2010 second quarter n half yr results

8/6/2019 2010 Second Quarter n Half Yr Results

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BG Group plc2010 SECOND QUARTER & HALF YEAR RESULTS

BG Group plc 2010 Second Quarter & Half Year Results 1

Second Quarter Business Performance Highlights

Earnings per share of 26.6 cents, up 19% year-on-year

Cash generated by operations of $2 323 million, up 57% year-on-year

Interim dividend of 9.82 cents per share (6.35 pence per share)

Tupi Alto, seventh consecutive successful well on the Tupi accumulation

QCLNG received state environmental approval, federal approval expected later this year

Total US shale gas net reserves and resources increased to over 1.3 billion boe

BG Groups Chief Executive, Frank Chapman said:

These are good results, accompanied by continued progress with the delivery of our growth plans.We had further appraisal success in the Santos Basin, offshore Brazil, and production from our firstpermanent production facility on Tupi is expected later this year. In Australia, our total reservesand resources are now 2.9 billion boe, and we remain on track to sanction the QCLNG projectlater this year. We have substantially increased our total US shale gas reserves and resources toover1.3 billion boe.

Second Quarter Half Year

2010$m

2009(b)$m Business Performance

(a)

2010$m

2009(b)$m

1 532 1 448 +6%

Total operating profit including share of pre-tax

operating results from joint ventures and associates 3 527 3 272 +8%

899 754 +19% Earnings for the period 2 019 1 742 +16%

26.6c 22.4c +19% Earnings per share 59.8c 51.9c +15%

9.82c 9.20c +7% Interim dividend per share 9.82c 9.20c +7%

Total results for the period (including disposals,re-measurements and impairments)

914 1 341 -32% Operating profit before share of results from jointventures and associates 2 541 3 080 -18%

1 048 1 468 -29%

Total operating profit including share of pre-tax

operating results from joint ventures and associates 2 806 3 336 -16%

602 761 -21% Earnings for the period 1 562 1 769 -12%

17.8c 22.7c -22% Earnings per share 46.2c 52.7c -12%

a) Business Performance excludes disposals, certain re-measurements and impairments as exclusion of these items provides a clear and consistentpresentation of the underlying operating performance of the Groups ongoing business. During the second quarter, total results included a netpre-tax charge of $41 million on the disposal/impairment of certain assets (pre-tax charge of $418 million for the half year). Total results for thesecond quarter also included a pre-tax charge of $443 million in relation to mark-to-market movements on long-term commodity contracts andeconomic hedges (pre-tax charge of $303 million for the half year). For further information see Presentation of Non-GAAP measures (page 13)and notes 1 to 3 (pages 21 to 25). Unless otherwise stated, the results discussed in this release relate to BG Group's Business Performance.

b) 2009 results have been restated from Pounds Sterling to US Dollars (see note 1, page 21).


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2010 SECOND QUARTER & HALF YEAR RESULTS


Business Review Group


2010$m

2009$m Business Performance

2010$m

2009$m

4 127 3 489 +18% Revenue and other operating income(a)

8 774 7 939 +11%

Total operating profit including share of pre-tax resultsfrom joint ventures and associates

746 728 +2% Exploration and Production 1 938 1 562 +24%

540 465 +16% Liquefied Natural Gas 1 173 1 292 -9%

174 189 -8% Transmission and Distribution 299 304 -2%

42 74 -43% Power Generation 97 109 -11%

30 (8) Other activities 20 5 +300%

1 532 1 448 +6% 3 527 3 272 +8%

19 (60) Net finance income/(costs) 1 (127)

(616) (591) +4% Taxation for the period (1 447) (1 337) +8%

899 754 +19% Earnings for the period 2 019 1 742 +16%

26.6c 22.4c +19% Earnings per share (cents) 59.8c 51.9c +15%

2 770 1 761 +57% Capital investment 4 671 3 633 +29%

a) 2009 comparatives have been restated on the application of IFRIC 12. See note 1 (page 21).

Second quarterRevenue and other operating income increased by 18% to $4 127 million, principally reflecting higher commodity pricesin the E&P and LNG segments.

Total operating profit increased by 6% to $1 532 million, reflecting the growth in revenue and other operating income,partially offset by a higher exploration charge in the quarter.

Cash generated by operations increased by 57% to $2 323 million reflecting the increase in operating profit and lowerlevels of working capital.

Net finance income of $19 million for the quarter (2009 $60 million costs) included foreign exchange gains of$71 million (2009 $8 million gain). As at 30 June 2010, net debt was $5 047 million and the gearing ratio of theGroup was 17%.

Capital investment (including acquisitions of $1 233 million) in the quarter was $2 770 million and comprised investmentin E&P ($2 433 million), LNG ($254 million), T&D ($57 million) and Power ($26 million).

