 71.7
Diluted 118.4 (149.0) (30.6) 128.0 (56.6) 71.4
Total operating pro?t/(loss) including share of pre-tax
operating results from joint ventures and associates
(c)
1 6 537 (7 954) (1 417) 7 616 (3 453) 4 163
(a) Operating pro?t/(loss) is before share of results from joint ventures and associates.
(b) Comprises earnings from continuing operations of $(1 051)m (2013: $2 205m) and from discontinued operations of $7m (2013: $236m).
(c) This measurement is shown by BG Group as it is used as a means of measuring the underlying performance of the business.
For information on dividends paid and proposed in the year see note 8, page 110.
The accounting policies on pages 88 to 91 together with the notes on pages 98 to 131 form part of these accounts.
92
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2014
$m
2013
$m
Pro?t/(loss) for the year (1 044) 2 450
Items that may be reclassi?ed to the income statement:
Fair value (losses)/gains on cash ?ow hedges (71) 121
Transfers to income statement on cash ?ow hedges
(a)
33 146
Fair value (losses)/gains on net investment hedges (574) 198
Fair value movements on available-for-sale assets (17) (8)
Tax on cash ?ow and net investment hedges
(b)
125 (90)
Currency translation adjustments
(c)
(223) (2 875)
Other items:
Re-measurement of de?ned bene?t pension obligation (163) (48)
Tax on re-measurement of de?ned bene?t pension obligation 45 –
Other comprehensive income/(charge) for the year, net of tax
(d)
(845) (2 556)
Total comprehensive income/(charge) for the year (1 889) (106)
Attributable to:
Shareholders (1 889) (115)
Non-controlling interest – 9
(1 889) (106)
(a) During 2014, a pre-tax loss of $33m (2013: $108m) was transferred from the hedging reserve to revenue to match against the underlying transactions and a pre-tax loss of $nil (2013: $38m)
was transferred from the hedging reserve related to the disposal of an associate.
(b) Includes a tax credit relating to cash ?ow hedges of $9m (2013: $54m charge) and a tax credit relating to net investment hedges of $116m (2013: $36m charge).
(c) In 2014, $nil (2013: $119m gain) was transferred to the income statement as part of the pro?t/(loss) on disposal of non-US Dollar denominated operations.
(d) Includes other comprehensive income in respect of joint ventures and associates of $(29)m (2013: $20m).
The loss for the ?nancial year for the Company was $(6)m (2013: $1m pro?t). Total comprehensive income/(charge) for the Company was $(361)m (2013: $121m).
As permitted by section 408 of the Companies Act 2006, no income statement or statement of comprehensive income is presented for the Company.
The accounting policies on pages 88 to 91 together with the notes on pages 98 to 131 form part of these accounts.
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93
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS
BALANCE SHEETS
Note
The Group The Company
as at 31 December 2014
$m
2013
$m
2014
$m
2013
$m
Assets
Non-current assets
Goodwill 10 – 25 – –
Other intangible assets 11 3 135 3 864 – –
Property, plant and equipment 12 35 855 42 225 – –
Investments in subsidiary undertakings 13 – – 4 104 4 288
Investments 13 3 547 2 933 – –
Deferred tax assets 6 3 949 1 397 2 10
Trade and other receivables 15 1 068 777 – –
Commodity contracts and other derivative ?nancial instruments 18 287 623 – –
47 841 51 844 4 106 4 298
Current assets
Inventories 14 1 194 838 – –
Trade and other receivables 15 5 042 6 900 1 786 2 881
Current tax receivable 151 77 35 47
Commodity contracts and other derivative ?nancial instruments 18 235 107 – –
Cash and cash equivalents 16 5 295 6 208 – –
11 917 14 130 1 821 2 928
Assets classi?ed as held for sale 7 2 088 – – –
Total assets 61 846 65 974 5 927 7 226
Liabilities
Current liabilities
Borrowings 17 (1 586) (475) – –
Trade and other payables 19 (4 768) (5 631) (48) (51)
Current tax liabilities (1 412) (1 831) – –
Commodity contracts and other derivative ?nancial instruments 18 (128) (297) – –
(7 894) (8 234) (48) (51)
Non-current liabilities
Borrowings 17 (15 921) (17 054) – –
Trade and other payables 19 (136) (150) – –
Commodity contracts and other derivative ?nancial instruments 18 (253) (173) – –
Deferred tax liabilities 6 (2 946) (4 120) – –
Retirement bene?t obligations 24 (258) (168) – –
Provisions for other liabilities and charges 20 (5 235) (4 115) – –
(24 749) (25 780) – –
Liabilities associated with assets classi?ed as held for sale 7 (63) – – –
Total liabilities (32 706) (34 014) (48) (51)
Net assets 29 140 31 960 5 879 7 175
The accounting policies on pages 88 to 91 together with the notes on pages 98 to 131 form part of these accounts.
94
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | BALANCE SHEETS > CONTINUED
Note
The Group The Company
as at 31 December 2014
$m
2013
$m
2014
$m
2013
$m
Equity
Ordinary shares 21 579 579 579 579
Share premium 691 663 691 663
Hedging reserve (7) 22 – –
Translation reserve (1 467) (786) (223) 132
Other reserves 2 710 2 710 1 203 1 203
Retained earnings 26 634 28 772 3 629 4 598
Total equity 29 140 31 960 5 879 7 175
The accounts on pages 88 to 131 were approved by the Board and signed on its behalf on 18 March 2015 by:
SIMON LOWTH
CHIEF FINANCIAL OFFICER
The accounting policies on pages 88 to 91 together with the notes on pages 98 to 131 form part of these accounts.
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95
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN EQUITY
The Group Called up
share
capital
$m
Share
premium
account
$m
Hedging
reserve
$m
Translation
reserve
(a)
$m
Other
reserves
(b)
$m
Retained
earnings
(c)
$m
Total
$m
Non-
controlling
interest
$m
Total
$m
As at 1 January 2013 578 619 (191) 1 927 2 710 27 248 32 891 57 32 948
Total comprehensive income for the year – – 213 (2 713) – 2 385 (115) 9 (106)
Pro?t for the year – – – – – 2 441 2 441 9 2 450
Hedges, net of tax – – 213 162 – – 375 – 375
Available-for-sale assets, net of tax – – – – – (8) (8) – (8)
De?ned bene?t pension obligation,
net of tax – – – – – (48) (48) – (48)
Currency translation adjustments – – – (2 875) – – (2 875) – (2 875)
Adjustment for share schemes – – – – – 85 85 – 85
Tax in respect of share schemes
(d)
– – – – – 19 19 – 19
Dividends – – – – – (952) (952) – (952)
Disposal of non-controlling interest – – – – – – – (66) (66)
Issue of shares
(e)
1 44 – – – – 45 – 45
Net purchase of own shares – – – – – (13) (13) – (13)
As at 31 December 2013 579 663 22 (786) 2 710 28 772 31 960 – 31 960
Total comprehensive income for the year – – (29) (681) – (1 179) (1 889) – (1 889)
Loss for the year – – – – – (1 044) (1 044) – (1 044)
Hedges, net of tax – – (29) (458) – – (487) – (487)
Available-for-sale assets, net of tax – – – – – (17) (17) – (17)
De?ned bene?t pension obligation,
net of tax – – – – – (118) (118) – (118)
Currency translation adjustments,
net of tax – – – (223) – – (223) – (223)
Adjustment for share schemes – – – – – 71 71 – 71
Tax in respect of share schemes
(d)
– – – – – (3) (3) – (3)
Dividends – – – – – (1 027) (1 027) – (1 027)
Issue of shares
(e)
– 28 – – – – 28 – 28
As at 31 December 2014 579 691 (7) (1 467) 2 710 26 634 29 140 – 29 140
The Company Called up
share
capital
$m
Share
premium
account
$m
Translation
reserve
$m
Other
reserves
(b)
$m
Retained
earnings
$m
Total
$m
As at 1 January 2013 578 619 12 1 203 5 473 7 885
Total comprehensive income for the year
(f)
– – 120 – 1 121
Adjustment for share schemes – – – – 85 85
Tax in respect of share schemes
(d)
– – – – 4 4
Dividends – – – – (952) (952)
Issue of shares
(e)
1 44 – – – 45
Net purchase of own shares – – – – (13) (13)
As at 31 December 2013 579 663 132 1 203 4 598 7 175
Total comprehensive income for the year
(f)
– – (355) – (6) (361)
Adjustment for share schemes – – – – 71 71
Tax in respect of share schemes
(d)
– – – – (7) (7)
Dividends – – – – (1 027) (1 027)
Issue of shares
(e)
– 28 – – – 28
As at 31 December 2014 579 691 (223) 1 203 3 629 5 879
(a) As at 31 December 2014, includes currency translation losses of $9m (2013: $20m gains) relating to joint ventures and associates.
(b) Other reserves, which are not distributable, represent the difference between the carrying value of subsidiary undertaking investments and their respective capital structures following
the restructuring and re?nancing in 1999.
(c) As at 31 December 2014, includes retained earnings in respect of joint ventures and associates of $660m (2013: $771m).
(d) This consists of current tax of $5m (2013: $9m) and deferred tax of $(8)m (2013: $10m) in the Group and current tax of $nil (2013: $3m) and deferred tax of $(7)m (2013: $1m) in the Company.
(e) The issue of shares relates to amounts issued to employees under employee share option schemes for a cash consideration of $28m (2013: $45m).
(f) Comprises loss for the year of $(6)m (2013: $1m pro?t) and currency translation adjustments of $(355)m (2013: $120m).
The accounting policies on pages 88 to 91 together with the notes on pages 98 to 131 form part of these accounts.
96
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS
CASH FLOW STATEMENTS
Note
The Group The Company
for the year ended 31 December 2014
$m
2013
$m
2014
$m
2013
$m
Pro?t/(loss) before taxation
(a)
(2 321) 4 147 (1) (3)
Finance income (153) (170) (13) (17)
Finance costs 906 284 – –
Share of post-tax results from joint ventures and associates (166) (335) – –
Operating pro?t/(loss) (1 734) 3 926 (14) (20)
Depreciation of property, plant and equipment 2 788 2 946 – –
Amortisation of other intangible assets 11 9 – –
Share-based payments 62 74 3 11
Fair value movements in commodity-based contracts (354) (98) – –
Pro?ts and losses on disposal of non-current assets and impairments
(b)
8 120 3 576 – –
Unsuccessful exploration expenditure written off 237 394 – –
Decrease in provisions for liabilities and retirement bene?t obligations (94) (129) – –
Movements in working capital:
Increase in inventories (272) (29) – –
Decrease/(increase) in trade and other receivables 993 (618) – –
Increase in trade and other payables 258 234 – –
Cash generated/(used) by operations 10 015 10 285 (11) (9)
Income taxes (paid)/received (2 616) (2 468) 8 (5)
Net cash in?ow/(out?ow) from operating activities 7 399 7 817 (3) (14)
Cash ?ows from investing activities
Dividends received 179 147 – –
Proceeds from disposal of subsidiary undertakings and investments
(c)
800 774 – –
Proceeds from disposal of property, plant and equipment and intangible assets
(d)
55 3 827 – –
Purchase of property, plant and equipment and intangible assets (8 510) (10 605) – –
Repayments from joint ventures and associates 41 73 – –
Interests in subsidiaries, joint ventures and associates, and other investments (892) (610) – –
Other loan repayments 111 112 – –
Net cash out?ow from investing activities (8 216) (6 282) – –
Cash ?ows from ?nancing activities
Interest paid (620) (675) – –
Interest received 64 115 – –
Dividends paid (1 024) (923) (1 024) (923)
Net proceeds from issue of new borrowings
(e)
2 086 2 713 – –
Repayment of borrowings (625) (1 093) – –
Issue of shares 28 45 28 45
Movements in own shares – (13) – (13)
Funding movements with subsidiary – – 999 904
Net cash (out?ow)/in?ow from ?nancing activities (91) 169 3 13
Net (decrease)/increase in cash and cash equivalents (908) 1 704 – (1)
Cash and cash equivalents at 1 January 16 6 208 4 520 – 2
Effect of foreign exchange rate changes (5) (16) – (1)
Cash and cash equivalents at 31 December 16 5 295 6 208 – –
(a) Pro?t before taxation from discontinued operations was $9m (2013: $258m).
(b) Pro?ts and losses on disposal of non-current assets and impairments include a pro?t from discontinued operations of $nil (2013: $241m).
(c) 2014 includes proceeds from the sale of the Central Area Transmission System pipeline and associated infrastructure in the UK North Sea of $797m. 2013 includes proceeds from the disposal
of Gujarat Gas Company Limited of $259m (net of cash held at the date of disposal of $84m), TGGT of $240m and the Group’s remaining 20% equity in GNL Quintero of $172m.
(d) 2014 includes proceeds of $53m from the sale and lease back of ships. 2013 includes proceeds of $3 633m from the disposal of certain interests in upstream coal seam gas tenements in Australia
and equity interests in the QCLNG project Train 1 liquefaction facility.
(e) Includes net cash ?ows relating to short maturity ?nancing.
The cash ?ows above are inclusive of discontinued operations (see note 7, page 109).
The accounting policies on pages 88 to 91 together with the notes on pages 98 to 131 form part of these accounts.
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97
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS
1 SEGMENTAL ANALYSIS AND RESULTS PRESENTATION
BG Group’s reportable segments are those used by the Group’s Board and management (the ‘Chief Operating Decision Maker’ as de?ned in IFRS 8
‘Operating Segments’) to run the business and are based on differences in the Group’s products and services. Segment information is presented
on the same basis as that used for internal reporting purposes. BG Group has two principal operating and reporting segments; Upstream
and LNG Shipping & Marketing. Upstream comprises exploration, development, production, liquefaction and marketing of hydrocarbons.
LNG Shipping & Marketing combines the development and use of LNG import facilities with the purchase, shipping and sale of LNG and regasi?ed
natural gas. The Group’s remaining Transmission and Distribution businesses, principally Mahanagar Gas in India, and certain corporate activities
are included in the Other activities segment.
Intra-Group sales are settled at market prices and are generally based on the same prices as those charged to third parties (arm’s length principle).
Group revenue, pro?t for the year, depreciation, amortisation and impairment and capital investment attributable to BG Group activities are
shown on pages 98 to 101, analysed by operating segment.
The presentation of BG Group’s results under IFRS separately identi?es the effect of the re-measurement of certain ?nancial instruments, pro?ts
and losses on the disposal and impairment of non-current assets and certain other exceptional items. Results excluding discontinued operations
and disposals, certain re-measurements and impairments and certain other exceptional items (‘Business Performance’) are used by management
and are presented in order to provide readers with a clear and consistent presentation of the underlying operating performance of the Group’s
ongoing business. Further information on Business Performance is given on page 142.
The disposals, re-measurements and impairments column includes unrealised gains and losses in respect of certain gas sales contracts classi?ed
as derivatives under IAS 39, commodity instruments that represent economic hedges but do not qualify for hedge accounting, and ?nancial
instruments used to manage foreign exchange and interest rate exposure. Where these instruments represent economic hedges but cannot be
designated as hedges under IAS 39, unrealised movements in fair value, together with foreign exchange movements associated with the underlying
borrowings and foreign exchange movements in respect of certain inter-company balances, are recorded in the income statement and disclosed
separately as ‘disposals, re-measurements and impairments’. The separate presentation of these items best re?ects the underlying performance
of the business since it distinguishes between the temporary timing differences associated with re-measurements under IAS 39 rules and
actual realised gains and losses.
Under IFRS the results from jointly controlled entities (joint ventures) and associates are presented net of tax and ?nance costs on the face of
the income statement. BG Group also presents the operating pro?t of the Group including results of joint ventures and associates before interest
and tax, as this approach provides additional information on the source of the Group’s operating pro?ts.
Reconciliations between the Total Results and Business Performance, and operating pro?t including and excluding the results of joint ventures
and associates are provided on pages 99 and 100. The geographical information provided for external revenue is based on country of production.
Further information is given in the Supplementary information on page 132.
GROUP REVENUE
Analysed by operating segment
External revenue Intra-Group revenue Total Group revenue
for the year ended 31 December 2014
$m
2013
$m
2014
$m
2013
$m
2014
$m
2013
$m
Group revenue
(a)
Upstream 11 161 11 455 701 688 11 862 12 143
LNG Shipping & Marketing 8 121 7 730 3 31 8 124 7 761
Other activities 7 7 – – 7 7
Segmental revenue 19 289 19 192 704 719 19 993 19 911
Less: Intra-Group revenue – – (704) (719) (704) (719)
Group revenue 19 289 19 192 – – 19 289 19 192
(a) External revenue attributable to the UK is $3 168m (2013: $3 270m). External revenue attributable to non-UK countries is $16 121m (2013: $15 922m). Included in the Upstream segment is revenue of
$2 441m attributable to Brazil representing 13% of Group external revenue (2013: $1 281m, 7%) and $1 716m attributable to Kazakhstan representing 9% of Group external revenue (2013: $2 090m, 11%).
Further geographical information on the Group’s E&P revenues can be found in Supplementary information – gas and oil (unaudited) on page 132. LNG Shipping & Marketing revenues are not
considered reliant on individual countries since they are associated with the global deployment of the Group’s portfolio of ?exible LNG supplies.
External revenue in respect of a single external customer amounted to $1 596m (2013: $2 198m), recognised in the Upstream segment. These revenues are associated with the sale of marketable
commodities and over 95% are secured by letters of credit; accordingly, this single customer is not considered to represent a concentration of business risk to the Group. For further information
on credit risk see the Group’s Principal risks and uncertainties, page 34 and note 18, page 117.
98
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS
1 SEGMENTAL ANALYSIS AND RESULTS PRESENTATION CONTINUED
PROFIT FOR THE YEAR
Analysed by operating segment
Business Performance
Disposals, re-measurements
and impairments
(c)
Total
for the year ended 31 December 2014
$m
2013
$m
2014
$m
2013
$m
2014
$m
2013
$m
Group revenue 19 289 19 192 – – 19 289 19 192
Other operating income
(a)(b)
257 (91) 403 210 660 119
Group revenue and other operating income 19 546 19 101 403 210 19 949 19 311
Operating pro?t/(loss) before share of results from joint ventures and associates
(c)
Upstream 3 615 4 531 (8 182) (3 815) (4 567) 716
LNG Shipping & Marketing 2 526 2 617 205 363 2 731 2 980
Other activities 14 (28) 79 (1) 93 (29)
6 155 7 120 (7 898) (3 453) (1 743) 3 667
Share of pre-tax operating results from joint ventures and associates
Upstream 332 436 (56) – 276 436
LNG Shipping & Marketing 18 26 – – 18 26
Other activities 32 34 – – 32 34
382 496 (56) – 326 496
Total operating pro?t/(loss)
Upstream 3 947 4 967 (8 238) (3 815) (4 291) 1 152
LNG Shipping & Marketing 2 544 2 643 205 363 2 749 3 006
Other activities 46 6 79 (1) 125 5
6 537 7 616 (7 954) (3 453) (1 417) 4 163
Net ?nance (costs)/income
Finance income 153 104 – 65 153 169
Finance costs (262) (283) (644) – (906) (283)
Share of joint ventures and associates (24) (24) – – (24) (24)
(133) (203) (644) 65 (777) (138)
Taxation
Taxation (2 233) (2 903) 3 512 1 219 1 279 (1 684)
Share of joint ventures and associates (136) (136) – – (136) (136)
(2 369) (3 039) 3 512 1 219 1 143 (1 820)
Pro?t/(loss) for the year from continuing operations 4 035 4 374 (5 086) (2 169) (1 051) 2 205
Pro?t for the year from discontinued operations – – 7 245 7 245
4 035 4 374 (5 079) (1 924) (1 044) 2 450
Pro?t attributable to:
Shareholders (earnings) 4 035 4 374 (5 079) (1 933) (1 044) 2 441
Non-controlling interest – – – 9 – 9
4 035 4 374 (5 079) (1 924) (1 044) 2 450
(a) Business Performance Other operating income includes gains on the Group’s 2014 oil hedging programme, the results of the purchase and re-sale of third-party gas and income arising from
optimisation activities undertaken by the Group’s LNG Shipping & Marketing operations. Information on Disposals, re-measurements and impairments Other operating income is given in note 4,
page 105.
(b) Business Performance Other operating income is attributable to segments as follows: Upstream $164m (2013: $15m) and LNG Shipping & Marketing $93m (2013: $(106)m).
(c) Disposals, re-measurements and impairments Operating pro?t/(loss) before share of results from joint ventures and associates includes:
(i) Disposals and impairments of $(8 120)m (2013: $(3 817)m), attributable to segments as follows: Upstream $(8 315)m (2013: $(3 941)m), LNG Shipping & Marketing $216m (2013: $140m) and Other
activities $(21)m (2013: $(16)m);
(ii) Re-measurements of $403m (2013: $210m), attributable to segments as follows: Upstream $287m (2013: $33m), LNG Shipping & Marketing $10m (2013: $177m) and Other activities $106m (2013: $nil); and
(iii) Other operating costs of $(181)m (2013: $154m gain), attributable to segments as follows: Upstream $(154)m (2013: $93m gain), LNG Shipping & Marketing $(21)m (2013: $46m gain) and Other
activities $(6)m (2013: $15m gain).
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99
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
1 SEGMENTAL ANALYSIS AND RESULTS PRESENTATION CONTINUED
PROFIT FOR THE YEAR CONTINUED
Analysed by operating segment
Business Performance
Disposals, re-measurements
and impairments Total
for the year ended 31 December 2014
$m
2013
$m
2014
$m
2013
$m
2014
$m
2013
$m
Total operating pro?t/(loss)
Upstream 3 947 4 967 (8 238) (3 815) (4 291) 1 152
LNG Shipping & Marketing 2 544 2 643 205 363 2 749 3 006
Other activities 46 6 79 (1) 125 5
6 537 7 616 (7 954) (3 453) (1 417) 4 163
Less: share of pre-tax operating results from joint ventures and associates (326) (496)
Add: share of post-tax results from joint ventures and associates 166 336
Net ?nance costs (753) (114)
Pro?t/(loss) before taxation (2 330) 3 889
Taxation 1 279 (1 684)
Pro?t/(loss) for the year from continuing operations (1 051) 2 205
Pro?t for the year from discontinued operations 7 245
(1 044) 2 450
JOINT VENTURES AND ASSOCIATES
Analysed by operating segment
Share of pre-tax operating
results from joint ventures
and associates
Share of net ?nance costs
and tax from joint ventures
and associates
Share of post-tax results
from joint ventures
and associates
for the year ended 31 December 2014
$m
2013
$m
2014
$m
2013
$m
2014
$m
2013
$m
Upstream 276 436 (146) (139) 130 297
LNG Shipping & Marketing 18 26 (4) (6) 14 20
Other activities 32 34 (10) (15) 22 19
Continuing operations 326 496 (160) (160) 166 336
Discontinued operations – 1 – (2) – (1)
326 497 (160) (162) 166 335
DEPRECIATION, AMORTISATION AND IMPAIRMENT
Analysed by operating segment
Depreciation and
Amortisation Impairment
(a)
Total
for the year ended 31 December 2014
$m
2013
$m
2014
$m
2013
$m
2014
$m
2013
$m
Upstream 2 652 2 793 8 956 4 029 11 608 6 822
LNG Shipping & Marketing 143 158 – – 143 158
Other activities 4 3 – 30 4 33
Continuing operations 2 799 2 954 8 956 4 059 11 755 7 013
Discontinued operations – 1 – – – 1
2 799 2 955 8 956 4 059 11 755 7 014
(a) Further details of impairments are given in note 4, page 105.
100
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
1 SEGMENTAL ANALYSIS AND RESULTS PRESENTATION CONTINUED
CAPITAL INVESTMENT
Analysed by operating segment
Capital expenditure
(a)
Capital investment
(b)
for the year ended 31 December 2014
$m
2013
$m
2014
$m
2013
$m
Upstream 8 867 11 597 9 759 12 206
LNG Shipping & Marketing 6 27 6 28
Other activities 4 – 4 –
Continuing operations 8 877 11 624 9 769 12 234
Discontinued operations – 10 – 10
8 877 11 634 9 769 12 244
(a) Comprises expenditure on property, plant and equipment and other intangible assets.
(b) Comprises expenditure on property, plant and equipment, other intangible assets and investments.
As at 31 December 2014, the Group non-current assets balance (excluding derivative ?nancial instruments, deferred tax assets and ?nance lease
receivable) of $43 433m (2013: $49 690m) included an amount attributable to the UK of $5 798m (2013: $8 246m). The amount attributable to
non-UK countries was $37 635m (2013: $41 444m) and included $16 148m (2013: $21 828m) attributable to Australia representing 37% (2013: 44%)
of the Group total and $8 022m (2013: $5 262m) attributable to Brazil representing 18% of the Group total (2013: 11%).
2 OPERATING COSTS
Included within the Group’s operating costs charged to the income statement were the following items:
2014
$m
2013
$m
Raw materials, consumables and ?nished goods 3 552 3 062
Employee costs (see note 3(C), page 103) 1 259 1 096
Less: Own work capitalised (340) (295)
Employee costs included within other operating charges below (140) (116)
Employee costs included within net ?nance costs (7) (11)
772 674
Depreciation and amortisation
Depreciation of Property, plant and equipment 2 788 2 945
Amortisation of Other intangible assets 11 9
2 799 2 954
Other operating charges:
Unsuccessful exploration expenditure written off 237 394
Other exploration expenditure
(a)
514 317
Total exploration expenditure 751 711
Operating lease rentals 701 653
Research and development 90 76
Net foreign exchange (gains)/losses on operating activities (8) (31)
Other costs
(b)
4 915 3 728
Continuing operations total 13 572 11 827
(a) Broadly equivalent to cash ?ows attributable to operating activities arising from exploration and evaluation.
(b) Includes certain E&P lifting, storage, marketing, royalty, tariff and general administration costs (see Supplementary information – gas and oil (unaudited) page 132).
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101
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
2 OPERATING COSTS CONTINUED
AUDITOR’S FEES AND SERVICES
Ernst & Young LLP has served as BG Group’s independent external auditor for the two-year period ended 31 December 2014. The external auditor
is subject to re-appointment at the Annual General Meeting, see the Notice of Annual General Meeting on page 146.
The following table presents the aggregate fees for professional services and other services rendered by the external auditor to BG Group:
2014
$m
2013
$m
Fees payable to the Group’s auditor for the audit of both the parent Company and the Group’s Annual Report and Accounts 2.5 2.5
Fees payable to the Group’s auditor and its associates for other services:
The audit of the parent’s subsidiaries 2.2 2.0
Audit related assurance services
(a)
1.1 1.2
3.3 3.2
Total fees payable for audit services 5.8 5.7
Other assurance services 0.1 0.1
All other services
(b)
0.3 0.3
6.2 6.1
(a) Audit related assurance services includes costs relating to the interim review and regulatory reporting.
(b) All other services includes fees billed for attestation services, consultations concerning ?nancial accounting and reporting standards, and other advice.
3 DIRECTORS AND EMPLOYEES
A) DIRECTORS’ REMUNERATION
2014
$000
2013
$000
Fees to Non-Executive Directors and interim Executive Chairman 2 947 2 586
Salaries
(a)
3 834 3 367
Bene?ts
(b)
423 317
Bonuses
(c)
1 200 801
Share-based payments
(d)
3 444 6 002
Fees and bene?ts in respect of former Directors 7 18
11 855 13 091
(a) Salaries for 2014 include termination payments of $2 097 000 (2013: $nil).
(b) In addition, in 2014, no Directors (2013: two) had pension bene?ts accruing under de?ned bene?t schemes and two Directors (2013: three) received cash in lieu of their pension totalling $521 000 (2013: $527 000).
(c) Bonus ?gures for 2014 represent payments under the Annual Incentive Scheme (AIS) in respect of the 2014 incentive year which will be made in 2015. Bonus ?gures for 2013 represent payments under
the AIS in respect of the 2013 incentive year which were made in 2014. Bonuses for 2014 include remuneration in the form of awards under the Voluntary Bonus Deferral Plan (VBDP). Bonuses exclude
remuneration in the form of mandatorily deferred shares under the Deferred Bonus Plan (DBP) (2014: $251 000; 2013: $1 872 000).
(d) Share-based payments include a charge for mandatorily deferred shares awarded to the Directors under the DBP in respect of the previous incentive years.
For further information please see the Remuneration report on page 62.
B) KEY MANAGEMENT COMPENSATION
During 2014, the Group’s governance arrangements were revised and, in place of the Group Executive Committee (GEC), a new Executive Management
Committee (EMC) was established, along with a wider Group Leadership Team (GLT). See Corporate Governance report, page 44, for further details.
The key management compensation analysed below for 2014 represents amounts in respect of the Directors and the executive of?cers, de?ned as
members of the GEC and, subsequently, both the EMC and the GLT, and the Company Secretary. For 2013, the analysis re?ects the Group’s previous
governance structure, and represents amounts in respect of the Directors and the executive of?cers, de?ned as the GEC and the Company Secretary.
2014
$000
2013
$000
Fees to Non-Executive Directors and interim Executive Chairman 2 947 2 586
Salaries
(a)
11 078 8 831
Bene?ts 817 653
Bonuses
(b)
6 952 1 477
Pension charge
(c)
2 158 3 110
Share-based payments
(d)
14 746 15 984
38 698 32 641
(a) Salaries for 2014 include termination payments of $3 021 000 (2013: $nil).
(b) Bonus ?gures for 2014 include payments under the AIS in respect of the 2014 incentive year which will be made in 2015. Bonus ?gures for 2013 represent payments under the AIS in respect of the 2013
incentive year which were made in 2014. Bonuses for 2014 and 2013 include remuneration in the form of awards under the VBDP. Bonuses exclude remuneration in the form of mandatorily deferred
shares under the DBP (2014: $746 000; 2013: $4 327 000).
(c) Includes bene?ts accruing under de?ned bene?t schemes and cash in lieu of pensions.
(d) Share-based payments include a charge for mandatorily deferred shares awarded to key management under the DBP in respect of the previous incentive years.
102
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
3 DIRECTORS AND EMPLOYEES CONTINUED
C) EMPLOYEE COSTS
The Group
2014
$m
2013
$m
Wages and salaries
(a)
896 829
Social security costs 69 67
Pension charge
(b)
65 (19)
Share-based payments (see note 3(E) below) 56 91
Other including incentive schemes
(c)
173 137
1 259 1 105
Less: attributable to discontinued operations – (9)
Continuing operations 1 259 1 096
(a) Includes termination payments.
(b) The pension charge for the year ended 31 December 2014 includes a curtailment gain of $nil (2013: $154m) and a $7m charge (2013: $11m) which is presented within ?nance costs (see note 24, page 127).
(c) Includes payments under the AIS and remuneration in the form of awards under the VBDP.
In 2014, employee costs of $919m (2013: $810m) were charged to the income statement and $340m (2013: $295m) were capitalised.
D) AVERAGE NUMBER OF EMPLOYEES DURING THE YEAR
2014
Number
2013
Number
Upstream 4 779 4 887
LNG Shipping & Marketing 364 361
Discontinued operations – 288
5 143 5 536
E) SHARE-BASED PAYMENTS
The Group
2014
$m
2013
$m
Equity-settled share-based payments:
Group share awards 40 47
Performance Share Awards 15 20
Other share awards
(a)
10 9
65 76
Cash-settled share-based payments (9) 15
56 91
(a) The charge for other share awards excludes an amount of $6m (2013: $9m) relating to shares and nil-cost options awarded under the VBDP, which was transferred to equity during 2014.
This expense was recognised in the income statement during 2013 as part of the AIS charge. The number of awards made was 0.3m (2013: 0.5m).
Group share awards
Group share awards under the Group’s Long-Term Incentive Plan (LTIP) will normally vest three years after the date of grant, subject to continued
employment and the individual employee’s performance. Awards are in the form of shares (2014: 1.6m shares; 2013: 1.7m shares) or nil-cost options
(2014: 1.5m options; 2013: 1.7m options). The costs in respect of these awards are charged to the income statement over the vesting period, based
on the fair value of the shares and options at the award date. Dividend equivalents accrue on the award during the vesting period. Accordingly,
the fair value of the shares and options awarded is based on the market value of the shares on the award date, which was £12.09 per share in
2014 (2013: £12.69 per share).
Performance Share Awards
Details of Performance Share Awards under the Group’s LTIP are given on pages 64 and 65. Awards are in the form of shares (2014: 0.3m shares;
2013: 0.6m shares) or nil-cost options (2014: 2.0m options; 2013: 3.0m options). The costs in respect of these awards are charged to the income
statement over the vesting period, based on the fair value of the shares and options at the award date, adjusted for the probability of market-related
performance conditions being achieved. The fair value of shares and options awarded during the year is estimated using a Monte Carlo projection
model with the following assumptions: share price on date of issue of £12.11 (2013: £12.71), exercise price of £nil (2013: £nil), a risk-free rate of 1.20%
(2013: 0.81%) and a vesting period of three years (2013: three years). The model also contains assumptions for both the Group and each member
of the industry peer group (set out on page 69) in respect of volatility, average share price growth and share price correlation. Expected volatility
was determined by calculating the historical volatility of the share price over the previous three-year period. Share price correlation was determined
by calculating the historical correlation of the share price over the previous three-year period. Average share price growth was determined from
historical growth over the previous year. Dividend equivalents accrue on the award during the vesting period. The fair value of shares and options
awarded during the year was £4.73 per share (2013: £6.13 per share).
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103
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
3 DIRECTORS AND EMPLOYEES CONTINUED
E) SHARE-BASED PAYMENTS CONTINUED
Other share awards
The charge for Other share awards includes awards made under the DBP, the Sharesave Plan, the Share Incentive Plan and the Share Award Plan.
The DBP operates in conjunction with the AIS and is described on pages 64 and 65. Awards are in the form of shares (2014: nil shares; 2013: 0.1m shares)
or nil-cost options (2014: 0.3m options; 2013: nil options). The charge to the income statement in respect of these awards was $3m in 2014 (2013: $2m)
and is based on the market value of the shares at the award date, which was £10.74 in 2014 (2013: £11.72).
The charge to the income statement in respect of the Sharesave Plan is based on the fair value of the share options at the grant date and the
likelihood of allocations vesting under the scheme. The charge was $1m in 2014 (2013: $2m). The fair value of the share options granted is determined
using a Black-Scholes option pricing model and was £2.10 in 2014 (2013: £3.36).
In 2014, awards of 0.3m shares (2013: 0.3m shares) were made in conjunction with the Group’s UK Flexible Bene?ts Plan, an element of the Share
Incentive Plan. The charge to the income statement in respect of these awards was $4m in 2014 (2013: $4m) and is based on the market value of
the shares at the grant date, which was £11.34 in 2014 (2013: £10.79).
The Share Award Plan was an award in 2013 in the form of shares or nil-cost options with a three-year vesting period. In 2014, no awards were
made under this plan (2013: 0.1m shares and 0.3m nil-cost options). The charge to the income statement in respect of these awards was $2m in 2014
(2013: $1m). The fair value of the shares and options awarded is based on the market value of the shares at the grant date, which was £12.19 in 2013.
Cash-settled share-based payments
Cash-settled share-based payments arise when the Group incurs a liability to transfer cash amounts that are based on the price (or value) of the
Company’s shares. Most of the charge in respect of cash-settled share-based payments relates to social security costs on share awards which have
not vested or, in the case of share options, have not been exercised. The charge to the income statement is based on the fair value of the awards
outstanding at the balance sheet date, multiplied by the current employer’s social security rate.
F) SUMMARY OF MOVEMENTS IN SHARE AWARDS AND SHARE OPTIONS
Share
awards
under
the LTIP
m
Nil-cost
options
under
the LTIP
m
Sharesave
Plan
options
m
CSOS
options
m
Other
nil-cost
options
(a)
m
2013
Outstanding as at 1 January 2013 5.1 12.5 1.6 10.1 0.9
Granted 2.3 4.7 0.2 – 0.8
Vested (1.1) n/a n/a n/a n/a
Exercised n/a (1.1) (0.3) (4.0) (0.2)
Forfeited (1.0) (3.7) (0.1) (0.1) –
Outstanding as at 31 December 2013 5.3 12.4 1.4 6.0 1.5
Exercisable as at 31 December 2013 n/a 1.9 – 6.0 1.1
Option price range as at 31 December 2013 (£) n/a n/a 8.63-11.10 3.47-7.92 n/a
Weighted average remaining contractual life n/a 8yrs 5mths 2yrs 5mths 2yrs 6mths 4yrs 9mths
Option price range for exercised options (£) n/a n/a 8.63-11.10 2.71-7.92 n/a
Weighted average share price at the date of exercise for options exercised in the year (£) n/a 11.95 11.57 12.10 12.16
2014
Outstanding as at 1 January 2014 5.3 12.4 1.4 6.0 1.5
Granted 1.9 3.5 1.0 – 0.5
Vested (1.0) n/a n/a n/a n/a
Exercised n/a (0.9) (0.2) (2.3) (0.2)
Forfeited (1.9) (3.6) (0.3) (0.1) (0.1)
Outstanding as at 31 December 2014 4.3 11.4 1.9 3.6 1.7
Exercisable as at 31 December 2014 n/a 2.2 – 3.6 1.2
Option price range as at 31 December 2014 (£) n/a n/a 8.30-11.10 4.99-7.92 n/a
Weighted average remaining contractual life n/a 8yrs 2mths 2yrs 7mths 1yr 9mths 4yrs 5mths
Option price range for exercised options (£) n/a n/a 8.74-11.10 3.47-7.92 n/a
Weighted average share price at the date of exercise for options exercised in the year (£) n/a 11.82 11.63 11.52 11.89
(a) Comprises nil-cost options awarded under the DBP, Share Award Plan and VBDP.
G) WEIGHTED AVERAGE EXERCISE PRICE OF SHARE OPTIONS
2014
Sharesave
Plan options
£
2014
CSOS
options
£
2013
Sharesave
Plan options
£
2013
CSOS
options
£
Outstanding as at 1 January 9.43 6.38 9.14 6.13
Granted 8.30 – 10.22 –
Exercised 10.00 5.69 8.65 5.76
Forfeited 9.64 6.71 9.51 5.51
Outstanding as at 31 December 8.72 6.82 9.43 6.38
Exercisable as at 31 December n/a 6.82 8.63 6.38
104
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
4 DISPOSALS, RE-MEASUREMENTS AND IMPAIRMENTS
BG Group has separately identi?ed pro?ts and losses related to disposals of non-current assets, certain re-measurements of ?nancial instruments,
impairments of non-current assets and certain other exceptional items. A reconciliation of results before and after disposals, re-measurements
and impairments is given in note 1, page 98.
2014
$m
2013
$m
Other operating income:
Re-measurements of commodity-based contracts 297 210
Other 106 –
403 210
Operating costs (181) 154
Pro?ts and losses on disposal of non-current assets and impairments:
Disposals of non-current assets 967 253
Impairments (8 956) (4 059)
Other (131) (11)
(8 120) (3 817)
Finance income – 65
Finance costs (644) –
Share of post-tax results from joint ventures and associates (56) –
(8 598) (3 388)
Taxation 3 512 1 219
Loss for the year from continuing operations (5 086) (2 169)
OTHER OPERATING INCOME
Re-measurements included within Other operating income amount to a credit of $297m (2013: $210m), of which a credit of $280m (2013: $34m)
represents non-cash mark-to-market movements on certain gas contracts. While the activity surrounding these contracts involves the physical
delivery of gas, the contracts fall within the scope of IAS 39 and meet the de?nition of a derivative instrument. In addition, re-measurements
include a net $17m credit (2013: $176m) representing unrealised mark-to-market movements associated with economic hedges, including a credit
of $17m (2013: $nil) associated with Brent oil swaps partially hedging the Group’s exposure to commodity prices in 2014. Further information on
commodity instruments is given in note 18, page 117. Other operating income comprises $106m credit (2013: $nil) in respect of ?nal settlement
of a legacy treaty dispute relating to investments formerly held by the Group.
OPERATING COSTS
Operating costs in 2014 include a pre-tax charge of $100m (post-tax $79m) relating to the downward re-measurement of trade receivables in Egypt
to re?ect the time value of money associated with the outstanding debt based on a revised assumed repayment pro?le. In addition, there was
a pre-tax charge of $81m (post-tax $62m) primarily relating to restructuring costs in the UK, Egypt and Australia. Operating costs in 2013 comprised
a curtailment gain of $154m in respect of the closure of the BG Group UK de?ned bene?t pension scheme to future accrual of bene?ts on
31 December 2013. Further information on the pension scheme is given in note 24, page 127.
DISPOSAL OF NON-CURRENT ASSETS AND IMPAIRMENTS
2014
Disposal of non-current assets
BG Group completed the sale of its 62.78% equity interest in the Central Area Transmission System (CATS) gas pipeline and associated infrastructure
in the UK North Sea for total consideration of $797m, resulting in a pre and post-tax pro?t on disposal of $782m in the Upstream segment.
The Group completed the sale of six LNG steam vessels, which were previously held as ?nance leases and have subsequently been leased back
under operating leases, for total gross consideration of $930m (net cash proceeds were $53m after repayment of the ?nance lease liabilities
and settlement of associated cross-currency interest rate swaps and interest rate swaps). This resulted in a pre-tax pro?t on disposal of $216m
(post-tax $170m) in the LNG Shipping & Marketing segment.
Other disposals resulted in a pre-tax charge of $31m (post-tax $18m) in the Upstream segment.
Impairments
There was a pre-tax impairment charge of $8 956m (post-tax $5 928m) relating to Upstream activities in Australia, Egypt and certain other assets.
This was driven mainly by the signi?cant fall in global commodity prices and re?ects a recent forward Brent price curve for ?ve years, reverting
to the Group’s long-term price assumption for impairment testing of $90 real from 1 January 2020.
The Group used the fair value less costs of disposal method to calculate the recoverable amount of the cash-generating units (CGU) consistent
with a level 3 fair value measurement as de?ned in note 18, page 117. In determining the fair value, the Group used a post-tax discount rate
of 8% based on the Group weighted average cost of capital. Where appropriate, cash ?ows were adjusted to take into account any speci?c
country risks.
In Australia, the total pre-tax non-cash impairment charge was $6 824m (post-tax $4 540m) in the Upstream segment. The Group has entered
into an agreement to sell its wholly-owned subsidiary QCLNG Pipeline Pty Limited and, as a result, the remaining QCLNG assets were subject to
a pre-tax impairment charge of $2 747m (post-tax $1 828m) principally re?ecting the increase in tariffs payable to third parties post-completion.
The remaining pre-tax impairment charge of $4 077m (post-tax $2 712m) in Australia was driven primarily by a reduction in the Group’s assumptions
of future commodity prices. The recoverable amount of the CGU, excluding QCLNG Pipeline Pty Limited which is classi?ed as held for sale,
is $15.0bn.
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105
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
4 DISPOSALS, RE-MEASUREMENTS AND IMPAIRMENTS CONTINUED
Impairments continued
In Egypt, there was a pre-tax impairment charge of $790m (post-tax $737m) in the Upstream segment, principally driven by further reserve
downgrades re?ecting underlying reservoir performance and the Group’s expectation of limited LNG exports from Egyptian LNG for the
foreseeable future. The recoverable amount of the CGU is $0.8bn.
Elsewhere, the reduction in the Group’s assumptions of future commodity prices resulted in pre-tax impairment charges of $1 342m (post-tax $651m)
in the Upstream segment. The most signi?cant impairment charges were in the North Sea $566m pre-tax (post-tax $172m), Tunisia $450m pre-tax
(post-tax $255m) and the USA $227m pre-tax (post-tax $148m). Other impairments in 2014 resulted in pre-tax impairment charges of $99m
(post-tax $76m).
Other
Other write-offs and provisions for certain other exceptional items resulted in a pre-tax charge to the income statement of $131m (post-tax $95m).
2013
Disposal of non-current assets
BG Group completed transactions with China National Offshore Oil Corporation (CNOOC) for the sale of certain interests in the QCLNG project
in Australia for total consideration of $3 801m, resulting in a pre and post-tax pro?t on disposal of $31m in the Upstream segment, and the sale
of its 50% holding in TGGT in the USA for a total consideration of $257m, resulting in a pre-tax pro?t on disposal of $187m (post-tax $98m) in
the Upstream segment.
The Group completed the sale of its remaining 20% equity in the Quintero LNG regasi?cation facility in Chile for a total consideration of $176m.
This resulted in a pre-tax pro?t on disposal of $140m (post-tax $107m) in the LNG Shipping & Marketing segment.
The Group completed the sale of all its interests in the Cotton Valley formation to EXCO Resources for $131m. This resulted in a pre and post-tax pro?t
on disposal of $10m in the Upstream segment. Other disposals resulted in a pre and post-tax pro?t of $11m, comprising $1m pre and post-tax charge
in the Upstream segment and $12m pre and post-tax pro?t in the Other activities segment.
A pre-tax charge of $126m (post-tax $83m) was recognised in the Upstream segment following the relinquishment of land licences in the
US Lower 48 region.
Impairments
The Group used the fair value less costs of disposal method to calculate the recoverable amount of the cash-generating units (CGU) consistent
with a level 3 fair value measurement as de?ned in note 18, page 117. In determining the fair value, the Group used a post-tax discount rate
of 8% based on the Group weighted average cost of capital and acreage valuations for intangible assets in the USA. Where appropriate, cash
?ows were adjusted to take into account any speci?c country risks.