Half year

Revenue and other operating income of $8 774 million was 11% higher, reflecting generally higher commodity prices.

Total operating profit of $3 527 million was 8% higher as a result of the increase in revenue and other operatingincome, partially offset by lower realisations in the LNG segment.

Cash generated by operations increased by 39% to $4 831 million.

Net finance income of $1 million (2009 $127 million costs) included foreign exchange gains of $122 million(2009 $2 million loss).

The Groups effective tax rate (including BG Groups share of joint venture and associates tax) for the full year isexpected to be 41%. The current quarters tax charge includes an adjustment to reflect this tax rate for the first sixmonths of the year.

Capital investment in the half year (including acquisitions of $1 233 million) was $4 671 million and comprisedinvestment in E&P ($3 463 million), LNG ($1 053 million), T&D ($109 million) and Power ($46 million).


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The Board has approved the payment of an interim dividend of 9.82 cents per share. This is half of the 2009 totaldividend, in accordance with the Boards usual policy. Following the change of reporting currency with effect from thefirst quarter of this year, this interim dividend for 2010 has been based on 19.63 cents as the US Dollar equivalent of

the 2009 total Sterling dividend. The interim dividend has been converted to Sterling at the average of the closingexchange rate for the three business days preceding this announcement and will be paid on 10 September 2010 as6.35 pence per share to shareholders on the register as at 6 August 2010.

Disposals, re-measurements and impairments

A post-tax charge of $297 million was recorded in the quarter in respect of disposals, re-measurements andimpairments. For further information, see note 2 (page 22).


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Exploration and Production (E&P)


2010$m


2010$m

2009$m

57.3 58.5 -2% Production volumes (mmboe) 118.6 116.4 +2%

2 059 1 732 +19% Revenue and other operating income 4 353 3 562 +22%

1 112 928 +20% Total operating profit before exploration charge 2 408 2 014 +20%

(366) (200) +83% Exploration charge (470) (452) +4%

746 728 +2% Total operating profit 1 938 1 562 +24%

2 433 1 347 +81% Capital investment 3 463 3 023 +15%

Additional operating and financial data is given on page 30.

Second quarterRevenue and other operating income of $2 059 million was 19% higher, reflecting higher realised oil, liquids andinternational gas prices, partially offset by lower realised gas prices in the UK and a 2% fall in production volumes.

Total operating profit increased by 2% to $746 million as a result of the increase in revenue and other operatingincome, partially offset by a higher exploration charge, including the write-off of the Mandarin well in Norway($255 million).

Lower production volumes in the quarter reflect the extent and phasing of planned work-over and maintenance activity,partially offset by higher production from the USA and from Hasdrubal in Tunisia. BG Group continues to expect slightproduction growth for the full year.

International gas realisations were 35% higher at 33.35 cents per produced therm, reflecting gas prices linked to higheroil and Henry Hub market prices. The average realised gas price in the UK fell by 17% to 29.97 pence per producedtherm as a result of lower contract prices.

The exploration charge of $366 million is $166 million higher as a result of higher well write-off costs.

Unit operating expenditure increased to $7.77 per barrel of oil equivalent, reflecting the impact of higher commodityprices and the phasing of maintenance activity.

Capital investment of $2 433 million in the quarter comprised investment in the Americas ($1 669 million, including$1 233 million on acquisitions in the USA as part of our alliance with EXCO Resources, Inc.), Africa, Middle East andAsia ($297 million), Europe and Central Asia ($293 million) and Australia ($174 million).

Half yearRevenue and other operating income increased by 22% to $4 353 million as a result of a 2% increase in productionvolumes and higher oil, liquids and international gas prices, partially offset by lower realised UK gas prices. Totaloperating profit increased by 24% to $1 938 million, reflecting the increase in revenue and other operating income.

The average realised international gas price increased by 9% to 32.99 cents per produced therm as a result of gasprices linked to higher oil and Henry Hub market prices. The average realised gas price in the UK fell by 28% to36.15 pence per produced therm as a result of lower contract prices.

Unit operating expenditure increased to $7.35 per barrel of oil equivalent, reflecting the phasing of maintenance activity,the impact of higher commodity prices and changes in the production mix.

Capital investment of $3 463 million in the half year comprised investment in the Americas ($2 070 million, including$1 233 million on acquisitions in the USA as part of our alliance with EXCO Resources, Inc.), Europe and Central Asia($564 million), Africa, Middle East and Asia ($540 million) and Australia ($289 million).


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Second quarter business highlights

Brazil

In June, BG Group confirmed the success of a new well known as Tupi Alto in BM-S-11 (BG Group 25%) in theSantos Basin, offshore Brazil. This is the seventh consecutive successful well on the Tupi accumulation and confirmsthe extended presence of light oil.