As a result of reserves revisions and revised expectations of the value of its Egyptian operations given continuing uncertainty over the business
environment in country, the Group reviewed the recoverable amount of its assets in Egypt. This resulted in a pre-tax impairment charge of
$2 000m (post-tax $1 286m) in the Upstream segment.
In addition, against the backdrop of lower forward gas market prices, lower production expectations based on well performance and a continued
low rig count, the Group reviewed the recoverable amount of certain assets associated with the shale gas business in the USA. This resulted
in a pre-tax impairment charge of $1 700m (post-tax $1 105m) in the Upstream segment.
A $171m pre-tax impairment charge (post-tax $94m) was recognised against certain other Upstream assets as a result of a reserves revision.
Other impairments resulted in a pre-tax charge to the income statement of $188m (post-tax $85m): $158m (post-tax $55m) in the Upstream
segment and $30m pre and post-tax in the Other activities segment.
Other
Other write-offs and provisions for certain other exceptional items resulted in a pre-tax charge to the income statement of $11m (post-tax $5m).
FINANCE INCOME AND COSTS
Re-measurements presented in ?nance income and costs include mark-to-market movements on certain derivatives used to hedge foreign
exchange and interest rate risk and foreign exchange movements on borrowings and certain inter-company balances.
SHARE OF POST-TAX RESULTS FROM JOINT VENTURES AND ASSOCIATES
A pre and post-tax charge of $56m (2013: $nil) was recognised in the Upstream segment in respect of the Group’s share of a write-off of assets
under construction in Brazil following the bankruptcy of a contractor.
TAXATION
Taxation includes a credit of $3 028m (2013: $1 489m) as a result of the impairment charges, and a net credit of $449m (2013: $nil) resulting
from a number of exceptional one-off and prior period taxation items. These items included the full recognition of taxable losses in Australia
following ?rst LNG production at QCLNG and exceptional prior period adjustments and one-off changes to tax positions in a number
of jurisdictions.
106
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
5 FINANCE INCOME AND COSTS
2014
$m
2013
$m
Interest receivable
(a)
153 104
Net fair value gains and losses on derivatives and fair value hedge adjustments
(b)
– 65
Finance income 153 169
Interest payable
(c)
(548) (577)
Finance lease charges (92) (108)
Interest capitalised
(d)
532 522
Unwinding of discount on provisions and pension assets and liabilities
(e)
(154) (120)
Net fair value gains and losses on derivatives and fair value hedge adjustments
(b)
(644) –
Finance costs (906) (283)
Net ?nance costs – continuing operations (753) (114)
(a) Interest receivable includes net exchange gains of $49m (2013: $nil).
(b) Comprises $26m loss (2013: $65m gain) associated with fair value hedge adjustments, $238m loss (2013: $nil) in respect of mark-to-market movements on derivatives, $236m gain (2013: $136m loss)
on foreign exchange movements on borrowings and $616m loss (2013: $136m gain) on foreign exchange movements on certain inter-company balances.
(c) Interest payable includes net exchange losses of $nil (2013: $44m).
(d) Finance costs associated with the Group’s central borrowings used to ?nance major capital projects, are capitalised up to the point that the project is ready for its intended use. The weighted average
interest cost applicable to these borrowings is 3.4% per annum (2013: 3.8%). Tax relief for capitalised interest is approximately $162m (2013: $121m).
(e) Relates to the unwinding of the discount on provisions and amounts in respect of pension obligations which represent the unwinding of discount on the plans’ net de?cit.
6 TAXATION
2014
$m
2013
$m
Current tax
UK corporation tax and petroleum revenue tax 869 1 385
Overseas tax 1 321 1 524
Total current tax 2 190 2 909
Deferred tax (3 469) (1 225)
Total tax (credit)/charge – continuing operations (1 279) 1 684
The total tax (credit)/charge reconciles with that calculated using the statutory UK corporate tax rate of 21.49% (2013: 23.25%):
2014
$m
2013
$m
Pro?t/(loss)before taxation (2 330) 3 889
Tax on pro?t/(loss) before taxation at UK statutory corporation tax rate (501) 904
Effect on tax charge of:
Non tax-deductible or non-taxable items (145) (529)
Overseas taxes at different rates to UK statutory rate (478) 562
North Sea taxes at different rates to UK statutory rate 380 415
Petroleum revenue tax 2 11
Effect of changes in tax rate on deferred tax balances – (68)
Adjustment recognised for current tax of prior periods (194) (179)
Adjustment recognised for deferred tax of prior periods (35) 105
(Recognition)/derecognition of deferred tax (183) 103
Other items (125) 360
Total tax (credit)/charge – continuing operations (1 279) 1 684
Certain comparative amounts shown in the reconciliation of total tax have been reclassi?ed. There is no change to the tax amounts reported in the
income statement, balance sheet or cash ?ow statement. The tax charge in the 2013 Annual Report and Accounts was reconciled using a blended
UK rate comprised of the UK tax rates for both UK North Sea and other UK activities.
The tax credit relating to disposals, re-measurements, impairments and other items is $3 512m (2013: $1 219m). This consists of a tax charge
on unrealised re-measurements of $8m (2013: $166m), a tax credit on one-off and prior year taxation adjustments of $449m, and a tax credit
on disposals, impairments and other items of $3 071m (2013: $1 385m).
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107
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
6 TAXATION CONTINUED
The net movement in deferred tax assets and liabilities is shown below:
Accelerated tax
depreciation
$m
Decommis-
sioning
$m
Unused
tax losses
$m
Other
temporary
differences
(a)
$m
Total
$m
As at 1 January 2013 (8 205) 817 3 114 459 (3 815)
Credit/(charge) for the year 2 306 (269) (706) (108) 1 223
Charge to equity and other comprehensive income – – – (80) (80)
Currency translation adjustments (89) – 25 11 (53)
Disposals 2 – – – 2
As at 31 December 2013 (5 986) 548 2 433 282 (2 723)
Credit/(charge) for the year 2 130 189 1 510 (360) 3 469
Charge to equity and other comprehensive income – – – 163 163
Currency translation adjustments 400 (42) (306) 13 65
Disposals 60 (31) – – 29
As at 31 December 2014 (3 396) 664 3 637 98 1 003
2014
$m
2013
$m
Deferred tax liabilities (2 946) (4 120)
Deferred tax assets 3 949 1 397
Net deferred tax asset/(liability) as at 31 December 1 003 (2 723)
(a) Other temporary differences include deferred petroleum revenue tax, retirement bene?t obligations and certain provisions.
Deferred tax assets are recognised for deductible temporary differences, unutilised tax losses and unused tax credits to the extent that realisation of
the related tax bene?t through future taxable income is probable. To determine the future taxable income, reference is made to the latest available
pro?t forecast which takes into account production volumes, LNG Shipping & Marketing supply volumes and commodity prices in the relevant
jurisdictions. This requires assumptions regarding future pro?tability and is therefore inherently uncertain.
Certain comparative amounts shown in the analysis of deferred tax by category of temporary differences have been reclassi?ed. There is no change
to the tax amounts reported in the income statement, balance sheet or cash ?ow statement.
2014
$m
2013
$m
Temporary differences for which no deferred tax asset has been recognised
Deductible temporary differences 2 211 840
Unused tax losses 2 192 3 233
Tax credits 554 464
Total deferred tax assets not recognised 4 957 4 537
To the extent unutilised, $7m of the unused tax losses will expire within 5 years (2013: $9m) and $849m of the unused tax losses will expire
between 6 and 20 years (2013: $1 219m).
The aggregate amount of taxable temporary differences associated with undistributed earnings of subsidiaries, joint ventures and associates,
for which deferred tax liabilities have not been recognised, is approximately $5m (2013: $6m). No liability has been recognised in respect of
these differences either because no liability is expected to arise on distribution under applicable tax legislation or because the Group is in a position
to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future.
As at 31 December 2014, the Company had a deferred tax asset of $2m (2013: $10m).
108
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
7 DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
Following the decision to dispose of the majority of the Group’s Transmission and Distribution assets in 2012, certain businesses have been
treated as discontinued. In 2013, the Group completed the sale of its interest in Gujarat Gas Company Limited (GGCL) in India.
RESULTS FROM DISCONTINUED OPERATIONS
2014
$m
2013
$m
Revenue – 236
Operating costs 9 (218)
Operating pro?t 9 18
Share of post-tax results from joint ventures and associates – (1)
Pro?t before tax 9 17
Taxation (2) (15)
Pro?t after tax 7 2
Pro?ts and losses on disposal of non-current assets and impairments – 241
Taxation – 2
Post-tax pro?ts and losses on disposal of non-current assets and impairments – 243
Pro?t for the year from discontinued operations 7 245
CASH FLOWS RELATING TO DISCONTINUED OPERATIONS
2014
$m
2013
$m
Pro?t before tax 9 17
Share of post-tax results from joint ventures and associates – 1
Depreciation of property, plant and equipment – 1
Increase in provisions – 1
Movements in working capital 45 120
Cash generated by operations 54 140
Income taxes paid – (6)
Net cash in?ow from operating activities 54 134
Net cash out?ow from investing activities – (8)
Net cash out?ow from ?nancing activities (58) (112)
Net (decrease)/increase in cash and cash equivalents (4) 14
DISPOSAL OF NON-CURRENT ASSETS AND IMPAIRMENTS
In 2013, the sale of the Group’s investment in GGCL in India for gross consideration of $422m resulted in a pre and post-tax pro?t of $245m,
being the gross consideration less net assets of $194m, recycling to the income statement of currency translation losses of $46m, the derecognition
of the non-controlling interest of $64m and $1m of other costs.
Other disposals and impairments in 2013 resulted in a pre-tax charge of $4m (post-tax charge of $2m).
ASSETS HELD FOR SALE
The Group
as at 31 December 2014
$m
2013
$m
Property, plant and equipment 2 078 –
Trade and other receivables 10 –
Assets classi?ed as held for sale 2 088 –
Trade and other payables (27) –
Provisions for other liabilities and charges (36) –
Liabilities associated with assets classi?ed as held for sale (63) –
Net assets classi?ed as held for sale 2 025 –
Assets held for sale as at 31 December 2014 comprised QCLNG Pipeline Pty Limited in the Upstream segment and two LNG vessels in the
LNG Shipping & Marketing segment, the disposals of which are expected to complete in the ?rst half of 2015.
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109
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
8 DIVIDENDS
2014 2013
$m
Cents per
ordinary
share
Pence per
ordinary
share $m
Cents per
ordinary
share
Pence per
ordinary
share
Prior year ?nal dividend, paid in the year 547 15.68 9.51 478 14.26 9.03
Interim dividend, paid in the year 480 14.38 8.47 448 13.07 8.51
Total dividend, paid in the year 1 027 30.06 17.98 926 27.33 17.54
Proposed ?nal dividend for the year ended 31 December 2014
(a)
490 14.37 9.52
(a) The proposed ?nal dividend was announced on 3 February 2015 in US Dollars, with a Pounds Sterling equivalent. It is paid to shareholders in Pounds Sterling. The total amount payable in US Dollars
has been determined based on the shares in issue as at 31 December 2014 that are eligible for the dividend. The total amount payable in US Dollars may vary, depending on movements in exchange
rates between February 2015 and May 2015, when the dividend will be paid.
The proposed ?nal dividend for the year ended 31 December 2014 of 14.37 cents per share takes the 2014 full-year dividend to 28.75 cents per share.
The ?nal dividend of 15.68 cents per ordinary share ($547m) in respect of the year ended 31 December 2013 was paid on 30 May 2014. The interim
dividend was paid on 12 September 2014. The proposed ?nal dividend of 14.37 cents per ordinary share ($490m) in respect of the year ended
31 December 2014 is payable on 22 May 2015 to all shareholders on the register at the close of business on 24 April 2015.
9 EARNINGS PER ORDINARY SHARE – CONTINUING OPERATIONS
Earnings per ordinary share has been calculated by dividing the earnings for the year for the continuing operations of the Group of $(1 051)m
(2013: $2 205m) by 3 408m (2013: 3 402m), being the weighted average number of ordinary shares outstanding during the year. The average number
of shares outstanding excludes treasury shares and shares held by employee share plans. Earnings per ordinary share excluding disposals,
re-measurements and impairments has been presented in order to re?ect the underlying performance of the Group.
2014 2013
$m
Basic
earnings per
ordinary
share
cents $m
Basic
earnings per
ordinary
share
cents
Earnings excluding disposals, re-measurements and impairments 4 035 118.4 4 374 128.6
Disposals, re-measurements and impairments (see note 4, page 105) (5 086) (149.2) (2 169) (63.8)
Earnings including disposals, re-measurements and impairments (1 051) (30.8) 2 205 64.8
The earnings ?gure used to calculate diluted earnings per ordinary share is the same as that used to calculate earnings per ordinary share given
above, divided by 3 408m, being the weighted average number of ordinary shares in issue during the year. A reconciliation of the weighted average
number of ordinary shares used as the denominator in calculating the basic and diluted earnings per ordinary share is given below. In 2014,
potentially issuable ordinary shares are excluded from the diluted earnings per ordinary share calculation, as their inclusion would decrease
the loss per ordinary share.
2014
Shares
m
2013
Shares
m
Basic 3 408 3 402
Dilutive potential ordinary shares:
Equity instruments outstanding during the year
(a)
– 17
Diluted basis 3 408 3 419
Diluted earnings per ordinary share (excluding disposals, re-measurements and impairments) (cents) 118.4 128.0
Diluted earnings per ordinary share (including disposals, re-measurements and impairments) (cents) (30.8) 64.5
(a) The weighted average number of anti-dilutive equity instruments excluded from the calculation of diluted earnings per ordinary share was 15m at 31 December 2014.
110
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
10 GOODWILL
The Group 2014
$m
2013
$m
Cost and net book value as at 1 January 25 24
Currency translation adjustments (2) 1
Charge for impairment (see note 4, page 105) (23) –
Cost and net book value as at 31 December – 25
For the purpose of impairment testing, goodwill is allocated to cash-generating units; these represent the lowest level at which goodwill is monitored.
The Group tests goodwill annually for impairment or more frequently if there are indications that it might be impaired. During the year there was
a goodwill impairment charge of $23m (2013: $nil) recognised as a consequence of the signi?cant fall in global commodity prices.
11 OTHER INTANGIBLE ASSETS
The Group Expenditure on unproved
gas and oil reserves Other
(a)
Total
2014
$m
2013
$m
2014
$m
2013
$m
2014
$m
2013
$m
Cost as at 1 January 4 800 4 782 373 377 5 173 5 159
Additions 746
(b)
1 341
(b)
24 – 770 1 341
Disposals and unsuccessful exploration expenditure
(c)
(256) (810) – – (256) (810)
Transfers to property, plant and equipment (100) (298) – – (100) (298)
Other movements 8 (16) (3) – 5 (16)
Currency translation adjustments (175) (199) (1) (4) (176) (203)
Cost as at 31 December 5 023 4 800 393 373 5 416 5 173
Amortisation as at 1 January (1 048) (438) (261) (252) (1 309) (690)
Charge for the year – – (11) (9) (11) (9)
Charge for impairment (see note 4, page 105) (961) (665) – – (961) (665)
Disposals and transfers – 55 – – – 55
Amortisation as at 31 December (2 009) (1 048) (272) (261) (2 281) (1 309)
Net book value as at 31 December 3 014 3 752 121 112 3 135 3 864
(a) Other includes capacity rights in the Caspian Pipeline Consortium export pipeline which are amortised on a straight-line basis over the term of the contract and have an average remaining useful life
of 23 years (2013: 24 years). Other also includes the contractual rights in respect of the purchase of LNG regasi?cation services and related gas sales. These rights are amortised on a straight-line basis
over the term of the contract.
(b) Broadly equivalent to cash ?ows attributable to investing activities arising from exploration and evaluation.
(c) Disposals and unsuccessful exploration expenditure includes $232m of intangible assets written off (2013: $394m).
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111
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
12 PROPERTY, PLANT AND EQUIPMENT
The Group
Land and
buildings
$m
Plant and
machinery
$m
Motor
vehicles
and of?ce
equipment
$m
Exploration
and
production
$m
Total
$m
Cost as at 1 January 2014 138 11 735 1 869 52 117 65 859
Additions – 994 213 6 900 8 107
Disposals, transfers and other movements
(a)
– (650) (22) 49 (623)
Currency translation adjustments (9) (88) (99) (2 084) (2 280)
Reclassi?ed as held for sale – (2 157) – – (2 157)
Cost as at 31 December 2014 129 9 834 1 961 56 982 68 906
Accumulated depreciation as at 1 January 2014 (49) (938) (1 035) (21 612) (23 634)
Charge for the year
(b)
– (145) (213) (2 436) (2 794)
Charge for impairment
(b)
(see note 4, page 105) (12) (1 228) (25) (6 792) (8 057)
Disposals and transfers – 252 24 569 845
Currency translation adjustments 3 31 60 416 510
Reclassi?ed as held for sale – 79 – – 79
Accumulated depreciation as at 31 December 2014 (58) (1 949) (1 189) (29 855) (33 051)
Net book value as at 31 December 2014
(c)(d)(e)
71 7 885 772 27 127 35 855
The Group
Land and
buildings
$m
Plant and
machinery
$m
Motor
vehicles
and of?ce
equipment
$m
Exploration
and
production
$m
Total
$m
Cost as at 1 January 2013 148 10 945 1 704 48 838 61 635
Additions – 1 904 179 8 210 10 293
Disposals, transfers and other movements
(a)
– (1 073) (5) (2 677) (3 755)
Currency translation adjustments (10) (41) (9) (2 254) (2 314)
Cost as at 31 December 2013 138 11 735 1 869 52 117 65 859
Accumulated depreciation as at 1 January 2013 (48) (784) (844) (16 034) (17 710)
Charge for the year
(b)
– (149) (193) (2 613) (2 955)
Charge for impairment
(b)
(see note 4, page 105) – – – (3 124) (3 124)
Disposals and transfers – (2) 5 200 203
Currency translation adjustments (1) (3) (3) (41) (48)
Accumulated depreciation as at 31 December 2013 (49) (938) (1 035) (21 612) (23 634)
Net book value as at 31 December 2013
(c)(d)(e)
89 10 797 834 30 505 42 225
(a) Includes, within Exploration and production, a transfer from other intangible assets of $100m (2013: $298m).
(b) Depreciation charge and charge for impairment is attributable to continuing and discontinued operations as follows:
Depreciation Impairment
2014
$m
2013
$m
2014
$m
2013
$m
Continuing operations 2 794 2 954 8 057 3 124
Discontinued operations – 1 – –
2 794 2 955 8 057 3 124
(c) The Group’s net book value includes capitalised interest of $1 398m (2013: $1 225m) comprising Exploration and production $873m (2013: $838m) and Plant and machinery $525m (2013: $387m).
A deferred tax liability is recognised in respect of this taxable temporary difference at current enacted rates.
(d) Includes the net book value of decommissioning assets of $2 908m (2013: $2 432m) and expenditure on Plant and machinery and Exploration and production assets under construction of $10 739m
(2013: $23 405m).
(e) The net book value of assets capitalised and held under ?nance leases is shown below and comprises $1 073m (2013: $1 884m) included in Plant and machinery and $228m (2013: $64m) included
in Exploration and production:
as at 31 December 2014
$m
2013
$m
Cost 1 963 2 738
Accumulated depreciation (662) (790)
Net book value 1 301 1 948
Details of BG Group’s gas and oil reserves are given in Supplementary information – gas and oil (unaudited) on page 132.
112
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
13 INVESTMENTS
The Group
as at 31 December
2014
$m
2013
$m
Joint ventures 796 840
Associates 2 709 2 015
Other investments
(a)
42 78
3 547 2 933
(a) Includes an investment in Drillsearch Energy Limited and Azure Midstream Energy, LP (Azure).
During 2014, a charge for impairment of $168m was recorded against the carrying value of associates (2013: $270m).
There were no material acquisitions or disposals in 2014. In 2013, the Group disposed of its entire 50% equity holding in TGGT, a joint venture
midstream company operating in east Texas and north Louisiana, to Azure. The Group received net cash of $240m along with a $17m stake
in Azure, equating to an approximate 3% equity holding.
JOINT VENTURES AND ASSOCIATES INFORMATION
The Group does not have any individually material joint ventures or associates. Analysis of BG Group’s share of pro?t and comprehensive income
from individually immaterial joint ventures and associates in aggregate is shown below:
Joint ventures Associates
For the year ended 31 December 2014
$m
2013
$m
2014
$m
2013
$m
Share of pro?t from continuing operations 80 112 86 224
Share of total comprehensive income 80 112 86 224
As at 31 December 2014, the Group’s joint ventures had placed contracts for capital expenditure, the Group’s share of which amounted to
$23m (2013: $27m). As at 31 December 2014, the Group had no contingent liabilities in respect of its joint ventures or associates (2013: $nil).
Further information on principal subsidiary undertakings, joint ventures, associates and material joint operations is given in note 25, page 130.
The Company Subsidiary undertakings
2014
$m
2013
$m
As at 1 January 4 288 4 130
Capital contribution
(a)
70 74
Currency translation adjustments (254) 84
As at 31 December 4 104 4 288
(a) Represents the fair value of equity instruments granted to subsidiaries’ employees arising from equity-settled employee share schemes.
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113
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
14 INVENTORIES
The Group
as at 31 December 2014
$m
2013
$m
Raw materials and consumables 613 448
Finished goods for resale 581 390
1 194 838
15 TRADE AND OTHER RECEIVABLES
The Group The Company
as at 31 December 2014
$m
2013
$m
2014
$m
2013
$m
Amounts falling due within one year
Trade receivables 1 228 2 283 – –
Amounts owed by Group undertakings – – 1 786 2 881
Amounts owed by joint ventures and associates (see note 23, page 126) 42 69 – –
Other receivables 1 225 1 488 – –
Prepayments 387 787 – –
Accrued income 2 160 2 273 – –
5 042 6 900 1 786 2 881
Amounts falling due after more than one year
Trade receivables 460 449 – –
Other receivables 608 328 – –
1 068 777 – –
6 110 7 677 1 786 2 881
Trade receivables are stated net of provisions. When management considers the recovery of a receivable to be improbable, a provision is made
against the carrying value of the receivable. The movement in this provision is as follows:
The Group 2014
$m
2013
$m
Provision as at 1 January 41 60
Charge/(credit) to the income statement 17 (19)
Provision as at 31 December 58 41
As at 31 December 2014, $928m (2013: $754m) of trade and other receivables were past due but not provided for; an analysis of these receivables
is as follows:
The Group 2014
$m
2013
$m
Less than three months past due 134 129
Between three and six months past due 196 185
Between six and 12 months past due 42 241
More than 12 months past due 556 199
928 754
Included within past due but not impaired receivables is a balance of $729m (2013: $525m) with Egypt General Petroleum Corporation (EGPC) of
which $24m has been received post year end. This balance, and the analysis of trade and other receivables past due but not provided for above,
does not include a further $100m downward re-measurement of the carrying amount in 2014, to re?ect the time value of money associated with
the outstanding debt based on a revised assumed repayment pro?le. The net amount of trade and other receivables past due but not provided
for after this re-measurement is $828m.
The remaining balance relates to a diversi?ed number of independent customers, $22m of which has been received post year end.
For further information on the credit risk associated with trade receivables, including the EGPC balance, see note 18, page 117.
114
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
16 CASH AND CASH EQUIVALENTS
The Group
as at 31 December 2014
$m
2013
$m
Cash at bank and in hand 371 597
Cash equivalent investments 4 924 5 611
5 295 6 208
Cash and cash equivalents comprise cash in hand, deposits with a maturity of three months or less and other short-term money market deposit
accounts that are readily convertible into known amounts of cash.
Included within cash and cash equivalent investments is an amount equivalent to $390m (2.8bn Egyptian Pounds) which, due to foreign exchange
restrictions, is not immediately available to the Group other than for funding local cash expenditure.
For information on the interest rate composition of the Group’s ?nancial assets see note 18, page 117.
17 BORROWINGS
GROSS BORROWINGS
The Group
as at 31 December 2014
$m
2013
$m
Amounts falling due within one year
Bonds
2.5% US Dollar 350m bond due December 2015 349 –
Fair value hedge adjustments 1 –
350 –
Loans from ?nancial institutions 1 169 414
Obligations under ?nance leases 67 61
1 586 475
Amounts falling due after more than one year
Bonds and other loans
2.5% US Dollar 350m bond due December 2015 – 349
2.875% US Dollar 750m bond due October 2016 749 748
5.125% Pound Sterling 500m bond due December 2017 779 827
Floating rate US Dollar 300m bond due September 2018 300 300
3.0% Euro 1 000m bond due November 2018 1 209 1 376
3.625% Euro 500m bond due July 2019 603 686
3.625% Euro 250m bond due July 2019 308 352
3.94% Hong Kong Dollar 370m bond due October 2019 48 48
4.0% US Dollar 650m bond due December 2020 644 643
4.0% US Dollar 1 350m bond due October 2021 1 339 1 338
1.25% Euro 775m bond due November 2022 935 –
5.125% Pound Sterling 750m bond due December 2025 1 157 1 228
2.25% Euro 800m bond due November 2029 964 –
3.5% Euro 100m bond due October 2033 118 134
5.0% Pound Sterling 750m bond due November 2036 1 144 1 214
5.125% US Dollar 900m bond due October 2041 881 880
6.5% Pound Sterling 600m bond due November 2072
(a)
932 990
6.5% US Dollar 500m bond due November 2072
(a)
497 497
6.5% Euro 500m bond due November 2072
(a)
603 686
Fair value hedge adjustments 175 172
13 385 12 468
Loans from ?nancial institutions 1 076 2 242
Obligations under ?nance leases 1 460 2 344
15 921 17 054
Gross borrowings 17 507 17 529
(a) These bonds are long-dated, subordinated securities which although accounted for as debt, incorporate some features typical of equity, such as potential coupon deferral. The Group may,
at its sole discretion, redeem all, but not part, of the securities at their principal amount on 30 November 2017, 30 November 2022 or any subsequent coupon date thereafter to maturity.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
17 BORROWINGS CONTINUED
NET BORROWINGS
(a)
The Group
as at 31 December 2014
$m
2013
$m
Amounts falling due within one year
Cash and cash equivalents 5 295 6 208
Trade and other receivables
(b)
– 38
Borrowings (1 586) (475)
Commodity contracts and other derivative ?nancial instruments
(c)
6 (11)
3 715 5 760
Amounts falling due after more than one year
Borrowings (15 921) (17 054)
Trade and other receivables
(b)
172 134
Commodity contracts and other derivative ?nancial instruments
(c)
36 550
(15 713) (16 370)
Net borrowings (11 998) (10 610)
(a) Net borrowings are de?ned on page 143.
(b) Trade and other receivables comprise a ?nance lease receivable of $172m (2013: $172m). See Note 18, page 117.
(c) Commodity contracts and other derivative ?nancial instruments comprise treasury ?nancial derivatives of $42m (2013: $539m).
The following table shows a reconciliation of net borrowings:
The Group 2014
$m
2013
$m
Net borrowings as at 1 January (10 610) (10 624)
Net (decrease)/increase in cash and cash equivalents (908) 1 704
Cash in?ow from changes in borrowings (1 461) (1 620)
Inception of ?nance leases (247) (103)
Disposal of ?nance leases 923 –
Currency translation and other re-measurements 305 (53)
Movement in net borrowings classi?ed as held for sale – 86
Net borrowings as at 31 December (11 998) (10 610)
As at 31 December 2014, BG Group’s share of the net borrowings in joint ventures and associates amounted to approximately $0.3bn (2013: $0.6bn),
including BG Group shareholder loans of approximately $0.4bn (2013: $0.7bn). These net borrowings are included in BG Group’s share of the net
assets in joint ventures and associates.
MATURITY AND INTEREST RATE PROFILE OF THE GROUP’S BORROWINGS
The following tables analyse the Group’s gross borrowings. These are repayable as follows:
Gross borrowings (including obligations under ?nance leases) Fixed rate borrowings Total gross borrowings
2014
$m
2013
$m
2014
$m
2013
$m
Within one year 417 61 1 586 475
Between one and two years 827 413 1 078 1 655
Between two and three years 73 818 1 424 1 068
Between three and four years 78 66 1 833 1 471
Between four and ?ve years 1 009 1 452 1 058 2 005
After ?ve years 7 816 10 236 10 528 10 855
10 220 13 046 17 507 17 529
For the purpose of the table above, borrowings with an initial maturity within one year, such as commercial paper, are treated as ?oating rate.
As part of its interest rate risk strategy, the Group has entered into swaps. The disclosure above is presented after the effect of these swaps.
Further information on the fair value of the swaps is included in note 18, page 117.
The weighted average post-swap interest rate of borrowings as at 31 December 2014 was 3.7% (2013: 4.0%). Post-swap ?xed-rate borrowings
mature between 2015 and 2072 (2013: mature between 2014 and 2072).
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FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
17 BORROWINGS CONTINUED
Obligations under ?nance leases pre-swap
Amounts due:
Minimum lease payments
Obligations under
?nance leases
2014
$m
2013
$m
2014
$m
2013
$m
Within one year 162 154 67 61
Between one and ?ve years 654 672 275 278
After ?ve years 1 904 2 966 1 185 2 066
Less: future ?nance charges (1 193) (1 387) – –
1 527 2 405 1 527 2 405
The Group has ?nance lease obligations in respect of infrastructure and LNG ships. These lease obligations expire between 2024 and 2039
(2013: expire between 2024 and 2038).
CURRENCY COMPOSITION OF THE GROUP’S BORROWINGS
The following table analyses the currency composition of the Group’s borrowings:
2014
$m
2013
$m
Currency:
Pound Sterling 5 296 6 477
US Dollar 7 205 7 667
Euro 4 778 3 253
Other 228 132
17 507 17 529
The disclosure above does not include the impact of certain currency swaps as these are separately recognised under IAS 39 and presented
in note 18, page 117. As at 31 December 2014, the Group had swapped $2 291m (2013: $2 437m) of Pound Sterling borrowings into US Dollars,
$4 778m (2013: $3 253m) of Euro borrowings into US Dollars and $50m (2013: $50m) of other currencies into US Dollars.
COMPOSITION OF THE GROUP’S UNDRAWN COMMITTED FACILITIES
The Group has undrawn committed borrowing facilities, in respect of which all conditions have been met, as follows:
Expiring:
2014
$m
2013
$m
Within one year
(a)
2 102 –
Between one and two years 2 180 –
Between two and three years 3 040 2 180
Between three and four years – 3 040
7 322 5 220
(a) Undrawn committed facilities expiring within one year as at 31 December 2014 comprise a £250m revolving bank borrowing facility (which was fully drawn as at 31 December 2013) and a further
credit facility provided by an export credit agency, which was executed during 2014 and of which $1.7 billion was undrawn at 31 December 2014. While the opportunity to draw upon this credit
facility expires within one year, drawn funds are repaid in equal semi-annual instalments commencing after more than one year and ending after more than ?ve years.
18 FINANCIAL INSTRUMENTS
TREASURY INSTRUMENTS
The Group is exposed to credit risk, interest rate risk, exchange rate risk and liquidity risk. As part of its business operations, the Group uses
derivative ?nancial instruments (derivatives) in order to manage exposure to ?uctuations in interest rates and exchange rates. The Group enters
into interest rate derivatives to manage the ?xed and ?oating composition of its debt. The Group enters into currency exchange rate derivatives to
hedge certain currency cash ?ows and to adjust the currency composition of its assets and liabilities. Certain agreements are combined currency
and interest swap transactions, described as cross-currency interest rate derivatives. The Group’s policy is to enter into interest or currency
exchange rate derivatives only where these are matched by an underlying asset, liability or transaction.
Further information on treasury risks is contained in the Principal risks and uncertainties section, pages 34 to 41.
COMMODITY INSTRUMENTS
Within the ordinary course of business the Group routinely enters into sale and purchase transactions for commodities. The majority of these
transactions take the form of contracts that were entered into and continue to be held for the purpose of the receipt or delivery of the commodity
in accordance with the Group’s expected sale, purchase or usage requirements. Such contracts are not within the scope of IAS 39.
Certain gas sales contracts fall within the scope of IAS 39. These contracts include pricing terms that are based on a variety of commodities
and indices. They are recognised in the balance sheet at fair value with movements in fair value recognised in the income statement.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
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18 FINANCIAL INSTRUMENTS CONTINUED
COMMODITY INSTRUMENTS CONTINUED
Certain short-term market traded contracts for the purchase and subsequent resale of third-party commodities are within the scope of IAS 39
and are recognised in the balance sheet at fair value with movements in fair value recognised in the income statement. The Group uses various
commodity-based derivative instruments to manage some of the risks arising from ?uctuations in commodity prices. Such contracts include
physical and net-settled forwards, futures, swaps and options. Where these derivatives have been designated as cash ?ow hedges of underlying
commodity price exposures, certain gains and losses attributable to these instruments are deferred in other comprehensive income and
subsequently recognised in the income statement when the underlying hedged transaction crystallises. Commodity derivatives that are not part
of a hedging relationship are recognised in the balance sheet within Other commodity derivatives at fair value, with movements in fair value
recognised in the income statement.
Further information on commodity price exposure is contained in the Principal risks and uncertainties section, pages 34 to 41.
AMOUNTS RECOGNISED IN RESPECT OF FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE
The Group
as at 31 December
Included in the balance sheet:
2014 2013
Assets
$m
Liabilities
$m
Assets
$m
Liabilities
$m
Interest rate derivatives 102 (61) 127 (42)
Currency exchange rate derivatives – (3) 20 (17)
Cross-currency interest rate derivatives 183 (179) 495 (44)
Gas contracts 82 (14) – (208)
Other commodity derivatives 155 (124) 88 (159)
522 (381) 730 (470)
As at 31 December 2014, the Group also held non-derivative available-for-sale ?nancial assets of $42m (2013: $61m) which are recognised in the balance
sheet at fair value.
As at 31 December 2014, the Group had deposited cash of $119m (2013: $110m) and received cash of $16m (2013: $7m) in respect of collateral and margin
payments associated with the use of commodity derivatives.
Derivative ?nancial instruments expected to be realised within one year are presented within current assets and current liabilities. All other derivative
?nancial instruments are classi?ed as non-current. The maturity pro?le of derivative ?nancial instruments is as follows:
2014 2013
Assets
$m
Liabilities
$m
Assets
$m
Liabilities
$m
Within one year 235 (128) 107 (297)
Between one and ?ve years 103 (163) 237 (122)
After ?ve years 184 (90) 386 (51)
522 (381) 730 (470)
The notional principal amounts of derivative ?nancial instruments are as follows:
2014 2013
Within
one year
$m
Between
one and
?ve years
$m
After
?ve years
$m
Total
$m
Within
one year
$m
Between
one and
?ve years
$m
After
?ve years
$m
Total
$m
Interest rate derivatives 1 300 780 2 200 4 280 9 2 194 3 253 5 456
Currency exchange rate derivatives 599 – – 599 1 263 47 – 1 310
Cross-currency interest rate derivatives – 4 461 3 285 7 746 – 3 113 2 815 5 928
Other commodity derivatives 10 394 5 723 – 16 117 15 047 4 636 232 19 915
The notional principal amounts of gas contracts are $293m (2013: $690m). The amounts in respect of other commodity derivatives represent
the gross combination of notional principals relating to all purchase and sale contracts and accordingly do not show the extent to which these
contracts may offset. These notional principal amounts give an indication of the scale of derivatives held, but do not re?ect the risks that the
Group is exposed to from their use.
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18 FINANCIAL INSTRUMENTS CONTINUED
VALUATION
All ?nancial instruments that are initially recognised and subsequently re-measured at fair value have been classi?ed in accordance with the
hierarchy described in IFRS 13 ‘Fair Value Measurement’.
Fair value measurement hierarchy
The fair value hierarchy, described below, re?ects the signi?cance of the inputs used to determine the valuation of ?nancial assets and liabilities
measured at fair value.
Level 1 fair value measurements are those derived directly from quoted prices (unadjusted) in active markets for identical assets and liabilities.
Level 2 fair value measurements are those including inputs other than quoted prices included within Level 1 that are observable for the asset or liability
directly or indirectly. The fair value of the Group’s interest rate and currency exchange rate derivatives and the majority of the Group’s commodity
derivatives are calculated from relevant market prices and yield curves at the balance sheet date and are therefore based solely on observable price
information. These instruments are not directly quoted in active markets and are accordingly classi?ed as Level 2 in the fair value hierarchy.
Level 3 fair value measurements are those derived from valuation techniques that include signi?cant inputs for the asset or liability that are not based
on observable market data. Where observable market valuations of commodity contracts are unavailable, the fair value on initial recognition is the
transaction price and is subsequently determined using the Group’s forward planning assumptions for the price of gas, other commodities and indices.
Due to the assumptions underlying their fair value, certain gas contracts are categorised as Level 3 in the fair value hierarchy. These contracts contain
an underlying linkage to oil prices, and one of the assumptions used for their valuation is that observable commodity prices are liquid for four years
(2013: four years). The fair values of the commodity contracts are calculated using the market yield curve at the balance sheet date.
The Group Financial assets Financial liabilities
as at 31 December 2014 Level 1
$m
Level 2
$m
Level 3
$m
Total
$m
Level 1
$m
Level 2
$m
Level 3
$m
Total
$m
Interest rate derivatives – 102 – 102 – (61) – (61)
Currency exchange rate derivatives – – – – – (3) – (3)
Cross-currency interest rate derivatives – 183 – 183 – (179) – (179)
Gas contracts – – 82 82 – (14) – (14)
Other commodity derivatives 43 73 39 155 (69) (9) (46) (124)
43 358 121 522 (69) (266) (46) (381)
Financial assets Financial liabilities
as at 31 December 2013 Level 1
$m
Level 2
$m
Level 3
$m
Total
$m
Level 1
$m
Level 2
$m
Level 3
$m
Total
$m
Interest rate derivatives – 127 – 127 – (42) – (42)
Currency exchange rate derivatives – 20 – 20 – (17) – (17)
Cross-currency interest rate derivatives – 495 – 495 – (44) – (44)
Gas contracts – – – – – (144) (64) (208)
Other commodity derivatives 3 51 34 88 (28) (74) (57) (159)
3 693 34 730 (28) (321) (121) (470)
As at 31 December 2014, the Group also held available-for-sale ?nancial assets of $42m (2013: $61m), the fair value of which is determined using
Level 1 fair value measurements.
Level 3 fair value measurements
The movements in the year associated with ?nancial assets and liabilities, measured at fair value and determined in accordance with Level 3,
are shown below:
Total
2014
$m
2013
$m
Fair value as at 1 January (87) (8)
Total gains or losses recognised in the income statement 139 (85)
Reclassi?cation to Level 2 8 –
Settlements 19 3
Currency translation adjustments (4) 3
Fair value as at 31 December 75 (87)
Total gains or losses recognised in the income statement are presented in Other operating income.
As at 31 December 2014, the potential pre-tax change in the fair value of gas contracts, assuming a $20 per barrel change (2013: $10 per barrel) in
the Brent price assumption, was $79m (2013: $53m). A reasonably foreseeable change in the valuation assumptions underlying other commodity
derivatives would not signi?cantly change their fair value measurement.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
18 FINANCIAL INSTRUMENTS CONTINUED
FAIR VALUE ADJUSTMENTS ON FINANCIAL INSTRUMENTS
The Group
Included in the income statement
(a)
:
2014
$m
2013
$m
Interest rate and currency exchange rate derivatives not in a designated hedge relationship
(b)
(176) 18
Interest rate derivatives designated as fair value hedges – (56)
Cross-currency interest rate derivatives designated as fair value hedges
(b)
(71) 66
Ineffectiveness on net investment hedges 10 (6)
Gas contracts 280 34
Other commodity derivatives not in a designated hedge relationship 73 42
Continuing operations 116 98
(a) Includes $57m gain (2013: $112m loss) recognised as Other operating income within Business Performance.
(b) These amounts are offset by foreign exchange gains or losses on the underlying borrowings.
Fair value losses of $17m (2013: $8m) on available-for-sale ?nancial assets are included within other comprehensive income.
HEDGE ACCOUNTING
In line with the Group’s risk management policies, certain derivative and non-derivative instruments are designated as hedges of currency, interest
rate and commodity price exposures in accordance with IAS 39.
Fair value hedges
As at 31 December 2014, the Group held a number of interest rate derivatives and cross-currency interest rate derivatives designated as hedges of
the fair value risk associated with the Group’s ?xed rate debt. The hedged items and the related derivatives have the same critical terms to ensure that
they are an effective hedge under IAS 39. The fair value of derivative instruments designated as fair value hedges outstanding as at 31 December 2014
is $(8)m (2013: $66m). During 2014, adjustments of $(26)m (2013: $65m) have been made to hedged items in respect of the risks being hedged.
Cash ?ow hedges
The Group has forward commodity contracts, currency exchange rate derivatives, interest rate derivatives and cross-currency interest rate
derivatives designated as hedges of highly probable forecast purchases and sales, and of interest ?ows and currency exposure on Group debt.
As at 31 December 2014, an unrealised pre-tax loss of $42m (2013: $4m) was deferred in other comprehensive income in respect of effective cash
?ow hedges. The hedged transactions are expected to occur within 19 years (2013: 24 years) and the associated gains and losses deferred in other
comprehensive income will be released to the income statement as the underlying transaction crystallises. As at 31 December 2014, deferred
pre-tax losses of $13m (2013: $nil) are expected to be released to the income statement within one year. The fair value of derivative instruments
designated as cash ?ow hedges outstanding as at 31 December 2014 is $(30)m (2013: $174m).
The Consolidated statement of comprehensive income, page 93, identi?es the amounts that have been transferred from other comprehensive
income in respect of transactions completed during the year. These items are reported within the income statement to match against the
underlying transaction.
Hedges of net investments in foreign operations
As at 31 December 2014, certain borrowings and currency derivatives have been designated as hedges of the currency risk associated with net investments
in foreign operations. The portion of gains or losses on the hedging instruments determined to be an effective hedge are transferred to other comprehensive
income to offset the gains or losses arising on the retranslation of net investments in foreign subsidiaries. The pre-tax loss on effective hedging instruments
deferred within other comprehensive income as at 31 December 2014 is $45m (2013: $529m gain). The fair value of ?nancial instruments designated
as hedges of net investments in foreign operations outstanding as at 31 December 2014 is $(5 682)m (2013: $(5 681)m).
FINANCIAL ASSETS (EXCLUDING NON-INTEREST BEARING SHORT-TERM RECEIVABLES)
The Group’s ?nancial assets consist of cash and cash equivalents of $5 295m (2013: $6 208m), loans made to joint ventures and associates of $353m
(2013: $714m), a ?nance lease receivable of $172m (2013: $172m), available-for-sale assets of $42m (2013: $61m), other long-term investments of $nil
(2013: $17m), receivables due within one year of $520m (2013: $640m) and receivables due after more than one year of $519m (2013: $571m).
The currency and interest rate pro?le of ?nancial assets is as follows:
The Group 2014 2013
Fixed rate
?nancial
assets
$m
Floating rate
?nancial
assets
$m
Non-interest
bearing
assets
$m
Total
$m
Fixed rate
?nancial
assets
$m
Floating rate
?nancial
assets
$m
Non-interest
bearing
assets
$m
Total
$m
Currency:
Pound Sterling – – – – – – 361 361
US Dollar 231 6 295 22 6 548 231 7 563 34 7 828
Other – 328 25 353 – 145 49 194
231 6 623 47 6 901 231 7 708 444 8 383
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
18 FINANCIAL INSTRUMENTS CONTINUED
FINANCIAL ASSETS (EXCLUDING NON-INTEREST BEARING SHORT-TERM RECEIVABLES) CONTINUED
Within ?oating rate ?nancial assets, cash and cash equivalents earn interest at the relevant market rates. Periodic interest rate determinations in
respect of ?oating rate loans to joint ventures and associates generally comprise London Interbank Offered Rate (LIBOR) plus or minus an agreed margin.
As at 31 December 2014, ?oating rate receivables and loans to joint ventures and associates had an effective interest rate of between 1.27% and 4.52%
(2013: between 1.26% and 4.00%) and are expected to expire between 2015 and 2022 (2013: between 2015 and 2020). The maturity pro?le of non-interest bearing
loans to joint ventures and associates cannot be practicably estimated as repayments are based on the performance of the individual joint venture or associate.
As at 31 December 2014, ?xed rate assets expire between 2016 and 2024 (2013: 2016 and 2024) and have effective interest rates of between
6% and 15% (2013: 6% and 14%).
OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The following ?nancial assets and ?nancial liabilities are subject to offsetting, enforceable master netting arrangements or similar agreements:
The Group
Financial assets as at 31 December 2014
Amounts offset Amounts not offset Net
Gross
assets
$m
Gross
liabilities
offset
$m
Net
presented
in the
balance sheet
$m
Financial
instruments
$m
Cash
collateral
received
$m $m
Derivative ?nancial assets 1 098 (658) 440 (123) (16) 301
Other receivables 82 (82) – – – –
Trade receivables 906 (166) 740 – (4) 736
2 086 (906) 1 180 (123) (20) 1 037
The Group
Financial liabilities as at 31 December 2014
Amounts offset Amounts not offset Net
Gross
liabilities
$m
Gross
assets
offset
$m
Net
presented
in the
balance sheet
$m
Financial
instruments
$m
Cash
collateral
paid
$m $m
Derivative ?nancial liabilities (1 121) 740 (381) 123 5 (253)
Trade payables (718) 166 (552) – 9 (543)
(1 839) 906 (933) 123 14 (796)
The Group
Financial assets as at 31 December 2013
Amounts offset Amounts not offset Net
Gross
assets
$m
Gross
liabilities
offset
$m
Net
presented
in the
balance sheet
$m
Financial
instruments
$m
Cash
collateral
received
$m $m
Derivative ?nancial assets 1 198 (492) 706 (48) (33) 625
Other receivables 76 (76) – – – –
Trade receivables 864 (314) 550 – (21) 529
2 138 (882) 1 256 (48) (54) 1 154
The Group
Financial liabilities as at 31 December 2013
Amounts offset Amounts not offset Net
Gross
liabilities
$m
Gross
assets
offset
$m
Net
presented
in the
balance sheet
$m
Financial
instruments
$m
Cash
collateral
paid
$m $m
Derivative ?nancial liabilities (923) 568 (355) 48 37 (270)
Trade payables (560) 314 (246) – – (246)
(1 483) 882 (601) 48 37 (516)
For the ?nancial assets and liabilities subject to enforceable master netting arrangements or similar arrangements above, each agreement between
the Group and the counterparty typically requires net settlement of the relevant ?nancial assets and liabilities. In the absence of such a requirement,
?nancial assets and liabilities will be settled on a gross basis, however, each party to the master netting agreement or similar agreement will be
required or have the option to settle all such amounts on a net basis in the event of default of the other party. Per the terms of each agreement,
an event of default includes: failure by a party to make payment when due; failure by a party to perform any obligation required by the agreement
(other than payment) if such failure is not remedied within a speci?ed cure period after notice of such failure is given to the party; or bankruptcy.
FAIR VALUES OF OTHER FINANCIAL INSTRUMENTS
The following ?nancial instruments are measured at historical or amortised cost and have fair values that differ from their book values:
The Group 2014 2013
Book value
$m
Fair value
$m
Book value
$m
Fair value
$m
Financial instruments held or issued to ?nance the Group’s operations:
Long-term borrowings (15 921) (17 770) (17 054) (18 510)
The fair values of long-term borrowings are within Level 1 ($14 387m) and Level 2 ($3 383m) of the fair value hierarchy and have been estimated
based on quoted market prices where available, or by discounting all future cash ?ows by the relevant market yield curve at the balance sheet date.
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FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
18 FINANCIAL INSTRUMENTS CONTINUED
THE COMPANY
The Company’s ?nancial instruments are all denominated in Pounds Sterling and consist of short-term receivables of $1 786m (2013: $2 881m) and
short-term payables of $48m (2013: $51m). Short-term receivables comprise amounts owed by Group undertakings, of which $1 768m (2013: $2 858m)
earns interest at LIBOR minus an agreed margin. The remaining short-term receivables of $18m (2013: $23m) were non-interest bearing. Short-term
payables are due within one year and are non-interest bearing. The fair value of the ?nancial instruments approximates book value.
FINANCIAL RISK FACTORS
The principal ?nancial risks arising from ?nancial instruments are commodity price risk, exchange rate risk, interest rate risk and credit and liquidity risk.
Additional quantitative information and market sensitivities in relation to certain principal market risks are included in the following sections.
Liquidity risk
The Group limits the amount of borrowings maturing within any speci?c period and the Group’s ?nancial assets are primarily held as short-term, liquid
investments that are readily convertible into known amounts of cash. These measures reduce liquidity risk. The Group proposes to meet its ?nancing
commitments from the operating cash ?ows of the business, existing cash and cash equivalent investments, proceeds from asset disposals and
borrowings from a range of sources which are expected to include money and debt capital markets, government lending agencies and existing committed
lines of credit. The undiscounted contractual cash ?ows receivable/(payable) under ?nancial instruments as at the balance sheet date are as follows:
The Group
as at 31 December 2014 Within
one year
$m
Between
one and
two years
$m
Between
two and
?ve years
$m
After
?ve years
$m
Total
$m
Non-derivative ?nancial liabilities
Borrowings (2 251) (1 737) (6 083) (24 231) (34 302)
Short-term payables (1 509) – – – (1 509)
(3 760) (1 737) (6 083) (24 231) (35 811)
Out?ows from derivative ?nancial instruments
Currency and interest rate derivatives (310) (327) (4 963) (4 254) (9 854)
Gross-settled commodity derivatives (1 213) (291) (559) (234) (2 297)
Net-settled commodity derivatives (5) – – – (5)
(1 528) (618) (5 522) (4 488) (12 156)
Non-derivative ?nancial assets and in?ows from derivative ?nancial instruments 9 197 1 438 5 560 4 490 20 685
Total as at 31 December 2014 3 909 (917) (6 045) (24 229) (27 282)
The Group
as at 31 December 2013 Within
one year
$m
Between
one and
two years
$m
Between
two and
?ve years
$m
After
?ve years
$m
Total
$m
Non-derivative ?nancial liabilities
Borrowings (1 150) (1 977) (6 864) (25 750) (35 741)
Short-term payables (1 878) – – – (1 878)
(3 028) (1 977) (6 864) (25 750) (37 619)
Out?ows from derivative ?nancial instruments
Currency and interest rate derivatives
(a)
(374) (317) (3 898) (3 612) (8 201)
Gross-settled commodity derivatives (1 232) (397) (276) – (1 905)
Net-settled commodity derivatives (49) (17) (12) – (78)
(1 655) (731) (4 186) (3 612) (10 184)
Non-derivative ?nancial assets and in?ows from derivative ?nancial instruments
(a)
12 172 1 728 4 701 4 582 23 183
Total as at 31 December 2013
(a)
7 489 (980) (6 349) (24 780) (24 620)
(a) The Group has amended the comparative disclosures in order to present both principal and interest settlement amounts gross where the pay and receive legs of a derivative will be settled separately,
including currency exchange, interest rate and cross-currency interest rate derivatives.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
18 FINANCIAL INSTRUMENTS CONTINUED
FINANCIAL RISK FACTORS CONTINUED
Credit risk
Credit risk is managed on a Group basis. Credit risk in ?nancial instruments arises from cash and cash equivalents and derivative ?nancial instruments,
as well as credit exposures of commercial counterparties including exposures in respect of outstanding receivables and committed transactions. For banks
and ?nancial institutions, only independently rated parties with a minimum long-term credit rating of ‘A’ are normally accepted as a counterparty and
credit limits are established based primarily on the credit ratings, although other credit assessment factors that determine credit quality, including the
external environment, are taken into account when considering the awarding of or maintenance of a limit. Similarly if a commercial counterparty is
independently credit rated, the rating is primarily used to determine credit quality and limits, with other relevant assessment factors also considered.
If there is no independent credit rating, credit quality is assessed in accordance with credit policies that take account of the counterparty’s ?nancial
position and other similar factors. Exposures are monitored by the relevant Group businesses and at a Group level.
As at 31 December 2014, the Group’s maximum credit risk exposure (after the impact of any netting arrangements) under currency and interest rate related
derivatives was $167m (2013: $570m) and commodity related derivatives $79m (2013: $65m). The Group’s credit risk exposure under receivables and
other ?nancial assets is represented by the book values. The Group considers its portfolio for credit related concentration risks where risks may
result from strategic investments, commercial relationships or sales of product in a variety of locations. Mitigation may be considered where
appropriate to diversify or reduce risk pro?le.
The Egyptian government continues to demonstrate its commitment to repay outstanding debts to the energy industry. Following partial repayments of the
Group’s outstanding debt during 2014, the amount owed by Egypt General Petroleum Corporation (EGPC) in respect of domestic gas sales as at 31 December
2014 was $0.9bn (2013: $1.2bn), of which $0.7bn (2013: $0.5bn) was overdue. The Group considers that the current receivable balance remains fully recoverable
as direct cash payments from EGPC continue to be received, however in 2014 a $100 million pre-tax ($79 million post-tax) charge was recognised relating
to the downward re-measurement of the receivable balance to re?ect the time value of money associated with the outstanding debt based on a revised
assumed repayment pro?le. The recoverability of the receivable balance depends on the business environment in Egypt, the Group’s continued investment
plans and the volume of gas available for export, together with the outcome of ongoing negotiations with EGPC.
Market risk
Financial instruments used by the Group that are affected by market risks primarily comprise cash and cash equivalents, borrowings and derivative
contracts. The principal market variables that affect the value of these ?nancial instruments are UK and US interest rates, US Dollar to Pound Sterling
exchange rates, UK and US gas prices, and Japan Custom-cleared Crude (JCC) and Brent oil prices. The table below illustrates the indicative post-tax
effects on the income statement and other comprehensive income of applying reasonably foreseeable market movements to the Group’s ?nancial
instruments at the balance sheet date.
The Group Market movement Business Performance
Disposals, re-measurements
and impairments
Other comprehensive
income/(charge)
2014 2013 2014
$m
2013
$m
2014
$m
2013
$m
2014
$m
2013
$m
UK interest rates + 100 basis points + 100 basis points (6) (18) (1) (10) (142) (140)
US interest rates + 100 basis points + 100 basis points (1) 29 50 97 140 203
US$/UK£ exchange rates + 20 cents + 20 cents 10 – (376) (208)
(a)
1 506 1 635
(a)
UK gas prices + 20 pence/therm + 10 pence/therm – – (48) (12) – –
US gas prices + 1 $/mmbtu + 1 $/mmbtu 2 (14) 84 – – (2)
JCC/Brent prices + 20 $/bbl + 10 $/bbl – – (62) (39) – –
The Company
UK interest rates + 100 basis points + 100 basis points 14 22 – – – –
(a) The Group has undertaken a review of the methodology used to calculate foreign exchange rate sensitivities and has chosen to utilise a more granular approach in the sensitivity calculation of
intra-group exposures. The Group has amended the comparative disclosures for foreign exchange rate sensitivities reported in 2013 from a $144m loss to a $208m loss for disposals, re-measurements
and impairments and from a $357m gain to a $1 635 gain for other comprehensive income.
The above sensitivity analysis is based on the Group’s ?nancial assets, liabilities and hedge designations as at the balance sheet date and indicates
the effect of a reasonable increase in each market variable. The effect of a corresponding decrease in these variables is approximately equal and
opposite. The following assumptions have been made:
(i) the sensitivity includes a full year’s change in interest payable and receivable from ?oating rate borrowings and investments based on
the post-swap amounts and composition as at the balance sheet date;
(ii) fair value changes from derivative instruments designated as cash ?ow or net investment hedges are considered fully effective and are
recorded in other comprehensive income;
(iii) fair value changes from derivative instruments designated as fair value hedges are considered fully effective and entirely offset by adjustments
to the underlying hedged item; and
(iv) fair value changes from derivatives not in a hedge relationship are recorded in the income statement.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
19 TRADE AND OTHER PAYABLES
The Group The Company
as at 31 December 2014
$m
2013
$m
2014
$m
2013
$m
Amounts falling due within one year
Trade payables 894 1 459 – –
Amounts owed to Group undertakings – – 23 28
Amounts owed to joint ventures and associates (see note 23, page 126) 258 109 – –
Other payables
(a)
357 310 25 23
Accruals and deferred income 3 259 3 753 – –
4 768 5 631 48 51
Amounts falling due after more than one year
Other payables – – – –
Accruals and deferred income 136 150 – –
136 150 – –
4 904 5 781 48 51
(a) As at 31 December 2014, Group payables include $16m (2013: $35m) relating to share-based payment transactions, of which $10m (2013: $22m) relates to awards that have already vested,
and $165m (2013: $140m) relating to amounts provided in 2014 for payments to eligible employees under bonus schemes, including the BG Group Annual Incentive Scheme (AIS).
20 PROVISIONS FOR OTHER LIABILITIES AND CHARGES
The Group Decommissioning Other Total
2014
$m
2013
$m
2014
$m
2013
$m
2014
$m
2013
$m
As at 1 January 3 662 3 767 453 415 4 115 4 182
Charge for the year 17 63 172 98 189 161
Unwinding of discount 146 107 2 2 148 109
Additions 714 993 56 – 770 993
Change in discount rate 808 (764) – – 808 (764)
Disposals (119) (295) – – (119) (295)
Currency translation and other adjustments (504)
(a)
(134) 110
(b)
(2) (394) (136)
Amounts used (83) (75) (139) (58) (222) (133)
Unused provisions credited to the income statement – – (24) (2) (24) (2)
Reclassi?ed as assets held for sale (36) – – – (36) –
As at 31 December 4 605 3 662 630 453 5 235 4 115
(a) Includes a movement of $(272)m due to a change in in?ation assumptions (2013: $nil).
(b) Includes $138m reclassi?ed from elsewhere on the balance sheet.
A brief description of each provision together with estimates of the timing of expenditure is given below:
DECOMMISSIONING COSTS
The estimated cost of decommissioning at the end of the producing lives of ?elds is reviewed at least annually and engineering estimates and reports are
updated periodically. Provision is made for the estimated cost of decommissioning at the balance sheet date, to the extent that current circumstances indicate
BG Group will ultimately bear this cost. The payment dates of expected decommissioning costs are uncertain and are based on economic assumptions
surrounding the useful economic lives of the ?elds concerned. Useful economic lives of ?elds are affected by the estimation of hydrocarbon reserves and
resources, which is in turn impacted by available reservoir data, commodity prices and future costs. Payments (on a discounted basis) of $705m (2013: $828m)
are currently anticipated within one to ?ve years; $1 093m (2013: $829m) within six to 10 years; and $2 807m (2013: $2 005m) over 10 years.
OTHER
The balance as at 31 December 2014 includes provisions for onerous contracts of $111m (2013: $146m), ?eld-related payments of $124m (2013: $51m),
insurance costs of $107m (2013: $67m) and costs associated with disposals and restructuring of $119m (2013: $112m). The payment dates are
uncertain, but are expected to be between 2015 and 2018 (2013: 2014 and 2018).
124
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
21 CALLED UP SHARE CAPITAL
Number of shares
as at 31 December 2014
m
2013
m
2014
$m
2013
$m
Issued and fully paid up
Equity:
Ordinary shares of 10p each 3 621 3 619 579 579
For information on the rights and restrictions applying to the Company’s shares see Other disclosures section on page 78.
During the year, the Company allotted 2.51m ordinary shares of 10p each (2013: 4.38m ordinary shares) with an aggregate nominal value of $416 703
(2013: $689 768) in connection with exercises of share options issued under the Company Share Option Scheme (CSOS) and the Sharesave Plan.
The consideration received on these allotments amounted to $28m (2013: $45m).
At 31 December 2014, the Company held 209.9m (2013: 212.7m) of its own shares. The market value of these shares as at 31 December 2014 was
$2 831m (2013: $4 572m). The Company made the following transactions in respect of its own shares:
(i) During 2014, the Company made no purchases of its own ordinary shares. During 2013, the Company purchased 0.7m of its own ordinary shares
for the Long-Term Incentive Plan (LTIP), for aggregate consideration of $13m including transaction costs, which had a nominal value of
$105 838 and represented less than 0.1% of the called up share capital at 31 December 2013.
(ii) During 2014, the Company transferred 2.8m (2013: 3.2m) of its ordinary shares to eligible employees in accordance with the terms of the Share
Incentive Plan, the LTIP and Global Partnership Plan. The shares transferred had a nominal value of $469 193 (2013: $496 056) and represented
approximately 0.1% (2013: 0.1 %) of the called up share capital at 31 December 2014. The cost of shares transferred was $22m (2013: $43m).
(iii) The maximum number of shares held during the year was 212.7m ordinary shares (2013: 215.5m), representing approximately 5.9% (2013: 6.0%)
of the called up share capital at 31 December 2014, and having a nominal value of $35 233 224 (2013: $32 722 390).
22 COMMITMENTS AND CONTINGENCIES
A) CAPITAL EXPENDITURE
As at 31 December 2014, the Group had contractual commitments for future capital expenditure amounting to $4 195m (2013: $6 235m) of which
$3 998m related to acquisition of property, plant and equipment (2013: $5 770m) and $197m related to intangible exploration assets (2013: $465m).
Included in the amount for contractual commitments for future capital expenditure is $1 388m (2013: $1 921m) relating to commitments under operating
leases split between amounts due within one year $723m (2013: $970m), and amounts due between one and ?ve years $665m (2013: $951m).
B) DECOMMISSIONING COSTS ON DISPOSED ASSETS
BG Group has contingent liabilities in respect of the future decommissioning costs of gas and oil assets disposed of to third parties should
they fail to meet their remediation obligations. The amounts of future costs associated with these contingent liabilities could be signi?cant.
The Group has obtained indemnities and/or letters of credit against the estimated amount of certain of these potential liabilities.
C) FUTURE EXPLORATION WELL COSTS
As at 31 December 2014, certain petroleum licences in which BG Group has an interest contained outstanding uncontracted obligations to
drill exploration and appraisal wells. The uncontracted cost attributable to the Group in respect of these capital commitments is estimated to be
$384m (2013: $806m).
D) LEASE COMMITMENTS
Commitments under operating leases to be expensed to the income statement as at 31 December were as follows:
The Group Land and buildings Vessels and other FPSOs Total
2014
$m
Restated
(a)
2013
$m
2014
$m
Restated
(a)
2013
$m
2014
$m
Restated
(a)
2013
$m
2014
$m
Restated
(a)
2013
$m
Amounts due:
Within one year 70 72 542 395 282 162 894 629
Between one and ?ve years 203 191 2 369 1 851 1 579 1 120 4 151 3 162
After ?ve years 152 204 1 718 2 146 2 695 2 102 4 565 4 452
425 467 4 629 4 392 4 556 3 384 9 610 8 243
(a) The Group has amended the comparative lease commitment disclosure for ‘Land and buildings’, ‘Vessels and other’ and ‘FPSOs’ to exclude certain operating and maintenance costs, to re?ect a shorter
minimum lease term for certain FPSOs, to remove four FPSO leases from the disclosure and ensure that the net commitment of the Group is shown. The impact of excluding these amounts on the
previously disclosed 2013 comparative was to reduce operating lease commitments for ‘Land and buildings’ from $549m to $467m, ‘Vessels and other’ from $6 057m to $4 392m and FPSOs from
$13 009m to $3 384m.
Certain expenditure under operating leases is recovered from third parties under partnership agreements and is excluded from the table above.
The longest dated lease, in respect of an FPSO, expires in 2029 (2013: expires in 2029).
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
22 COMMITMENTS AND CONTINGENCIES CONTINUED
E) LEGAL PROCEEDINGS
In August 2009 two separate tax de?ciency notices were issued against Petrobras based on alleged irregularities in connection with the import
of equipment and rigs on behalf of the BM-S-9 Consortium (Petrobras (45% – Operator), BG E&P Brasil (30%) and Repsol Sinopec Brasil (25%)).
BG Group’s potential liability arises from indemnity provisions in favour of Petrobras, as set out in the Joint Operating Agreement.
The ?rst tax de?ciency notice was issued due to the São Paulo State Tax Authority’s allegation that Petrobras cannot enjoy lower tax rates in
the importation of a rig. Petrobras challenged this decision through the administrative courts (this appeal was rejected); and in the judicial branch,
in which the ?rst instance and second instance (February 2014) courts declared and upheld that the São Paulo State Tax Authority was not competent
to decide unilaterally where customs clearance takes place or to consider if the Consortium would be entitled to the special tax treatment.
These rulings were positive decisions for the Consortium. The São Paulo State Tax Authority appealed the second instance judicial decision to the
Brazilian Superior Court of Justice and a ?nal decision is expected within the next three years.
The second tax de?ciency notice was issued by the São Paulo Tax Authority re?ecting their view that Petrobras should have recorded transfers of
goods to and from a rig as if the offshore rig and the onshore base were two distinct branches of Petrobras. As such, the authorities are charging a
penalty. Petrobras has appealed an unfavourable decision in the administrative courts and a decision is expected in 2015. If the appeal by Petrobras
is rejected, it is anticipated that judicial proceedings will be brought in a manner similar to the ?rst tax de?ciency notice referred to above and that
this matter may take up to ?ve years to be resolved.
In 2014 tax assessments were issued against Petrobras in respect of the charter/services contract split for FPSOs, offshore service vessels and rig
hire for the years 2008, 2009 and 2010. Some of these FPSOs, vessels and rigs were allocated to the BM-S-9 and BM-S-11 consortia. Defences and
administrative appeals were submitted by Petrobras and are pending.
BG Group’s Australian subsidiary is defending claims brought by an unincorporated joint venture between McConnell Dowell Constructors (Aust) Pty Limited
and Consolidated Contracting Company Australia Pty Limited (together, ‘MCJV’). MCJV is the main contractor for the Export and Narrows pipelines project.
In March 2014, MCJV initiated ICC arbitration proceedings relating to project variations, delay and completion of milestones. The arbitral panel has been
constituted and an indicative timetable for the arbitration set. The full hearing of the matter is not expected before Q4 2015. The claim has been retained
by BG Group in the sales process of QCLNG Pipeline Pty Limited.
Various issues have been in dispute for a number of years with the Government of India in relation to the interpretation of the production sharing
contracts for the Panna/Mukta and Tapti ?elds and related matters. Arbitration proceedings are ongoing.
It is not practicable at this time to estimate the ?nancial effects (other than for the tax de?ciency notices); given the uncertainties relating to the
amounts and timing of any economic in?ows or out?ows and the possibility of any reimbursements in relation to the outstanding legal proceedings
detailed above. An amount for the tax de?ciency notices has been included within the other contingency liabilities amount in subsection (F) below.
The Company and its subsidiaries are, or may from time to time be, in connection with current or past operations, involved in a number of legal or
arbitration proceedings, including, for example, claims, suits, actions, investigations and/or inquiries relating to commercial, tax, environmental
or other matters, with third parties or governmental or regulatory authorities. While the outcome of some of these matters cannot readily be foreseen,
it is currently considered that they will be resolved without material effect on the net asset position as set out in these Financial statements.
F) CONTINGENT LIABILITIES
The amount of contingent liabilities as at 31 December 2014 (mainly the provision of guarantees, indemnities, contingent decommissioning
obligations or warranties to third parties and various legal or arbitration proceedings in connection with the current and prior operations of the Group)
amounted to $7 188m (2013: $7 144m), of which $224m (2013: $242m) related to the Company.
23 RELATED PARTY TRANSACTIONS
In the normal course of business BG Group provides goods and services to, and receives goods and services from, its joint ventures and associates.
The Group received and incurred the following income and charges from its joint ventures and associates:
for the year ended 31 December 2014 2013 Restated
(a)
Income
$m
Charges
$m
Income
$m
Charges
$m
LNG cargo purchases, sales and other related costs 118 (720) 108 (601)
Shipping, transportation costs and other related costs 2 (23) 5 (47)
E&P operating costs – (298) – (149)
120 (1 041) 113 (797)
(a) On the adoption of IFRS 11 ‘Joint Arrangements’, the Group has reclassi?ed the comparative disclosures given in 2013 to exclude relationships that are now deemed to be ‘Joint Operations’ and fall
outside of the scope of IAS24 ‘Related Party Disclosures’. The impact of excluding these items were as follows: LNG cargo purchases, and other related costs from $717m to $601m, Shipping,
transportation and other related income from $90m to $5m and Shipping, transaction costs and other related costs from $113m to $47m.
BG Group provides certain guarantees in respect of its obligations to its joint ventures and associates, and its share of obligations undertaken
by its joint ventures and associates, in the normal course of business.
As at 31 December 2014, a debtor balance of $42m (2013: $69m) (see note 15, page 114) and a creditor balance of $258m (2013: $109m)
(see note 19, page 124) were outstanding with these parties.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
23 RELATED PARTY TRANSACTIONS CONTINUED
In addition, BG Group provides ?nancing to some of these parties by way of loans. As at 31 December 2014, loans of $353m (2013: $714m) were due
from joint ventures and associates. These loans are accounted for as part of BG Group’s investment in joint ventures and associates and disclosed
in note 13, page 113. Interest of $9m (2013: $10m) was charged on these loans during the year at interest rates of between 1.25% and 3.99%
(2013: 1.26% and 4.06%). The maximum debt outstanding during the year was $714m (2013: $715m).
BG Group has a ?nance lease arrangement with a joint venture company. As at 31 December 2014, the obligation was $130m (2013: $135m).
Interest of $7m (2013: $9m) was paid during the year in respect of this lease. The lease expires in 2027.
BG Group has operating lease arrangements with associate companies in respect of FPSOs. As at 31 December 2014, the obligation was
$3 846m (2013 restated: $2 649m). Charges paid during the year in respect of these leases are presented as E&P operating costs in the table.
The last of these leases expires in 2029 (2013: 2029).
William Backhouse, the son of Peter Backhouse, a former Non-Executive Director who resigned during 2014, was employed by BG International
Limited, a wholly owned subsidiary of BG Group plc. Peter Backhouse is regarded as interested in the contract of employment by virtue of his
relationship with William Backhouse. The terms and conditions of William Backhouse’s employment are consistent with others employed in
a similar role.
As at 31 December 2014, a debtor balance of $1 786m (2013: $2 881m) (see note 15, page 114) and a creditor balance of $23m (2013: $28m)
(see note 19, page 124) were outstanding between BG Group plc and other Group undertakings.
BG Group plc grants equity instruments to subsidiaries’ employees in respect of equity-settled employee share schemes. In 2014, the fair value
of equity instruments charged to the income statement was $70m (2013: $74m).
24 PENSIONS AND POST-RETIREMENT BENEFITS
In the year ended 31 December 2014, a number of the Group’s UK employees were members of the BG Pension Scheme (BGPS), a de?ned bene?t
registered pension plan established under trust. The Trustee is BG Group Pension Trustees Limited. The BGPS is funded to cover future pension
liabilities in respect of service up to the closure of the scheme. It is subject to an independent valuation at least every three years, on the basis
of which the independent quali?ed actuary certi?es the rate of employers’ contributions that, together with the returns on the BGPS’s assets,
are expected to be suf?cient to fund the bene?ts payable.
In common with all workplace pension schemes in the UK, the BGPS is subject to regulation by The Pensions Regulator. The Trustee is responsible
for overall management and governance of the BGPS, including compliance with all applicable legislation and regulations. The Trustee also has
responsibility for investment of the BGPS’s assets, following consultation with the Group.
The BGPS closed to future accrual of bene?ts on 31 December 2013 and all active members became deferred pensioners with pensions calculated
based on salaries up until the point of closure for such active members. These deferred pensions are generally revalued in line with movements
in the Retail Prices Index. Certain bene?ts relating to individual transfers-in and purchases of additional pensionable service by employees retain
a link to pensionable salary post-closure. The closure of the scheme to future accruals resulted in a curtailment gain of $154m, recognised in the
2013 income statement (see note 4, page 105).
The last full independent actuarial valuation of the BGPS for funding purposes showed that the aggregate market value of the plan assets at
31 March 2014 was £1 540m, representing 97% of the accrued liabilities. The next full funding valuation is expected to be performed with an
effective date of 31 March 2017. As part of the funding agreement in respect of the 2011 actuarial valuation and the closure of the BGPS to future
accrual of bene?ts, the Group and the Trustee established a Pension Funding Partnership (PFP) to address the de?cit and to provide greater
security to the Trustee.
In December 2013, the Group acquired an interest in the PFP for £110m. It also contributed £350m to the BGPS and the Trustee used this to purchase
its interest in the PFP. The PFP has an interest in loans secured on four of the Group’s LNG ships, the proceeds from which the PFP will use to make
annual distributions of £33m to the BGPS for 15 years and to pay a capital sum in 2028 of £172m which will be used, if necessary, to fund any de?cit
in the BGPS at that time, measured on a ‘self-suf?ciency’ funding basis. In December 2014, BG Group entered into an agreement for the sale
of two of these LNG ships for proceeds of $460 million. Consequently, the majority of the proceeds from this sale will be utilised to support the
funding of the BGPS.
The Group has taken advantage of the exemption conferred by Regulation 7 of the Partnerships (Accounts) Regulations 2008 and has, therefore,
not appended the accounts of this qualifying partnership to these ?nancial statements. Separate accounts for the PFP are not required to be,
and have not been, ?led at Companies House.
For scheme funding purposes, the Trustee’s interest in the PFP is treated as an asset which reduces the BGPS actuarial funding de?cit. However,
the PFP is not a plan asset under IAS 19 for the purposes of the Group’s consolidated ?nancial statements and therefore does not reduce the
de?cit on an IAS 19 accounting basis.
The Group is exposed to a number of risks relating to the BGPS. For example, additional contributions may be required if the life expectancy
of the members increases or if investments underperform, compared with the assumptions adopted at the last valuation of the BGPS.
The BGPS holds a diversi?ed investment portfolio (see table on page 129), primarily comprising quoted investments, spread across ?ve investment
managers. The portfolio remains weighted towards growth assets, with the benchmark allocation to these assets maintained at 60% during the
year. As at 31 December 2014, the BGPS held unquoted assets valued at $4m (2013: $3m) through its absolute return investment in the Lansdowne
Developed Markets Fund.
The BG Supplementary Bene?ts Scheme (BGSBS) provides bene?ts broadly in excess of the ‘lifetime allowance’. This de?ned bene?t plan is
an unfunded, non-registered arrangement. The BGSBS was closed to future accrual of bene?ts on 31 December 2013, the same date as bene?t
accrual ceased in the BGPS.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
24 PENSIONS AND POST-RETIREMENT BENEFITS CONTINUED
The Group has a small number of de?ned bene?t plans outside the UK which are not material in Group terms.
Independent actuaries reported on the ?nancial position of the BGPS and the BGSBS as at 31 December 2014 in accordance with the requirements
of IAS 19. The fair value of plan assets, the present value of plan liabilities and the net balance sheet liability were as follows:
as at 31 December 2014
$m
2013
$m
Fair value of plan assets 2 004 1 927
Present value of liabilities (2 262) (2 095)
Net balance sheet liability (258) (168)
The following table shows the movements in the de?ned bene?t obligation (DBO), the fair values on plan assets and the net de?ned bene?t
obligation in the period, separately identifying the impact on the income statement and other comprehensive income:
2014
$m
2013
$m
De?ned
bene?t
obligation
Fair values
on plan
assets
Net de?ned
bene?t
obligation
De?ned
bene?t
obligation
Fair values
on plan
assets
Net de?ned
bene?t
obligation
At 1 January (2 095) 1 927 (168) (1 886) 1 598 (288)
Pension (cost)/ credit to income statement:
Current service cost – – – (63) – (63)
Past service cost 15 – 15 – – –
Curtailment gain – – – 154 – 154
Net interest (92) 85 (7) (83) 72 (11)
Subtotal recognised in the income statement: (77) 85 8 8 72 80
Remeasurement gains/(losses) in other comprehensive income:
Return on plan assets (excluding amounts included in net interest) – 119 119 – 158 158
Actuarial changes arising from changes in ?nancial assumptions (225) – (225) (210) – (210)
Actuarial changes arising from changes in demographic assumptions (75) – (75) – – –
Experience adjustments 18 – 18 4 – 4
Currency translation adjustments 124 (116) 8 (55) 47 (8)
Subtotal recognised in Other Comprehensive Income: (158) 3 (155) (261) 205 (56)
Bene?ts paid 68 (68) – 45 (45) –
Contributions by employees – – – (1) 1 –
Contributions by employer – 57 57 – 96 96
At 31 December (2 262) 2 004 (258) (2 095) 1 927 (168)
Also recognised in the consolidated income statement was a $73m charge (2013: $60m) in relation to de?ned contribution schemes within
continuing operations and $nil (2013: $1m) within discontinued operations.
As at 31 December 2014, $2 187m of the DBO relates to the funded BGPS (2013: $2 021m) and $75m relates to the unfunded BGSBS (2013: $74m).
The weighted average duration of the DBO as at 31 December 2014 is 22 years. As at 31 December 2014, $1 554m of the DBO relates to deferred
pensioners and $708m relates to pensions in payment.
The valuations as at 31 December were based on the following signi?cant assumptions
(a)
:
2014
%
2013
%
Rate of price in?ation and bene?t increases
(b)
3.1 3.4
Discount rate 3.7 4.5
(a) Due to the closure of the BGPS to future accrual of bene?ts on 31 December 2013 the future increase in earnings is no longer considered a signi?cant assumption.
(b) Rate of increase of the majority of deferred pensions and pensions in payment in excess of any Guaranteed Minimum Pension element.
The assumptions set out in the table above are those applicable to Pounds Sterling, being the currency in which the plans are denominated.
If the discount rate used for the valuation of the BGPS and BGSBS was reduced by 0.1% to 3.6%, the DBO would increase by $49m.
A 0.1% increase in the in?ation rate would have a similar impact on the DBO.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
24 PENSIONS AND POST-RETIREMENT BENEFITS CONTINUED
In determining the DBO as at 31 December 2014, mortality assumptions are based on the ‘Self Administered Pension Schemes’ (SAPS) S2 series (light)
tables with a 98% multiplier for males and a 91% multiplier for females issued by the Institute and Faculty of Actuaries, appropriate to each member’s
year of birth, with an allowance for projected longevity improvements in line with the CMI’s ‘core projection’ model (2013 version), with a long-term
rate of improvement of the projected mortality rates of 1.5% per annum. Based on these assumptions, the life expectancies of pensioners on the
measurement date and also of pensioners in 10 years time are as follows:
Life expectancy of pensioners (years)
as at 31 December 2014 2013
2014 2024 2013 2023
Male age 60 28.8 30.0 28.3 29.0
Male age 65 23.9 24.9 23.6 24.2
Female age 60 30.6 31.8 29.4 30.2
Female age 65 25.6 26.8 24.6 25.4
If the life expectancy of a member currently age 60 was increased by one year, with consistent changes for members at other ages, the DBO
in respect of the BGPS and BGSBS would increase by $61m.
As at 31 December, the fair value of plan assets was as follows:
2014 2013
Percentage
of plan assets
%
Value
$m
Percentage
of plan assets
%
Value
$m
Equities
(a)
38 753 38 733
Absolute return strategies 15 305 16 305
Index-linked gilts 30 590 29 551
Corporate bonds 10 204 10 196
Property funds 7 146 7 131
Money market funds and cash – 6 – 11
Fair value of plan assets 2 004 1 927
(a) Equities are invested across a globally diversi?ed range of funds which track benchmark general industry indices in each market.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
25 PRINCIPAL SUBSIDIARY UNDERTAKINGS, JOINT VENTURES, ASSOCIATES AND MATERIAL JOINT OPERATIONS
The principal subsidiary undertakings, joint ventures and associates listed in accordance with the Companies Act 2006, are those that in the
opinion of the Directors principally affect the ?gures shown in the Financial statements. A full list of subsidiary undertakings, joint ventures and
associates is included in the Annual Return of BG Group plc ?led with the Registrar of Companies. The Group does not have any individually
material joint ventures or associates requiring disclosure under IFRS 12.
PRINCIPAL SUBSIDIARY UNDERTAKINGS
as at 31 December 2014 Country of incorporation Location of operation Activity
BG International (AUS) Limited Partnership Australia Australia Exploration and production
QCLNG Common Facilities Company Pty Limited Australia Australia LNG manufacture
QCLNG Pipeline Pty Limited Australia Australia Gas infrastructure
QCLNG Train 2 Pty Limited Australia Australia LNG manufacture
QGC (Infrastructure) Pty Limited Australia Australia Exploration and production
QGC Pty Limited (QGC) Australia Australia Exploration and production
QGC Train 1 Pty Limited Australia Australia LNG manufacture
BG E&P Brasil Ltda. Brazil Brazil Exploration and production
BG Bolivia Corporation Cayman Islands Bolivia Exploration and production
BG Exploration and Production India Limited Cayman Islands India Exploration and production
BG Egypt S.A. Cayman Islands Egypt Exploration and production
BG Delta Limited England and Wales Egypt Exploration and production
BG Energy Capital plc England and Wales UK Financing company
BG Energy Holdings Limited
(a)
England and Wales UK Group holding company
BG Energy Trading Limited England and Wales UK Oil marketing
BG Gas Marketing Limited England and Wales UK
(b)
LNG marketing
BG Global Energy Limited
(c)
England and Wales UK
(b)
Exploration and production/LNG marketing
BG Hasdrubal Limited England and Wales Tunisia Exploration and production
BG International Limited England and Wales UK
(b)
Holding company/Exploration and production
BG International (CNS) Limited England and Wales UK Exploration and production
BG Karachaganak Limited England and Wales Kazakhstan Holding company/Exploration and production
BG North Sea Holdings Limited England and Wales UK Holding company/Exploration and production
BG Trinidad and Tobago Limited England and Wales Trinidad and Tobago Exploration and production
BG Tunisia Limited England and Wales Tunisia Exploration and production
Methane Services Limited England and Wales UK
(b)
LNG shipping
BG Norge Limited England and Wales UK and Norway Exploration and production
BG Tanzania Limited England and Wales Tanzania Exploration and production
BG Asia Paci?c Pte. Limited Singapore Singapore
(b)
Exploration and production
BG Singapore Gas Marketing Pte. Limited Singapore Singapore LNG marketing
BG Energy Finance, Inc. USA USA Financing company
BG Energy Merchants, LLC USA USA Gas marketing
BG LNG Services, LLC USA USA LNG regasi?cation
BG LNG Trading, LLC USA UK
(b)
LNG marketing
BG Production Company (PA), LLC USA USA Exploration and production
BG US Production Company, LLC USA USA Exploration and production
(a) Shares are held by the Company; others are held by subsidiary undertakings.
(b) This is the primary country of operation; however, the company also operates across several other countries.
(c) BG International (NSW) Limited was renamed BG Global Energy Limited on 8 October 2014.
All the above are wholly owned.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
25 PRINCIPAL SUBSIDIARY UNDERTAKINGS, JOINT VENTURES, ASSOCIATES AND MATERIAL JOINT OPERATIONS CONTINUED
JOINT VENTURES AND ASSOCIATES
as at 31 December 2014 Country of incorporation
and location of operation
Activity Group holding
%
Joint ventures
Atlantic LNG 2/3 Company of Trinidad and Tobago Unlimited Trinidad and Tobago LNG manufacture 32.5
Dragon LNG Group Limited England and Wales LNG regasi?cation 50.0
Mahanagar Gas Limited India Gas distribution 49.8
Associates
Guará B.V. Netherlands
(a)
Leasing 30.0
Tupi B.V. Netherlands
(a)
Leasing 25.0
Atlantic LNG Company of Trinidad and Tobago Trinidad and Tobago LNG manufacture 26.0
Atlantic LNG 4 Company of Trinidad and Tobago Unlimited Trinidad and Tobago LNG manufacture 28.9
(a) Guará B.V. and Tupi B.V. are incorporated in the Netherlands and operate in Brazil.
MATERIAL JOINT OPERATIONS
The following joint operations are considered individually material to the Group.
as at 31 December 2014
Principal place of business Activity
West Delta Deep Marine
(a)
Egypt Exploration and production
Karachaganak
(b)
Kazakhstan Exploration and production
(a) West Delta Deep Marine concession is operated by Burullus Gas Company S.A.E. in which the Group has a 25% interest.
(b) Karachaganak concession is operated by Karachaganak Petroleum Operating B.V. in which the Group has a 29.25% interest.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS
SUPPLEMENTARY INFORMATION –
GAS AND OIL (UNAUDITED)
She is a past member of the Society of
Petroleum Engineers Oil and Gas Reserves
Committee, a member of the SPE Joint
Committee on Reserves Evaluation Training,
a member of the SPE London Board, a member
of the United Nations Economic Commission
for Europe Expert Group on Resource Classi?cation
and a member of the SPE Carll, Lucas & Uren
Award Committee.
Total additions and revisions to proved
reserves during the year were 295 mmboe.
This comprised technical revisions due to
new data and ?eld performance updates
(124 mmboe increase), extensions, discoveries
and reclassi?cations (180 mmboe increase),
acquisitions and disposals (8 mmboe decrease)
and the net effect of price movements
(1 mmboe decrease). Production in the
period was 221 mmboe.
Gas and oil reserves cannot be measured
exactly since estimation of reserves involves
subjective judgement. Therefore, all estimates
are subject to revision. Changes in gas and oil
prices in ?elds subject to Production Sharing
Contracts (PSCs) may result in changes to
entitlements and therefore proved reserves.
PROVED RESERVES
Proved reserves are those quantities of
petroleum, which, by analysis of geoscience
and engineering data, can be estimated
with reasonable certainty to be commercially
recoverable, from a given date forward,
from known reservoirs and under de?ned
economic conditions, operating methods
and government regulations.
Proved developed reserves are those reserves
that can be expected to be recovered through
existing wells and with existing equipment
and operating methods. Proved undeveloped
reserves comprise total proved reserves less
total proved developed reserves.
PROBABLE RESERVES
Probable reserves are those additional
reserves which analysis of geoscience and
engineering data indicate are less likely to
be recovered than proved reserves but more
certain to be recovered than possible reserves.
It is equally likely that actual remaining
quantities recovered will be greater than or
less than the sum of the estimated proved
plus probable reserves.
DISCOVERED RESOURCES
Discovered resources are de?ned by BG Group
as the best estimate of discovered recoverable
hydrocarbons where commercial and/or
technical maturity is such that the initiation
of development is subject to certain conditions
and therefore sanction is not expected
within the next few years.
RISKED EXPLORATION
Risked exploration resources are de?ned by
BG Group as the best estimate (mean value)
of recoverable hydrocarbons from undiscovered
accumulations multiplied by the chance
of success.
TOTAL RESOURCES
Total resources are de?ned by BG Group as the
aggregate of proved and probable reserves
plus discovered resources and risked exploration.
Total resources may also be referred to as
total reserves and resources.
From the year ended 31 December 2013
onwards BG Group has adopted the reserves
de?nitions and guidelines consistent with
the internationally recognised Petroleum
Resources Management System published
by the Society of Petroleum Engineers,
American Association of Petroleum Geologists,
World Petroleum Council and the Society
of Petroleum Evaluation Engineers, known
as the SPE-PRMS, in accordance with
recommendations issued by the European
Securities and Markets Authority (ESMA).
Prior to this, BG Group had voluntarily used
the SEC de?nition of proved reserves and
of probable reserves (from 2009), to report
proved gas and oil reserves and disclose
certain unaudited supplementary information.
In accordance with the SPE-PRMS guidelines,
BG Group uses gas and crude oil price forecasts
that are based on its reference conditions to
determine reserves estimates. Therefore reserves
(proved and probable) as at 31 December 2014
are measured in accordance with SPE-PRMS
de?nitions and guidelines.
Information in this section is grouped on
a geographical basis as shown below:
?
Australia;
?
Africa – Algeria, Egypt, Kenya, Madagascar,
Tanzania and Tunisia;
?
Asia – China, India, Kazakhstan, Myanmar
and Thailand;
?
North America and the Caribbean – Aruba,
Honduras, Trinidad and Tobago and the USA;
?
South America – Bolivia, Brazil, Colombia
and Uruguay; and
?
Europe – Norway and the UK.
The Corporate Reserves Group (CRG) is a
central multidisciplinary group of reserves
experts with an average of 20 years’ experience
in the oil and gas industry which provides
an independent review of all reserves and
discovered resources bookings and revisions
proposed by assets to the Reserves Committee
which in turn reports to the Audit Committee.
The Head of the CRG, Dr. Carolina Coll has
more than 25 years of diversi?ed experience
in the oil and gas industry. She has a degree in
physics and a PhD in petroleum engineering.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | SUPPLEMENTARY INFORMATION – GAS AND OIL (UNAUDITED)
A) RESERVES
All information for periods up to 31 December 2012 is presented under SEC methodology. Information for 31 December 2013 is presented under
both SEC and SPE-PRMS methodology. Information from 31 December 2013 is presented under SPE-PRMS methodology.
ESTIMATED NET PROVED RESERVES OF NATURAL GAS
Australia
bcf
Africa
bcf
Asia
bcf
North America
and the
Caribbean
bcf
South
America
bcf
Europe
bcf
Total
bcf
As at 31 December 2011 (SEC): 2 717 2 403 2 032 2 623 2 100 979 12 854
Movement during the year (SEC):
Revisions of previous estimates
(a)
– (250) 87 (339) 8 (50) (544)
Extensions, discoveries and reclassi?cations 805 – 16 79 57 1 958
Production (55) (342) (185) (331) (60) (90) (1 063)
Disposals of reserves-in-place – – (22) – – – (22)
750 (592) (104) (591) 5 (139) (671)
As at 31 December 2012 (SEC): 3 467 1 811 1 928 2 032 2 105 840 12 183
Movement during the year (SEC):
Revisions of previous estimates
(a)
544 (277) 9 129 169 (35) 539
Extensions, discoveries and reclassi?cations – (45) 27 (71) – (13) (102)
Production (55) (297) (185) (275) (72) (83) (967)
Disposals of reserves-in-place (791) – – (65) – – (856)
(302) (619) (149) (282) 97 (131) (1 386)
As at 31 December 2013 (SEC): 3 165 1 192 1 779 1 750 2 202 709 10 797
Revisions of previous estimates
(b)
5 11 51 81 6 (1) 153
Extensions, discoveries and reclassi?cations 1 091 – – – – – 1 091
As at 31 December 2013 (SPE-PRMS): 4 261 1 203 1 830 1 831 2 208 708 12 041
Movement during the year (SPE-PRMS):
Revisions of previous estimates
(a)
(1) (172) 99 (124) 37 (18) (179)
Extensions, discoveries and reclassi?cations 479 (25) 7 (5) 74 – 530
Production (74) (183) (172) (224) (100) (88) (841)
Disposals of reserves-in-place – – – – – (1) (1)
404 (380) (66) (353) 11 (107) (491)
As at 31 December 2014 (SPE-PRMS) 4 665 823 1 764 1 478 2 219 601 11 550
(c)
(a) Includes effect of oil and gas price changes on PSCs.
(b) Includes the effect of changing from SEC price assumptions to SPE-PRMS reference prices, including impact on PSCs.
(c) Estimates of proved natural gas reserves at 31 December 2014 includes fuel gas of 1 289 bcf (2013: 1 031 bcf).
Note: Conversion factor of 6 bcf of gas to 1 mmboe.
ESTIMATED NET PROVED DEVELOPED RESERVES OF NATURAL GAS
Australia
bcf
Africa
bcf
Asia
bcf
North America
and the
Caribbean
bcf
South
America
bcf
Europe
bcf
Total
bcf
As at 31 December 2011 (SEC) 575 1 254 1 851 1 349 392 728 6 149
As at 31 December 2012 (SEC) 503 1 181 1 858 1 387 709 684 6 322
As at 31 December 2013 (SPE-PRMS) 509 758 1 791 993 850 573 5 474
As at 31 December 2014 (SPE-PRMS) 1 539 476 1 719 724 849 503 5 810
ESTIMATED NET PROBABLE RESERVES OF NATURAL GAS
Australia
bcf
Africa
bcf
Asia
bcf
North America
and the
Caribbean
bcf
South
America
bcf
Europe
bcf
Total
bcf
As at 31 December 2011 (SEC) 6 565 1 425 920 1 342 1 157 355 11 764
As at 31 December 2012 (SEC) 5 788 1 170 1 137 1 416 1 550 452 11 513
As at 31 December 2013 (SPE-PRMS) 2 930 3 894 636 1 350 1 435 394 10 639
As at 31 December 2014 (SPE-PRMS)
(a)
2 145 3 412 759 1 385 1 142 411 9 254
(a) Estimates of probable natural gas reserves at 31 December 2014 includes fuel gas of 689 bcf (2013: 607 bcf).
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | SUPPLEMENTARY INFORMATION – GAS AND OIL (UNAUDITED) > CONTINUED
A) RESERVES CONTINUED
ESTIMATED NET PROVED RESERVES OF OIL
‘Oil’ includes crude oil, condensate and natural gas liquids.
Australia
mmbbl
Africa
mmbbl
Asia
mmbbl
North America
and the
Caribbean
mmbbl
South
America
mmbbl
Europe
mmbbl
Total
mmbbl
As at 31 December 2011 (SEC): – 24.7 259.8 5.1 630.3 185.5 1 105.4
Movement during the year (SEC):
Revisions of previous estimates
(a)
– (1.2) 17.1 (0.6) 100.3 4.8 120.4
Extensions, discoveries and reclassi?cations – – 0.2 – 228.1 8.9 237.2
Production – (4.5) (27.5) (0.5) (9.5) (21.3) (63.3)
Disposals of reserves-in-place
(b)
– – 0.8 – – – 0.8
– (5.7) (9.4) (1.1) 318.9 (7.6) 295.1
As at 31 December 2012 (SEC): – 19.0 250.4 4.0 949.2 177.9 1 400.5
Movement during the year (SEC):
Revisions of previous estimates
(a)
– 3.7 2.6 0.3 145.8 9.3 161.7
Extensions, discoveries and reclassi?cations – 0.1 0.4 – 33.9 (2.9) 31.5
Production – (5.1) (25.4) (0.7) (15.3) (23.2) (69.7)
Disposals of reserves-in-place – – – (0.6) – – (0.6)
– (1.3) (22.4) (1.0) 164.4 (16.8) 122.9
As at 31 December 2013 (SEC) – 17.7 228.0 3.0 1 113.6 161.1 1 523.4
Revisions of previous estimates
(c)
– – 9.2 0.1 1.4 (2.1) 8.6
As at 31 December 2013 (SPE-PRMS) – 17.7 237.2 3.1 1 115.0 159.0 1 532.0
Movement during the year (SPE-PRMS):
Revisions of previous estimates
(a)
– 4.8 16.0 0.1 126.3 6.2 153.4
Extensions, discoveries and reclassi?cations – (0.2) 5.4 – 85.7 – 90.9
Production – (3.7) (23.4) (0.6) (29.1) (24.1) (80.9)
Disposals of reserves-in-place – – – – – (7.5) (7.5)
– 0.9 (2.0) (0.5) 182.9 (25.4) 155.9
As at 31 December 2014 (SPE-PRMS) – 18.6 235.2 2.6 1 297.9 133.6 1 687.9
(a) Includes effect of oil and gas price changes on PSCs.
(b) Karachaganak Settlement Agreement (disposal) resulted in a minor addition to liquids.
(c) Includes the effect of changing from SEC price assumptions to SPE-PRMS reference prices, including impact on PSCs.
ESTIMATED NET PROVED DEVELOPED RESERVES OF OIL
Australia
mmbbl
Africa
mmbbl
Asia
mmbbl
North America
and the
Caribbean
mmbbl
South
America
mmbbl
Europe
mmbbl
Total
mmbbl
As at 31 December 2011 (SEC) – 21.0 238.1 1.9 43.8 136.7 441.5
As at 31 December 2012 (SEC) – 18.8 230.5 3.6 78.5 126.4 457.8
As at 31 December 2013 (SPE-PRMS) – 14.0 221.4 2.8 120.4 119.2 477.8
As at 31 December 2014 (SPE-PRMS) – 15.5 221.1 1.9 196.1 101.9 536.5
ESTIMATED NET PROBABLE RESERVES OF OIL
Australia
mmbbl
Africa
mmbbl
Asia
mmbbl
North America
and the
Caribbean
mmbbl
South
America
mmbbl
Europe
mmbbl
Total
mmbbl
As at 31 December 2011 (SEC) – 9.0 137.2 2.3 1 737.4 92.4 1 978.3
As at 31 December 2012 (SEC) – 15.6 77.6 2.1 1 652.5 91.9 1 839.7
As at 31 December 2013 (SPE-PRMS) – 10.6 121.2 1.9 1 479.0 66.4 1 679.1
As at 31 December 2014 (SPE-PRMS) – 7.6 149.4 1.5 1 161.3 50.2 1 370.0
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | SUPPLEMENTARY INFORMATION – GAS AND OIL (UNAUDITED) > CONTINUED
B) STANDARDISED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
The following tables set out the standardised measure of discounted future net cash ?ows relating to proved gas and oil reserves and report the
causes of changes in the standardised measure of the cash ?ows relating to reserves. Future cash in?ows have been computed by reference to the
Group’s estimate of future production of net proved gas and oil reserves at the end of each year and estimates of third-party prices. Prices for the
years ended 31 December 2012 and 31 December 2013 are calculated using a 12-month average price in line with SEC methodology. Prices for the year
ended 31 December 2014 are calculated using the Group’s long-term reference conditions of Brent oil $90 real, used to determine reserves estimates
in accordance with SPE-PRMS price assumptions. The standardised measure of discounted future net cash ?ow information presented below is not
intended to represent the replacement cost or fair market value of the Group’s gas and oil properties. The disclosures shown are based on estimates
of proved reserves, future production schedules and costs, which are inherently imprecise and subject to revision. Reserves for the year ended
31 December 2012 and 31 December 2013 are under SEC methodology and reserves for the year ended 31 December 2014 are under SPE-PRMS
methodology. The standardised measure is as follows:
Australia
$bn
Africa
$bn
Asia
$bn
North America
and the
Caribbean
$bn
South
America
$bn
Europe
$bn
Total
$bn
As at 31 December 2012 (SEC):
Future cash in?ows 20.78 11.89 28.25 6.25 102.81 28.80 198.78
Future production and development costs (12.41) (4.30) (10.80) (3.27) (60.90) (12.25) (103.93)
Future income tax expenses (0.70) (2.52) (6.37) (1.48) (9.93) (10.51) (31.51)
Future net cash ?ows 7.67 5.07 11.08 1.50 31.98 6.04 63.34
10% annual discount for estimated timing of cash ?ows (6.66) (1.39) (4.70) (0.60) (19.12) (1.54) (34.01)
1.01 3.68 6.38 0.90 12.86 4.50 29.33
As at 31 December 2013 (SEC):
Future cash in?ows 19.40 8.87 25.19 5.03 121.68 25.63 205.80
Future production and development costs (13.18) (4.01) (10.89) (2.98) (76.00) (12.32) (119.38)
Future income tax expenses – (1.55) (5.19) (0.86) (16.34) (8.52) (32.46)
Future net cash ?ows 6.22 3.31 9.11 1.19 29.34 4.79 53.96
10% annual discount for estimated timing of cash ?ows (4.66) (0.90) (4.03) (0.36) (15.03) (0.98) (25.96)
1.56 2.41 5.08 0.83 14.31 3.81 28.00
As at 31 December 2014 (SPE-PRMS):
Future cash in?ows 43.93 6.69 19.95 5.02 113.72 17.09 206.40
Future production and development costs (19.90) (3.29) (10.40) (3.13) (68.27) (10.73) (115.72)
Future income tax expenses (5.17) (1.06) (3.64) (0.43) (15.79) (3.54) (29.63)
Future net cash ?ows 18.86 2.34 5.91 1.46 29.66 2.82 61.05
10% annual discount for estimated timing of cash ?ows (11.95) (0.65) (2.66) (0.49) (15.43) (0.21) (31.39)
6.91 1.69 3.25 0.97 14.23 2.61 29.66
The following were the main sources of change in the standardised measure of discounted cash ?ows in the three years ended 31 December 2014:
2014
$bn
2013
$bn
2012
$bn
Standardised measure at the beginning of the year 28.00 29.33 29.59
Sale of gas and oil produced net of production costs and other operating costs
(a)
(8.21) (8.93) (8.98)
Net changes in prices and production costs
(b)
(20.38) (6.36) (9.48)
Extensions, discoveries, reclassi?cations and revisions to previous estimates 21.63 6.39 17.14
Changes in estimated future development costs (6.41) (4.52) (12.52)
Development costs incurred in the period 6.90 8.21 6.80
Disposals of reserves-in-place (0.02) (0.47) (0.52)
Accretion of discount 4.54 4.67 4.79
Net change in income tax 3.54 (0.18) 2.45
Other 0.07 (0.14) 0.06
Standardised measure at the end of the year
(c)
29.66 28.00 29.33
(a) Production costs and other operating costs include lifting, tariff, insurance and royalty costs but not depreciation costs.
(b) Includes the effect of foreign exchange movements.
(c) Based on the following prices for 2012 and 2013 in line with SEC methodology. 2014 is based on the Group’s long-term reference conditions of Brent oil $90 real, used to determine reserves estimates
in accordance with SPE-PRMS methodology:
2013 2012
Brent oil price ($/bbl) 109 112
Henry Hub ($/mmbtu) 3.67 2.86
UK spot gas (p/therm) 66.82 59.39
US$/UK£ exchange rate 1.56 1.59
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | SUPPLEMENTARY INFORMATION – GAS AND OIL (UNAUDITED) > CONTINUED
B) STANDARDISED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS CONTINUED
To aid comparability with previous years, the standardised measure of discounted future net cash ?ows has also been calculated using 12-month
average prices under SEC methodology
(a)
as follows:
Australia
$bn
Africa
$bn
Asia
$bn
North America
and the
Caribbean
$bn
South
America
$bn
Europe
$bn
Total
$bn
As at 31 December 2014 (SEC): 8.22 1.99 3.77 1.12 18.00 2.97 36.07
(a) SEC price assumptions: Brent oil $101/bbl, Henry hub $4.30/mmbtu, UK spot gas 51.21p/therm, US$/UK£ exchange rate 1.65.
C) COSTS INCURRED IN GAS AND OIL ACTIVITIES
Aggregate costs incurred under the historical cost convention, comprising amounts capitalised to exploration and development and amounts
charged to the income statement in respect of exploration and appraisal, were as follows:
Australia
$m
Africa
$m
Asia
$m
North America
and the
Caribbean
$m
South
America
$m
Europe
$m
Total
$m
Year ended 31 December 2013:
Acquisition of properties
(a)
:
Unproved – – – 9 – – 9
Exploration 283 582 43 24 562 155 1 649
Development 4 746 537 349 312 1 220 1 046 8 210
Year ended 31 December 2014:
Acquisition of properties
(a)
:
Unproved – – – 62 – – 62
Exploration 257 387 16 148 189 201 1 198
Development 2 975 534 417 383 1 728 863 6 900
(a) There was no acquisition of proved properties during 2014 (2013: $nil).
The proportion of exploration costs capitalised in 2014 was 57.1% (2013: 80.8%).
The above table does not include additions to decommissioning provisions which amounted to $379m in 2014 (2013: $522m).
D) RESULTS OF OPERATIONS
The results of operations under the historical cost convention and in accordance with IFRS for the oil and gas exploration and producing activities
(excluding liquefaction, business development, disposals, re-measurements and impairments, and interest costs) is given below.
Australia
$m
Africa
$m
Asia
$m
North America
and the
Caribbean
$m
South
America
$m
Europe
$m
Total
$m
Year ended 31 December 2013:
Revenue and other operating income 146 1 999 3 357 842 2 068 3 328 11 740
Lifting costs (119) (232) (345) (141) (231) (563) (1 631)
Royalties and other operating costs (4) (59) (314) (59) (611) (131) (1 178)
Operating costs (123) (291) (659) (200) (842) (694) (2 809)
Other costs (104) (30) (238) (122) (231) (200) (925)
Depreciation (73) (971) (423) (404) (128) (609) (2 608)
Exploration expense (46) (78) (24) (24) (316) (223) (711)
(200) 629 2 013 92 551 1 602 4 687
Taxation – (362) (787) (80) (209) (961) (2 399)
Results of operations (200) 267 1 226 12 342 641 2 288
Year ended 31 December 2014:
Revenue and other operating income 87 1 317 2 921 777 3 370 3 177 11 649
Lifting costs (118) (202) (369) (126) (394) (642) (1 851)
Royalties and other operating costs (5) (51) (294) (62) (985) (189) (1 586)
Operating costs (123) (253) (663) (188) (1 379) (831) (3 437)
Other costs (148) (158) (290) (132) (454) (152) (1 334)
Depreciation (93) (396) (422) (331) (186) (1 002) (2 430)
Exploration expense (42) (282) (13) (112) (149) (153) (751)
(319) 228 1 533 14 1 202 1 039 3 697
Taxation 80 (70) (622) (145) (274) (633) (1 664)
Results of operations (239) 158 911 (131) 928 406 2 033
Included in revenue and other operating income are intra-Group sales at contract prices of $804m for the year ended 31 December 2014 (2013: $760m).
The accretion interest expense resulting from changes in the liability for decommissioning due to the passage of time, which is not included in the
table above, was $146m (2013: $107m).
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS
HISTORICAL PRODUCTION (UNAUDITED)
Gas production
kboed
Oil and liquids production
kboed
Total production
kboed
2014 2013 2012 2014 2013 2012 2014 2013 2012
Australia 34 25 25 – – – 34 25 25
Bolivia 40 29 23 8 7 5 48 36 28
Brazil 6 4 3 72 35 22 78 39 25
Egypt 59 107 129 3 5 3 62 112 132
India 12 14 17 6 6 8 18 20 25
Kazakhstan 33 36 36 52 56 62 85 92 98
Norway 1 1 2 – 1 1 1 2 3
Thailand 33 34 30 6 7 6 39 41 36
Trinidad and Tobago 64 68 72 1 2 1 65 70 73
Tunisia 24 29 28 8 9 9 32 38 37
UK 39 37 40 66 63 56 105 100 96
USA 39 58 79 – – – 39 58 79
Total production of gas,
oil and liquids (kboed) 384 442 484 222 191 173 606 633 657
Total production of gas,
oil and liquids (mmboe) 140.2 161.2 177.2 80.9 69.7 63.3 221.1 230.9 240.5
Production volumes include fuel gas.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS
FIVE-YEAR FINANCIAL SUMMARY (UNAUDITED)
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2014
$m
2013
$m
2012
$m
2011
$m
2010
$m
Group revenue and other operating income 19 949 19 311 19 200 17 849 13 710
Operating costs (13 572) (11 827) (11 355) (10 459) (8 485)
Pro?ts and losses on disposal of non-current assets and impairments (8 120) (3 817) (1 651) (414) (333)
Operating pro?t/(loss) (1 743) 3 667 6 194 6 976 4 892
Finance income 153 169 222 174 164
Finance costs (906) (283) (360) (208) (215)
Share of post-tax results from joint ventures and associates 166 336 289 269 260
Pro?t/(loss) before taxation (2 330) 3 889 6 345 7 211 5 101
Taxation 1 279 (1 684) (3 052) (3 134) (2 007)
Pro?t/(loss) for the year from continuing operations (1 051) 2 205 3 293 4 077 3 094
Pro?t for the year from discontinued operations 7 245 1 324 219 399
Pro?t/(loss) for the year (1 044) 2 450 4 617 4 296 3 493
Pro?t/(loss) attributable to:
Shareholders (earnings) (1 044) 2 441 4 523 4 215 3 344
Non-controlling interest – 9 94 81 149
(1 044) 2 450 4 617 4 296 3 493
Earnings per ordinary share continuing operations (cents)
Basic (30.8) 64.8 97.0 120.3 91.5
Diluted (30.8) 64.5 96.4 119.5 91.0
Earnings per ordinary share discontinued operations (cents)
Basic 0.2 6.9 36.2 4.1 7.4
Diluted 0.2 6.9 36.0 4.0 7.3
CONSOLIDATED BALANCE SHEET
as at 31 December 2014
$m
2013
$m
2012
$m
2011
$m
2010
$m
Non-current assets 47 841 51 844 53 155 48 979 40 132
Current assets 11 917 14 130 11 749 12 216 9 965
Assets classi?ed as held for sale 2 088 – 386 245 227
Total assets 61 846 65 974 65 290 61 440 50 324
Current liabilities (7 894) (8 234) (8 165) (9 085) (8 886)
Non-current liabilities (24 749) (25 780) (24 019) (22 745) (14 710)
Liabilities associated with assets classi?ed as held for sale (63) – (158) (99) (104)
Total liabilities (32 706) (34 014) (32 342) (31 929) (23 700)
Net assets 29 140 31 960 32 948 29 511 26 624
Equity
Total shareholders’ equity 29 140 31 960 32 891 29 220 26 268
Non-controlling interest in equity – – 57 291 356
Total equity 29 140 31 960 32 948 29 511 26 624
OTHER INFORMATION
as at 31 December
2014 2013 2012 2011 2010
Net borrowings
(a)
$m (11 998) (10 610) (10 624) (11 336) (6 973)
Gearing ratio
(a)
% 29.2 24.8 24.3 27.2 20.2
Debt/equity ratio
(b)
% 41.3 33.0 32.0 37.5 25.3
Employee numbers (headcount) thousands 4.9 5.4 5.7 6.6 6.2
(a) See Glossary, page 143.
(b) Debt/equity ratio represents net borrowings as a percentage of total shareholders’ funds (excluding balances associated with commodity ?nancial instruments and related deferred tax).
138
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | FIVE-YEAR FINANCIAL SUMMARY (UNAUDITED)
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2014
$m
2013
$m
2012
$m
2011
$m
2010
$m
Cash generated by operations 10 015 10 285 10 715 9 773 8 370
Income taxes paid (2 616) (2 468) (2 720) (2 791) (1 984)
Net cash in?ow from operating activities 7 399 7 817 7 995 6 982 6 386
Cash ?ows from investing activities
Dividends received 179 147 151 204 198
Proceeds from disposal of subsidiary undertakings and investments 800 774 2 185 84 468
Proceeds from disposal of property, plant and equipment and intangible assets 55 3 827 754 116 897
Purchase of property, plant and equipment and intangible assets (8 510) (10 605) (9 974) (10 300) (8 397)
Loans to and repayments from joint ventures and associates 41 73 698 (51) 92
Interests in subsidiaries, joint ventures, associates and other investments (892) (610) (429) (246) (529)
Other loan repayments/(advances) 111 112 (280) – –
Net cash out?ow from investing activities (8 216) (6 282) (6 895) (10 193) (7 271)
Cash ?ows from ?nancing activities
Net interest paid (556) (560) (541) (247) (229)
Dividends paid (1 024) (923) (859) (772) (680)
Dividends paid to non-controlling interest – – (18) (136) (108)
Net proceeds from issue of new borrowings 2 086 2 713 2 925 6 392 3 559
Repayment of borrowings (625) (1 093) (1 736) (940) (348)
Issue of shares 28 45 36 48 95
Movements in own shares – (13) (16) (23) (2)
Net cash (out?ow)/in?ow from ?nancing activities (91) 169 (209) 4 322 2 287
Net (decrease)/increase in cash and cash equivalents (908) 1 704 891 1 111 1 402
OTHER INFORMATION
for the year ended 31 December 2014
$m
2013
$m
2012
$m
2011
$m
2010
$m
Closing total equity 29 140 31 960 32 948 29 511 26 624
Add back:
Closing commodity ?nancial instruments net of associated deferred tax (62) 159 201 757 958
Closing net borrowings 11 998 10 610 10 624 11 336 6 973
Closing capital employed 41 076 42 729 43 773 41 604 34 555
Average capital employed
(a)
41 903 43 251 42 689 38 080 31 250
Business performance pro?t before tax
(b)
6 404 7 413 7 898 7 565 6 128
Add back Business performance Finance costs/(income) on net borrowings 52 71 51 60 (8)
6 456 7 484 7 949 7 625 6 120
Taxation applied at the Group’s effective rate (2 389) (3 068) (3 537) (3 355) (2 356)
Post-tax return 4 067 4 416 4 412 4 270 3 764
Pre-tax return on average capital employed
(c)
% 15.4 17.3 18.6 20.0 19.6
Post-tax return on average capital employed
(c)
% 9.7 10.2 10.3 11.2 12.0
(a) Average capital employed is calculated as the average of the opening and closing capital employed balances for the year.
(b) Business performance pro?t before tax excludes disposals, re-measurements and impairments and includes share of pre-tax results from joint ventures and associates.
(c) Return on average capital employed represents Business performance pro?t (excluding disposals, re-measurements and impairments), excluding net ?nance costs/(income) on net borrowings,
as a percentage of average capital employed. The above table presents this before and after taxation applied at the Group’s effective rate.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
doc_219018831.pdf
The financial reporting framework that has been applied in their preparation is applicable law and IFRS as adopted by the European Union and, as regards the parent Company Financial statements, as applied in accordance with the provisions of the Companies Act 2006.
FINANCIAL
STATEMENTS
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
KARACHAGANAK PROCESSING COMPLEX,
KAZAKHSTAN.
BG Group is joint operator of the giant
Karachaganak ?eld in north-west Kazakhstan.
The ?eld covers an area of more than
280 square kilometres where some 395 wells
have been drilled. Only 10% of the hydrocarbons
initially in place have been produced to date.
84 Independent auditor’s report
88 Principal accounting policies
92 Primary statements
92 – Consolidated income statement
93 – Consolidated statement of comprehensive
income
94 – Balance sheets
96 – Statements of changes in equity
97 – Cash ?ow statements
98 Notes to the accounts
132 Supplementary information –
gas and oil (unaudited)
137 Historical production (unaudited)
138 Five-year ?nancial summary (unaudited)
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83
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF BG GROUP PLC
3. Our approach to planning our audit 1. Our opinion on the Financial statements
In our opinion:
?
the Financial statements give a true and fair
view of the state of the Group’s and of the
parent Company’s affairs as at 31 December
2014 and of the Group’s loss for the year
then ended;
?
the Group’s Financial statements have
been properly prepared in accordance with
International Financial Reporting Standards
(IFRS) as adopted by the European Union;
?
the parent Company Financial statements
have been properly prepared in accordance
with IFRS as adopted by the European
Union and as applied in accordance with the
provisions of the Companies Act 2006; and
?
the Financial statements have been prepared
in accordance with the requirements of
the Companies Act 2006 and, as regards the
Group’s Financial statements, Article 4
of the IAS Regulation.
2. What we have audited
We have audited the Financial statements of
BG Group plc for the year ended 31 December
2014, which comprise:
?
the Consolidated income statement, the
Consolidated statement of comprehensive
income, the Consolidated and parent Company
balance sheets, the Consolidated and parent
Company statements of changes in equity,
the Consolidated and parent Company cash
?ow statements; and
?
the Principal accounting policies and the
related notes 1 to 25.
The ?nancial reporting framework that has
been applied in their preparation is applicable
law and IFRS as adopted by the European Union
and, as regards the parent Company Financial
statements, as applied in accordance with
the provisions of the Companies Act 2006.
OUR OPINIONS AND CONCLUSIONS ARISING FROM OUR AUDIT
UNDERSTANDING
BG GROUP’S BUSINESS
Understand BG Group’s business,
strategy and business model
We obtain an understanding of BG Group
and the environment in which it operates
by review, enquiry, analytical procedures,
observation and inspection.
RISK OF MATERIAL
MISSTATEMENT
Identify and assess the risks
of material misstatement
We perform risk assessment procedures
to provide a basis for the identi?cation
and assessment of risks of material
misstatement, including those relating
to signi?cant risks (see section 4).
MATERIALITY
Determine materiality and
performance materiality
When establishing our overall audit
strategy, we determine materiality for
the ?nancial statements as a whole.
In so doing, we make judgements about
the size of misstatements that will be
considered material (see section 5)
SCOPE
Determine the scope of our audit
Our scope is tailored to the particular
circumstances of our audit of BG Group
and is in?uenced by our assessed risks of
material misstatement and determination
of materiality (see section 6).
84
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BG GROUP PLC
RISKS OUR RESPONSE TO THESE RISKS WHAT WE REPORTED TO THE AUDIT COMMITTEE
The recent decline in crude oil prices has had a
signi?cant impact on the Group Financial statements
and disclosures. The lower outlook has resulted
in material impairments of assets.
A signi?cant judgement is oil price assumptions,
both in the short and long-term.
Commodity price assumptions impact many areas
of ?nancial reporting, including estimation of oil
and gas reserve volumes, impairment assessment
and decommissioning provision estimates.
In 2014, around three quarters of the output of BG Group’s
gas assets was sold under contracts linked to oil prices.
We therefore focused our analysis principally on oil prices.
In assessing the appropriateness of management’s
oil price assumptions, we have compared their price
assumptions with the latest market evidence available,
including forward curves, broker’s estimates and other
long-term price forecasts.
The available market evidence shows that there is
a wide range of expectations as to the oil price over
the next 5 years.
Beyond 2020 brokers expect prices to recover, although
not to levels experienced over the last three years.
BG Group’s oil price assumptions are comfortably
within the range of analyst expectations and
other market data, including the range of what we
understand other market participants are considering
as a long-term oil price.
Estimation of oil and gas reserves requires
signi?cant judgement and assumptions by
management and engineers. These estimates
have a material impact on the Financial statements,
particularly: impairment testing; depreciation,
depletion and amortisation (DD&A); decommissioning
provisions; and going concern.
There is technical uncertainty in assessing reserve
quantities and complex contractual arrangements
dictating BG Group’s share of reserves, particularly
the Production Sharing Contracts (PSCs) and joint
venture arrangements in place. This technical
uncertainty is even higher in the case of
unconventional hydrocarbons.
Our audit procedures have focused on management’s
estimation process, including whether bias exists
in the determination of reserves and resources.
Our procedures included:
?
assessing the competence and objectivity of both
internal and external specialists involved in the
estimation process;
?
ensuring that signi?cant additions or reductions in proved
reserves were compliant with BG Group’s Reserves
and Resources Technical Standards and Guidelines;
?
testing group-wide controls over the reserves
review process; and
?
discussing and ensuring that any reserve revisions
were consistent with our understanding.
Based on our procedures we consider that the reserves
estimations are a reasonable basis for estimating
reserves in-place for impairment testing, calculating
DD&A, the determination of decommissioning
dates and in considering going concern.
The assessment of the existence of any indicators
of impairment of the carrying amount of non-current
exploration and production assets is judgemental.
In the event that indicators are identi?ed, the
assessment of the recoverable amounts of the assets
is also judgemental. Overall there has been a material
impairment charge that has been recognised during
2014. The impairment charge has primarily been
driven by the signi?cant reduction in commodity
prices and reduced outlook for the long-term
assumed oil and gas prices.
The principal indicator of impairment was the decline
in the oil price. We engaged our business modelling
and valuation specialists to assist us in the audit of
the impairment charge.
Separately, we audited the inputs to impairment models,
including the commodity prices, production pro?les,
cash ?ow projections, capital expenditure, operating
expenditure, risk weightings and discount rates.
Our procedures included:
?
understanding the variations in future production
to historical data;
?
comparing future operating expenditure to historical
expenditure and ensuring that variations are in line
with our expectations;
?
comparing the in?ation and exchange rate
assumptions to external market data; and
?
an independent assessment of the discount rate.
Based on our procedures, we believe the impairment
charge is appropriate and well within an acceptable
range. Furthermore, based on our audit procedures,
we believe that the cash ?ow projections estimated
are reasonable, the assumptions are supportable
and the range of economic conditions that could
exist over the remaining useful lives of the assets
have appropriately been considered.
The overdue amount from the Egyptian government
at the year end was $0.7 billion. Given the political
and economic uncertainty in Egypt we continue to
focus on the recoverability of this overdue amount.
We challenged management’s assessment as to
the recoverability of the receivable. We gained an
understanding of the local environment in Egypt and
monitored its impact on operations. We con?rmed the
receivables balance and agreed the receipts to supporting
documentation. We critically evaluated management’s
assessment of the recoverability of asset balances.
We considered cash received during the year, average
grid take for the year, the status of price re-negotiations
with the Egyptian government, general developments in
Egypt, the anticipated time over which the outstanding
amount is expected to be repaid and the currency
that those payments are anticipated to be made in.
Based on the overall balance of the quantitative
and qualitative factors, we believe that the overdue
Egyptian receivable of $0.7 billion remains
recoverable. In forming our view we have taken
into account the signi?cant lump sum cash
payments that have been received during the year
and the positive developments that have taken
place during the year on price re-negotiation.
We consider the pre-tax charge of $100 million
relating to the downward re-measurement of
the receivable to re?ect the time value of money
to be appropriate.
There are material deferred tax assets recognised
as at the balance sheet date. These assets primarily
relate to tax losses and are recognised on the basis
that there will be taxable pro?t within the Group
to utilise these losses. The assets are primarily
in Australia, the US and the UK. The Australian
element was previously unrecognised.
We have audited the forecast taxable pro?ts that
underpin the recognition of the deferred tax assets,
in particular the taxable pro?ts of the Australian,
US and UK businesses.
Our procedures included:
?
understanding the income sources supporting the
future taxable pro?ts;
?
ensuring that the assumptions are consistent with
those tested as part of the impairment testing; and
?
con?rming as to whether the tax losses are restricted
against the source of future pro?ts or are required
to be utilised within a certain timeframe.
We are satis?ed there is suf?cient certainty over
the ability of the company to utilise these losses and
that recognition of the related deferred tax assets
is appropriate.
4. Our assessment of risk of material misstatement
We identi?ed the following risks that have had the greatest effect on: our overall audit strategy; our allocation of resources in the audit; and directing
the efforts of the engagement team.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BG GROUP PLC > CONTINUED
RISKS OUR RESPONSE TO THESE RISKS WHAT WE REPORTED TO THE AUDIT COMMITTEE
The Group has a number of material uncertain
tax positions, which are subject to judgement in
relation to interpretation of tax regulations and
estimation in recording a provision for any
potential cash out?ow.
We considered management’s interpretation and
application of relevant tax law and challenged the
appropriateness of management’s assumptions and
estimates in relation to uncertain tax positions.
To assist us in assessing a number of uncertain tax
positions, we engaged our tax specialists to advise us
on the tax technical issues in order to form a view of
the risk of challenge to certain tax treatments adopted.
We believe that the amount provided by
management is appropriate and well within
an acceptable range.
Going concern assessment, particularly in light
of the recent oil price decline and decrease in
forward prices.
Our audit procedures included:
?
agreeing the assumed cash ?ows to the business
plan, walking through the business planning process
and testing the central assumptions to external data;
?
considering the impact of any delays in the receipt
of cash proceeds from the Group’s asset disposals;
?
con?rming, through enquiry, the consistent application
of the cash ?ow at risk methodology to assess the
sensitivity of the underlying assumptions used
in the going concern review; and
?
agreeing the standby facilities to underlying
agreements and assessing the concentration risk.
Based on the results of our procedures, we are of
the opinion that the Group has prepared a robust
assessment that has considered appropriate sensitivities
and stress scenarios, in particular a delay in receiving
the cash from anticipated disposals. In assessing the
robustness of the assessment, we have taken assurance
from the level to which oil prices would have to fall
for a sustained period for the stressed scenario to
become a reality.
We consider the decision to prepare the Financial
statements on a going concern basis is appropriate.
5. Our application of materiality
We apply the concept of materiality both
in planning and performing our audit, and
in evaluating the effect of misstatements
on our audit and on the Financial statements.
For the purposes of determining whether the
Financial statements are free from material
misstatement we de?ne materiality as the
magnitude of misstatement that makes it
probable that the economic decisions of a
reasonably knowledgeable person, relying
on the Financial statements, would be
changed or in?uenced.
We initially determined materiality for the
Group to be $300 million (2013: $375 million),
which is approximately 5% (2013: 5%) of
Business Performance* pro?t before tax, and
approximately 1% (2013: 1%) of total equity.
We have calculated materiality with reference
to the Group’s Business Performance as
we consider this to be one of the principal
considerations for members of the Company
in assessing the ?nancial performance of
the Group. This is on the basis that Business
Performance excludes one-off items and fair
value measurement of commodity contracts.
It is the key earnings measure discussed when
the Group presents the ?nancial results.
This provided a basis for determining the
nature, timing and extent of risk assessment
procedures, identifying and assessing the risk
of material misstatement and determining
the nature, timing and extent of further audit
procedures. Our evaluation of materiality
requires professional judgement and
necessarily takes into account qualitative
as well as quantitative considerations
implicit in the de?nition.
The oil price declined signi?cantly during the
course of our audit. The signi?cant decline
was in the fourth quarter of the year and did
not have a signi?cant impact on the full year
Business Performance. However, there have
been a number of material impairments, which
have been audited individually and in full.
On the basis of our risk assessments, together
with our assessment of the Group’s overall
control environment, our judgement was
that overall performance materiality (i.e. our
tolerance for misstatement in an individual
account or balance) for the Group should be
50% (2013: 50%) of planning materiality, namely
$150 million (2013: $187 million). Our objective
in adopting this approach was to ensure
that total uncorrected and undetected audit
differences in all accounts did not exceed
our materiality level of $300 million.
Audit work at individual components is
undertaken based on a percentage of our total
performance materiality. The performance
materiality set for each component is based
on the relative size of the component and
our view of the risk of misstatement at that
component. In the current year the range
of performance materiality allocated to
components was $30 million to $113 million.
This is set out in more detail in section 6 below.
We agreed with the Audit Committee
that we would report to the Committee all
audit differences in excess of $15 million
(2013: $18 million), as well as differences below
that threshold that, in our view, warranted
reporting on qualitative grounds.
We evaluate any uncorrected misstatements
against both the quantitative measures of
materiality discussed above and in the light
of other relevant qualitative considerations.
6. An overview of the scope of our audit
Our assessment of audit risk, our evaluation
of materiality and our allocation of that
materiality determined our audit scope. The
factors that we considered when assessing
the scope of the Group audit and the level
of work to be performed at each location
included the following: the ?nancial signi?cance
and speci?c risks of the location; and the
effectiveness of the control environment and
monitoring activities, including Group-wide
controls and recent internal audit ?ndings.
Following our assessment of the risk of
material misstatement to the Group Financial
statements, we selected seven components
(2013: seven) which represent the principal
business units within the Group’s two
reportable segments and account for
78% (2013: 80%) of the Group’s total assets
and 75% (2013: 75%) of the Group’s Business
Performance pre-tax pro?t.
The components selected, together with
the allocated performance materiality,
were as follows:
Location and allocated performance materiality $ million
Australia (full audit) 113
Brazil (speci?c audit procedures) 30
Egypt (speci?c audit procedures) 30
UK & Norway (full audit) 56
GEMS (full audit) 90
Kazakhstan (full audit) 56
Treasury (speci?c audit procedures) 98
Four of these locations were subject to a full
audit (2013: four), whilst at the remaining three
(2013: three) speci?c audit procedures were
performed, including full audit of the accounts
that were impacted by our assessed risks of
material misstatement. For the remaining
components, we performed other procedures
to con?rm there were no signi?cant risks of
material misstatement in the Group Financial
statements. For those items excluded from
Business Performance, primarily impairment
charges, we applied a similar approach
whereby our in-scope component audit
* ‘Business Performance’ excludes discontinued operations,
disposals, certain re-measurements and impairments and
certain other exceptional items.
4. Our assessment of risk of material misstatement continued
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
67% Full audit
8% Speci?c audit procedures
25% Other procedures
BUSINESS PERFORMANCE:
PROFIT BEFORE TAX
(%)
TOTAL ASSETS
(%)
49% Full audit
29% Speci?c audit procedures
22% Other procedures
FINANCIAL STATEMENTS | INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BG GROUP PLC > CONTINUED
teams performed audit procedures on items
generated at the locations including Australia,
Egypt and North Sea pre-tax impairment
charges. The Group audit team performed
procedures on the remaining items including
the US and Tunisia pre-tax impairment
charges and tax items.
The charts below illustrate the coverage
obtained from the work performed by
our component teams:
The Group audit team continued to follow
a programme of planned visits that has been
designed to ensure that the Senior Statutory
Auditor visits each of the locations where
the Group audit scope was focused at least
once every two years and the most signi?cant
of them at least once a year. For all full audit
components, in addition to the location visit,
the Group audit team reviewed key working
papers and participated in the component
team’s planning, including the component
team’s discussion of fraud and error.
7. Our opinion on other matters prescribed
by the Companies Act 2006
In our opinion:
?
the part of the Directors’ Remuneration
report to be audited has been properly
prepared in accordance with the Companies
Act 2006; and
?
the information given in the Strategic report
and the Directors’ report for the ?nancial
year for which the Financial statements
are prepared is consistent with the
Financial statements.
8. Matters on which we are required
to report by exception
We have nothing to report in respect
of the following:
Under International Standards on Auditing (ISAs)
(UK and Ireland) we are required to report to
you if, in our opinion, information in the
Annual Report and Accounts is:
?
materially inconsistent with the information
in the audited Financial statements; or
?
apparently materially incorrect based
on, or materially inconsistent with, our
knowledge of the Group acquired in the
course of performing our audit; or
?
is otherwise misleading.
In particular, we are required to consider
whether we have identi?ed any inconsistencies
between our knowledge acquired during the
audit and the directors’ statement that they
consider the annual report is fair, balanced and
understandable and whether the annual report
appropriately discloses those matters that we
communicated to the audit committee which
we consider should have been disclosed.
Under the Companies Act 2006 we are
required to report to you if, in our opinion:
?
adequate accounting records have not
been kept by the parent Company, or
returns adequate for our audit have not been
received from branches not visited by us; or
?
the parent Company Financial statements
and the part of the Directors’ Remuneration
report to be audited are not in agreement
with the accounting records and returns; or
?
certain disclosures of Directors’ remuneration
speci?ed by law are not made; or
?
we have not received all the information
and explanations we require for our audit.
Under the Listing Rules we are required
to review:
?
the Directors’ statement, set out on
page 81, in relation to going concern; and
?
the part of the Corporate Governance
Statement relating to the Company’s
compliance with the nine provisions of the
UK Corporate Governance Code speci?ed
for our review.
9. The scope of our report
This report is made solely to the Company’s
members, as a body, in accordance with Chapter
3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we
might state to the Company’s members those
matters we are required to state to them in
an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone
other than the Company and the Company’s
members as a body, for our audit work, for this
report, or for the opinions we have formed.
10. The scope of our audit of the
Financial statements
An audit involves obtaining evidence about
the amounts and disclosures in the Financial
statements suf?cient to give reasonable
assurance that the Financial statements are
free from material misstatement, whether
caused by fraud or error. This includes an
assessment of: whether the accounting
policies are appropriate to the Group’s and the
parent Company’s circumstances and have
been consistently applied and adequately
disclosed; the reasonableness of signi?cant
accounting estimates made by the Directors;
and the overall presentation of the Financial
statements. In addition, we read all the
?nancial and non-?nancial information in
the Annual Report and Accounts to identify
material inconsistencies with the audited
Financial statements and to identify any
information that is apparently materially
incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the
course of performing the audit. If we become
aware of any apparent material misstatements
or inconsistencies we consider the implications
for our report.
11. The respective responsibilities
of Directors and auditor
As explained more fully in the Statement
of Directors’ Responsibilities set out on
page 81, the Directors are responsible for the
preparation of the Financial statements
and for being satis?ed that they give a true
and fair view. Our responsibility is to audit
and express an opinion on the Financial
statements in accordance with applicable
law and lSAs (UK and Ireland). Those standards
require us to comply with the Auditing Practices
Board’s Ethical Standards for Auditors.
ALLISTER WILSON
SENIOR STATUTORY AUDITOR
for and on behalf of Ernst & Young LLP,
Statutory Auditor
London
18 March 2015
Notes:
1. The maintenance and integrity of the BG Group plc web site
is the responsibility of the Directors; the work carried out
by the auditor does not involve consideration of these
matters and, accordingly, the auditor accepts no responsibility
for any changes that may have occurred to the Financial
statements since they were initially presented on the web site.
2. Legislation in the United Kingdom governing the preparation
and dissemination of ?nancial statements may differ from
legislation in other jurisdictions.
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87
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS
PRINCIPAL ACCOUNTING POLICIES
Reserves, commodity prices,
impairment and depreciation
One factor that affects the calculation of
depreciation and impairment in particular is
the estimation of hydrocarbon reserves and
resources. BG Group’s estimates of reserves
and resources of gas and oil are reviewed and,
where appropriate, updated quarterly. They
are also subject to periodic review by external
petroleum engineers. A number of factors
impact on the amount of gas and oil reserves
and resources, including the available reservoir
data, commodity prices and future costs, and
the amount is subject to periodic revision as
these factors change. BG Group estimates that
a 1% change throughout 2014 in the estimation
of proved, proved developed and proved plus
probable reserves associated with producing
?elds would have changed the 2014 depreciation
charge by $24 million.
BG Group uses a range of short and long-term
assumptions to determine the net present value
of future cash ?ows for use in impairment
reviews unless short-term market assumptions
are more appropriate to the asset under review.
Particular assumptions that impact the
calculations are commodity prices, reserves
estimates, exchange rates, discount rates
and the value of risked exploration acreage.
Pages 34 to 41 include further detail in relation
to commodity prices and reserves estimates.
In 2014, the Group recognised a pre-tax
impairment charge of $9.0 billion (post-tax
$5.9 billion) relating to Upstream activities
in Australia, Egypt and certain other assets.
Of the total pre-tax impairment of $9.0 billion,
$5.5 billion (post-tax $3.4 billion) resulted
predominately from commodity price declines,
$2.7 billion (post-tax $1.8 billion) related to
the QCLNG Pipeline Pty Limited disposal
and $0.8 billion (post-tax $0.7 billion) related
primarily to reserves downgrades.
In Australia, the total pre-tax non-cash
impairment charge was $6.8 billion (post-tax
$4.5 billion) driven mainly by a reduction in the
Group’s assumptions of future commodity prices
and the disposal of QCLNG Pipeline Pty Limited.
The impairment is sensitive to assumptions
including commodity prices, foreign exchange
(movements in the Australian Dollar relative
to the US Dollar), timely ramp up of production,
third-party gas purchases required to maintain
full LNG production in both QCLNG trains,
successful exploration of intangible assets
and the discount rate applied to cash ?ow
projections. Any adverse changes in these
assumptions could result in an additional
impairment in the next ?nancial year.
In Egypt, the total pre-tax non-cash impairment
charge was $0.8 billion (post-tax $0.7 billion),
principally driven by further reserve downgrades
re?ecting underlying reservoir performance.
The impairment is sensitive to assumptions
including the level of domestic gas diversions,
the sanctioning of future investment projects,
the continued repayment of the domestic
receivables and the discount rate applied to
cash ?ow projections. Any adverse changes in
these assumptions could result in an additional
impairment in the next ?nancial year.
Elsewhere, the reduction in the Group’s
assumptions of future commodity prices
resulted in pre-tax non-cash impairment
charges in the North Sea of $0.6 billion
(post-tax $0.2 billion), Tunisia of $0.5 billion
(post-tax $0.3 billion) and the USA of $0.2 billion
(post-tax $0.1 billion). These impairments
are sensitive to assumptions including
commodity prices.
Egypt receivables
The Egyptian government continues
to demonstrate its commitment to repay
outstanding debts to the energy industry. After
partial repayments of the Group’s outstanding
debt during 2014, the amount owed by Egypt
General Petroleum Corporation (EGPC) in
respect of domestic gas sales as at 31 December
2014 was $0.9 billion (2013: $1.2 billion), of which
$0.7 billion (2013: $0.5 billion) was overdue.
The Group considers that the current receivable
balance remains fully recoverable as cash
payments from EGPC continue to be received,
however in 2014 a $100 million pre-tax
(post-tax $79 million) charge was recognised
relating to the downward re-measurement of
the receivable balance to re?ect the time value
of money associated with the outstanding
debt based on a revised assumed repayment
pro?le. The recoverability of the receivable
balance depends on the business environment
in Egypt, the Group’s continued investment
plans and the volume of gas available for
export, together with the outcome of ongoing
negotiations with EGPC.
Exploration expenditure
Expenditure on unproved gas and oil reserves
within intangible assets is reviewed at least
annually to con?rm the Group’s continued
right and intent to explore, develop or
otherwise realise value from these assets. As
at 31 December 2014 BG Group held a balance
of $3 014 million (2013: $3 752 million) relating
to expenditure on unproved gas and oil reserves
within intangible assets. Capitalised exploratory
well costs included within this total amounted
to $2 525 million (2013: $3 058 million). Unsuccessful
exploration expenditure written off to the
income statement in 2014 was $237 million
(2013: $394 million). Capitalised exploratory
well costs relate to areas where further work
is being undertaken on geological and geophysical
assessment, development design and
commercial arrangements.
BASIS OF PREPARATION
The Financial statements for the year ended
31 December 2014 have been prepared in
accordance with International Financial
Reporting Standards (IFRS), and IFRS Interpretations
Committee (IFRIC) interpretations as adopted by
the European Union. In addition, the Financial
statements have been prepared in accordance
with those parts of the Companies Act 2006
applicable to companies reporting under IFRS.
The Financial statements have been prepared
primarily using historical cost principles except
that, as disclosed in the accounting policies
below, certain items, including derivatives,
are measured at fair value.
BASIS OF CONSOLIDATION
The Financial statements comprise a consolidation
of the accounts of the Company and its subsidiary
undertakings and incorporate the results of its
share of joint ventures and associates using the
equity method of accounting. All inter-company
transactions are eliminated on consolidation.
Consistent accounting policies have been used
to prepare the consolidated Financial statements.
Most of BG Group’s exploration and production
(E&P) activity is conducted through joint
operations. The Group recognises its own share of
the assets, liabilities, revenues, expenses and cash
?ows associated with these joint operations.
The results of undertakings acquired or disposed
of are consolidated from or to the date when
control passes to or from the Company. For the
Company Financial statements only, investments
in subsidiary undertakings are stated at cost
less any provision for impairment.
PRESENTATION OF RESULTS
BG Group presents its results in the income
statement to separately identify the contribution
of disposals, certain re-measurements,
impairments and certain other exceptional
items in order to provide readers with a clear
and consistent presentation of the underlying
operating performance of the Group’s ongoing
business; see note 1, page 98 and note 9,
page 110.
SIGNIFICANT ACCOUNTING
JUDGEMENTS AND ESTIMATES
The preparation of ?nancial statements in
conformity with IFRS requires management to
make judgements and assumptions that affect
the reported amounts of assets and liabilities
and disclosure of contingencies at the date
of the ?nancial statements and the reported
revenues and expenses during the reporting
period. Actual results could differ from
these estimates. BG Group believes that the
accounting policies associated with reserves,
impairment, depreciation, exploration
expenditure, decommissioning costs and tax
are the policies where changes in estimates
and assumptions could have a signi?cant
impact on the Financial statements.
88
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | PRINCIPAL ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES
Exploration expenditure
BG Group uses the ‘successful efforts’ method
of accounting for exploration expenditure.
Exploration expenditure, including licence
acquisition costs, is capitalised as an intangible
asset when incurred and certain expenditure,
such as geological and geophysical exploration
costs, is expensed. A review of each licence
or ?eld is carried out, at least annually, to
ascertain whether commercial reserves have
been discovered.
For conventional E&P activities, intangible
exploration and appraisal expenditure is
reclassi?ed to property, plant and equipment
on the determination of proved reserves. This
is the point when exploration and appraisal
activities become a development project
and re?ects the importance of individual well
performance and reserves to conventional
E&P projects. By comparison, unconventional
coal seam and shale gas activities have a
relatively short exploration and appraisal
phase and are more focused on the average
deliverability of a large number of wells over
an entire licence area rather than the performance
and reserves associated with individual wells.
Accordingly, BG Group uses the determination
of proved plus probable reserves as the point
at which exploration and appraisal expenditure
on unconventional E&P activities is reclassi?ed
to property, plant and equipment. This
approach is consistent with the methodology
used to depreciate assets associated with
these activities.
Exploration expenditure transferred to
property, plant and equipment is subsequently
depreciated on a unit of production basis.
Exploration expenditure deemed to be
unsuccessful is written off to the
income statement.
Depreciation and amortisation
Freehold land is not depreciated. Other property,
plant and equipment, except exploration
and production assets, is depreciated on a
straight-line basis at rates suf?cient to write
off the historical cost less residual value of
individual assets over their estimated useful
economic lives. Asset lives and residual
values are reassessed annually.
The depreciation periods for the principal
categories of assets are as follows:
Freehold and leasehold buildings up to 50 years
Plant and machinery 5 to 40 years
Motor vehicles and of?ce equipment up to 10 years
Exploration and production assets associated
with conventional activities are depreciated
from the commencement of commercial
production in the ?elds concerned, using
the unit of production method based on the
proved developed reserves of those ?elds,
except that a basis of total proved reserves
is used for acquired interests and for facilities.
Exploration and production assets associated
with unconventional activities, including
coal seam and shale gas, are depreciated from
the commencement of commercial production
in the ?elds concerned, using the unit of
production method based on proved plus
probable reserves, together with the estimated
future development expenditure required
to develop those reserves.
Intangible assets in respect of contractual
rights are recognised at cost less amortisation.
They are amortised on a straight-line basis
over the term of the related contract.
Changes in depreciation and amortisation
estimates are dealt with prospectively.
Decommissioning costs
Where a legal or constructive obligation
has been incurred, provision is made for the
net present value of the estimated cost of
decommissioning at the end of the producing
lives of assets.
When this provision gives access to future
economic bene?ts, an asset is recognised
and then subsequently depreciated in line
with the life of the underlying producing
asset, otherwise the costs are charged to
the income statement. The unwinding of
the discount on the provision is included in
the income statement within ?nance costs.
Any changes to estimated costs or discount
rates are dealt with prospectively.
Impairment of non-current assets
Non-current assets subject to depreciation
or amortisation are reviewed for impairments
whenever events or other changes in
circumstances indicate that the carrying
amount may not be recoverable. Expenditure
on unproved gas and oil reserves is assessed
for impairment when facts and circumstances
suggest that its carrying amount exceeds
its recoverable amount.
Any impairment of non-current assets
(excluding ?nancial assets) is calculated as
the difference between the carrying values
of cash-generating units (including associated
goodwill) and their recoverable amount,
being the higher of the estimated value in
use or fair value less costs of disposal at
the date the impairment charge is recognised.
Value in use represents the net present value
of expected future cash ?ows discounted
on a pre-tax basis. Fair value less costs of
disposal is based on the best evidence available
to the Group, and may include appropriate
valuation techniques, market data or sales
of comparable assets.
Decommissioning costs
The recognition and measurement of
decommissioning provisions involves the use
of estimates and assumptions. These include:
the existence of a legal or constructive obligation
to decommission, based on current legislation,
contractual or regulatory requirements or best
practice; the risk-free discount rate used to
determine the net present value of the liability;
the estimated cost of decommissioning based
on internal and external engineering estimates
and reports; and the payment dates of expected
decommissioning costs which are uncertain
and are based on economic assumptions
surrounding the useful economic lives of the
?elds concerned. Actual costs could differ from
estimated costs due to changes in legislation,
regulations, technology, price levels and the
expected date of decommissioning.
On the basis that all other assumptions
in the calculation remain the same as at
31 December 2014, a 10% increase in the cost
estimates used to assess the ?nal decommissioning
obligations would result in an increase to the
decommissioning provision of circa $450 million,
and a 1% increase in the discount rate would
result in a decrease to the decommissioning
provision of circa $800 million. These changes
would be principally offset by a change in the
value of the associated asset, resulting in no
material change to the consolidated net assets.
Current and deferred tax
BG Group is subject to income taxes in
numerous jurisdictions. There are transactions
and calculations for which the ultimate tax
determination is uncertain. The Group periodically
evaluates situations in which applicable tax
regulation is subject to interpretation and
establishes provisions where appropriate based
on amounts expected to be paid to the tax
authorities. In estimating these provisions
consideration is taken of the strength of the
technical arguments, the local statute of
limitations, likely scope for double tax relief,
and whether penalties and interest could apply.
Deferred tax assets are recognised for
deductible temporary differences, unutilised
tax losses and unused tax credits to the extent
that realisation of the related tax bene?t
through future taxable income is probable.
To determine the future taxable income,
reference is made to the latest available pro?t
forecasts. This requires assumptions regarding
future pro?tability and is therefore inherently
uncertain. Signi?cant items where the Group
has relied on estimates of future taxable income
include a deferred tax asset in respect of the
US tax group amounting to $1 298 million
(2013: $1 056 million) and a deferred tax asset
relating to the Australian tax group amounting
to $2 167 million (2013: $nil).
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | PRINCIPAL ACCOUNTING POLICIES > CONTINUED
These contracts are recognised on the balance
sheet at fair value with movements in fair
value recognised in the income statement.
The Group uses various commodity-based
derivative instruments to manage some of the
risks arising from ?uctuations in commodity
prices. Such contracts include physical and
net-settled forwards, futures, swaps and
options. Where these derivatives have been
designated as cash ?ow hedges of underlying
commodity price exposures, certain gains and
losses attributable to these instruments are
deferred in other comprehensive income and
recognised in the income statement when
the underlying hedged transaction crystallises
or is no longer expected to occur.
All other commodity contracts within the
scope of IAS 39 are measured at fair value
with gains and losses taken to the income
statement. Gas and oil contracts and related
derivative instruments associated with the
physical purchase and re-sale of third-party
gas are presented on a net basis within
other operating income.
Revenue recognition
Revenue associated with E&P sales (of natural
gas, crude oil and petroleum products) is
recorded when title passes to the customer.
Revenue from the production of natural gas
and oil in which BG Group has an interest
with other producers is recognised based on
the Group’s working interest and the terms
of the relevant production sharing contracts
(entitlement method).
Sales of LNG and associated products are
recognised when title passes to the customer.
LNG shipping revenue is recognised over the
period of the relevant contract.
All other revenue is recognised when title
passes to the customer.
Current and deferred income tax
The tax expense for the period comprises
current and deferred tax, determined using
currently enacted or substantively enacted
tax laws.
Deferred income tax is provided in full, using
the liability method, on temporary differences
arising between the tax bases of assets and
liabilities and their carrying amounts in the
Financial statements. Deferred tax assets are
recognised to the extent that it is probable
that future taxable pro?t will be available,
against which the temporary differences can
be utilised.
Deferred income tax is provided on temporary
differences arising on investments in subsidiaries,
joint ventures and associates, except where
the timing of the reversal of the temporary
difference can be controlled and it is probable
that the temporary difference will not reverse
in the foreseeable future.
OTHER ACCOUNTING POLICIES
Property, plant and equipment
excluding decommissioning assets
All property, plant and equipment is carried
at depreciated historical cost. Additions
represent new, or replacements of speci?c
components of property, plant and equipment.
Finance costs associated with borrowings
used to ?nance major capital projects are
capitalised up to the point at which the
asset is ready for its intended use.
Inventories
Inventories, including inventories of gas,
LNG and oil held for sale in the ordinary course
of business, are stated at weighted average
historical cost less provision for deterioration and
obsolescence or, if lower, net realisable value.
Foreign currencies
The currency in which the Group presents its
consolidated and parent Company Financial
statements is US Dollars. The functional
currency of the Company is Pounds Sterling.
The exchange rates of US Dollar to Pound
Sterling over the periods included in this
Annual Report and Accounts are as follows:
US$/UK£
exchange rate 2014 2013 2012 2011 2010
Closing rate 1.5593 1.6563 1.6255 1.5541 1.5657
Average rate 1.6545 1.5640 1.5848 1.6079 1.5489
On consolidation, assets and liabilities
denominated in currencies other than US Dollars
are translated into US Dollars at closing rates
of exchange. Non-US Dollar trading results of
the parent Company, subsidiary undertakings,
jointly controlled entities and associates are
translated into US Dollars at average rates
of exchange. Differences resulting from the
retranslation of the opening net assets and
the results for the year are recognised in
other comprehensive income.
Any differences arising from 1 January 2003,
the date of transition to IFRS, are presented
as a separate component of equity.
Share capital, share premium and other
reserves are translated into US Dollars at
the historical rates prevailing at the date
of the transaction.
Exchange differences on monetary assets
and liabilities arising in individual entities are
taken to the income statement, including
those in respect of inter-company balances
unless related to exchange differences on
items that form part of a net investment
in a foreign operation. These differences
are taken to reserves until the related
investment is disposed of. All other exchange
movements are dealt with through the
income statement.
For the purposes of impairment testing,
exploration and production assets may be
aggregated into appropriate cash-generating
units based on considerations including
geographical location, the use of common
facilities and marketing arrangements.
Financial instruments
Derivative ?nancial instruments are initially
recognised and subsequently re-measured
at fair value.
Derivative ?nancial instruments utilised
by BG Group’s treasury operations include
interest rate swaps, foreign currency swaps,
cross-currency interest rate swaps, forward rate
agreements and forward exchange contracts.
Certain derivative ?nancial instruments are
designated as hedges in line with the Group’s
risk management policies. Gains and losses
arising from the re-measurement of these
?nancial instruments are either recognised
in the income statement or deferred in other
comprehensive income depending on the
type of hedging relationship. When a hedging
instrument is sold or expires, any cumulative
gain or loss previously recognised in other
comprehensive income remains in other
comprehensive income until the hedged
transaction is recognised in the income
statement or is no longer expected to occur.
Movements in the fair value of derivative
?nancial instruments not included in
hedging relationships are recognised in the
income statement.
Loans held by the Group are initially measured
at fair value and subsequently carried at
amortised cost, except where they form the
underlying transaction in an effective fair
value hedge relationship when the carrying
value is adjusted to re?ect fair value
movements associated with the hedged
risks. Such adjustments are reported in
the income statement.
Other ?nancial instruments such as receivable
balances are measured at amortised cost
less impairments.
Commodity instruments
Within the ordinary course of business
BG Group routinely enters into sale and
purchase transactions for commodities.
The majority of these transactions take the
form of contracts that were entered into and
continue to be held for the purpose of receipt
or delivery of the commodity in accordance
with the Group’s expected sale, purchase
or usage requirements. Such contracts are
not within the scope of IAS 39.
Certain commodity contracts have pricing
terms that bring them into the scope of IAS 39.
In addition, commodity instruments are used
to manage certain price exposures in respect
of optimising the timing and location of
physical gas, LNG and oil commitments.
90
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | PRINCIPAL ACCOUNTING POLICIES > CONTINUED
ACCOUNTING DEVELOPMENTS DURING 2014
IFRS 10 ‘Consolidated Financial Statements’
The IASB issued IFRS 10 in May 2011. The standard
builds on existing principles by identifying
the concept of control as the determining factor
in whether an entity should be consolidated.
The standard also provides additional
guidance to assist in the determination of
control. Adoption of this standard has not
had a material impact on the Group’s
Financial statements.
IFRS 11 ‘Joint Arrangements’
The IASB issued IFRS 11 in May 2011. The standard
aims to provide a more substance-based
re?ection of joint arrangements in the
?nancial statements by focusing on the rights
and obligations of the arrangement rather
than the legal form. Adoption of this standard
has not had a material impact on the Group’s
Financial statements.
IFRS 12 ‘Disclosure of Interests in Other Entities’
The IASB issued IFRS 12 in May 2011. The
standard introduces new and comprehensive
disclosure requirements for all forms of interests
in other entities, including joint arrangements,
associates and structured entities. New and
revised disclosures in accordance with this
standard are presented in note 13 on page 113
and note 25 on page 130.
Other amendments
A number of other amendments to accounting
standards issued by the IASB are applicable
from 1 January 2014. They have not had
a material impact on the Group’s Financial
statements for the year ended 31 December 2014.
ACCOUNTING DEVELOPMENTS
NOT YET ADOPTED
The following standards and amendments
have been issued by the IASB up to the date
of this report and in some cases have not
yet been endorsed by the European Union.
IFRS 9 ‘Financial Instruments’
The IASB issued the ?nal version of IFRS 9
in July 2014, which re?ects all phases of the
?nancial instruments project. IFRS 9 introduces
new requirements for the classi?cation,
measurement and impairment of ?nancial
instruments and hedge accounting, and will
be adopted by the Group when it becomes
mandatory in the European Union. BG Group
is currently reviewing the standard to
determine the likely impact on the Group’s
Financial statements.
IFRS 15 ‘Revenue from Contracts
with Customers’
The IASB issued IFRS 15 in May 2014. The
standard establishes a ?ve-step model that
will apply to revenue arising from contracts
with customers. Revenue is recognised
when a customer obtains control of a good
or service and thus has the ability to direct
the use and obtain the bene?ts from the
good or service. Revenue is recognised based
on the consideration to which the Group
expects to be entitled. IFRS 15 will be adopted
by the Group when it becomes mandatory
in the European Union. BG Group is currently
reviewing the standard to determine the likely
impact on the Group’s Financial statements.
Amendment to IFRS 11 ‘Joint Arrangements’
The IASB issued an amended IFRS 11 in May
2014. The amendment requires an acquisition
of an interest in a joint operation that is
a business as de?ned in IFRS 3, ‘Business
Combinations’, to apply the relevant IFRS 3
principles for business combinations accounting,
and applies to both the acquisition of an initial
interest in a joint operation and the acquisition
of any additional interest. The amendment
will be applied prospectively by the Group
when it becomes mandatory in the
European Union.
Other revisions and amendments
Other revisions and amendments are not
expected to have a material impact on
the Group’s Financial statements.
Leases
Assets held under ?nance leases are capitalised
and included in property, plant and equipment
at the lower of fair value and the present
value of the minimum lease payments
as determined at the inception of the lease.
The obligations relating to ?nance leases, net
of ?nance charges in respect of future periods,
are determined at the inception of the lease
and included within borrowings. The interest
element of the rental obligation is allocated
to accounting periods during the lease term
to re?ect the constant rate of interest on
the remaining balance of the obligation for
each accounting period.
BG Group has certain long-term arrangements
under which it has acquired all of the capacity
of certain property, plant and equipment. In
circumstances where it is considered that the
Group has the majority of the risks and rewards
of ownership of the plant, the arrangement
is considered to contain a ?nance lease.
Rentals under operating leases are charged
to the income statement on a straight-line
basis over the lease term.
Pensions
The amount recognised on the balance sheet
in respect of liabilities for de?ned bene?t
pension and post-retirement bene?t plans
represents the present value of the obligations
offset by the fair value of plan assets.
The cost of providing retirement pensions
and related bene?ts is charged to the income
statement over the periods bene?ting from
the employees’ services. Current service
costs are re?ected in operating pro?t and net
interest costs are re?ected in ?nance costs
in the period in which they arise. Actuarial
gains and losses are recognised in full as they
occur in other comprehensive income.
Contributions made to de?ned contribution
pension plans are charged to the income
statement when payable.
Share-based payments
The cost of providing share-based payments to
employees is charged to the income statement
over the vesting period of the related share
options or share allocations. The cost is based
on the fair value of the options or shares
allocated and the number of awards expected
to vest. The fair value of each option or share
is determined using either the share price on
the date of the grant or a Monte Carlo projection
model, depending on the type of award.
Market-related performance conditions are
re?ected in the fair value of the share.
Non-market-related performance conditions
are allowed for using a separate assumption
about the number of awards expected to
vest; the ?nal charge made re?ects the
number actually vesting.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December
Note
2014 2013
Business
Performance
$m
Disposals,
re-measurements
and impairments
$m
Total
$m
Business
Performance
$m
Disposals,
re-measurements
and impairments
$m
Total
$m
Group revenue 1 19 289 – 19 289 19 192 – 19 192
Other operating income 1, 4 257 403 660 (91) 210 119
Group revenue and other operating income 1 19 546 403 19 949 19 101 210 19 311
Operating costs 2, 4 (13 391) (181) (13 572) (11 981) 154 (11 827)
Pro?ts and losses on disposal of non-current assets
and impairments 4 – (8 120) (8 120) – (3 817) (3 817)
Operating pro?t/(loss)
(a)
1 6 155 (7 898) (1 743) 7 120 (3 453) 3 667
Finance income 4, 5 153 – 153 104 65 169
Finance costs 4, 5 (262) (644) (906) (283) – (283)
Share of post-tax results from joint ventures and associates 1 222 (56) 166 336 – 336
Pro?t/(loss) before taxation 6 268 (8 598) (2 330) 7 277 (3 388) 3 889
Taxation 4, 6 (2 233) 3 512 1 279 (2 903) 1 219 (1 684)
Pro?t/(loss) for the year from continuing operations 1, 4 4 035 (5 086) (1 051) 4 374 (2 169) 2 205
Pro?t/(loss) for the year from discontinued operations 7 – 7 7 – 245 245
Pro?t/(loss) for the year 4 035 (5 079) (1 044) 4 374 (1 924) 2 450
Pro?t attributable to:
Shareholders (earnings) 1 4 035 (5 079) (1 044)
(b)
4 374 (1 933) 2 441
(b)
Non-controlling interest 1 – – – – 9 9
4 035 (5 079) (1 044) 4 374 (1 924) 2 450
Earnings per ordinary share continuing operations (cents)
Basic 9 118.4 (149.2) (30.8) 128.6 (63.8) 64.8
Diluted 9 118.4 (149.2) (30.8) 128.0 (63.5) 64.5
Earnings per ordinary share discontinued operations (cents)
Basic – 0.2 0.2 – 6.9 6.9
Diluted – 0.2 0.2 – 6.9 6.9
Total earnings per ordinary share (cents)
Basic 118.4 (149.0) (30.6) 128.6 (56.9) 71.7
Diluted 118.4 (149.0) (30.6) 128.0 (56.6) 71.4
Total operating pro?t/(loss) including share of pre-tax
operating results from joint ventures and associates
(c)
1 6 537 (7 954) (1 417) 7 616 (3 453) 4 163
(a) Operating pro?t/(loss) is before share of results from joint ventures and associates.
(b) Comprises earnings from continuing operations of $(1 051)m (2013: $2 205m) and from discontinued operations of $7m (2013: $236m).
(c) This measurement is shown by BG Group as it is used as a means of measuring the underlying performance of the business.
For information on dividends paid and proposed in the year see note 8, page 110.
The accounting policies on pages 88 to 91 together with the notes on pages 98 to 131 form part of these accounts.
92
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 December 2014
$m
2013
$m
Pro?t/(loss) for the year (1 044) 2 450
Items that may be reclassi?ed to the income statement:
Fair value (losses)/gains on cash ?ow hedges (71) 121
Transfers to income statement on cash ?ow hedges
(a)
33 146
Fair value (losses)/gains on net investment hedges (574) 198
Fair value movements on available-for-sale assets (17) (8)
Tax on cash ?ow and net investment hedges
(b)
125 (90)
Currency translation adjustments
(c)
(223) (2 875)
Other items:
Re-measurement of de?ned bene?t pension obligation (163) (48)
Tax on re-measurement of de?ned bene?t pension obligation 45 –
Other comprehensive income/(charge) for the year, net of tax
(d)
(845) (2 556)
Total comprehensive income/(charge) for the year (1 889) (106)
Attributable to:
Shareholders (1 889) (115)
Non-controlling interest – 9
(1 889) (106)
(a) During 2014, a pre-tax loss of $33m (2013: $108m) was transferred from the hedging reserve to revenue to match against the underlying transactions and a pre-tax loss of $nil (2013: $38m)
was transferred from the hedging reserve related to the disposal of an associate.
(b) Includes a tax credit relating to cash ?ow hedges of $9m (2013: $54m charge) and a tax credit relating to net investment hedges of $116m (2013: $36m charge).
(c) In 2014, $nil (2013: $119m gain) was transferred to the income statement as part of the pro?t/(loss) on disposal of non-US Dollar denominated operations.
(d) Includes other comprehensive income in respect of joint ventures and associates of $(29)m (2013: $20m).
The loss for the ?nancial year for the Company was $(6)m (2013: $1m pro?t). Total comprehensive income/(charge) for the Company was $(361)m (2013: $121m).
As permitted by section 408 of the Companies Act 2006, no income statement or statement of comprehensive income is presented for the Company.
The accounting policies on pages 88 to 91 together with the notes on pages 98 to 131 form part of these accounts.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS
BALANCE SHEETS
Note
The Group The Company
as at 31 December 2014
$m
2013
$m
2014
$m
2013
$m
Assets
Non-current assets
Goodwill 10 – 25 – –
Other intangible assets 11 3 135 3 864 – –
Property, plant and equipment 12 35 855 42 225 – –
Investments in subsidiary undertakings 13 – – 4 104 4 288
Investments 13 3 547 2 933 – –
Deferred tax assets 6 3 949 1 397 2 10
Trade and other receivables 15 1 068 777 – –
Commodity contracts and other derivative ?nancial instruments 18 287 623 – –
47 841 51 844 4 106 4 298
Current assets
Inventories 14 1 194 838 – –
Trade and other receivables 15 5 042 6 900 1 786 2 881
Current tax receivable 151 77 35 47
Commodity contracts and other derivative ?nancial instruments 18 235 107 – –
Cash and cash equivalents 16 5 295 6 208 – –
11 917 14 130 1 821 2 928
Assets classi?ed as held for sale 7 2 088 – – –
Total assets 61 846 65 974 5 927 7 226
Liabilities
Current liabilities
Borrowings 17 (1 586) (475) – –
Trade and other payables 19 (4 768) (5 631) (48) (51)
Current tax liabilities (1 412) (1 831) – –
Commodity contracts and other derivative ?nancial instruments 18 (128) (297) – –
(7 894) (8 234) (48) (51)
Non-current liabilities
Borrowings 17 (15 921) (17 054) – –
Trade and other payables 19 (136) (150) – –
Commodity contracts and other derivative ?nancial instruments 18 (253) (173) – –
Deferred tax liabilities 6 (2 946) (4 120) – –
Retirement bene?t obligations 24 (258) (168) – –
Provisions for other liabilities and charges 20 (5 235) (4 115) – –
(24 749) (25 780) – –
Liabilities associated with assets classi?ed as held for sale 7 (63) – – –
Total liabilities (32 706) (34 014) (48) (51)
Net assets 29 140 31 960 5 879 7 175
The accounting policies on pages 88 to 91 together with the notes on pages 98 to 131 form part of these accounts.
94
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | BALANCE SHEETS > CONTINUED
Note
The Group The Company
as at 31 December 2014
$m
2013
$m
2014
$m
2013
$m
Equity
Ordinary shares 21 579 579 579 579
Share premium 691 663 691 663
Hedging reserve (7) 22 – –
Translation reserve (1 467) (786) (223) 132
Other reserves 2 710 2 710 1 203 1 203
Retained earnings 26 634 28 772 3 629 4 598
Total equity 29 140 31 960 5 879 7 175
The accounts on pages 88 to 131 were approved by the Board and signed on its behalf on 18 March 2015 by:
SIMON LOWTH
CHIEF FINANCIAL OFFICER
The accounting policies on pages 88 to 91 together with the notes on pages 98 to 131 form part of these accounts.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS
STATEMENTS OF CHANGES IN EQUITY
The Group Called up
share
capital
$m
Share
premium
account
$m
Hedging
reserve
$m
Translation
reserve
(a)
$m
Other
reserves
(b)
$m
Retained
earnings
(c)
$m
Total
$m
Non-
controlling
interest
$m
Total
$m
As at 1 January 2013 578 619 (191) 1 927 2 710 27 248 32 891 57 32 948
Total comprehensive income for the year – – 213 (2 713) – 2 385 (115) 9 (106)
Pro?t for the year – – – – – 2 441 2 441 9 2 450
Hedges, net of tax – – 213 162 – – 375 – 375
Available-for-sale assets, net of tax – – – – – (8) (8) – (8)
De?ned bene?t pension obligation,
net of tax – – – – – (48) (48) – (48)
Currency translation adjustments – – – (2 875) – – (2 875) – (2 875)
Adjustment for share schemes – – – – – 85 85 – 85
Tax in respect of share schemes
(d)
– – – – – 19 19 – 19
Dividends – – – – – (952) (952) – (952)
Disposal of non-controlling interest – – – – – – – (66) (66)
Issue of shares
(e)
1 44 – – – – 45 – 45
Net purchase of own shares – – – – – (13) (13) – (13)
As at 31 December 2013 579 663 22 (786) 2 710 28 772 31 960 – 31 960
Total comprehensive income for the year – – (29) (681) – (1 179) (1 889) – (1 889)
Loss for the year – – – – – (1 044) (1 044) – (1 044)
Hedges, net of tax – – (29) (458) – – (487) – (487)
Available-for-sale assets, net of tax – – – – – (17) (17) – (17)
De?ned bene?t pension obligation,
net of tax – – – – – (118) (118) – (118)
Currency translation adjustments,
net of tax – – – (223) – – (223) – (223)
Adjustment for share schemes – – – – – 71 71 – 71
Tax in respect of share schemes
(d)
– – – – – (3) (3) – (3)
Dividends – – – – – (1 027) (1 027) – (1 027)
Issue of shares
(e)
– 28 – – – – 28 – 28
As at 31 December 2014 579 691 (7) (1 467) 2 710 26 634 29 140 – 29 140
The Company Called up
share
capital
$m
Share
premium
account
$m
Translation
reserve
$m
Other
reserves
(b)
$m
Retained
earnings
$m
Total
$m
As at 1 January 2013 578 619 12 1 203 5 473 7 885
Total comprehensive income for the year
(f)
– – 120 – 1 121
Adjustment for share schemes – – – – 85 85
Tax in respect of share schemes
(d)
– – – – 4 4
Dividends – – – – (952) (952)
Issue of shares
(e)
1 44 – – – 45
Net purchase of own shares – – – – (13) (13)
As at 31 December 2013 579 663 132 1 203 4 598 7 175
Total comprehensive income for the year
(f)
– – (355) – (6) (361)
Adjustment for share schemes – – – – 71 71
Tax in respect of share schemes
(d)
– – – – (7) (7)
Dividends – – – – (1 027) (1 027)
Issue of shares
(e)
– 28 – – – 28
As at 31 December 2014 579 691 (223) 1 203 3 629 5 879
(a) As at 31 December 2014, includes currency translation losses of $9m (2013: $20m gains) relating to joint ventures and associates.
(b) Other reserves, which are not distributable, represent the difference between the carrying value of subsidiary undertaking investments and their respective capital structures following
the restructuring and re?nancing in 1999.
(c) As at 31 December 2014, includes retained earnings in respect of joint ventures and associates of $660m (2013: $771m).
(d) This consists of current tax of $5m (2013: $9m) and deferred tax of $(8)m (2013: $10m) in the Group and current tax of $nil (2013: $3m) and deferred tax of $(7)m (2013: $1m) in the Company.
(e) The issue of shares relates to amounts issued to employees under employee share option schemes for a cash consideration of $28m (2013: $45m).
(f) Comprises loss for the year of $(6)m (2013: $1m pro?t) and currency translation adjustments of $(355)m (2013: $120m).
The accounting policies on pages 88 to 91 together with the notes on pages 98 to 131 form part of these accounts.
96
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS
CASH FLOW STATEMENTS
Note
The Group The Company
for the year ended 31 December 2014
$m
2013
$m
2014
$m
2013
$m
Pro?t/(loss) before taxation
(a)
(2 321) 4 147 (1) (3)
Finance income (153) (170) (13) (17)
Finance costs 906 284 – –
Share of post-tax results from joint ventures and associates (166) (335) – –
Operating pro?t/(loss) (1 734) 3 926 (14) (20)
Depreciation of property, plant and equipment 2 788 2 946 – –
Amortisation of other intangible assets 11 9 – –
Share-based payments 62 74 3 11
Fair value movements in commodity-based contracts (354) (98) – –
Pro?ts and losses on disposal of non-current assets and impairments
(b)
8 120 3 576 – –
Unsuccessful exploration expenditure written off 237 394 – –
Decrease in provisions for liabilities and retirement bene?t obligations (94) (129) – –
Movements in working capital:
Increase in inventories (272) (29) – –
Decrease/(increase) in trade and other receivables 993 (618) – –
Increase in trade and other payables 258 234 – –
Cash generated/(used) by operations 10 015 10 285 (11) (9)
Income taxes (paid)/received (2 616) (2 468) 8 (5)
Net cash in?ow/(out?ow) from operating activities 7 399 7 817 (3) (14)
Cash ?ows from investing activities
Dividends received 179 147 – –
Proceeds from disposal of subsidiary undertakings and investments
(c)
800 774 – –
Proceeds from disposal of property, plant and equipment and intangible assets
(d)
55 3 827 – –
Purchase of property, plant and equipment and intangible assets (8 510) (10 605) – –
Repayments from joint ventures and associates 41 73 – –
Interests in subsidiaries, joint ventures and associates, and other investments (892) (610) – –
Other loan repayments 111 112 – –
Net cash out?ow from investing activities (8 216) (6 282) – –
Cash ?ows from ?nancing activities
Interest paid (620) (675) – –
Interest received 64 115 – –
Dividends paid (1 024) (923) (1 024) (923)
Net proceeds from issue of new borrowings
(e)
2 086 2 713 – –
Repayment of borrowings (625) (1 093) – –
Issue of shares 28 45 28 45
Movements in own shares – (13) – (13)
Funding movements with subsidiary – – 999 904
Net cash (out?ow)/in?ow from ?nancing activities (91) 169 3 13
Net (decrease)/increase in cash and cash equivalents (908) 1 704 – (1)
Cash and cash equivalents at 1 January 16 6 208 4 520 – 2
Effect of foreign exchange rate changes (5) (16) – (1)
Cash and cash equivalents at 31 December 16 5 295 6 208 – –
(a) Pro?t before taxation from discontinued operations was $9m (2013: $258m).
(b) Pro?ts and losses on disposal of non-current assets and impairments include a pro?t from discontinued operations of $nil (2013: $241m).
(c) 2014 includes proceeds from the sale of the Central Area Transmission System pipeline and associated infrastructure in the UK North Sea of $797m. 2013 includes proceeds from the disposal
of Gujarat Gas Company Limited of $259m (net of cash held at the date of disposal of $84m), TGGT of $240m and the Group’s remaining 20% equity in GNL Quintero of $172m.
(d) 2014 includes proceeds of $53m from the sale and lease back of ships. 2013 includes proceeds of $3 633m from the disposal of certain interests in upstream coal seam gas tenements in Australia
and equity interests in the QCLNG project Train 1 liquefaction facility.
(e) Includes net cash ?ows relating to short maturity ?nancing.
The cash ?ows above are inclusive of discontinued operations (see note 7, page 109).
The accounting policies on pages 88 to 91 together with the notes on pages 98 to 131 form part of these accounts.
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97
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS
1 SEGMENTAL ANALYSIS AND RESULTS PRESENTATION
BG Group’s reportable segments are those used by the Group’s Board and management (the ‘Chief Operating Decision Maker’ as de?ned in IFRS 8
‘Operating Segments’) to run the business and are based on differences in the Group’s products and services. Segment information is presented
on the same basis as that used for internal reporting purposes. BG Group has two principal operating and reporting segments; Upstream
and LNG Shipping & Marketing. Upstream comprises exploration, development, production, liquefaction and marketing of hydrocarbons.
LNG Shipping & Marketing combines the development and use of LNG import facilities with the purchase, shipping and sale of LNG and regasi?ed
natural gas. The Group’s remaining Transmission and Distribution businesses, principally Mahanagar Gas in India, and certain corporate activities
are included in the Other activities segment.
Intra-Group sales are settled at market prices and are generally based on the same prices as those charged to third parties (arm’s length principle).
Group revenue, pro?t for the year, depreciation, amortisation and impairment and capital investment attributable to BG Group activities are
shown on pages 98 to 101, analysed by operating segment.
The presentation of BG Group’s results under IFRS separately identi?es the effect of the re-measurement of certain ?nancial instruments, pro?ts
and losses on the disposal and impairment of non-current assets and certain other exceptional items. Results excluding discontinued operations
and disposals, certain re-measurements and impairments and certain other exceptional items (‘Business Performance’) are used by management
and are presented in order to provide readers with a clear and consistent presentation of the underlying operating performance of the Group’s
ongoing business. Further information on Business Performance is given on page 142.
The disposals, re-measurements and impairments column includes unrealised gains and losses in respect of certain gas sales contracts classi?ed
as derivatives under IAS 39, commodity instruments that represent economic hedges but do not qualify for hedge accounting, and ?nancial
instruments used to manage foreign exchange and interest rate exposure. Where these instruments represent economic hedges but cannot be
designated as hedges under IAS 39, unrealised movements in fair value, together with foreign exchange movements associated with the underlying
borrowings and foreign exchange movements in respect of certain inter-company balances, are recorded in the income statement and disclosed
separately as ‘disposals, re-measurements and impairments’. The separate presentation of these items best re?ects the underlying performance
of the business since it distinguishes between the temporary timing differences associated with re-measurements under IAS 39 rules and
actual realised gains and losses.
Under IFRS the results from jointly controlled entities (joint ventures) and associates are presented net of tax and ?nance costs on the face of
the income statement. BG Group also presents the operating pro?t of the Group including results of joint ventures and associates before interest
and tax, as this approach provides additional information on the source of the Group’s operating pro?ts.
Reconciliations between the Total Results and Business Performance, and operating pro?t including and excluding the results of joint ventures
and associates are provided on pages 99 and 100. The geographical information provided for external revenue is based on country of production.
Further information is given in the Supplementary information on page 132.
GROUP REVENUE
Analysed by operating segment
External revenue Intra-Group revenue Total Group revenue
for the year ended 31 December 2014
$m
2013
$m
2014
$m
2013
$m
2014
$m
2013
$m
Group revenue
(a)
Upstream 11 161 11 455 701 688 11 862 12 143
LNG Shipping & Marketing 8 121 7 730 3 31 8 124 7 761
Other activities 7 7 – – 7 7
Segmental revenue 19 289 19 192 704 719 19 993 19 911
Less: Intra-Group revenue – – (704) (719) (704) (719)
Group revenue 19 289 19 192 – – 19 289 19 192
(a) External revenue attributable to the UK is $3 168m (2013: $3 270m). External revenue attributable to non-UK countries is $16 121m (2013: $15 922m). Included in the Upstream segment is revenue of
$2 441m attributable to Brazil representing 13% of Group external revenue (2013: $1 281m, 7%) and $1 716m attributable to Kazakhstan representing 9% of Group external revenue (2013: $2 090m, 11%).
Further geographical information on the Group’s E&P revenues can be found in Supplementary information – gas and oil (unaudited) on page 132. LNG Shipping & Marketing revenues are not
considered reliant on individual countries since they are associated with the global deployment of the Group’s portfolio of ?exible LNG supplies.
External revenue in respect of a single external customer amounted to $1 596m (2013: $2 198m), recognised in the Upstream segment. These revenues are associated with the sale of marketable
commodities and over 95% are secured by letters of credit; accordingly, this single customer is not considered to represent a concentration of business risk to the Group. For further information
on credit risk see the Group’s Principal risks and uncertainties, page 34 and note 18, page 117.
98
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS
1 SEGMENTAL ANALYSIS AND RESULTS PRESENTATION CONTINUED
PROFIT FOR THE YEAR
Analysed by operating segment
Business Performance
Disposals, re-measurements
and impairments
(c)
Total
for the year ended 31 December 2014
$m
2013
$m
2014
$m
2013
$m
2014
$m
2013
$m
Group revenue 19 289 19 192 – – 19 289 19 192
Other operating income
(a)(b)
257 (91) 403 210 660 119
Group revenue and other operating income 19 546 19 101 403 210 19 949 19 311
Operating pro?t/(loss) before share of results from joint ventures and associates
(c)
Upstream 3 615 4 531 (8 182) (3 815) (4 567) 716
LNG Shipping & Marketing 2 526 2 617 205 363 2 731 2 980
Other activities 14 (28) 79 (1) 93 (29)
6 155 7 120 (7 898) (3 453) (1 743) 3 667
Share of pre-tax operating results from joint ventures and associates
Upstream 332 436 (56) – 276 436
LNG Shipping & Marketing 18 26 – – 18 26
Other activities 32 34 – – 32 34
382 496 (56) – 326 496
Total operating pro?t/(loss)
Upstream 3 947 4 967 (8 238) (3 815) (4 291) 1 152
LNG Shipping & Marketing 2 544 2 643 205 363 2 749 3 006
Other activities 46 6 79 (1) 125 5
6 537 7 616 (7 954) (3 453) (1 417) 4 163
Net ?nance (costs)/income
Finance income 153 104 – 65 153 169
Finance costs (262) (283) (644) – (906) (283)
Share of joint ventures and associates (24) (24) – – (24) (24)
(133) (203) (644) 65 (777) (138)
Taxation
Taxation (2 233) (2 903) 3 512 1 219 1 279 (1 684)
Share of joint ventures and associates (136) (136) – – (136) (136)
(2 369) (3 039) 3 512 1 219 1 143 (1 820)
Pro?t/(loss) for the year from continuing operations 4 035 4 374 (5 086) (2 169) (1 051) 2 205
Pro?t for the year from discontinued operations – – 7 245 7 245
4 035 4 374 (5 079) (1 924) (1 044) 2 450
Pro?t attributable to:
Shareholders (earnings) 4 035 4 374 (5 079) (1 933) (1 044) 2 441
Non-controlling interest – – – 9 – 9
4 035 4 374 (5 079) (1 924) (1 044) 2 450
(a) Business Performance Other operating income includes gains on the Group’s 2014 oil hedging programme, the results of the purchase and re-sale of third-party gas and income arising from
optimisation activities undertaken by the Group’s LNG Shipping & Marketing operations. Information on Disposals, re-measurements and impairments Other operating income is given in note 4,
page 105.
(b) Business Performance Other operating income is attributable to segments as follows: Upstream $164m (2013: $15m) and LNG Shipping & Marketing $93m (2013: $(106)m).
(c) Disposals, re-measurements and impairments Operating pro?t/(loss) before share of results from joint ventures and associates includes:
(i) Disposals and impairments of $(8 120)m (2013: $(3 817)m), attributable to segments as follows: Upstream $(8 315)m (2013: $(3 941)m), LNG Shipping & Marketing $216m (2013: $140m) and Other
activities $(21)m (2013: $(16)m);
(ii) Re-measurements of $403m (2013: $210m), attributable to segments as follows: Upstream $287m (2013: $33m), LNG Shipping & Marketing $10m (2013: $177m) and Other activities $106m (2013: $nil); and
(iii) Other operating costs of $(181)m (2013: $154m gain), attributable to segments as follows: Upstream $(154)m (2013: $93m gain), LNG Shipping & Marketing $(21)m (2013: $46m gain) and Other
activities $(6)m (2013: $15m gain).
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99
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
1 SEGMENTAL ANALYSIS AND RESULTS PRESENTATION CONTINUED
PROFIT FOR THE YEAR CONTINUED
Analysed by operating segment
Business Performance
Disposals, re-measurements
and impairments Total
for the year ended 31 December 2014
$m
2013
$m
2014
$m
2013
$m
2014
$m
2013
$m
Total operating pro?t/(loss)
Upstream 3 947 4 967 (8 238) (3 815) (4 291) 1 152
LNG Shipping & Marketing 2 544 2 643 205 363 2 749 3 006
Other activities 46 6 79 (1) 125 5
6 537 7 616 (7 954) (3 453) (1 417) 4 163
Less: share of pre-tax operating results from joint ventures and associates (326) (496)
Add: share of post-tax results from joint ventures and associates 166 336
Net ?nance costs (753) (114)
Pro?t/(loss) before taxation (2 330) 3 889
Taxation 1 279 (1 684)
Pro?t/(loss) for the year from continuing operations (1 051) 2 205
Pro?t for the year from discontinued operations 7 245
(1 044) 2 450
JOINT VENTURES AND ASSOCIATES
Analysed by operating segment
Share of pre-tax operating
results from joint ventures
and associates
Share of net ?nance costs
and tax from joint ventures
and associates
Share of post-tax results
from joint ventures
and associates
for the year ended 31 December 2014
$m
2013
$m
2014
$m
2013
$m
2014
$m
2013
$m
Upstream 276 436 (146) (139) 130 297
LNG Shipping & Marketing 18 26 (4) (6) 14 20
Other activities 32 34 (10) (15) 22 19
Continuing operations 326 496 (160) (160) 166 336
Discontinued operations – 1 – (2) – (1)
326 497 (160) (162) 166 335
DEPRECIATION, AMORTISATION AND IMPAIRMENT
Analysed by operating segment
Depreciation and
Amortisation Impairment
(a)
Total
for the year ended 31 December 2014
$m
2013
$m
2014
$m
2013
$m
2014
$m
2013
$m
Upstream 2 652 2 793 8 956 4 029 11 608 6 822
LNG Shipping & Marketing 143 158 – – 143 158
Other activities 4 3 – 30 4 33
Continuing operations 2 799 2 954 8 956 4 059 11 755 7 013
Discontinued operations – 1 – – – 1
2 799 2 955 8 956 4 059 11 755 7 014
(a) Further details of impairments are given in note 4, page 105.
100
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
1 SEGMENTAL ANALYSIS AND RESULTS PRESENTATION CONTINUED
CAPITAL INVESTMENT
Analysed by operating segment
Capital expenditure
(a)
Capital investment
(b)
for the year ended 31 December 2014
$m
2013
$m
2014
$m
2013
$m
Upstream 8 867 11 597 9 759 12 206
LNG Shipping & Marketing 6 27 6 28
Other activities 4 – 4 –
Continuing operations 8 877 11 624 9 769 12 234
Discontinued operations – 10 – 10
8 877 11 634 9 769 12 244
(a) Comprises expenditure on property, plant and equipment and other intangible assets.
(b) Comprises expenditure on property, plant and equipment, other intangible assets and investments.
As at 31 December 2014, the Group non-current assets balance (excluding derivative ?nancial instruments, deferred tax assets and ?nance lease
receivable) of $43 433m (2013: $49 690m) included an amount attributable to the UK of $5 798m (2013: $8 246m). The amount attributable to
non-UK countries was $37 635m (2013: $41 444m) and included $16 148m (2013: $21 828m) attributable to Australia representing 37% (2013: 44%)
of the Group total and $8 022m (2013: $5 262m) attributable to Brazil representing 18% of the Group total (2013: 11%).
2 OPERATING COSTS
Included within the Group’s operating costs charged to the income statement were the following items:
2014
$m
2013
$m
Raw materials, consumables and ?nished goods 3 552 3 062
Employee costs (see note 3(C), page 103) 1 259 1 096
Less: Own work capitalised (340) (295)
Employee costs included within other operating charges below (140) (116)
Employee costs included within net ?nance costs (7) (11)
772 674
Depreciation and amortisation
Depreciation of Property, plant and equipment 2 788 2 945
Amortisation of Other intangible assets 11 9
2 799 2 954
Other operating charges:
Unsuccessful exploration expenditure written off 237 394
Other exploration expenditure
(a)
514 317
Total exploration expenditure 751 711
Operating lease rentals 701 653
Research and development 90 76
Net foreign exchange (gains)/losses on operating activities (8) (31)
Other costs
(b)
4 915 3 728
Continuing operations total 13 572 11 827
(a) Broadly equivalent to cash ?ows attributable to operating activities arising from exploration and evaluation.
(b) Includes certain E&P lifting, storage, marketing, royalty, tariff and general administration costs (see Supplementary information – gas and oil (unaudited) page 132).
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101
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
2 OPERATING COSTS CONTINUED
AUDITOR’S FEES AND SERVICES
Ernst & Young LLP has served as BG Group’s independent external auditor for the two-year period ended 31 December 2014. The external auditor
is subject to re-appointment at the Annual General Meeting, see the Notice of Annual General Meeting on page 146.
The following table presents the aggregate fees for professional services and other services rendered by the external auditor to BG Group:
2014
$m
2013
$m
Fees payable to the Group’s auditor for the audit of both the parent Company and the Group’s Annual Report and Accounts 2.5 2.5
Fees payable to the Group’s auditor and its associates for other services:
The audit of the parent’s subsidiaries 2.2 2.0
Audit related assurance services
(a)
1.1 1.2
3.3 3.2
Total fees payable for audit services 5.8 5.7
Other assurance services 0.1 0.1
All other services
(b)
0.3 0.3
6.2 6.1
(a) Audit related assurance services includes costs relating to the interim review and regulatory reporting.
(b) All other services includes fees billed for attestation services, consultations concerning ?nancial accounting and reporting standards, and other advice.
3 DIRECTORS AND EMPLOYEES
A) DIRECTORS’ REMUNERATION
2014
$000
2013
$000
Fees to Non-Executive Directors and interim Executive Chairman 2 947 2 586
Salaries
(a)
3 834 3 367
Bene?ts
(b)
423 317
Bonuses
(c)
1 200 801
Share-based payments
(d)
3 444 6 002
Fees and bene?ts in respect of former Directors 7 18
11 855 13 091
(a) Salaries for 2014 include termination payments of $2 097 000 (2013: $nil).
(b) In addition, in 2014, no Directors (2013: two) had pension bene?ts accruing under de?ned bene?t schemes and two Directors (2013: three) received cash in lieu of their pension totalling $521 000 (2013: $527 000).
(c) Bonus ?gures for 2014 represent payments under the Annual Incentive Scheme (AIS) in respect of the 2014 incentive year which will be made in 2015. Bonus ?gures for 2013 represent payments under
the AIS in respect of the 2013 incentive year which were made in 2014. Bonuses for 2014 include remuneration in the form of awards under the Voluntary Bonus Deferral Plan (VBDP). Bonuses exclude
remuneration in the form of mandatorily deferred shares under the Deferred Bonus Plan (DBP) (2014: $251 000; 2013: $1 872 000).
(d) Share-based payments include a charge for mandatorily deferred shares awarded to the Directors under the DBP in respect of the previous incentive years.
For further information please see the Remuneration report on page 62.
B) KEY MANAGEMENT COMPENSATION
During 2014, the Group’s governance arrangements were revised and, in place of the Group Executive Committee (GEC), a new Executive Management
Committee (EMC) was established, along with a wider Group Leadership Team (GLT). See Corporate Governance report, page 44, for further details.
The key management compensation analysed below for 2014 represents amounts in respect of the Directors and the executive of?cers, de?ned as
members of the GEC and, subsequently, both the EMC and the GLT, and the Company Secretary. For 2013, the analysis re?ects the Group’s previous
governance structure, and represents amounts in respect of the Directors and the executive of?cers, de?ned as the GEC and the Company Secretary.
2014
$000
2013
$000
Fees to Non-Executive Directors and interim Executive Chairman 2 947 2 586
Salaries
(a)
11 078 8 831
Bene?ts 817 653
Bonuses
(b)
6 952 1 477
Pension charge
(c)
2 158 3 110
Share-based payments
(d)
14 746 15 984
38 698 32 641
(a) Salaries for 2014 include termination payments of $3 021 000 (2013: $nil).
(b) Bonus ?gures for 2014 include payments under the AIS in respect of the 2014 incentive year which will be made in 2015. Bonus ?gures for 2013 represent payments under the AIS in respect of the 2013
incentive year which were made in 2014. Bonuses for 2014 and 2013 include remuneration in the form of awards under the VBDP. Bonuses exclude remuneration in the form of mandatorily deferred
shares under the DBP (2014: $746 000; 2013: $4 327 000).
(c) Includes bene?ts accruing under de?ned bene?t schemes and cash in lieu of pensions.
(d) Share-based payments include a charge for mandatorily deferred shares awarded to key management under the DBP in respect of the previous incentive years.
102
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
3 DIRECTORS AND EMPLOYEES CONTINUED
C) EMPLOYEE COSTS
The Group
2014
$m
2013
$m
Wages and salaries
(a)
896 829
Social security costs 69 67
Pension charge
(b)
65 (19)
Share-based payments (see note 3(E) below) 56 91
Other including incentive schemes
(c)
173 137
1 259 1 105
Less: attributable to discontinued operations – (9)
Continuing operations 1 259 1 096
(a) Includes termination payments.
(b) The pension charge for the year ended 31 December 2014 includes a curtailment gain of $nil (2013: $154m) and a $7m charge (2013: $11m) which is presented within ?nance costs (see note 24, page 127).
(c) Includes payments under the AIS and remuneration in the form of awards under the VBDP.
In 2014, employee costs of $919m (2013: $810m) were charged to the income statement and $340m (2013: $295m) were capitalised.
D) AVERAGE NUMBER OF EMPLOYEES DURING THE YEAR
2014
Number
2013
Number
Upstream 4 779 4 887
LNG Shipping & Marketing 364 361
Discontinued operations – 288
5 143 5 536
E) SHARE-BASED PAYMENTS
The Group
2014
$m
2013
$m
Equity-settled share-based payments:
Group share awards 40 47
Performance Share Awards 15 20
Other share awards
(a)
10 9
65 76
Cash-settled share-based payments (9) 15
56 91
(a) The charge for other share awards excludes an amount of $6m (2013: $9m) relating to shares and nil-cost options awarded under the VBDP, which was transferred to equity during 2014.
This expense was recognised in the income statement during 2013 as part of the AIS charge. The number of awards made was 0.3m (2013: 0.5m).
Group share awards
Group share awards under the Group’s Long-Term Incentive Plan (LTIP) will normally vest three years after the date of grant, subject to continued
employment and the individual employee’s performance. Awards are in the form of shares (2014: 1.6m shares; 2013: 1.7m shares) or nil-cost options
(2014: 1.5m options; 2013: 1.7m options). The costs in respect of these awards are charged to the income statement over the vesting period, based
on the fair value of the shares and options at the award date. Dividend equivalents accrue on the award during the vesting period. Accordingly,
the fair value of the shares and options awarded is based on the market value of the shares on the award date, which was £12.09 per share in
2014 (2013: £12.69 per share).
Performance Share Awards
Details of Performance Share Awards under the Group’s LTIP are given on pages 64 and 65. Awards are in the form of shares (2014: 0.3m shares;
2013: 0.6m shares) or nil-cost options (2014: 2.0m options; 2013: 3.0m options). The costs in respect of these awards are charged to the income
statement over the vesting period, based on the fair value of the shares and options at the award date, adjusted for the probability of market-related
performance conditions being achieved. The fair value of shares and options awarded during the year is estimated using a Monte Carlo projection
model with the following assumptions: share price on date of issue of £12.11 (2013: £12.71), exercise price of £nil (2013: £nil), a risk-free rate of 1.20%
(2013: 0.81%) and a vesting period of three years (2013: three years). The model also contains assumptions for both the Group and each member
of the industry peer group (set out on page 69) in respect of volatility, average share price growth and share price correlation. Expected volatility
was determined by calculating the historical volatility of the share price over the previous three-year period. Share price correlation was determined
by calculating the historical correlation of the share price over the previous three-year period. Average share price growth was determined from
historical growth over the previous year. Dividend equivalents accrue on the award during the vesting period. The fair value of shares and options
awarded during the year was £4.73 per share (2013: £6.13 per share).
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
3 DIRECTORS AND EMPLOYEES CONTINUED
E) SHARE-BASED PAYMENTS CONTINUED
Other share awards
The charge for Other share awards includes awards made under the DBP, the Sharesave Plan, the Share Incentive Plan and the Share Award Plan.
The DBP operates in conjunction with the AIS and is described on pages 64 and 65. Awards are in the form of shares (2014: nil shares; 2013: 0.1m shares)
or nil-cost options (2014: 0.3m options; 2013: nil options). The charge to the income statement in respect of these awards was $3m in 2014 (2013: $2m)
and is based on the market value of the shares at the award date, which was £10.74 in 2014 (2013: £11.72).
The charge to the income statement in respect of the Sharesave Plan is based on the fair value of the share options at the grant date and the
likelihood of allocations vesting under the scheme. The charge was $1m in 2014 (2013: $2m). The fair value of the share options granted is determined
using a Black-Scholes option pricing model and was £2.10 in 2014 (2013: £3.36).
In 2014, awards of 0.3m shares (2013: 0.3m shares) were made in conjunction with the Group’s UK Flexible Bene?ts Plan, an element of the Share
Incentive Plan. The charge to the income statement in respect of these awards was $4m in 2014 (2013: $4m) and is based on the market value of
the shares at the grant date, which was £11.34 in 2014 (2013: £10.79).
The Share Award Plan was an award in 2013 in the form of shares or nil-cost options with a three-year vesting period. In 2014, no awards were
made under this plan (2013: 0.1m shares and 0.3m nil-cost options). The charge to the income statement in respect of these awards was $2m in 2014
(2013: $1m). The fair value of the shares and options awarded is based on the market value of the shares at the grant date, which was £12.19 in 2013.
Cash-settled share-based payments
Cash-settled share-based payments arise when the Group incurs a liability to transfer cash amounts that are based on the price (or value) of the
Company’s shares. Most of the charge in respect of cash-settled share-based payments relates to social security costs on share awards which have
not vested or, in the case of share options, have not been exercised. The charge to the income statement is based on the fair value of the awards
outstanding at the balance sheet date, multiplied by the current employer’s social security rate.
F) SUMMARY OF MOVEMENTS IN SHARE AWARDS AND SHARE OPTIONS
Share
awards
under
the LTIP
m
Nil-cost
options
under
the LTIP
m
Sharesave
Plan
options
m
CSOS
options
m
Other
nil-cost
options
(a)
m
2013
Outstanding as at 1 January 2013 5.1 12.5 1.6 10.1 0.9
Granted 2.3 4.7 0.2 – 0.8
Vested (1.1) n/a n/a n/a n/a
Exercised n/a (1.1) (0.3) (4.0) (0.2)
Forfeited (1.0) (3.7) (0.1) (0.1) –
Outstanding as at 31 December 2013 5.3 12.4 1.4 6.0 1.5
Exercisable as at 31 December 2013 n/a 1.9 – 6.0 1.1
Option price range as at 31 December 2013 (£) n/a n/a 8.63-11.10 3.47-7.92 n/a
Weighted average remaining contractual life n/a 8yrs 5mths 2yrs 5mths 2yrs 6mths 4yrs 9mths
Option price range for exercised options (£) n/a n/a 8.63-11.10 2.71-7.92 n/a
Weighted average share price at the date of exercise for options exercised in the year (£) n/a 11.95 11.57 12.10 12.16
2014
Outstanding as at 1 January 2014 5.3 12.4 1.4 6.0 1.5
Granted 1.9 3.5 1.0 – 0.5
Vested (1.0) n/a n/a n/a n/a
Exercised n/a (0.9) (0.2) (2.3) (0.2)
Forfeited (1.9) (3.6) (0.3) (0.1) (0.1)
Outstanding as at 31 December 2014 4.3 11.4 1.9 3.6 1.7
Exercisable as at 31 December 2014 n/a 2.2 – 3.6 1.2
Option price range as at 31 December 2014 (£) n/a n/a 8.30-11.10 4.99-7.92 n/a
Weighted average remaining contractual life n/a 8yrs 2mths 2yrs 7mths 1yr 9mths 4yrs 5mths
Option price range for exercised options (£) n/a n/a 8.74-11.10 3.47-7.92 n/a
Weighted average share price at the date of exercise for options exercised in the year (£) n/a 11.82 11.63 11.52 11.89
(a) Comprises nil-cost options awarded under the DBP, Share Award Plan and VBDP.
G) WEIGHTED AVERAGE EXERCISE PRICE OF SHARE OPTIONS
2014
Sharesave
Plan options
£
2014
CSOS
options
£
2013
Sharesave
Plan options
£
2013
CSOS
options
£
Outstanding as at 1 January 9.43 6.38 9.14 6.13
Granted 8.30 – 10.22 –
Exercised 10.00 5.69 8.65 5.76
Forfeited 9.64 6.71 9.51 5.51
Outstanding as at 31 December 8.72 6.82 9.43 6.38
Exercisable as at 31 December n/a 6.82 8.63 6.38
104
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
4 DISPOSALS, RE-MEASUREMENTS AND IMPAIRMENTS
BG Group has separately identi?ed pro?ts and losses related to disposals of non-current assets, certain re-measurements of ?nancial instruments,
impairments of non-current assets and certain other exceptional items. A reconciliation of results before and after disposals, re-measurements
and impairments is given in note 1, page 98.
2014
$m
2013
$m
Other operating income:
Re-measurements of commodity-based contracts 297 210
Other 106 –
403 210
Operating costs (181) 154
Pro?ts and losses on disposal of non-current assets and impairments:
Disposals of non-current assets 967 253
Impairments (8 956) (4 059)
Other (131) (11)
(8 120) (3 817)
Finance income – 65
Finance costs (644) –
Share of post-tax results from joint ventures and associates (56) –
(8 598) (3 388)
Taxation 3 512 1 219
Loss for the year from continuing operations (5 086) (2 169)
OTHER OPERATING INCOME
Re-measurements included within Other operating income amount to a credit of $297m (2013: $210m), of which a credit of $280m (2013: $34m)
represents non-cash mark-to-market movements on certain gas contracts. While the activity surrounding these contracts involves the physical
delivery of gas, the contracts fall within the scope of IAS 39 and meet the de?nition of a derivative instrument. In addition, re-measurements
include a net $17m credit (2013: $176m) representing unrealised mark-to-market movements associated with economic hedges, including a credit
of $17m (2013: $nil) associated with Brent oil swaps partially hedging the Group’s exposure to commodity prices in 2014. Further information on
commodity instruments is given in note 18, page 117. Other operating income comprises $106m credit (2013: $nil) in respect of ?nal settlement
of a legacy treaty dispute relating to investments formerly held by the Group.
OPERATING COSTS
Operating costs in 2014 include a pre-tax charge of $100m (post-tax $79m) relating to the downward re-measurement of trade receivables in Egypt
to re?ect the time value of money associated with the outstanding debt based on a revised assumed repayment pro?le. In addition, there was
a pre-tax charge of $81m (post-tax $62m) primarily relating to restructuring costs in the UK, Egypt and Australia. Operating costs in 2013 comprised
a curtailment gain of $154m in respect of the closure of the BG Group UK de?ned bene?t pension scheme to future accrual of bene?ts on
31 December 2013. Further information on the pension scheme is given in note 24, page 127.
DISPOSAL OF NON-CURRENT ASSETS AND IMPAIRMENTS
2014
Disposal of non-current assets
BG Group completed the sale of its 62.78% equity interest in the Central Area Transmission System (CATS) gas pipeline and associated infrastructure
in the UK North Sea for total consideration of $797m, resulting in a pre and post-tax pro?t on disposal of $782m in the Upstream segment.
The Group completed the sale of six LNG steam vessels, which were previously held as ?nance leases and have subsequently been leased back
under operating leases, for total gross consideration of $930m (net cash proceeds were $53m after repayment of the ?nance lease liabilities
and settlement of associated cross-currency interest rate swaps and interest rate swaps). This resulted in a pre-tax pro?t on disposal of $216m
(post-tax $170m) in the LNG Shipping & Marketing segment.
Other disposals resulted in a pre-tax charge of $31m (post-tax $18m) in the Upstream segment.
Impairments
There was a pre-tax impairment charge of $8 956m (post-tax $5 928m) relating to Upstream activities in Australia, Egypt and certain other assets.
This was driven mainly by the signi?cant fall in global commodity prices and re?ects a recent forward Brent price curve for ?ve years, reverting
to the Group’s long-term price assumption for impairment testing of $90 real from 1 January 2020.
The Group used the fair value less costs of disposal method to calculate the recoverable amount of the cash-generating units (CGU) consistent
with a level 3 fair value measurement as de?ned in note 18, page 117. In determining the fair value, the Group used a post-tax discount rate
of 8% based on the Group weighted average cost of capital. Where appropriate, cash ?ows were adjusted to take into account any speci?c
country risks.
In Australia, the total pre-tax non-cash impairment charge was $6 824m (post-tax $4 540m) in the Upstream segment. The Group has entered
into an agreement to sell its wholly-owned subsidiary QCLNG Pipeline Pty Limited and, as a result, the remaining QCLNG assets were subject to
a pre-tax impairment charge of $2 747m (post-tax $1 828m) principally re?ecting the increase in tariffs payable to third parties post-completion.
The remaining pre-tax impairment charge of $4 077m (post-tax $2 712m) in Australia was driven primarily by a reduction in the Group’s assumptions
of future commodity prices. The recoverable amount of the CGU, excluding QCLNG Pipeline Pty Limited which is classi?ed as held for sale,
is $15.0bn.
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105
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
4 DISPOSALS, RE-MEASUREMENTS AND IMPAIRMENTS CONTINUED
Impairments continued
In Egypt, there was a pre-tax impairment charge of $790m (post-tax $737m) in the Upstream segment, principally driven by further reserve
downgrades re?ecting underlying reservoir performance and the Group’s expectation of limited LNG exports from Egyptian LNG for the
foreseeable future. The recoverable amount of the CGU is $0.8bn.
Elsewhere, the reduction in the Group’s assumptions of future commodity prices resulted in pre-tax impairment charges of $1 342m (post-tax $651m)
in the Upstream segment. The most signi?cant impairment charges were in the North Sea $566m pre-tax (post-tax $172m), Tunisia $450m pre-tax
(post-tax $255m) and the USA $227m pre-tax (post-tax $148m). Other impairments in 2014 resulted in pre-tax impairment charges of $99m
(post-tax $76m).
Other
Other write-offs and provisions for certain other exceptional items resulted in a pre-tax charge to the income statement of $131m (post-tax $95m).
2013
Disposal of non-current assets
BG Group completed transactions with China National Offshore Oil Corporation (CNOOC) for the sale of certain interests in the QCLNG project
in Australia for total consideration of $3 801m, resulting in a pre and post-tax pro?t on disposal of $31m in the Upstream segment, and the sale
of its 50% holding in TGGT in the USA for a total consideration of $257m, resulting in a pre-tax pro?t on disposal of $187m (post-tax $98m) in
the Upstream segment.
The Group completed the sale of its remaining 20% equity in the Quintero LNG regasi?cation facility in Chile for a total consideration of $176m.
This resulted in a pre-tax pro?t on disposal of $140m (post-tax $107m) in the LNG Shipping & Marketing segment.
The Group completed the sale of all its interests in the Cotton Valley formation to EXCO Resources for $131m. This resulted in a pre and post-tax pro?t
on disposal of $10m in the Upstream segment. Other disposals resulted in a pre and post-tax pro?t of $11m, comprising $1m pre and post-tax charge
in the Upstream segment and $12m pre and post-tax pro?t in the Other activities segment.
A pre-tax charge of $126m (post-tax $83m) was recognised in the Upstream segment following the relinquishment of land licences in the
US Lower 48 region.
Impairments
The Group used the fair value less costs of disposal method to calculate the recoverable amount of the cash-generating units (CGU) consistent
with a level 3 fair value measurement as de?ned in note 18, page 117. In determining the fair value, the Group used a post-tax discount rate
of 8% based on the Group weighted average cost of capital and acreage valuations for intangible assets in the USA. Where appropriate, cash
?ows were adjusted to take into account any speci?c country risks.
As a result of reserves revisions and revised expectations of the value of its Egyptian operations given continuing uncertainty over the business
environment in country, the Group reviewed the recoverable amount of its assets in Egypt. This resulted in a pre-tax impairment charge of
$2 000m (post-tax $1 286m) in the Upstream segment.
In addition, against the backdrop of lower forward gas market prices, lower production expectations based on well performance and a continued
low rig count, the Group reviewed the recoverable amount of certain assets associated with the shale gas business in the USA. This resulted
in a pre-tax impairment charge of $1 700m (post-tax $1 105m) in the Upstream segment.
A $171m pre-tax impairment charge (post-tax $94m) was recognised against certain other Upstream assets as a result of a reserves revision.
Other impairments resulted in a pre-tax charge to the income statement of $188m (post-tax $85m): $158m (post-tax $55m) in the Upstream
segment and $30m pre and post-tax in the Other activities segment.
Other
Other write-offs and provisions for certain other exceptional items resulted in a pre-tax charge to the income statement of $11m (post-tax $5m).
FINANCE INCOME AND COSTS
Re-measurements presented in ?nance income and costs include mark-to-market movements on certain derivatives used to hedge foreign
exchange and interest rate risk and foreign exchange movements on borrowings and certain inter-company balances.
SHARE OF POST-TAX RESULTS FROM JOINT VENTURES AND ASSOCIATES
A pre and post-tax charge of $56m (2013: $nil) was recognised in the Upstream segment in respect of the Group’s share of a write-off of assets
under construction in Brazil following the bankruptcy of a contractor.
TAXATION
Taxation includes a credit of $3 028m (2013: $1 489m) as a result of the impairment charges, and a net credit of $449m (2013: $nil) resulting
from a number of exceptional one-off and prior period taxation items. These items included the full recognition of taxable losses in Australia
following ?rst LNG production at QCLNG and exceptional prior period adjustments and one-off changes to tax positions in a number
of jurisdictions.
106
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
5 FINANCE INCOME AND COSTS
2014
$m
2013
$m
Interest receivable
(a)
153 104
Net fair value gains and losses on derivatives and fair value hedge adjustments
(b)
– 65
Finance income 153 169
Interest payable
(c)
(548) (577)
Finance lease charges (92) (108)
Interest capitalised
(d)
532 522
Unwinding of discount on provisions and pension assets and liabilities
(e)
(154) (120)
Net fair value gains and losses on derivatives and fair value hedge adjustments
(b)
(644) –
Finance costs (906) (283)
Net ?nance costs – continuing operations (753) (114)
(a) Interest receivable includes net exchange gains of $49m (2013: $nil).
(b) Comprises $26m loss (2013: $65m gain) associated with fair value hedge adjustments, $238m loss (2013: $nil) in respect of mark-to-market movements on derivatives, $236m gain (2013: $136m loss)
on foreign exchange movements on borrowings and $616m loss (2013: $136m gain) on foreign exchange movements on certain inter-company balances.
(c) Interest payable includes net exchange losses of $nil (2013: $44m).
(d) Finance costs associated with the Group’s central borrowings used to ?nance major capital projects, are capitalised up to the point that the project is ready for its intended use. The weighted average
interest cost applicable to these borrowings is 3.4% per annum (2013: 3.8%). Tax relief for capitalised interest is approximately $162m (2013: $121m).
(e) Relates to the unwinding of the discount on provisions and amounts in respect of pension obligations which represent the unwinding of discount on the plans’ net de?cit.
6 TAXATION
2014
$m
2013
$m
Current tax
UK corporation tax and petroleum revenue tax 869 1 385
Overseas tax 1 321 1 524
Total current tax 2 190 2 909
Deferred tax (3 469) (1 225)
Total tax (credit)/charge – continuing operations (1 279) 1 684
The total tax (credit)/charge reconciles with that calculated using the statutory UK corporate tax rate of 21.49% (2013: 23.25%):
2014
$m
2013
$m
Pro?t/(loss)before taxation (2 330) 3 889
Tax on pro?t/(loss) before taxation at UK statutory corporation tax rate (501) 904
Effect on tax charge of:
Non tax-deductible or non-taxable items (145) (529)
Overseas taxes at different rates to UK statutory rate (478) 562
North Sea taxes at different rates to UK statutory rate 380 415
Petroleum revenue tax 2 11
Effect of changes in tax rate on deferred tax balances – (68)
Adjustment recognised for current tax of prior periods (194) (179)
Adjustment recognised for deferred tax of prior periods (35) 105
(Recognition)/derecognition of deferred tax (183) 103
Other items (125) 360
Total tax (credit)/charge – continuing operations (1 279) 1 684
Certain comparative amounts shown in the reconciliation of total tax have been reclassi?ed. There is no change to the tax amounts reported in the
income statement, balance sheet or cash ?ow statement. The tax charge in the 2013 Annual Report and Accounts was reconciled using a blended
UK rate comprised of the UK tax rates for both UK North Sea and other UK activities.
The tax credit relating to disposals, re-measurements, impairments and other items is $3 512m (2013: $1 219m). This consists of a tax charge
on unrealised re-measurements of $8m (2013: $166m), a tax credit on one-off and prior year taxation adjustments of $449m, and a tax credit
on disposals, impairments and other items of $3 071m (2013: $1 385m).
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107
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
6 TAXATION CONTINUED
The net movement in deferred tax assets and liabilities is shown below:
Accelerated tax
depreciation
$m
Decommis-
sioning
$m
Unused
tax losses
$m
Other
temporary
differences
(a)
$m
Total
$m
As at 1 January 2013 (8 205) 817 3 114 459 (3 815)
Credit/(charge) for the year 2 306 (269) (706) (108) 1 223
Charge to equity and other comprehensive income – – – (80) (80)
Currency translation adjustments (89) – 25 11 (53)
Disposals 2 – – – 2
As at 31 December 2013 (5 986) 548 2 433 282 (2 723)
Credit/(charge) for the year 2 130 189 1 510 (360) 3 469
Charge to equity and other comprehensive income – – – 163 163
Currency translation adjustments 400 (42) (306) 13 65
Disposals 60 (31) – – 29
As at 31 December 2014 (3 396) 664 3 637 98 1 003
2014
$m
2013
$m
Deferred tax liabilities (2 946) (4 120)
Deferred tax assets 3 949 1 397
Net deferred tax asset/(liability) as at 31 December 1 003 (2 723)
(a) Other temporary differences include deferred petroleum revenue tax, retirement bene?t obligations and certain provisions.
Deferred tax assets are recognised for deductible temporary differences, unutilised tax losses and unused tax credits to the extent that realisation of
the related tax bene?t through future taxable income is probable. To determine the future taxable income, reference is made to the latest available
pro?t forecast which takes into account production volumes, LNG Shipping & Marketing supply volumes and commodity prices in the relevant
jurisdictions. This requires assumptions regarding future pro?tability and is therefore inherently uncertain.
Certain comparative amounts shown in the analysis of deferred tax by category of temporary differences have been reclassi?ed. There is no change
to the tax amounts reported in the income statement, balance sheet or cash ?ow statement.
2014
$m
2013
$m
Temporary differences for which no deferred tax asset has been recognised
Deductible temporary differences 2 211 840
Unused tax losses 2 192 3 233
Tax credits 554 464
Total deferred tax assets not recognised 4 957 4 537
To the extent unutilised, $7m of the unused tax losses will expire within 5 years (2013: $9m) and $849m of the unused tax losses will expire
between 6 and 20 years (2013: $1 219m).
The aggregate amount of taxable temporary differences associated with undistributed earnings of subsidiaries, joint ventures and associates,
for which deferred tax liabilities have not been recognised, is approximately $5m (2013: $6m). No liability has been recognised in respect of
these differences either because no liability is expected to arise on distribution under applicable tax legislation or because the Group is in a position
to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future.
As at 31 December 2014, the Company had a deferred tax asset of $2m (2013: $10m).
108
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
7 DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE
Following the decision to dispose of the majority of the Group’s Transmission and Distribution assets in 2012, certain businesses have been
treated as discontinued. In 2013, the Group completed the sale of its interest in Gujarat Gas Company Limited (GGCL) in India.
RESULTS FROM DISCONTINUED OPERATIONS
2014
$m
2013
$m
Revenue – 236
Operating costs 9 (218)
Operating pro?t 9 18
Share of post-tax results from joint ventures and associates – (1)
Pro?t before tax 9 17
Taxation (2) (15)
Pro?t after tax 7 2
Pro?ts and losses on disposal of non-current assets and impairments – 241
Taxation – 2
Post-tax pro?ts and losses on disposal of non-current assets and impairments – 243
Pro?t for the year from discontinued operations 7 245
CASH FLOWS RELATING TO DISCONTINUED OPERATIONS
2014
$m
2013
$m
Pro?t before tax 9 17
Share of post-tax results from joint ventures and associates – 1
Depreciation of property, plant and equipment – 1
Increase in provisions – 1
Movements in working capital 45 120
Cash generated by operations 54 140
Income taxes paid – (6)
Net cash in?ow from operating activities 54 134
Net cash out?ow from investing activities – (8)
Net cash out?ow from ?nancing activities (58) (112)
Net (decrease)/increase in cash and cash equivalents (4) 14
DISPOSAL OF NON-CURRENT ASSETS AND IMPAIRMENTS
In 2013, the sale of the Group’s investment in GGCL in India for gross consideration of $422m resulted in a pre and post-tax pro?t of $245m,
being the gross consideration less net assets of $194m, recycling to the income statement of currency translation losses of $46m, the derecognition
of the non-controlling interest of $64m and $1m of other costs.
Other disposals and impairments in 2013 resulted in a pre-tax charge of $4m (post-tax charge of $2m).
ASSETS HELD FOR SALE
The Group
as at 31 December 2014
$m
2013
$m
Property, plant and equipment 2 078 –
Trade and other receivables 10 –
Assets classi?ed as held for sale 2 088 –
Trade and other payables (27) –
Provisions for other liabilities and charges (36) –
Liabilities associated with assets classi?ed as held for sale (63) –
Net assets classi?ed as held for sale 2 025 –
Assets held for sale as at 31 December 2014 comprised QCLNG Pipeline Pty Limited in the Upstream segment and two LNG vessels in the
LNG Shipping & Marketing segment, the disposals of which are expected to complete in the ?rst half of 2015.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
8 DIVIDENDS
2014 2013
$m
Cents per
ordinary
share
Pence per
ordinary
share $m
Cents per
ordinary
share
Pence per
ordinary
share
Prior year ?nal dividend, paid in the year 547 15.68 9.51 478 14.26 9.03
Interim dividend, paid in the year 480 14.38 8.47 448 13.07 8.51
Total dividend, paid in the year 1 027 30.06 17.98 926 27.33 17.54
Proposed ?nal dividend for the year ended 31 December 2014
(a)
490 14.37 9.52
(a) The proposed ?nal dividend was announced on 3 February 2015 in US Dollars, with a Pounds Sterling equivalent. It is paid to shareholders in Pounds Sterling. The total amount payable in US Dollars
has been determined based on the shares in issue as at 31 December 2014 that are eligible for the dividend. The total amount payable in US Dollars may vary, depending on movements in exchange
rates between February 2015 and May 2015, when the dividend will be paid.
The proposed ?nal dividend for the year ended 31 December 2014 of 14.37 cents per share takes the 2014 full-year dividend to 28.75 cents per share.
The ?nal dividend of 15.68 cents per ordinary share ($547m) in respect of the year ended 31 December 2013 was paid on 30 May 2014. The interim
dividend was paid on 12 September 2014. The proposed ?nal dividend of 14.37 cents per ordinary share ($490m) in respect of the year ended
31 December 2014 is payable on 22 May 2015 to all shareholders on the register at the close of business on 24 April 2015.
9 EARNINGS PER ORDINARY SHARE – CONTINUING OPERATIONS
Earnings per ordinary share has been calculated by dividing the earnings for the year for the continuing operations of the Group of $(1 051)m
(2013: $2 205m) by 3 408m (2013: 3 402m), being the weighted average number of ordinary shares outstanding during the year. The average number
of shares outstanding excludes treasury shares and shares held by employee share plans. Earnings per ordinary share excluding disposals,
re-measurements and impairments has been presented in order to re?ect the underlying performance of the Group.
2014 2013
$m
Basic
earnings per
ordinary
share
cents $m
Basic
earnings per
ordinary
share
cents
Earnings excluding disposals, re-measurements and impairments 4 035 118.4 4 374 128.6
Disposals, re-measurements and impairments (see note 4, page 105) (5 086) (149.2) (2 169) (63.8)
Earnings including disposals, re-measurements and impairments (1 051) (30.8) 2 205 64.8
The earnings ?gure used to calculate diluted earnings per ordinary share is the same as that used to calculate earnings per ordinary share given
above, divided by 3 408m, being the weighted average number of ordinary shares in issue during the year. A reconciliation of the weighted average
number of ordinary shares used as the denominator in calculating the basic and diluted earnings per ordinary share is given below. In 2014,
potentially issuable ordinary shares are excluded from the diluted earnings per ordinary share calculation, as their inclusion would decrease
the loss per ordinary share.
2014
Shares
m
2013
Shares
m
Basic 3 408 3 402
Dilutive potential ordinary shares:
Equity instruments outstanding during the year
(a)
– 17
Diluted basis 3 408 3 419
Diluted earnings per ordinary share (excluding disposals, re-measurements and impairments) (cents) 118.4 128.0
Diluted earnings per ordinary share (including disposals, re-measurements and impairments) (cents) (30.8) 64.5
(a) The weighted average number of anti-dilutive equity instruments excluded from the calculation of diluted earnings per ordinary share was 15m at 31 December 2014.
110
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
10 GOODWILL
The Group 2014
$m
2013
$m
Cost and net book value as at 1 January 25 24
Currency translation adjustments (2) 1
Charge for impairment (see note 4, page 105) (23) –
Cost and net book value as at 31 December – 25
For the purpose of impairment testing, goodwill is allocated to cash-generating units; these represent the lowest level at which goodwill is monitored.
The Group tests goodwill annually for impairment or more frequently if there are indications that it might be impaired. During the year there was
a goodwill impairment charge of $23m (2013: $nil) recognised as a consequence of the signi?cant fall in global commodity prices.
11 OTHER INTANGIBLE ASSETS
The Group Expenditure on unproved
gas and oil reserves Other
(a)
Total
2014
$m
2013
$m
2014
$m
2013
$m
2014
$m
2013
$m
Cost as at 1 January 4 800 4 782 373 377 5 173 5 159
Additions 746
(b)
1 341
(b)
24 – 770 1 341
Disposals and unsuccessful exploration expenditure
(c)
(256) (810) – – (256) (810)
Transfers to property, plant and equipment (100) (298) – – (100) (298)
Other movements 8 (16) (3) – 5 (16)
Currency translation adjustments (175) (199) (1) (4) (176) (203)
Cost as at 31 December 5 023 4 800 393 373 5 416 5 173
Amortisation as at 1 January (1 048) (438) (261) (252) (1 309) (690)
Charge for the year – – (11) (9) (11) (9)
Charge for impairment (see note 4, page 105) (961) (665) – – (961) (665)
Disposals and transfers – 55 – – – 55
Amortisation as at 31 December (2 009) (1 048) (272) (261) (2 281) (1 309)
Net book value as at 31 December 3 014 3 752 121 112 3 135 3 864
(a) Other includes capacity rights in the Caspian Pipeline Consortium export pipeline which are amortised on a straight-line basis over the term of the contract and have an average remaining useful life
of 23 years (2013: 24 years). Other also includes the contractual rights in respect of the purchase of LNG regasi?cation services and related gas sales. These rights are amortised on a straight-line basis
over the term of the contract.
(b) Broadly equivalent to cash ?ows attributable to investing activities arising from exploration and evaluation.
(c) Disposals and unsuccessful exploration expenditure includes $232m of intangible assets written off (2013: $394m).
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
12 PROPERTY, PLANT AND EQUIPMENT
The Group
Land and
buildings
$m
Plant and
machinery
$m
Motor
vehicles
and of?ce
equipment
$m
Exploration
and
production
$m
Total
$m
Cost as at 1 January 2014 138 11 735 1 869 52 117 65 859
Additions – 994 213 6 900 8 107
Disposals, transfers and other movements
(a)
– (650) (22) 49 (623)
Currency translation adjustments (9) (88) (99) (2 084) (2 280)
Reclassi?ed as held for sale – (2 157) – – (2 157)
Cost as at 31 December 2014 129 9 834 1 961 56 982 68 906
Accumulated depreciation as at 1 January 2014 (49) (938) (1 035) (21 612) (23 634)
Charge for the year
(b)
– (145) (213) (2 436) (2 794)
Charge for impairment
(b)
(see note 4, page 105) (12) (1 228) (25) (6 792) (8 057)
Disposals and transfers – 252 24 569 845
Currency translation adjustments 3 31 60 416 510
Reclassi?ed as held for sale – 79 – – 79
Accumulated depreciation as at 31 December 2014 (58) (1 949) (1 189) (29 855) (33 051)
Net book value as at 31 December 2014
(c)(d)(e)
71 7 885 772 27 127 35 855
The Group
Land and
buildings
$m
Plant and
machinery
$m
Motor
vehicles
and of?ce
equipment
$m
Exploration
and
production
$m
Total
$m
Cost as at 1 January 2013 148 10 945 1 704 48 838 61 635
Additions – 1 904 179 8 210 10 293
Disposals, transfers and other movements
(a)
– (1 073) (5) (2 677) (3 755)
Currency translation adjustments (10) (41) (9) (2 254) (2 314)
Cost as at 31 December 2013 138 11 735 1 869 52 117 65 859
Accumulated depreciation as at 1 January 2013 (48) (784) (844) (16 034) (17 710)
Charge for the year
(b)
– (149) (193) (2 613) (2 955)
Charge for impairment
(b)
(see note 4, page 105) – – – (3 124) (3 124)
Disposals and transfers – (2) 5 200 203
Currency translation adjustments (1) (3) (3) (41) (48)
Accumulated depreciation as at 31 December 2013 (49) (938) (1 035) (21 612) (23 634)
Net book value as at 31 December 2013
(c)(d)(e)
89 10 797 834 30 505 42 225
(a) Includes, within Exploration and production, a transfer from other intangible assets of $100m (2013: $298m).
(b) Depreciation charge and charge for impairment is attributable to continuing and discontinued operations as follows:
Depreciation Impairment
2014
$m
2013
$m
2014
$m
2013
$m
Continuing operations 2 794 2 954 8 057 3 124
Discontinued operations – 1 – –
2 794 2 955 8 057 3 124
(c) The Group’s net book value includes capitalised interest of $1 398m (2013: $1 225m) comprising Exploration and production $873m (2013: $838m) and Plant and machinery $525m (2013: $387m).
A deferred tax liability is recognised in respect of this taxable temporary difference at current enacted rates.
(d) Includes the net book value of decommissioning assets of $2 908m (2013: $2 432m) and expenditure on Plant and machinery and Exploration and production assets under construction of $10 739m
(2013: $23 405m).
(e) The net book value of assets capitalised and held under ?nance leases is shown below and comprises $1 073m (2013: $1 884m) included in Plant and machinery and $228m (2013: $64m) included
in Exploration and production:
as at 31 December 2014
$m
2013
$m
Cost 1 963 2 738
Accumulated depreciation (662) (790)
Net book value 1 301 1 948
Details of BG Group’s gas and oil reserves are given in Supplementary information – gas and oil (unaudited) on page 132.
112
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
13 INVESTMENTS
The Group
as at 31 December
2014
$m
2013
$m
Joint ventures 796 840
Associates 2 709 2 015
Other investments
(a)
42 78
3 547 2 933
(a) Includes an investment in Drillsearch Energy Limited and Azure Midstream Energy, LP (Azure).
During 2014, a charge for impairment of $168m was recorded against the carrying value of associates (2013: $270m).
There were no material acquisitions or disposals in 2014. In 2013, the Group disposed of its entire 50% equity holding in TGGT, a joint venture
midstream company operating in east Texas and north Louisiana, to Azure. The Group received net cash of $240m along with a $17m stake
in Azure, equating to an approximate 3% equity holding.
JOINT VENTURES AND ASSOCIATES INFORMATION
The Group does not have any individually material joint ventures or associates. Analysis of BG Group’s share of pro?t and comprehensive income
from individually immaterial joint ventures and associates in aggregate is shown below:
Joint ventures Associates
For the year ended 31 December 2014
$m
2013
$m
2014
$m
2013
$m
Share of pro?t from continuing operations 80 112 86 224
Share of total comprehensive income 80 112 86 224
As at 31 December 2014, the Group’s joint ventures had placed contracts for capital expenditure, the Group’s share of which amounted to
$23m (2013: $27m). As at 31 December 2014, the Group had no contingent liabilities in respect of its joint ventures or associates (2013: $nil).
Further information on principal subsidiary undertakings, joint ventures, associates and material joint operations is given in note 25, page 130.
The Company Subsidiary undertakings
2014
$m
2013
$m
As at 1 January 4 288 4 130
Capital contribution
(a)
70 74
Currency translation adjustments (254) 84
As at 31 December 4 104 4 288
(a) Represents the fair value of equity instruments granted to subsidiaries’ employees arising from equity-settled employee share schemes.
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113
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
14 INVENTORIES
The Group
as at 31 December 2014
$m
2013
$m
Raw materials and consumables 613 448
Finished goods for resale 581 390
1 194 838
15 TRADE AND OTHER RECEIVABLES
The Group The Company
as at 31 December 2014
$m
2013
$m
2014
$m
2013
$m
Amounts falling due within one year
Trade receivables 1 228 2 283 – –
Amounts owed by Group undertakings – – 1 786 2 881
Amounts owed by joint ventures and associates (see note 23, page 126) 42 69 – –
Other receivables 1 225 1 488 – –
Prepayments 387 787 – –
Accrued income 2 160 2 273 – –
5 042 6 900 1 786 2 881
Amounts falling due after more than one year
Trade receivables 460 449 – –
Other receivables 608 328 – –
1 068 777 – –
6 110 7 677 1 786 2 881
Trade receivables are stated net of provisions. When management considers the recovery of a receivable to be improbable, a provision is made
against the carrying value of the receivable. The movement in this provision is as follows:
The Group 2014
$m
2013
$m
Provision as at 1 January 41 60
Charge/(credit) to the income statement 17 (19)
Provision as at 31 December 58 41
As at 31 December 2014, $928m (2013: $754m) of trade and other receivables were past due but not provided for; an analysis of these receivables
is as follows:
The Group 2014
$m
2013
$m
Less than three months past due 134 129
Between three and six months past due 196 185
Between six and 12 months past due 42 241
More than 12 months past due 556 199
928 754
Included within past due but not impaired receivables is a balance of $729m (2013: $525m) with Egypt General Petroleum Corporation (EGPC) of
which $24m has been received post year end. This balance, and the analysis of trade and other receivables past due but not provided for above,
does not include a further $100m downward re-measurement of the carrying amount in 2014, to re?ect the time value of money associated with
the outstanding debt based on a revised assumed repayment pro?le. The net amount of trade and other receivables past due but not provided
for after this re-measurement is $828m.
The remaining balance relates to a diversi?ed number of independent customers, $22m of which has been received post year end.
For further information on the credit risk associated with trade receivables, including the EGPC balance, see note 18, page 117.
114
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
16 CASH AND CASH EQUIVALENTS
The Group
as at 31 December 2014
$m
2013
$m
Cash at bank and in hand 371 597
Cash equivalent investments 4 924 5 611
5 295 6 208
Cash and cash equivalents comprise cash in hand, deposits with a maturity of three months or less and other short-term money market deposit
accounts that are readily convertible into known amounts of cash.
Included within cash and cash equivalent investments is an amount equivalent to $390m (2.8bn Egyptian Pounds) which, due to foreign exchange
restrictions, is not immediately available to the Group other than for funding local cash expenditure.
For information on the interest rate composition of the Group’s ?nancial assets see note 18, page 117.
17 BORROWINGS
GROSS BORROWINGS
The Group
as at 31 December 2014
$m
2013
$m
Amounts falling due within one year
Bonds
2.5% US Dollar 350m bond due December 2015 349 –
Fair value hedge adjustments 1 –
350 –
Loans from ?nancial institutions 1 169 414
Obligations under ?nance leases 67 61
1 586 475
Amounts falling due after more than one year
Bonds and other loans
2.5% US Dollar 350m bond due December 2015 – 349
2.875% US Dollar 750m bond due October 2016 749 748
5.125% Pound Sterling 500m bond due December 2017 779 827
Floating rate US Dollar 300m bond due September 2018 300 300
3.0% Euro 1 000m bond due November 2018 1 209 1 376
3.625% Euro 500m bond due July 2019 603 686
3.625% Euro 250m bond due July 2019 308 352
3.94% Hong Kong Dollar 370m bond due October 2019 48 48
4.0% US Dollar 650m bond due December 2020 644 643
4.0% US Dollar 1 350m bond due October 2021 1 339 1 338
1.25% Euro 775m bond due November 2022 935 –
5.125% Pound Sterling 750m bond due December 2025 1 157 1 228
2.25% Euro 800m bond due November 2029 964 –
3.5% Euro 100m bond due October 2033 118 134
5.0% Pound Sterling 750m bond due November 2036 1 144 1 214
5.125% US Dollar 900m bond due October 2041 881 880
6.5% Pound Sterling 600m bond due November 2072
(a)
932 990
6.5% US Dollar 500m bond due November 2072
(a)
497 497
6.5% Euro 500m bond due November 2072
(a)
603 686
Fair value hedge adjustments 175 172
13 385 12 468
Loans from ?nancial institutions 1 076 2 242
Obligations under ?nance leases 1 460 2 344
15 921 17 054
Gross borrowings 17 507 17 529
(a) These bonds are long-dated, subordinated securities which although accounted for as debt, incorporate some features typical of equity, such as potential coupon deferral. The Group may,
at its sole discretion, redeem all, but not part, of the securities at their principal amount on 30 November 2017, 30 November 2022 or any subsequent coupon date thereafter to maturity.
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115
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
17 BORROWINGS CONTINUED
NET BORROWINGS
(a)
The Group
as at 31 December 2014
$m
2013
$m
Amounts falling due within one year
Cash and cash equivalents 5 295 6 208
Trade and other receivables
(b)
– 38
Borrowings (1 586) (475)
Commodity contracts and other derivative ?nancial instruments
(c)
6 (11)
3 715 5 760
Amounts falling due after more than one year
Borrowings (15 921) (17 054)
Trade and other receivables
(b)
172 134
Commodity contracts and other derivative ?nancial instruments
(c)
36 550
(15 713) (16 370)
Net borrowings (11 998) (10 610)
(a) Net borrowings are de?ned on page 143.
(b) Trade and other receivables comprise a ?nance lease receivable of $172m (2013: $172m). See Note 18, page 117.
(c) Commodity contracts and other derivative ?nancial instruments comprise treasury ?nancial derivatives of $42m (2013: $539m).
The following table shows a reconciliation of net borrowings:
The Group 2014
$m
2013
$m
Net borrowings as at 1 January (10 610) (10 624)
Net (decrease)/increase in cash and cash equivalents (908) 1 704
Cash in?ow from changes in borrowings (1 461) (1 620)
Inception of ?nance leases (247) (103)
Disposal of ?nance leases 923 –
Currency translation and other re-measurements 305 (53)
Movement in net borrowings classi?ed as held for sale – 86
Net borrowings as at 31 December (11 998) (10 610)
As at 31 December 2014, BG Group’s share of the net borrowings in joint ventures and associates amounted to approximately $0.3bn (2013: $0.6bn),
including BG Group shareholder loans of approximately $0.4bn (2013: $0.7bn). These net borrowings are included in BG Group’s share of the net
assets in joint ventures and associates.
MATURITY AND INTEREST RATE PROFILE OF THE GROUP’S BORROWINGS
The following tables analyse the Group’s gross borrowings. These are repayable as follows:
Gross borrowings (including obligations under ?nance leases) Fixed rate borrowings Total gross borrowings
2014
$m
2013
$m
2014
$m
2013
$m
Within one year 417 61 1 586 475
Between one and two years 827 413 1 078 1 655
Between two and three years 73 818 1 424 1 068
Between three and four years 78 66 1 833 1 471
Between four and ?ve years 1 009 1 452 1 058 2 005
After ?ve years 7 816 10 236 10 528 10 855
10 220 13 046 17 507 17 529
For the purpose of the table above, borrowings with an initial maturity within one year, such as commercial paper, are treated as ?oating rate.
As part of its interest rate risk strategy, the Group has entered into swaps. The disclosure above is presented after the effect of these swaps.
Further information on the fair value of the swaps is included in note 18, page 117.
The weighted average post-swap interest rate of borrowings as at 31 December 2014 was 3.7% (2013: 4.0%). Post-swap ?xed-rate borrowings
mature between 2015 and 2072 (2013: mature between 2014 and 2072).
116
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
17 BORROWINGS CONTINUED
Obligations under ?nance leases pre-swap
Amounts due:
Minimum lease payments
Obligations under
?nance leases
2014
$m
2013
$m
2014
$m
2013
$m
Within one year 162 154 67 61
Between one and ?ve years 654 672 275 278
After ?ve years 1 904 2 966 1 185 2 066
Less: future ?nance charges (1 193) (1 387) – –
1 527 2 405 1 527 2 405
The Group has ?nance lease obligations in respect of infrastructure and LNG ships. These lease obligations expire between 2024 and 2039
(2013: expire between 2024 and 2038).
CURRENCY COMPOSITION OF THE GROUP’S BORROWINGS
The following table analyses the currency composition of the Group’s borrowings:
2014
$m
2013
$m
Currency:
Pound Sterling 5 296 6 477
US Dollar 7 205 7 667
Euro 4 778 3 253
Other 228 132
17 507 17 529
The disclosure above does not include the impact of certain currency swaps as these are separately recognised under IAS 39 and presented
in note 18, page 117. As at 31 December 2014, the Group had swapped $2 291m (2013: $2 437m) of Pound Sterling borrowings into US Dollars,
$4 778m (2013: $3 253m) of Euro borrowings into US Dollars and $50m (2013: $50m) of other currencies into US Dollars.
COMPOSITION OF THE GROUP’S UNDRAWN COMMITTED FACILITIES
The Group has undrawn committed borrowing facilities, in respect of which all conditions have been met, as follows:
Expiring:
2014
$m
2013
$m
Within one year
(a)
2 102 –
Between one and two years 2 180 –
Between two and three years 3 040 2 180
Between three and four years – 3 040
7 322 5 220
(a) Undrawn committed facilities expiring within one year as at 31 December 2014 comprise a £250m revolving bank borrowing facility (which was fully drawn as at 31 December 2013) and a further
credit facility provided by an export credit agency, which was executed during 2014 and of which $1.7 billion was undrawn at 31 December 2014. While the opportunity to draw upon this credit
facility expires within one year, drawn funds are repaid in equal semi-annual instalments commencing after more than one year and ending after more than ?ve years.
18 FINANCIAL INSTRUMENTS
TREASURY INSTRUMENTS
The Group is exposed to credit risk, interest rate risk, exchange rate risk and liquidity risk. As part of its business operations, the Group uses
derivative ?nancial instruments (derivatives) in order to manage exposure to ?uctuations in interest rates and exchange rates. The Group enters
into interest rate derivatives to manage the ?xed and ?oating composition of its debt. The Group enters into currency exchange rate derivatives to
hedge certain currency cash ?ows and to adjust the currency composition of its assets and liabilities. Certain agreements are combined currency
and interest swap transactions, described as cross-currency interest rate derivatives. The Group’s policy is to enter into interest or currency
exchange rate derivatives only where these are matched by an underlying asset, liability or transaction.
Further information on treasury risks is contained in the Principal risks and uncertainties section, pages 34 to 41.
COMMODITY INSTRUMENTS
Within the ordinary course of business the Group routinely enters into sale and purchase transactions for commodities. The majority of these
transactions take the form of contracts that were entered into and continue to be held for the purpose of the receipt or delivery of the commodity
in accordance with the Group’s expected sale, purchase or usage requirements. Such contracts are not within the scope of IAS 39.
Certain gas sales contracts fall within the scope of IAS 39. These contracts include pricing terms that are based on a variety of commodities
and indices. They are recognised in the balance sheet at fair value with movements in fair value recognised in the income statement.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
18 FINANCIAL INSTRUMENTS CONTINUED
COMMODITY INSTRUMENTS CONTINUED
Certain short-term market traded contracts for the purchase and subsequent resale of third-party commodities are within the scope of IAS 39
and are recognised in the balance sheet at fair value with movements in fair value recognised in the income statement. The Group uses various
commodity-based derivative instruments to manage some of the risks arising from ?uctuations in commodity prices. Such contracts include
physical and net-settled forwards, futures, swaps and options. Where these derivatives have been designated as cash ?ow hedges of underlying
commodity price exposures, certain gains and losses attributable to these instruments are deferred in other comprehensive income and
subsequently recognised in the income statement when the underlying hedged transaction crystallises. Commodity derivatives that are not part
of a hedging relationship are recognised in the balance sheet within Other commodity derivatives at fair value, with movements in fair value
recognised in the income statement.
Further information on commodity price exposure is contained in the Principal risks and uncertainties section, pages 34 to 41.
AMOUNTS RECOGNISED IN RESPECT OF FINANCIAL INSTRUMENTS MEASURED AT FAIR VALUE
The Group
as at 31 December
Included in the balance sheet:
2014 2013
Assets
$m
Liabilities
$m
Assets
$m
Liabilities
$m
Interest rate derivatives 102 (61) 127 (42)
Currency exchange rate derivatives – (3) 20 (17)
Cross-currency interest rate derivatives 183 (179) 495 (44)
Gas contracts 82 (14) – (208)
Other commodity derivatives 155 (124) 88 (159)
522 (381) 730 (470)
As at 31 December 2014, the Group also held non-derivative available-for-sale ?nancial assets of $42m (2013: $61m) which are recognised in the balance
sheet at fair value.
As at 31 December 2014, the Group had deposited cash of $119m (2013: $110m) and received cash of $16m (2013: $7m) in respect of collateral and margin
payments associated with the use of commodity derivatives.
Derivative ?nancial instruments expected to be realised within one year are presented within current assets and current liabilities. All other derivative
?nancial instruments are classi?ed as non-current. The maturity pro?le of derivative ?nancial instruments is as follows:
2014 2013
Assets
$m
Liabilities
$m
Assets
$m
Liabilities
$m
Within one year 235 (128) 107 (297)
Between one and ?ve years 103 (163) 237 (122)
After ?ve years 184 (90) 386 (51)
522 (381) 730 (470)
The notional principal amounts of derivative ?nancial instruments are as follows:
2014 2013
Within
one year
$m
Between
one and
?ve years
$m
After
?ve years
$m
Total
$m
Within
one year
$m
Between
one and
?ve years
$m
After
?ve years
$m
Total
$m
Interest rate derivatives 1 300 780 2 200 4 280 9 2 194 3 253 5 456
Currency exchange rate derivatives 599 – – 599 1 263 47 – 1 310
Cross-currency interest rate derivatives – 4 461 3 285 7 746 – 3 113 2 815 5 928
Other commodity derivatives 10 394 5 723 – 16 117 15 047 4 636 232 19 915
The notional principal amounts of gas contracts are $293m (2013: $690m). The amounts in respect of other commodity derivatives represent
the gross combination of notional principals relating to all purchase and sale contracts and accordingly do not show the extent to which these
contracts may offset. These notional principal amounts give an indication of the scale of derivatives held, but do not re?ect the risks that the
Group is exposed to from their use.
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18 FINANCIAL INSTRUMENTS CONTINUED
VALUATION
All ?nancial instruments that are initially recognised and subsequently re-measured at fair value have been classi?ed in accordance with the
hierarchy described in IFRS 13 ‘Fair Value Measurement’.
Fair value measurement hierarchy
The fair value hierarchy, described below, re?ects the signi?cance of the inputs used to determine the valuation of ?nancial assets and liabilities
measured at fair value.
Level 1 fair value measurements are those derived directly from quoted prices (unadjusted) in active markets for identical assets and liabilities.
Level 2 fair value measurements are those including inputs other than quoted prices included within Level 1 that are observable for the asset or liability
directly or indirectly. The fair value of the Group’s interest rate and currency exchange rate derivatives and the majority of the Group’s commodity
derivatives are calculated from relevant market prices and yield curves at the balance sheet date and are therefore based solely on observable price
information. These instruments are not directly quoted in active markets and are accordingly classi?ed as Level 2 in the fair value hierarchy.
Level 3 fair value measurements are those derived from valuation techniques that include signi?cant inputs for the asset or liability that are not based
on observable market data. Where observable market valuations of commodity contracts are unavailable, the fair value on initial recognition is the
transaction price and is subsequently determined using the Group’s forward planning assumptions for the price of gas, other commodities and indices.
Due to the assumptions underlying their fair value, certain gas contracts are categorised as Level 3 in the fair value hierarchy. These contracts contain
an underlying linkage to oil prices, and one of the assumptions used for their valuation is that observable commodity prices are liquid for four years
(2013: four years). The fair values of the commodity contracts are calculated using the market yield curve at the balance sheet date.
The Group Financial assets Financial liabilities
as at 31 December 2014 Level 1
$m
Level 2
$m
Level 3
$m
Total
$m
Level 1
$m
Level 2
$m
Level 3
$m
Total
$m
Interest rate derivatives – 102 – 102 – (61) – (61)
Currency exchange rate derivatives – – – – – (3) – (3)
Cross-currency interest rate derivatives – 183 – 183 – (179) – (179)
Gas contracts – – 82 82 – (14) – (14)
Other commodity derivatives 43 73 39 155 (69) (9) (46) (124)
43 358 121 522 (69) (266) (46) (381)
Financial assets Financial liabilities
as at 31 December 2013 Level 1
$m
Level 2
$m
Level 3
$m
Total
$m
Level 1
$m
Level 2
$m
Level 3
$m
Total
$m
Interest rate derivatives – 127 – 127 – (42) – (42)
Currency exchange rate derivatives – 20 – 20 – (17) – (17)
Cross-currency interest rate derivatives – 495 – 495 – (44) – (44)
Gas contracts – – – – – (144) (64) (208)
Other commodity derivatives 3 51 34 88 (28) (74) (57) (159)
3 693 34 730 (28) (321) (121) (470)
As at 31 December 2014, the Group also held available-for-sale ?nancial assets of $42m (2013: $61m), the fair value of which is determined using
Level 1 fair value measurements.
Level 3 fair value measurements
The movements in the year associated with ?nancial assets and liabilities, measured at fair value and determined in accordance with Level 3,
are shown below:
Total
2014
$m
2013
$m
Fair value as at 1 January (87) (8)
Total gains or losses recognised in the income statement 139 (85)
Reclassi?cation to Level 2 8 –
Settlements 19 3
Currency translation adjustments (4) 3
Fair value as at 31 December 75 (87)
Total gains or losses recognised in the income statement are presented in Other operating income.
As at 31 December 2014, the potential pre-tax change in the fair value of gas contracts, assuming a $20 per barrel change (2013: $10 per barrel) in
the Brent price assumption, was $79m (2013: $53m). A reasonably foreseeable change in the valuation assumptions underlying other commodity
derivatives would not signi?cantly change their fair value measurement.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
18 FINANCIAL INSTRUMENTS CONTINUED
FAIR VALUE ADJUSTMENTS ON FINANCIAL INSTRUMENTS
The Group
Included in the income statement
(a)
:
2014
$m
2013
$m
Interest rate and currency exchange rate derivatives not in a designated hedge relationship
(b)
(176) 18
Interest rate derivatives designated as fair value hedges – (56)
Cross-currency interest rate derivatives designated as fair value hedges
(b)
(71) 66
Ineffectiveness on net investment hedges 10 (6)
Gas contracts 280 34
Other commodity derivatives not in a designated hedge relationship 73 42
Continuing operations 116 98
(a) Includes $57m gain (2013: $112m loss) recognised as Other operating income within Business Performance.
(b) These amounts are offset by foreign exchange gains or losses on the underlying borrowings.
Fair value losses of $17m (2013: $8m) on available-for-sale ?nancial assets are included within other comprehensive income.
HEDGE ACCOUNTING
In line with the Group’s risk management policies, certain derivative and non-derivative instruments are designated as hedges of currency, interest
rate and commodity price exposures in accordance with IAS 39.
Fair value hedges
As at 31 December 2014, the Group held a number of interest rate derivatives and cross-currency interest rate derivatives designated as hedges of
the fair value risk associated with the Group’s ?xed rate debt. The hedged items and the related derivatives have the same critical terms to ensure that
they are an effective hedge under IAS 39. The fair value of derivative instruments designated as fair value hedges outstanding as at 31 December 2014
is $(8)m (2013: $66m). During 2014, adjustments of $(26)m (2013: $65m) have been made to hedged items in respect of the risks being hedged.
Cash ?ow hedges
The Group has forward commodity contracts, currency exchange rate derivatives, interest rate derivatives and cross-currency interest rate
derivatives designated as hedges of highly probable forecast purchases and sales, and of interest ?ows and currency exposure on Group debt.
As at 31 December 2014, an unrealised pre-tax loss of $42m (2013: $4m) was deferred in other comprehensive income in respect of effective cash
?ow hedges. The hedged transactions are expected to occur within 19 years (2013: 24 years) and the associated gains and losses deferred in other
comprehensive income will be released to the income statement as the underlying transaction crystallises. As at 31 December 2014, deferred
pre-tax losses of $13m (2013: $nil) are expected to be released to the income statement within one year. The fair value of derivative instruments
designated as cash ?ow hedges outstanding as at 31 December 2014 is $(30)m (2013: $174m).
The Consolidated statement of comprehensive income, page 93, identi?es the amounts that have been transferred from other comprehensive
income in respect of transactions completed during the year. These items are reported within the income statement to match against the
underlying transaction.
Hedges of net investments in foreign operations
As at 31 December 2014, certain borrowings and currency derivatives have been designated as hedges of the currency risk associated with net investments
in foreign operations. The portion of gains or losses on the hedging instruments determined to be an effective hedge are transferred to other comprehensive
income to offset the gains or losses arising on the retranslation of net investments in foreign subsidiaries. The pre-tax loss on effective hedging instruments
deferred within other comprehensive income as at 31 December 2014 is $45m (2013: $529m gain). The fair value of ?nancial instruments designated
as hedges of net investments in foreign operations outstanding as at 31 December 2014 is $(5 682)m (2013: $(5 681)m).
FINANCIAL ASSETS (EXCLUDING NON-INTEREST BEARING SHORT-TERM RECEIVABLES)
The Group’s ?nancial assets consist of cash and cash equivalents of $5 295m (2013: $6 208m), loans made to joint ventures and associates of $353m
(2013: $714m), a ?nance lease receivable of $172m (2013: $172m), available-for-sale assets of $42m (2013: $61m), other long-term investments of $nil
(2013: $17m), receivables due within one year of $520m (2013: $640m) and receivables due after more than one year of $519m (2013: $571m).
The currency and interest rate pro?le of ?nancial assets is as follows:
The Group 2014 2013
Fixed rate
?nancial
assets
$m
Floating rate
?nancial
assets
$m
Non-interest
bearing
assets
$m
Total
$m
Fixed rate
?nancial
assets
$m
Floating rate
?nancial
assets
$m
Non-interest
bearing
assets
$m
Total
$m
Currency:
Pound Sterling – – – – – – 361 361
US Dollar 231 6 295 22 6 548 231 7 563 34 7 828
Other – 328 25 353 – 145 49 194
231 6 623 47 6 901 231 7 708 444 8 383
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
18 FINANCIAL INSTRUMENTS CONTINUED
FINANCIAL ASSETS (EXCLUDING NON-INTEREST BEARING SHORT-TERM RECEIVABLES) CONTINUED
Within ?oating rate ?nancial assets, cash and cash equivalents earn interest at the relevant market rates. Periodic interest rate determinations in
respect of ?oating rate loans to joint ventures and associates generally comprise London Interbank Offered Rate (LIBOR) plus or minus an agreed margin.
As at 31 December 2014, ?oating rate receivables and loans to joint ventures and associates had an effective interest rate of between 1.27% and 4.52%
(2013: between 1.26% and 4.00%) and are expected to expire between 2015 and 2022 (2013: between 2015 and 2020). The maturity pro?le of non-interest bearing
loans to joint ventures and associates cannot be practicably estimated as repayments are based on the performance of the individual joint venture or associate.
As at 31 December 2014, ?xed rate assets expire between 2016 and 2024 (2013: 2016 and 2024) and have effective interest rates of between
6% and 15% (2013: 6% and 14%).
OFFSETTING FINANCIAL ASSETS AND FINANCIAL LIABILITIES
The following ?nancial assets and ?nancial liabilities are subject to offsetting, enforceable master netting arrangements or similar agreements:
The Group
Financial assets as at 31 December 2014
Amounts offset Amounts not offset Net
Gross
assets
$m
Gross
liabilities
offset
$m
Net
presented
in the
balance sheet
$m
Financial
instruments
$m
Cash
collateral
received
$m $m
Derivative ?nancial assets 1 098 (658) 440 (123) (16) 301
Other receivables 82 (82) – – – –
Trade receivables 906 (166) 740 – (4) 736
2 086 (906) 1 180 (123) (20) 1 037
The Group
Financial liabilities as at 31 December 2014
Amounts offset Amounts not offset Net
Gross
liabilities
$m
Gross
assets
offset
$m
Net
presented
in the
balance sheet
$m
Financial
instruments
$m
Cash
collateral
paid
$m $m
Derivative ?nancial liabilities (1 121) 740 (381) 123 5 (253)
Trade payables (718) 166 (552) – 9 (543)
(1 839) 906 (933) 123 14 (796)
The Group
Financial assets as at 31 December 2013
Amounts offset Amounts not offset Net
Gross
assets
$m
Gross
liabilities
offset
$m
Net
presented
in the
balance sheet
$m
Financial
instruments
$m
Cash
collateral
received
$m $m
Derivative ?nancial assets 1 198 (492) 706 (48) (33) 625
Other receivables 76 (76) – – – –
Trade receivables 864 (314) 550 – (21) 529
2 138 (882) 1 256 (48) (54) 1 154
The Group
Financial liabilities as at 31 December 2013
Amounts offset Amounts not offset Net
Gross
liabilities
$m
Gross
assets
offset
$m
Net
presented
in the
balance sheet
$m
Financial
instruments
$m
Cash
collateral
paid
$m $m
Derivative ?nancial liabilities (923) 568 (355) 48 37 (270)
Trade payables (560) 314 (246) – – (246)
(1 483) 882 (601) 48 37 (516)
For the ?nancial assets and liabilities subject to enforceable master netting arrangements or similar arrangements above, each agreement between
the Group and the counterparty typically requires net settlement of the relevant ?nancial assets and liabilities. In the absence of such a requirement,
?nancial assets and liabilities will be settled on a gross basis, however, each party to the master netting agreement or similar agreement will be
required or have the option to settle all such amounts on a net basis in the event of default of the other party. Per the terms of each agreement,
an event of default includes: failure by a party to make payment when due; failure by a party to perform any obligation required by the agreement
(other than payment) if such failure is not remedied within a speci?ed cure period after notice of such failure is given to the party; or bankruptcy.
FAIR VALUES OF OTHER FINANCIAL INSTRUMENTS
The following ?nancial instruments are measured at historical or amortised cost and have fair values that differ from their book values:
The Group 2014 2013
Book value
$m
Fair value
$m
Book value
$m
Fair value
$m
Financial instruments held or issued to ?nance the Group’s operations:
Long-term borrowings (15 921) (17 770) (17 054) (18 510)
The fair values of long-term borrowings are within Level 1 ($14 387m) and Level 2 ($3 383m) of the fair value hierarchy and have been estimated
based on quoted market prices where available, or by discounting all future cash ?ows by the relevant market yield curve at the balance sheet date.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
18 FINANCIAL INSTRUMENTS CONTINUED
THE COMPANY
The Company’s ?nancial instruments are all denominated in Pounds Sterling and consist of short-term receivables of $1 786m (2013: $2 881m) and
short-term payables of $48m (2013: $51m). Short-term receivables comprise amounts owed by Group undertakings, of which $1 768m (2013: $2 858m)
earns interest at LIBOR minus an agreed margin. The remaining short-term receivables of $18m (2013: $23m) were non-interest bearing. Short-term
payables are due within one year and are non-interest bearing. The fair value of the ?nancial instruments approximates book value.
FINANCIAL RISK FACTORS
The principal ?nancial risks arising from ?nancial instruments are commodity price risk, exchange rate risk, interest rate risk and credit and liquidity risk.
Additional quantitative information and market sensitivities in relation to certain principal market risks are included in the following sections.
Liquidity risk
The Group limits the amount of borrowings maturing within any speci?c period and the Group’s ?nancial assets are primarily held as short-term, liquid
investments that are readily convertible into known amounts of cash. These measures reduce liquidity risk. The Group proposes to meet its ?nancing
commitments from the operating cash ?ows of the business, existing cash and cash equivalent investments, proceeds from asset disposals and
borrowings from a range of sources which are expected to include money and debt capital markets, government lending agencies and existing committed
lines of credit. The undiscounted contractual cash ?ows receivable/(payable) under ?nancial instruments as at the balance sheet date are as follows:
The Group
as at 31 December 2014 Within
one year
$m
Between
one and
two years
$m
Between
two and
?ve years
$m
After
?ve years
$m
Total
$m
Non-derivative ?nancial liabilities
Borrowings (2 251) (1 737) (6 083) (24 231) (34 302)
Short-term payables (1 509) – – – (1 509)
(3 760) (1 737) (6 083) (24 231) (35 811)
Out?ows from derivative ?nancial instruments
Currency and interest rate derivatives (310) (327) (4 963) (4 254) (9 854)
Gross-settled commodity derivatives (1 213) (291) (559) (234) (2 297)
Net-settled commodity derivatives (5) – – – (5)
(1 528) (618) (5 522) (4 488) (12 156)
Non-derivative ?nancial assets and in?ows from derivative ?nancial instruments 9 197 1 438 5 560 4 490 20 685
Total as at 31 December 2014 3 909 (917) (6 045) (24 229) (27 282)
The Group
as at 31 December 2013 Within
one year
$m
Between
one and
two years
$m
Between
two and
?ve years
$m
After
?ve years
$m
Total
$m
Non-derivative ?nancial liabilities
Borrowings (1 150) (1 977) (6 864) (25 750) (35 741)
Short-term payables (1 878) – – – (1 878)
(3 028) (1 977) (6 864) (25 750) (37 619)
Out?ows from derivative ?nancial instruments
Currency and interest rate derivatives
(a)
(374) (317) (3 898) (3 612) (8 201)
Gross-settled commodity derivatives (1 232) (397) (276) – (1 905)
Net-settled commodity derivatives (49) (17) (12) – (78)
(1 655) (731) (4 186) (3 612) (10 184)
Non-derivative ?nancial assets and in?ows from derivative ?nancial instruments
(a)
12 172 1 728 4 701 4 582 23 183
Total as at 31 December 2013
(a)
7 489 (980) (6 349) (24 780) (24 620)
(a) The Group has amended the comparative disclosures in order to present both principal and interest settlement amounts gross where the pay and receive legs of a derivative will be settled separately,
including currency exchange, interest rate and cross-currency interest rate derivatives.
122
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
18 FINANCIAL INSTRUMENTS CONTINUED
FINANCIAL RISK FACTORS CONTINUED
Credit risk
Credit risk is managed on a Group basis. Credit risk in ?nancial instruments arises from cash and cash equivalents and derivative ?nancial instruments,
as well as credit exposures of commercial counterparties including exposures in respect of outstanding receivables and committed transactions. For banks
and ?nancial institutions, only independently rated parties with a minimum long-term credit rating of ‘A’ are normally accepted as a counterparty and
credit limits are established based primarily on the credit ratings, although other credit assessment factors that determine credit quality, including the
external environment, are taken into account when considering the awarding of or maintenance of a limit. Similarly if a commercial counterparty is
independently credit rated, the rating is primarily used to determine credit quality and limits, with other relevant assessment factors also considered.
If there is no independent credit rating, credit quality is assessed in accordance with credit policies that take account of the counterparty’s ?nancial
position and other similar factors. Exposures are monitored by the relevant Group businesses and at a Group level.
As at 31 December 2014, the Group’s maximum credit risk exposure (after the impact of any netting arrangements) under currency and interest rate related
derivatives was $167m (2013: $570m) and commodity related derivatives $79m (2013: $65m). The Group’s credit risk exposure under receivables and
other ?nancial assets is represented by the book values. The Group considers its portfolio for credit related concentration risks where risks may
result from strategic investments, commercial relationships or sales of product in a variety of locations. Mitigation may be considered where
appropriate to diversify or reduce risk pro?le.
The Egyptian government continues to demonstrate its commitment to repay outstanding debts to the energy industry. Following partial repayments of the
Group’s outstanding debt during 2014, the amount owed by Egypt General Petroleum Corporation (EGPC) in respect of domestic gas sales as at 31 December
2014 was $0.9bn (2013: $1.2bn), of which $0.7bn (2013: $0.5bn) was overdue. The Group considers that the current receivable balance remains fully recoverable
as direct cash payments from EGPC continue to be received, however in 2014 a $100 million pre-tax ($79 million post-tax) charge was recognised relating
to the downward re-measurement of the receivable balance to re?ect the time value of money associated with the outstanding debt based on a revised
assumed repayment pro?le. The recoverability of the receivable balance depends on the business environment in Egypt, the Group’s continued investment
plans and the volume of gas available for export, together with the outcome of ongoing negotiations with EGPC.
Market risk
Financial instruments used by the Group that are affected by market risks primarily comprise cash and cash equivalents, borrowings and derivative
contracts. The principal market variables that affect the value of these ?nancial instruments are UK and US interest rates, US Dollar to Pound Sterling
exchange rates, UK and US gas prices, and Japan Custom-cleared Crude (JCC) and Brent oil prices. The table below illustrates the indicative post-tax
effects on the income statement and other comprehensive income of applying reasonably foreseeable market movements to the Group’s ?nancial
instruments at the balance sheet date.
The Group Market movement Business Performance
Disposals, re-measurements
and impairments
Other comprehensive
income/(charge)
2014 2013 2014
$m
2013
$m
2014
$m
2013
$m
2014
$m
2013
$m
UK interest rates + 100 basis points + 100 basis points (6) (18) (1) (10) (142) (140)
US interest rates + 100 basis points + 100 basis points (1) 29 50 97 140 203
US$/UK£ exchange rates + 20 cents + 20 cents 10 – (376) (208)
(a)
1 506 1 635
(a)
UK gas prices + 20 pence/therm + 10 pence/therm – – (48) (12) – –
US gas prices + 1 $/mmbtu + 1 $/mmbtu 2 (14) 84 – – (2)
JCC/Brent prices + 20 $/bbl + 10 $/bbl – – (62) (39) – –
The Company
UK interest rates + 100 basis points + 100 basis points 14 22 – – – –
(a) The Group has undertaken a review of the methodology used to calculate foreign exchange rate sensitivities and has chosen to utilise a more granular approach in the sensitivity calculation of
intra-group exposures. The Group has amended the comparative disclosures for foreign exchange rate sensitivities reported in 2013 from a $144m loss to a $208m loss for disposals, re-measurements
and impairments and from a $357m gain to a $1 635 gain for other comprehensive income.
The above sensitivity analysis is based on the Group’s ?nancial assets, liabilities and hedge designations as at the balance sheet date and indicates
the effect of a reasonable increase in each market variable. The effect of a corresponding decrease in these variables is approximately equal and
opposite. The following assumptions have been made:
(i) the sensitivity includes a full year’s change in interest payable and receivable from ?oating rate borrowings and investments based on
the post-swap amounts and composition as at the balance sheet date;
(ii) fair value changes from derivative instruments designated as cash ?ow or net investment hedges are considered fully effective and are
recorded in other comprehensive income;
(iii) fair value changes from derivative instruments designated as fair value hedges are considered fully effective and entirely offset by adjustments
to the underlying hedged item; and
(iv) fair value changes from derivatives not in a hedge relationship are recorded in the income statement.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
19 TRADE AND OTHER PAYABLES
The Group The Company
as at 31 December 2014
$m
2013
$m
2014
$m
2013
$m
Amounts falling due within one year
Trade payables 894 1 459 – –
Amounts owed to Group undertakings – – 23 28
Amounts owed to joint ventures and associates (see note 23, page 126) 258 109 – –
Other payables
(a)
357 310 25 23
Accruals and deferred income 3 259 3 753 – –
4 768 5 631 48 51
Amounts falling due after more than one year
Other payables – – – –
Accruals and deferred income 136 150 – –
136 150 – –
4 904 5 781 48 51
(a) As at 31 December 2014, Group payables include $16m (2013: $35m) relating to share-based payment transactions, of which $10m (2013: $22m) relates to awards that have already vested,
and $165m (2013: $140m) relating to amounts provided in 2014 for payments to eligible employees under bonus schemes, including the BG Group Annual Incentive Scheme (AIS).
20 PROVISIONS FOR OTHER LIABILITIES AND CHARGES
The Group Decommissioning Other Total
2014
$m
2013
$m
2014
$m
2013
$m
2014
$m
2013
$m
As at 1 January 3 662 3 767 453 415 4 115 4 182
Charge for the year 17 63 172 98 189 161
Unwinding of discount 146 107 2 2 148 109
Additions 714 993 56 – 770 993
Change in discount rate 808 (764) – – 808 (764)
Disposals (119) (295) – – (119) (295)
Currency translation and other adjustments (504)
(a)
(134) 110
(b)
(2) (394) (136)
Amounts used (83) (75) (139) (58) (222) (133)
Unused provisions credited to the income statement – – (24) (2) (24) (2)
Reclassi?ed as assets held for sale (36) – – – (36) –
As at 31 December 4 605 3 662 630 453 5 235 4 115
(a) Includes a movement of $(272)m due to a change in in?ation assumptions (2013: $nil).
(b) Includes $138m reclassi?ed from elsewhere on the balance sheet.
A brief description of each provision together with estimates of the timing of expenditure is given below:
DECOMMISSIONING COSTS
The estimated cost of decommissioning at the end of the producing lives of ?elds is reviewed at least annually and engineering estimates and reports are
updated periodically. Provision is made for the estimated cost of decommissioning at the balance sheet date, to the extent that current circumstances indicate
BG Group will ultimately bear this cost. The payment dates of expected decommissioning costs are uncertain and are based on economic assumptions
surrounding the useful economic lives of the ?elds concerned. Useful economic lives of ?elds are affected by the estimation of hydrocarbon reserves and
resources, which is in turn impacted by available reservoir data, commodity prices and future costs. Payments (on a discounted basis) of $705m (2013: $828m)
are currently anticipated within one to ?ve years; $1 093m (2013: $829m) within six to 10 years; and $2 807m (2013: $2 005m) over 10 years.
OTHER
The balance as at 31 December 2014 includes provisions for onerous contracts of $111m (2013: $146m), ?eld-related payments of $124m (2013: $51m),
insurance costs of $107m (2013: $67m) and costs associated with disposals and restructuring of $119m (2013: $112m). The payment dates are
uncertain, but are expected to be between 2015 and 2018 (2013: 2014 and 2018).
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FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
21 CALLED UP SHARE CAPITAL
Number of shares
as at 31 December 2014
m
2013
m
2014
$m
2013
$m
Issued and fully paid up
Equity:
Ordinary shares of 10p each 3 621 3 619 579 579
For information on the rights and restrictions applying to the Company’s shares see Other disclosures section on page 78.
During the year, the Company allotted 2.51m ordinary shares of 10p each (2013: 4.38m ordinary shares) with an aggregate nominal value of $416 703
(2013: $689 768) in connection with exercises of share options issued under the Company Share Option Scheme (CSOS) and the Sharesave Plan.
The consideration received on these allotments amounted to $28m (2013: $45m).
At 31 December 2014, the Company held 209.9m (2013: 212.7m) of its own shares. The market value of these shares as at 31 December 2014 was
$2 831m (2013: $4 572m). The Company made the following transactions in respect of its own shares:
(i) During 2014, the Company made no purchases of its own ordinary shares. During 2013, the Company purchased 0.7m of its own ordinary shares
for the Long-Term Incentive Plan (LTIP), for aggregate consideration of $13m including transaction costs, which had a nominal value of
$105 838 and represented less than 0.1% of the called up share capital at 31 December 2013.
(ii) During 2014, the Company transferred 2.8m (2013: 3.2m) of its ordinary shares to eligible employees in accordance with the terms of the Share
Incentive Plan, the LTIP and Global Partnership Plan. The shares transferred had a nominal value of $469 193 (2013: $496 056) and represented
approximately 0.1% (2013: 0.1 %) of the called up share capital at 31 December 2014. The cost of shares transferred was $22m (2013: $43m).
(iii) The maximum number of shares held during the year was 212.7m ordinary shares (2013: 215.5m), representing approximately 5.9% (2013: 6.0%)
of the called up share capital at 31 December 2014, and having a nominal value of $35 233 224 (2013: $32 722 390).
22 COMMITMENTS AND CONTINGENCIES
A) CAPITAL EXPENDITURE
As at 31 December 2014, the Group had contractual commitments for future capital expenditure amounting to $4 195m (2013: $6 235m) of which
$3 998m related to acquisition of property, plant and equipment (2013: $5 770m) and $197m related to intangible exploration assets (2013: $465m).
Included in the amount for contractual commitments for future capital expenditure is $1 388m (2013: $1 921m) relating to commitments under operating
leases split between amounts due within one year $723m (2013: $970m), and amounts due between one and ?ve years $665m (2013: $951m).
B) DECOMMISSIONING COSTS ON DISPOSED ASSETS
BG Group has contingent liabilities in respect of the future decommissioning costs of gas and oil assets disposed of to third parties should
they fail to meet their remediation obligations. The amounts of future costs associated with these contingent liabilities could be signi?cant.
The Group has obtained indemnities and/or letters of credit against the estimated amount of certain of these potential liabilities.
C) FUTURE EXPLORATION WELL COSTS
As at 31 December 2014, certain petroleum licences in which BG Group has an interest contained outstanding uncontracted obligations to
drill exploration and appraisal wells. The uncontracted cost attributable to the Group in respect of these capital commitments is estimated to be
$384m (2013: $806m).
D) LEASE COMMITMENTS
Commitments under operating leases to be expensed to the income statement as at 31 December were as follows:
The Group Land and buildings Vessels and other FPSOs Total
2014
$m
Restated
(a)
2013
$m
2014
$m
Restated
(a)
2013
$m
2014
$m
Restated
(a)
2013
$m
2014
$m
Restated
(a)
2013
$m
Amounts due:
Within one year 70 72 542 395 282 162 894 629
Between one and ?ve years 203 191 2 369 1 851 1 579 1 120 4 151 3 162
After ?ve years 152 204 1 718 2 146 2 695 2 102 4 565 4 452
425 467 4 629 4 392 4 556 3 384 9 610 8 243
(a) The Group has amended the comparative lease commitment disclosure for ‘Land and buildings’, ‘Vessels and other’ and ‘FPSOs’ to exclude certain operating and maintenance costs, to re?ect a shorter
minimum lease term for certain FPSOs, to remove four FPSO leases from the disclosure and ensure that the net commitment of the Group is shown. The impact of excluding these amounts on the
previously disclosed 2013 comparative was to reduce operating lease commitments for ‘Land and buildings’ from $549m to $467m, ‘Vessels and other’ from $6 057m to $4 392m and FPSOs from
$13 009m to $3 384m.
Certain expenditure under operating leases is recovered from third parties under partnership agreements and is excluded from the table above.
The longest dated lease, in respect of an FPSO, expires in 2029 (2013: expires in 2029).
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
22 COMMITMENTS AND CONTINGENCIES CONTINUED
E) LEGAL PROCEEDINGS
In August 2009 two separate tax de?ciency notices were issued against Petrobras based on alleged irregularities in connection with the import
of equipment and rigs on behalf of the BM-S-9 Consortium (Petrobras (45% – Operator), BG E&P Brasil (30%) and Repsol Sinopec Brasil (25%)).
BG Group’s potential liability arises from indemnity provisions in favour of Petrobras, as set out in the Joint Operating Agreement.
The ?rst tax de?ciency notice was issued due to the São Paulo State Tax Authority’s allegation that Petrobras cannot enjoy lower tax rates in
the importation of a rig. Petrobras challenged this decision through the administrative courts (this appeal was rejected); and in the judicial branch,
in which the ?rst instance and second instance (February 2014) courts declared and upheld that the São Paulo State Tax Authority was not competent
to decide unilaterally where customs clearance takes place or to consider if the Consortium would be entitled to the special tax treatment.
These rulings were positive decisions for the Consortium. The São Paulo State Tax Authority appealed the second instance judicial decision to the
Brazilian Superior Court of Justice and a ?nal decision is expected within the next three years.
The second tax de?ciency notice was issued by the São Paulo Tax Authority re?ecting their view that Petrobras should have recorded transfers of
goods to and from a rig as if the offshore rig and the onshore base were two distinct branches of Petrobras. As such, the authorities are charging a
penalty. Petrobras has appealed an unfavourable decision in the administrative courts and a decision is expected in 2015. If the appeal by Petrobras
is rejected, it is anticipated that judicial proceedings will be brought in a manner similar to the ?rst tax de?ciency notice referred to above and that
this matter may take up to ?ve years to be resolved.
In 2014 tax assessments were issued against Petrobras in respect of the charter/services contract split for FPSOs, offshore service vessels and rig
hire for the years 2008, 2009 and 2010. Some of these FPSOs, vessels and rigs were allocated to the BM-S-9 and BM-S-11 consortia. Defences and
administrative appeals were submitted by Petrobras and are pending.
BG Group’s Australian subsidiary is defending claims brought by an unincorporated joint venture between McConnell Dowell Constructors (Aust) Pty Limited
and Consolidated Contracting Company Australia Pty Limited (together, ‘MCJV’). MCJV is the main contractor for the Export and Narrows pipelines project.
In March 2014, MCJV initiated ICC arbitration proceedings relating to project variations, delay and completion of milestones. The arbitral panel has been
constituted and an indicative timetable for the arbitration set. The full hearing of the matter is not expected before Q4 2015. The claim has been retained
by BG Group in the sales process of QCLNG Pipeline Pty Limited.
Various issues have been in dispute for a number of years with the Government of India in relation to the interpretation of the production sharing
contracts for the Panna/Mukta and Tapti ?elds and related matters. Arbitration proceedings are ongoing.
It is not practicable at this time to estimate the ?nancial effects (other than for the tax de?ciency notices); given the uncertainties relating to the
amounts and timing of any economic in?ows or out?ows and the possibility of any reimbursements in relation to the outstanding legal proceedings
detailed above. An amount for the tax de?ciency notices has been included within the other contingency liabilities amount in subsection (F) below.
The Company and its subsidiaries are, or may from time to time be, in connection with current or past operations, involved in a number of legal or
arbitration proceedings, including, for example, claims, suits, actions, investigations and/or inquiries relating to commercial, tax, environmental
or other matters, with third parties or governmental or regulatory authorities. While the outcome of some of these matters cannot readily be foreseen,
it is currently considered that they will be resolved without material effect on the net asset position as set out in these Financial statements.
F) CONTINGENT LIABILITIES
The amount of contingent liabilities as at 31 December 2014 (mainly the provision of guarantees, indemnities, contingent decommissioning
obligations or warranties to third parties and various legal or arbitration proceedings in connection with the current and prior operations of the Group)
amounted to $7 188m (2013: $7 144m), of which $224m (2013: $242m) related to the Company.
23 RELATED PARTY TRANSACTIONS
In the normal course of business BG Group provides goods and services to, and receives goods and services from, its joint ventures and associates.
The Group received and incurred the following income and charges from its joint ventures and associates:
for the year ended 31 December 2014 2013 Restated
(a)
Income
$m
Charges
$m
Income
$m
Charges
$m
LNG cargo purchases, sales and other related costs 118 (720) 108 (601)
Shipping, transportation costs and other related costs 2 (23) 5 (47)
E&P operating costs – (298) – (149)
120 (1 041) 113 (797)
(a) On the adoption of IFRS 11 ‘Joint Arrangements’, the Group has reclassi?ed the comparative disclosures given in 2013 to exclude relationships that are now deemed to be ‘Joint Operations’ and fall
outside of the scope of IAS24 ‘Related Party Disclosures’. The impact of excluding these items were as follows: LNG cargo purchases, and other related costs from $717m to $601m, Shipping,
transportation and other related income from $90m to $5m and Shipping, transaction costs and other related costs from $113m to $47m.
BG Group provides certain guarantees in respect of its obligations to its joint ventures and associates, and its share of obligations undertaken
by its joint ventures and associates, in the normal course of business.
As at 31 December 2014, a debtor balance of $42m (2013: $69m) (see note 15, page 114) and a creditor balance of $258m (2013: $109m)
(see note 19, page 124) were outstanding with these parties.
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23 RELATED PARTY TRANSACTIONS CONTINUED
In addition, BG Group provides ?nancing to some of these parties by way of loans. As at 31 December 2014, loans of $353m (2013: $714m) were due
from joint ventures and associates. These loans are accounted for as part of BG Group’s investment in joint ventures and associates and disclosed
in note 13, page 113. Interest of $9m (2013: $10m) was charged on these loans during the year at interest rates of between 1.25% and 3.99%
(2013: 1.26% and 4.06%). The maximum debt outstanding during the year was $714m (2013: $715m).
BG Group has a ?nance lease arrangement with a joint venture company. As at 31 December 2014, the obligation was $130m (2013: $135m).
Interest of $7m (2013: $9m) was paid during the year in respect of this lease. The lease expires in 2027.
BG Group has operating lease arrangements with associate companies in respect of FPSOs. As at 31 December 2014, the obligation was
$3 846m (2013 restated: $2 649m). Charges paid during the year in respect of these leases are presented as E&P operating costs in the table.
The last of these leases expires in 2029 (2013: 2029).
William Backhouse, the son of Peter Backhouse, a former Non-Executive Director who resigned during 2014, was employed by BG International
Limited, a wholly owned subsidiary of BG Group plc. Peter Backhouse is regarded as interested in the contract of employment by virtue of his
relationship with William Backhouse. The terms and conditions of William Backhouse’s employment are consistent with others employed in
a similar role.
As at 31 December 2014, a debtor balance of $1 786m (2013: $2 881m) (see note 15, page 114) and a creditor balance of $23m (2013: $28m)
(see note 19, page 124) were outstanding between BG Group plc and other Group undertakings.
BG Group plc grants equity instruments to subsidiaries’ employees in respect of equity-settled employee share schemes. In 2014, the fair value
of equity instruments charged to the income statement was $70m (2013: $74m).
24 PENSIONS AND POST-RETIREMENT BENEFITS
In the year ended 31 December 2014, a number of the Group’s UK employees were members of the BG Pension Scheme (BGPS), a de?ned bene?t
registered pension plan established under trust. The Trustee is BG Group Pension Trustees Limited. The BGPS is funded to cover future pension
liabilities in respect of service up to the closure of the scheme. It is subject to an independent valuation at least every three years, on the basis
of which the independent quali?ed actuary certi?es the rate of employers’ contributions that, together with the returns on the BGPS’s assets,
are expected to be suf?cient to fund the bene?ts payable.
In common with all workplace pension schemes in the UK, the BGPS is subject to regulation by The Pensions Regulator. The Trustee is responsible
for overall management and governance of the BGPS, including compliance with all applicable legislation and regulations. The Trustee also has
responsibility for investment of the BGPS’s assets, following consultation with the Group.
The BGPS closed to future accrual of bene?ts on 31 December 2013 and all active members became deferred pensioners with pensions calculated
based on salaries up until the point of closure for such active members. These deferred pensions are generally revalued in line with movements
in the Retail Prices Index. Certain bene?ts relating to individual transfers-in and purchases of additional pensionable service by employees retain
a link to pensionable salary post-closure. The closure of the scheme to future accruals resulted in a curtailment gain of $154m, recognised in the
2013 income statement (see note 4, page 105).
The last full independent actuarial valuation of the BGPS for funding purposes showed that the aggregate market value of the plan assets at
31 March 2014 was £1 540m, representing 97% of the accrued liabilities. The next full funding valuation is expected to be performed with an
effective date of 31 March 2017. As part of the funding agreement in respect of the 2011 actuarial valuation and the closure of the BGPS to future
accrual of bene?ts, the Group and the Trustee established a Pension Funding Partnership (PFP) to address the de?cit and to provide greater
security to the Trustee.
In December 2013, the Group acquired an interest in the PFP for £110m. It also contributed £350m to the BGPS and the Trustee used this to purchase
its interest in the PFP. The PFP has an interest in loans secured on four of the Group’s LNG ships, the proceeds from which the PFP will use to make
annual distributions of £33m to the BGPS for 15 years and to pay a capital sum in 2028 of £172m which will be used, if necessary, to fund any de?cit
in the BGPS at that time, measured on a ‘self-suf?ciency’ funding basis. In December 2014, BG Group entered into an agreement for the sale
of two of these LNG ships for proceeds of $460 million. Consequently, the majority of the proceeds from this sale will be utilised to support the
funding of the BGPS.
The Group has taken advantage of the exemption conferred by Regulation 7 of the Partnerships (Accounts) Regulations 2008 and has, therefore,
not appended the accounts of this qualifying partnership to these ?nancial statements. Separate accounts for the PFP are not required to be,
and have not been, ?led at Companies House.
For scheme funding purposes, the Trustee’s interest in the PFP is treated as an asset which reduces the BGPS actuarial funding de?cit. However,
the PFP is not a plan asset under IAS 19 for the purposes of the Group’s consolidated ?nancial statements and therefore does not reduce the
de?cit on an IAS 19 accounting basis.
The Group is exposed to a number of risks relating to the BGPS. For example, additional contributions may be required if the life expectancy
of the members increases or if investments underperform, compared with the assumptions adopted at the last valuation of the BGPS.
The BGPS holds a diversi?ed investment portfolio (see table on page 129), primarily comprising quoted investments, spread across ?ve investment
managers. The portfolio remains weighted towards growth assets, with the benchmark allocation to these assets maintained at 60% during the
year. As at 31 December 2014, the BGPS held unquoted assets valued at $4m (2013: $3m) through its absolute return investment in the Lansdowne
Developed Markets Fund.
The BG Supplementary Bene?ts Scheme (BGSBS) provides bene?ts broadly in excess of the ‘lifetime allowance’. This de?ned bene?t plan is
an unfunded, non-registered arrangement. The BGSBS was closed to future accrual of bene?ts on 31 December 2013, the same date as bene?t
accrual ceased in the BGPS.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
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24 PENSIONS AND POST-RETIREMENT BENEFITS CONTINUED
The Group has a small number of de?ned bene?t plans outside the UK which are not material in Group terms.
Independent actuaries reported on the ?nancial position of the BGPS and the BGSBS as at 31 December 2014 in accordance with the requirements
of IAS 19. The fair value of plan assets, the present value of plan liabilities and the net balance sheet liability were as follows:
as at 31 December 2014
$m
2013
$m
Fair value of plan assets 2 004 1 927
Present value of liabilities (2 262) (2 095)
Net balance sheet liability (258) (168)
The following table shows the movements in the de?ned bene?t obligation (DBO), the fair values on plan assets and the net de?ned bene?t
obligation in the period, separately identifying the impact on the income statement and other comprehensive income:
2014
$m
2013
$m
De?ned
bene?t
obligation
Fair values
on plan
assets
Net de?ned
bene?t
obligation
De?ned
bene?t
obligation
Fair values
on plan
assets
Net de?ned
bene?t
obligation
At 1 January (2 095) 1 927 (168) (1 886) 1 598 (288)
Pension (cost)/ credit to income statement:
Current service cost – – – (63) – (63)
Past service cost 15 – 15 – – –
Curtailment gain – – – 154 – 154
Net interest (92) 85 (7) (83) 72 (11)
Subtotal recognised in the income statement: (77) 85 8 8 72 80
Remeasurement gains/(losses) in other comprehensive income:
Return on plan assets (excluding amounts included in net interest) – 119 119 – 158 158
Actuarial changes arising from changes in ?nancial assumptions (225) – (225) (210) – (210)
Actuarial changes arising from changes in demographic assumptions (75) – (75) – – –
Experience adjustments 18 – 18 4 – 4
Currency translation adjustments 124 (116) 8 (55) 47 (8)
Subtotal recognised in Other Comprehensive Income: (158) 3 (155) (261) 205 (56)
Bene?ts paid 68 (68) – 45 (45) –
Contributions by employees – – – (1) 1 –
Contributions by employer – 57 57 – 96 96
At 31 December (2 262) 2 004 (258) (2 095) 1 927 (168)
Also recognised in the consolidated income statement was a $73m charge (2013: $60m) in relation to de?ned contribution schemes within
continuing operations and $nil (2013: $1m) within discontinued operations.
As at 31 December 2014, $2 187m of the DBO relates to the funded BGPS (2013: $2 021m) and $75m relates to the unfunded BGSBS (2013: $74m).
The weighted average duration of the DBO as at 31 December 2014 is 22 years. As at 31 December 2014, $1 554m of the DBO relates to deferred
pensioners and $708m relates to pensions in payment.
The valuations as at 31 December were based on the following signi?cant assumptions
(a)
:
2014
%
2013
%
Rate of price in?ation and bene?t increases
(b)
3.1 3.4
Discount rate 3.7 4.5
(a) Due to the closure of the BGPS to future accrual of bene?ts on 31 December 2013 the future increase in earnings is no longer considered a signi?cant assumption.
(b) Rate of increase of the majority of deferred pensions and pensions in payment in excess of any Guaranteed Minimum Pension element.
The assumptions set out in the table above are those applicable to Pounds Sterling, being the currency in which the plans are denominated.
If the discount rate used for the valuation of the BGPS and BGSBS was reduced by 0.1% to 3.6%, the DBO would increase by $49m.
A 0.1% increase in the in?ation rate would have a similar impact on the DBO.
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24 PENSIONS AND POST-RETIREMENT BENEFITS CONTINUED
In determining the DBO as at 31 December 2014, mortality assumptions are based on the ‘Self Administered Pension Schemes’ (SAPS) S2 series (light)
tables with a 98% multiplier for males and a 91% multiplier for females issued by the Institute and Faculty of Actuaries, appropriate to each member’s
year of birth, with an allowance for projected longevity improvements in line with the CMI’s ‘core projection’ model (2013 version), with a long-term
rate of improvement of the projected mortality rates of 1.5% per annum. Based on these assumptions, the life expectancies of pensioners on the
measurement date and also of pensioners in 10 years time are as follows:
Life expectancy of pensioners (years)
as at 31 December 2014 2013
2014 2024 2013 2023
Male age 60 28.8 30.0 28.3 29.0
Male age 65 23.9 24.9 23.6 24.2
Female age 60 30.6 31.8 29.4 30.2
Female age 65 25.6 26.8 24.6 25.4
If the life expectancy of a member currently age 60 was increased by one year, with consistent changes for members at other ages, the DBO
in respect of the BGPS and BGSBS would increase by $61m.
As at 31 December, the fair value of plan assets was as follows:
2014 2013
Percentage
of plan assets
%
Value
$m
Percentage
of plan assets
%
Value
$m
Equities
(a)
38 753 38 733
Absolute return strategies 15 305 16 305
Index-linked gilts 30 590 29 551
Corporate bonds 10 204 10 196
Property funds 7 146 7 131
Money market funds and cash – 6 – 11
Fair value of plan assets 2 004 1 927
(a) Equities are invested across a globally diversi?ed range of funds which track benchmark general industry indices in each market.
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FINANCIAL STATEMENTS | NOTES TO THE ACCOUNTS > CONTINUED
25 PRINCIPAL SUBSIDIARY UNDERTAKINGS, JOINT VENTURES, ASSOCIATES AND MATERIAL JOINT OPERATIONS
The principal subsidiary undertakings, joint ventures and associates listed in accordance with the Companies Act 2006, are those that in the
opinion of the Directors principally affect the ?gures shown in the Financial statements. A full list of subsidiary undertakings, joint ventures and
associates is included in the Annual Return of BG Group plc ?led with the Registrar of Companies. The Group does not have any individually
material joint ventures or associates requiring disclosure under IFRS 12.
PRINCIPAL SUBSIDIARY UNDERTAKINGS
as at 31 December 2014 Country of incorporation Location of operation Activity
BG International (AUS) Limited Partnership Australia Australia Exploration and production
QCLNG Common Facilities Company Pty Limited Australia Australia LNG manufacture
QCLNG Pipeline Pty Limited Australia Australia Gas infrastructure
QCLNG Train 2 Pty Limited Australia Australia LNG manufacture
QGC (Infrastructure) Pty Limited Australia Australia Exploration and production
QGC Pty Limited (QGC) Australia Australia Exploration and production
QGC Train 1 Pty Limited Australia Australia LNG manufacture
BG E&P Brasil Ltda. Brazil Brazil Exploration and production
BG Bolivia Corporation Cayman Islands Bolivia Exploration and production
BG Exploration and Production India Limited Cayman Islands India Exploration and production
BG Egypt S.A. Cayman Islands Egypt Exploration and production
BG Delta Limited England and Wales Egypt Exploration and production
BG Energy Capital plc England and Wales UK Financing company
BG Energy Holdings Limited
(a)
England and Wales UK Group holding company
BG Energy Trading Limited England and Wales UK Oil marketing
BG Gas Marketing Limited England and Wales UK
(b)
LNG marketing
BG Global Energy Limited
(c)
England and Wales UK
(b)
Exploration and production/LNG marketing
BG Hasdrubal Limited England and Wales Tunisia Exploration and production
BG International Limited England and Wales UK
(b)
Holding company/Exploration and production
BG International (CNS) Limited England and Wales UK Exploration and production
BG Karachaganak Limited England and Wales Kazakhstan Holding company/Exploration and production
BG North Sea Holdings Limited England and Wales UK Holding company/Exploration and production
BG Trinidad and Tobago Limited England and Wales Trinidad and Tobago Exploration and production
BG Tunisia Limited England and Wales Tunisia Exploration and production
Methane Services Limited England and Wales UK
(b)
LNG shipping
BG Norge Limited England and Wales UK and Norway Exploration and production
BG Tanzania Limited England and Wales Tanzania Exploration and production
BG Asia Paci?c Pte. Limited Singapore Singapore
(b)
Exploration and production
BG Singapore Gas Marketing Pte. Limited Singapore Singapore LNG marketing
BG Energy Finance, Inc. USA USA Financing company
BG Energy Merchants, LLC USA USA Gas marketing
BG LNG Services, LLC USA USA LNG regasi?cation
BG LNG Trading, LLC USA UK
(b)
LNG marketing
BG Production Company (PA), LLC USA USA Exploration and production
BG US Production Company, LLC USA USA Exploration and production
(a) Shares are held by the Company; others are held by subsidiary undertakings.
(b) This is the primary country of operation; however, the company also operates across several other countries.
(c) BG International (NSW) Limited was renamed BG Global Energy Limited on 8 October 2014.
All the above are wholly owned.
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25 PRINCIPAL SUBSIDIARY UNDERTAKINGS, JOINT VENTURES, ASSOCIATES AND MATERIAL JOINT OPERATIONS CONTINUED
JOINT VENTURES AND ASSOCIATES
as at 31 December 2014 Country of incorporation
and location of operation
Activity Group holding
%
Joint ventures
Atlantic LNG 2/3 Company of Trinidad and Tobago Unlimited Trinidad and Tobago LNG manufacture 32.5
Dragon LNG Group Limited England and Wales LNG regasi?cation 50.0
Mahanagar Gas Limited India Gas distribution 49.8
Associates
Guará B.V. Netherlands
(a)
Leasing 30.0
Tupi B.V. Netherlands
(a)
Leasing 25.0
Atlantic LNG Company of Trinidad and Tobago Trinidad and Tobago LNG manufacture 26.0
Atlantic LNG 4 Company of Trinidad and Tobago Unlimited Trinidad and Tobago LNG manufacture 28.9
(a) Guará B.V. and Tupi B.V. are incorporated in the Netherlands and operate in Brazil.
MATERIAL JOINT OPERATIONS
The following joint operations are considered individually material to the Group.
as at 31 December 2014
Principal place of business Activity
West Delta Deep Marine
(a)
Egypt Exploration and production
Karachaganak
(b)
Kazakhstan Exploration and production
(a) West Delta Deep Marine concession is operated by Burullus Gas Company S.A.E. in which the Group has a 25% interest.
(b) Karachaganak concession is operated by Karachaganak Petroleum Operating B.V. in which the Group has a 29.25% interest.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS
SUPPLEMENTARY INFORMATION –
GAS AND OIL (UNAUDITED)
She is a past member of the Society of
Petroleum Engineers Oil and Gas Reserves
Committee, a member of the SPE Joint
Committee on Reserves Evaluation Training,
a member of the SPE London Board, a member
of the United Nations Economic Commission
for Europe Expert Group on Resource Classi?cation
and a member of the SPE Carll, Lucas & Uren
Award Committee.
Total additions and revisions to proved
reserves during the year were 295 mmboe.
This comprised technical revisions due to
new data and ?eld performance updates
(124 mmboe increase), extensions, discoveries
and reclassi?cations (180 mmboe increase),
acquisitions and disposals (8 mmboe decrease)
and the net effect of price movements
(1 mmboe decrease). Production in the
period was 221 mmboe.
Gas and oil reserves cannot be measured
exactly since estimation of reserves involves
subjective judgement. Therefore, all estimates
are subject to revision. Changes in gas and oil
prices in ?elds subject to Production Sharing
Contracts (PSCs) may result in changes to
entitlements and therefore proved reserves.
PROVED RESERVES
Proved reserves are those quantities of
petroleum, which, by analysis of geoscience
and engineering data, can be estimated
with reasonable certainty to be commercially
recoverable, from a given date forward,
from known reservoirs and under de?ned
economic conditions, operating methods
and government regulations.
Proved developed reserves are those reserves
that can be expected to be recovered through
existing wells and with existing equipment
and operating methods. Proved undeveloped
reserves comprise total proved reserves less
total proved developed reserves.
PROBABLE RESERVES
Probable reserves are those additional
reserves which analysis of geoscience and
engineering data indicate are less likely to
be recovered than proved reserves but more
certain to be recovered than possible reserves.
It is equally likely that actual remaining
quantities recovered will be greater than or
less than the sum of the estimated proved
plus probable reserves.
DISCOVERED RESOURCES
Discovered resources are de?ned by BG Group
as the best estimate of discovered recoverable
hydrocarbons where commercial and/or
technical maturity is such that the initiation
of development is subject to certain conditions
and therefore sanction is not expected
within the next few years.
RISKED EXPLORATION
Risked exploration resources are de?ned by
BG Group as the best estimate (mean value)
of recoverable hydrocarbons from undiscovered
accumulations multiplied by the chance
of success.
TOTAL RESOURCES
Total resources are de?ned by BG Group as the
aggregate of proved and probable reserves
plus discovered resources and risked exploration.
Total resources may also be referred to as
total reserves and resources.
From the year ended 31 December 2013
onwards BG Group has adopted the reserves
de?nitions and guidelines consistent with
the internationally recognised Petroleum
Resources Management System published
by the Society of Petroleum Engineers,
American Association of Petroleum Geologists,
World Petroleum Council and the Society
of Petroleum Evaluation Engineers, known
as the SPE-PRMS, in accordance with
recommendations issued by the European
Securities and Markets Authority (ESMA).
Prior to this, BG Group had voluntarily used
the SEC de?nition of proved reserves and
of probable reserves (from 2009), to report
proved gas and oil reserves and disclose
certain unaudited supplementary information.
In accordance with the SPE-PRMS guidelines,
BG Group uses gas and crude oil price forecasts
that are based on its reference conditions to
determine reserves estimates. Therefore reserves
(proved and probable) as at 31 December 2014
are measured in accordance with SPE-PRMS
de?nitions and guidelines.
Information in this section is grouped on
a geographical basis as shown below:
?
Australia;
?
Africa – Algeria, Egypt, Kenya, Madagascar,
Tanzania and Tunisia;
?
Asia – China, India, Kazakhstan, Myanmar
and Thailand;
?
North America and the Caribbean – Aruba,
Honduras, Trinidad and Tobago and the USA;
?
South America – Bolivia, Brazil, Colombia
and Uruguay; and
?
Europe – Norway and the UK.
The Corporate Reserves Group (CRG) is a
central multidisciplinary group of reserves
experts with an average of 20 years’ experience
in the oil and gas industry which provides
an independent review of all reserves and
discovered resources bookings and revisions
proposed by assets to the Reserves Committee
which in turn reports to the Audit Committee.
The Head of the CRG, Dr. Carolina Coll has
more than 25 years of diversi?ed experience
in the oil and gas industry. She has a degree in
physics and a PhD in petroleum engineering.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | SUPPLEMENTARY INFORMATION – GAS AND OIL (UNAUDITED)
A) RESERVES
All information for periods up to 31 December 2012 is presented under SEC methodology. Information for 31 December 2013 is presented under
both SEC and SPE-PRMS methodology. Information from 31 December 2013 is presented under SPE-PRMS methodology.
ESTIMATED NET PROVED RESERVES OF NATURAL GAS
Australia
bcf
Africa
bcf
Asia
bcf
North America
and the
Caribbean
bcf
South
America
bcf
Europe
bcf
Total
bcf
As at 31 December 2011 (SEC): 2 717 2 403 2 032 2 623 2 100 979 12 854
Movement during the year (SEC):
Revisions of previous estimates
(a)
– (250) 87 (339) 8 (50) (544)
Extensions, discoveries and reclassi?cations 805 – 16 79 57 1 958
Production (55) (342) (185) (331) (60) (90) (1 063)
Disposals of reserves-in-place – – (22) – – – (22)
750 (592) (104) (591) 5 (139) (671)
As at 31 December 2012 (SEC): 3 467 1 811 1 928 2 032 2 105 840 12 183
Movement during the year (SEC):
Revisions of previous estimates
(a)
544 (277) 9 129 169 (35) 539
Extensions, discoveries and reclassi?cations – (45) 27 (71) – (13) (102)
Production (55) (297) (185) (275) (72) (83) (967)
Disposals of reserves-in-place (791) – – (65) – – (856)
(302) (619) (149) (282) 97 (131) (1 386)
As at 31 December 2013 (SEC): 3 165 1 192 1 779 1 750 2 202 709 10 797
Revisions of previous estimates
(b)
5 11 51 81 6 (1) 153
Extensions, discoveries and reclassi?cations 1 091 – – – – – 1 091
As at 31 December 2013 (SPE-PRMS): 4 261 1 203 1 830 1 831 2 208 708 12 041
Movement during the year (SPE-PRMS):
Revisions of previous estimates
(a)
(1) (172) 99 (124) 37 (18) (179)
Extensions, discoveries and reclassi?cations 479 (25) 7 (5) 74 – 530
Production (74) (183) (172) (224) (100) (88) (841)
Disposals of reserves-in-place – – – – – (1) (1)
404 (380) (66) (353) 11 (107) (491)
As at 31 December 2014 (SPE-PRMS) 4 665 823 1 764 1 478 2 219 601 11 550
(c)
(a) Includes effect of oil and gas price changes on PSCs.
(b) Includes the effect of changing from SEC price assumptions to SPE-PRMS reference prices, including impact on PSCs.
(c) Estimates of proved natural gas reserves at 31 December 2014 includes fuel gas of 1 289 bcf (2013: 1 031 bcf).
Note: Conversion factor of 6 bcf of gas to 1 mmboe.
ESTIMATED NET PROVED DEVELOPED RESERVES OF NATURAL GAS
Australia
bcf
Africa
bcf
Asia
bcf
North America
and the
Caribbean
bcf
South
America
bcf
Europe
bcf
Total
bcf
As at 31 December 2011 (SEC) 575 1 254 1 851 1 349 392 728 6 149
As at 31 December 2012 (SEC) 503 1 181 1 858 1 387 709 684 6 322
As at 31 December 2013 (SPE-PRMS) 509 758 1 791 993 850 573 5 474
As at 31 December 2014 (SPE-PRMS) 1 539 476 1 719 724 849 503 5 810
ESTIMATED NET PROBABLE RESERVES OF NATURAL GAS
Australia
bcf
Africa
bcf
Asia
bcf
North America
and the
Caribbean
bcf
South
America
bcf
Europe
bcf
Total
bcf
As at 31 December 2011 (SEC) 6 565 1 425 920 1 342 1 157 355 11 764
As at 31 December 2012 (SEC) 5 788 1 170 1 137 1 416 1 550 452 11 513
As at 31 December 2013 (SPE-PRMS) 2 930 3 894 636 1 350 1 435 394 10 639
As at 31 December 2014 (SPE-PRMS)
(a)
2 145 3 412 759 1 385 1 142 411 9 254
(a) Estimates of probable natural gas reserves at 31 December 2014 includes fuel gas of 689 bcf (2013: 607 bcf).
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | SUPPLEMENTARY INFORMATION – GAS AND OIL (UNAUDITED) > CONTINUED
A) RESERVES CONTINUED
ESTIMATED NET PROVED RESERVES OF OIL
‘Oil’ includes crude oil, condensate and natural gas liquids.
Australia
mmbbl
Africa
mmbbl
Asia
mmbbl
North America
and the
Caribbean
mmbbl
South
America
mmbbl
Europe
mmbbl
Total
mmbbl
As at 31 December 2011 (SEC): – 24.7 259.8 5.1 630.3 185.5 1 105.4
Movement during the year (SEC):
Revisions of previous estimates
(a)
– (1.2) 17.1 (0.6) 100.3 4.8 120.4
Extensions, discoveries and reclassi?cations – – 0.2 – 228.1 8.9 237.2
Production – (4.5) (27.5) (0.5) (9.5) (21.3) (63.3)
Disposals of reserves-in-place
(b)
– – 0.8 – – – 0.8
– (5.7) (9.4) (1.1) 318.9 (7.6) 295.1
As at 31 December 2012 (SEC): – 19.0 250.4 4.0 949.2 177.9 1 400.5
Movement during the year (SEC):
Revisions of previous estimates
(a)
– 3.7 2.6 0.3 145.8 9.3 161.7
Extensions, discoveries and reclassi?cations – 0.1 0.4 – 33.9 (2.9) 31.5
Production – (5.1) (25.4) (0.7) (15.3) (23.2) (69.7)
Disposals of reserves-in-place – – – (0.6) – – (0.6)
– (1.3) (22.4) (1.0) 164.4 (16.8) 122.9
As at 31 December 2013 (SEC) – 17.7 228.0 3.0 1 113.6 161.1 1 523.4
Revisions of previous estimates
(c)
– – 9.2 0.1 1.4 (2.1) 8.6
As at 31 December 2013 (SPE-PRMS) – 17.7 237.2 3.1 1 115.0 159.0 1 532.0
Movement during the year (SPE-PRMS):
Revisions of previous estimates
(a)
– 4.8 16.0 0.1 126.3 6.2 153.4
Extensions, discoveries and reclassi?cations – (0.2) 5.4 – 85.7 – 90.9
Production – (3.7) (23.4) (0.6) (29.1) (24.1) (80.9)
Disposals of reserves-in-place – – – – – (7.5) (7.5)
– 0.9 (2.0) (0.5) 182.9 (25.4) 155.9
As at 31 December 2014 (SPE-PRMS) – 18.6 235.2 2.6 1 297.9 133.6 1 687.9
(a) Includes effect of oil and gas price changes on PSCs.
(b) Karachaganak Settlement Agreement (disposal) resulted in a minor addition to liquids.
(c) Includes the effect of changing from SEC price assumptions to SPE-PRMS reference prices, including impact on PSCs.
ESTIMATED NET PROVED DEVELOPED RESERVES OF OIL
Australia
mmbbl
Africa
mmbbl
Asia
mmbbl
North America
and the
Caribbean
mmbbl
South
America
mmbbl
Europe
mmbbl
Total
mmbbl
As at 31 December 2011 (SEC) – 21.0 238.1 1.9 43.8 136.7 441.5
As at 31 December 2012 (SEC) – 18.8 230.5 3.6 78.5 126.4 457.8
As at 31 December 2013 (SPE-PRMS) – 14.0 221.4 2.8 120.4 119.2 477.8
As at 31 December 2014 (SPE-PRMS) – 15.5 221.1 1.9 196.1 101.9 536.5
ESTIMATED NET PROBABLE RESERVES OF OIL
Australia
mmbbl
Africa
mmbbl
Asia
mmbbl
North America
and the
Caribbean
mmbbl
South
America
mmbbl
Europe
mmbbl
Total
mmbbl
As at 31 December 2011 (SEC) – 9.0 137.2 2.3 1 737.4 92.4 1 978.3
As at 31 December 2012 (SEC) – 15.6 77.6 2.1 1 652.5 91.9 1 839.7
As at 31 December 2013 (SPE-PRMS) – 10.6 121.2 1.9 1 479.0 66.4 1 679.1
As at 31 December 2014 (SPE-PRMS) – 7.6 149.4 1.5 1 161.3 50.2 1 370.0
134
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | SUPPLEMENTARY INFORMATION – GAS AND OIL (UNAUDITED) > CONTINUED
B) STANDARDISED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS
The following tables set out the standardised measure of discounted future net cash ?ows relating to proved gas and oil reserves and report the
causes of changes in the standardised measure of the cash ?ows relating to reserves. Future cash in?ows have been computed by reference to the
Group’s estimate of future production of net proved gas and oil reserves at the end of each year and estimates of third-party prices. Prices for the
years ended 31 December 2012 and 31 December 2013 are calculated using a 12-month average price in line with SEC methodology. Prices for the year
ended 31 December 2014 are calculated using the Group’s long-term reference conditions of Brent oil $90 real, used to determine reserves estimates
in accordance with SPE-PRMS price assumptions. The standardised measure of discounted future net cash ?ow information presented below is not
intended to represent the replacement cost or fair market value of the Group’s gas and oil properties. The disclosures shown are based on estimates
of proved reserves, future production schedules and costs, which are inherently imprecise and subject to revision. Reserves for the year ended
31 December 2012 and 31 December 2013 are under SEC methodology and reserves for the year ended 31 December 2014 are under SPE-PRMS
methodology. The standardised measure is as follows:
Australia
$bn
Africa
$bn
Asia
$bn
North America
and the
Caribbean
$bn
South
America
$bn
Europe
$bn
Total
$bn
As at 31 December 2012 (SEC):
Future cash in?ows 20.78 11.89 28.25 6.25 102.81 28.80 198.78
Future production and development costs (12.41) (4.30) (10.80) (3.27) (60.90) (12.25) (103.93)
Future income tax expenses (0.70) (2.52) (6.37) (1.48) (9.93) (10.51) (31.51)
Future net cash ?ows 7.67 5.07 11.08 1.50 31.98 6.04 63.34
10% annual discount for estimated timing of cash ?ows (6.66) (1.39) (4.70) (0.60) (19.12) (1.54) (34.01)
1.01 3.68 6.38 0.90 12.86 4.50 29.33
As at 31 December 2013 (SEC):
Future cash in?ows 19.40 8.87 25.19 5.03 121.68 25.63 205.80
Future production and development costs (13.18) (4.01) (10.89) (2.98) (76.00) (12.32) (119.38)
Future income tax expenses – (1.55) (5.19) (0.86) (16.34) (8.52) (32.46)
Future net cash ?ows 6.22 3.31 9.11 1.19 29.34 4.79 53.96
10% annual discount for estimated timing of cash ?ows (4.66) (0.90) (4.03) (0.36) (15.03) (0.98) (25.96)
1.56 2.41 5.08 0.83 14.31 3.81 28.00
As at 31 December 2014 (SPE-PRMS):
Future cash in?ows 43.93 6.69 19.95 5.02 113.72 17.09 206.40
Future production and development costs (19.90) (3.29) (10.40) (3.13) (68.27) (10.73) (115.72)
Future income tax expenses (5.17) (1.06) (3.64) (0.43) (15.79) (3.54) (29.63)
Future net cash ?ows 18.86 2.34 5.91 1.46 29.66 2.82 61.05
10% annual discount for estimated timing of cash ?ows (11.95) (0.65) (2.66) (0.49) (15.43) (0.21) (31.39)
6.91 1.69 3.25 0.97 14.23 2.61 29.66
The following were the main sources of change in the standardised measure of discounted cash ?ows in the three years ended 31 December 2014:
2014
$bn
2013
$bn
2012
$bn
Standardised measure at the beginning of the year 28.00 29.33 29.59
Sale of gas and oil produced net of production costs and other operating costs
(a)
(8.21) (8.93) (8.98)
Net changes in prices and production costs
(b)
(20.38) (6.36) (9.48)
Extensions, discoveries, reclassi?cations and revisions to previous estimates 21.63 6.39 17.14
Changes in estimated future development costs (6.41) (4.52) (12.52)
Development costs incurred in the period 6.90 8.21 6.80
Disposals of reserves-in-place (0.02) (0.47) (0.52)
Accretion of discount 4.54 4.67 4.79
Net change in income tax 3.54 (0.18) 2.45
Other 0.07 (0.14) 0.06
Standardised measure at the end of the year
(c)
29.66 28.00 29.33
(a) Production costs and other operating costs include lifting, tariff, insurance and royalty costs but not depreciation costs.
(b) Includes the effect of foreign exchange movements.
(c) Based on the following prices for 2012 and 2013 in line with SEC methodology. 2014 is based on the Group’s long-term reference conditions of Brent oil $90 real, used to determine reserves estimates
in accordance with SPE-PRMS methodology:
2013 2012
Brent oil price ($/bbl) 109 112
Henry Hub ($/mmbtu) 3.67 2.86
UK spot gas (p/therm) 66.82 59.39
US$/UK£ exchange rate 1.56 1.59
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | SUPPLEMENTARY INFORMATION – GAS AND OIL (UNAUDITED) > CONTINUED
B) STANDARDISED MEASURE OF DISCOUNTED FUTURE NET CASH FLOWS CONTINUED
To aid comparability with previous years, the standardised measure of discounted future net cash ?ows has also been calculated using 12-month
average prices under SEC methodology
(a)
as follows:
Australia
$bn
Africa
$bn
Asia
$bn
North America
and the
Caribbean
$bn
South
America
$bn
Europe
$bn
Total
$bn
As at 31 December 2014 (SEC): 8.22 1.99 3.77 1.12 18.00 2.97 36.07
(a) SEC price assumptions: Brent oil $101/bbl, Henry hub $4.30/mmbtu, UK spot gas 51.21p/therm, US$/UK£ exchange rate 1.65.
C) COSTS INCURRED IN GAS AND OIL ACTIVITIES
Aggregate costs incurred under the historical cost convention, comprising amounts capitalised to exploration and development and amounts
charged to the income statement in respect of exploration and appraisal, were as follows:
Australia
$m
Africa
$m
Asia
$m
North America
and the
Caribbean
$m
South
America
$m
Europe
$m
Total
$m
Year ended 31 December 2013:
Acquisition of properties
(a)
:
Unproved – – – 9 – – 9
Exploration 283 582 43 24 562 155 1 649
Development 4 746 537 349 312 1 220 1 046 8 210
Year ended 31 December 2014:
Acquisition of properties
(a)
:
Unproved – – – 62 – – 62
Exploration 257 387 16 148 189 201 1 198
Development 2 975 534 417 383 1 728 863 6 900
(a) There was no acquisition of proved properties during 2014 (2013: $nil).
The proportion of exploration costs capitalised in 2014 was 57.1% (2013: 80.8%).
The above table does not include additions to decommissioning provisions which amounted to $379m in 2014 (2013: $522m).
D) RESULTS OF OPERATIONS
The results of operations under the historical cost convention and in accordance with IFRS for the oil and gas exploration and producing activities
(excluding liquefaction, business development, disposals, re-measurements and impairments, and interest costs) is given below.
Australia
$m
Africa
$m
Asia
$m
North America
and the
Caribbean
$m
South
America
$m
Europe
$m
Total
$m
Year ended 31 December 2013:
Revenue and other operating income 146 1 999 3 357 842 2 068 3 328 11 740
Lifting costs (119) (232) (345) (141) (231) (563) (1 631)
Royalties and other operating costs (4) (59) (314) (59) (611) (131) (1 178)
Operating costs (123) (291) (659) (200) (842) (694) (2 809)
Other costs (104) (30) (238) (122) (231) (200) (925)
Depreciation (73) (971) (423) (404) (128) (609) (2 608)
Exploration expense (46) (78) (24) (24) (316) (223) (711)
(200) 629 2 013 92 551 1 602 4 687
Taxation – (362) (787) (80) (209) (961) (2 399)
Results of operations (200) 267 1 226 12 342 641 2 288
Year ended 31 December 2014:
Revenue and other operating income 87 1 317 2 921 777 3 370 3 177 11 649
Lifting costs (118) (202) (369) (126) (394) (642) (1 851)
Royalties and other operating costs (5) (51) (294) (62) (985) (189) (1 586)
Operating costs (123) (253) (663) (188) (1 379) (831) (3 437)
Other costs (148) (158) (290) (132) (454) (152) (1 334)
Depreciation (93) (396) (422) (331) (186) (1 002) (2 430)
Exploration expense (42) (282) (13) (112) (149) (153) (751)
(319) 228 1 533 14 1 202 1 039 3 697
Taxation 80 (70) (622) (145) (274) (633) (1 664)
Results of operations (239) 158 911 (131) 928 406 2 033
Included in revenue and other operating income are intra-Group sales at contract prices of $804m for the year ended 31 December 2014 (2013: $760m).
The accretion interest expense resulting from changes in the liability for decommissioning due to the passage of time, which is not included in the
table above, was $146m (2013: $107m).
136
BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS
HISTORICAL PRODUCTION (UNAUDITED)
Gas production
kboed
Oil and liquids production
kboed
Total production
kboed
2014 2013 2012 2014 2013 2012 2014 2013 2012
Australia 34 25 25 – – – 34 25 25
Bolivia 40 29 23 8 7 5 48 36 28
Brazil 6 4 3 72 35 22 78 39 25
Egypt 59 107 129 3 5 3 62 112 132
India 12 14 17 6 6 8 18 20 25
Kazakhstan 33 36 36 52 56 62 85 92 98
Norway 1 1 2 – 1 1 1 2 3
Thailand 33 34 30 6 7 6 39 41 36
Trinidad and Tobago 64 68 72 1 2 1 65 70 73
Tunisia 24 29 28 8 9 9 32 38 37
UK 39 37 40 66 63 56 105 100 96
USA 39 58 79 – – – 39 58 79
Total production of gas,
oil and liquids (kboed) 384 442 484 222 191 173 606 633 657
Total production of gas,
oil and liquids (mmboe) 140.2 161.2 177.2 80.9 69.7 63.3 221.1 230.9 240.5
Production volumes include fuel gas.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS
FIVE-YEAR FINANCIAL SUMMARY (UNAUDITED)
CONSOLIDATED INCOME STATEMENT
for the year ended 31 December 2014
$m
2013
$m
2012
$m
2011
$m
2010
$m
Group revenue and other operating income 19 949 19 311 19 200 17 849 13 710
Operating costs (13 572) (11 827) (11 355) (10 459) (8 485)
Pro?ts and losses on disposal of non-current assets and impairments (8 120) (3 817) (1 651) (414) (333)
Operating pro?t/(loss) (1 743) 3 667 6 194 6 976 4 892
Finance income 153 169 222 174 164
Finance costs (906) (283) (360) (208) (215)
Share of post-tax results from joint ventures and associates 166 336 289 269 260
Pro?t/(loss) before taxation (2 330) 3 889 6 345 7 211 5 101
Taxation 1 279 (1 684) (3 052) (3 134) (2 007)
Pro?t/(loss) for the year from continuing operations (1 051) 2 205 3 293 4 077 3 094
Pro?t for the year from discontinued operations 7 245 1 324 219 399
Pro?t/(loss) for the year (1 044) 2 450 4 617 4 296 3 493
Pro?t/(loss) attributable to:
Shareholders (earnings) (1 044) 2 441 4 523 4 215 3 344
Non-controlling interest – 9 94 81 149
(1 044) 2 450 4 617 4 296 3 493
Earnings per ordinary share continuing operations (cents)
Basic (30.8) 64.8 97.0 120.3 91.5
Diluted (30.8) 64.5 96.4 119.5 91.0
Earnings per ordinary share discontinued operations (cents)
Basic 0.2 6.9 36.2 4.1 7.4
Diluted 0.2 6.9 36.0 4.0 7.3
CONSOLIDATED BALANCE SHEET
as at 31 December 2014
$m
2013
$m
2012
$m
2011
$m
2010
$m
Non-current assets 47 841 51 844 53 155 48 979 40 132
Current assets 11 917 14 130 11 749 12 216 9 965
Assets classi?ed as held for sale 2 088 – 386 245 227
Total assets 61 846 65 974 65 290 61 440 50 324
Current liabilities (7 894) (8 234) (8 165) (9 085) (8 886)
Non-current liabilities (24 749) (25 780) (24 019) (22 745) (14 710)
Liabilities associated with assets classi?ed as held for sale (63) – (158) (99) (104)
Total liabilities (32 706) (34 014) (32 342) (31 929) (23 700)
Net assets 29 140 31 960 32 948 29 511 26 624
Equity
Total shareholders’ equity 29 140 31 960 32 891 29 220 26 268
Non-controlling interest in equity – – 57 291 356
Total equity 29 140 31 960 32 948 29 511 26 624
OTHER INFORMATION
as at 31 December
2014 2013 2012 2011 2010
Net borrowings
(a)
$m (11 998) (10 610) (10 624) (11 336) (6 973)
Gearing ratio
(a)
% 29.2 24.8 24.3 27.2 20.2
Debt/equity ratio
(b)
% 41.3 33.0 32.0 37.5 25.3
Employee numbers (headcount) thousands 4.9 5.4 5.7 6.6 6.2
(a) See Glossary, page 143.
(b) Debt/equity ratio represents net borrowings as a percentage of total shareholders’ funds (excluding balances associated with commodity ?nancial instruments and related deferred tax).
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
FINANCIAL STATEMENTS | FIVE-YEAR FINANCIAL SUMMARY (UNAUDITED)
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2014
$m
2013
$m
2012
$m
2011
$m
2010
$m
Cash generated by operations 10 015 10 285 10 715 9 773 8 370
Income taxes paid (2 616) (2 468) (2 720) (2 791) (1 984)
Net cash in?ow from operating activities 7 399 7 817 7 995 6 982 6 386
Cash ?ows from investing activities
Dividends received 179 147 151 204 198
Proceeds from disposal of subsidiary undertakings and investments 800 774 2 185 84 468
Proceeds from disposal of property, plant and equipment and intangible assets 55 3 827 754 116 897
Purchase of property, plant and equipment and intangible assets (8 510) (10 605) (9 974) (10 300) (8 397)
Loans to and repayments from joint ventures and associates 41 73 698 (51) 92
Interests in subsidiaries, joint ventures, associates and other investments (892) (610) (429) (246) (529)
Other loan repayments/(advances) 111 112 (280) – –
Net cash out?ow from investing activities (8 216) (6 282) (6 895) (10 193) (7 271)
Cash ?ows from ?nancing activities
Net interest paid (556) (560) (541) (247) (229)
Dividends paid (1 024) (923) (859) (772) (680)
Dividends paid to non-controlling interest – – (18) (136) (108)
Net proceeds from issue of new borrowings 2 086 2 713 2 925 6 392 3 559
Repayment of borrowings (625) (1 093) (1 736) (940) (348)
Issue of shares 28 45 36 48 95
Movements in own shares – (13) (16) (23) (2)
Net cash (out?ow)/in?ow from ?nancing activities (91) 169 (209) 4 322 2 287
Net (decrease)/increase in cash and cash equivalents (908) 1 704 891 1 111 1 402
OTHER INFORMATION
for the year ended 31 December 2014
$m
2013
$m
2012
$m
2011
$m
2010
$m
Closing total equity 29 140 31 960 32 948 29 511 26 624
Add back:
Closing commodity ?nancial instruments net of associated deferred tax (62) 159 201 757 958
Closing net borrowings 11 998 10 610 10 624 11 336 6 973
Closing capital employed 41 076 42 729 43 773 41 604 34 555
Average capital employed
(a)
41 903 43 251 42 689 38 080 31 250
Business performance pro?t before tax
(b)
6 404 7 413 7 898 7 565 6 128
Add back Business performance Finance costs/(income) on net borrowings 52 71 51 60 (8)
6 456 7 484 7 949 7 625 6 120
Taxation applied at the Group’s effective rate (2 389) (3 068) (3 537) (3 355) (2 356)
Post-tax return 4 067 4 416 4 412 4 270 3 764
Pre-tax return on average capital employed
(c)
% 15.4 17.3 18.6 20.0 19.6
Post-tax return on average capital employed
(c)
% 9.7 10.2 10.3 11.2 12.0
(a) Average capital employed is calculated as the average of the opening and closing capital employed balances for the year.
(b) Business performance pro?t before tax excludes disposals, re-measurements and impairments and includes share of pre-tax results from joint ventures and associates.
(c) Return on average capital employed represents Business performance pro?t (excluding disposals, re-measurements and impairments), excluding net ?nance costs/(income) on net borrowings,
as a percentage of average capital employed. The above table presents this before and after taxation applied at the Group’s effective rate.
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BG GROUP | ANNUAL REPORT AND ACCOUNTS 2014
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