OmanIn June, BG Group informed the government of the Sultanate of Oman of its decision to relinquish its 100% interestin Block 60, onshore Oman. Although BG Group maintained a highly collaborative relationship with the Omanigovernment and delivered a successful appraisal programme on Abu Butabul, the decision to end its activity inOman was based upon the desire to focus on other commercial priorities within the Groups global portfolio.

TanzaniaIn June, BG Group completed a farm-in to blocks 1, 3 and 4, offshore southern Tanzania, a prospective newhydrocarbon play with significant resource potential. BG Group acquired 60% of Ophir Energy plc s interests in each ofthe offshore blocks. The three blocks cover more than 27 000 square kilometres of the Mafia Deep Offshore Basin and

the northern portion of the Ruvuma Basin. Exploration drilling is planned to commence before the end of 2010.

UK/NorwayIn June, the Plan for Development and Operation for the Gaupe field (formerly Pi) was approved. Gaupe is an oiland gas field situated south of the Varg field and close to the Norway and UK median line in the North Sea. Gaupewill be a two-well subsea tie-back to the Armada field on the UK Continental Shelf. Gross recoverable reserves onGaupe are estimated at around 30 mmboe. Gaupe will be the first BG Group field to come onstream in theNorwegian Continental Shelf and is due onstream by 2012.

USAIn May, BG Group announced that it had entered into further joint venture agreements with EXCO Resources, Inc.(EXCO) focused on assets in the Appalachian Basin, located primarily in Pennsylvania and West Virginia. In June,BG Group closed this transaction acquiring a 50% interest in a total of 654 000 net acres in the Appalachian Basin,including approximately 5 900 producing wells and 2 100 miles of supporting infrastructure. BG Group paid a total

consideration of $835 million, plus $150 million drilling carry, equating to an estimated unit resource cost of $0.40 perthousand cubic feet. The new joint venture extends the Groups successful alliance with EXCO and further strengthensBG Groups unconventional gas portfolio, adding substantial resources adjacent to the premium gas markets of the USeastern seaboard.

In June, BG Group acquired additional properties prospective for the Haynesville and Bossier shales via its alliancewith EXCO for a consideration of approximately $178 million. The properties include producing assets, gathering linesand acreage in Shelby, San Augustine and Nacogdoches Counties, Texas. Much of the interest acquired isincremental to the producing assets, gathering lines and acreage acquired by BG Group and EXCO through theacquisition of Common Resources, L.L.C., which closed in May.

These transactions provide critical mass to BG Groups US upstream gas business, with total reserves and resourcespresently estimated at over 1.3 billion boe.


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Liquefied Natural Gas (LNG)


2010$m


2010$m

2009$m

1 472 1 130 +30% Revenue and other operating income 3 155 3 173 -1%

Total operating profit

478 412 +16% Shipping and marketing 1 063 1 187 -10%

81 80 +1% Liquefaction 164 168 -2%

(19) (27) -30% Business development and other (54) (63) -14%

540 465 +16% 1 173 1 292 -9%

254 349 -27% Capital investment 1 053 498 +111%

Additional operating and financial data is given on page 30.

Second quarterLNG total operating profit for the quarter increased by 16% to $540 million.

Shipping and marketing total operating profit of $478 million was 16% higher, reflecting higher realised prices.

BG Groups share of operating profit from liquefaction activities of $81 million was in line with 2009.

Capital investment of $254 million in the quarter included $143 million in Australia and $90 million relating to LNG ships.

Half yearLNG total operating profit was 9% lower at $1 173 million. Shipping and marketing total operating profit was 10% lower

at $1 063 million, reflecting lower realisations.

The Groups share of total operating profit from liquefaction activities of $164 million was in line with 2009.

Capital investment of $1 053 million in the half year included $492 million arising on recognition of a finance leaseunder IAS 17, following the commissioning of a natural gas liquids-stripping facility at Lake Charles in the USA,$276 million relating to LNG ships and $257 million in Australia.


AustraliaIn June, BG Group received environmental approval from the Queensland state government for the QueenslandCurtis LNG project. The approval follows review of the projects Environmental Impact Statement by the QueenslandCoordinator-General. The Federal environmental approval process is ongoing. The project is making good progress

and remains on track for sanction later this year.


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Transmission and Distribution (T&D)


2010$m


2010$m

2009$m

Revenue and other operating income(a)

561 482 +16% Comgs 1 080 905 +19%

97 74 +31% Other 192 140 +37%

658 556 +18% 1 272 1 045 +22%


144 171 -16% Comgs 244 271 -10%

30 18 +67% Other 55 33 +67%

174 189 -8% 299 304 -2%

57 53 +8% Capital investment 109 95 +15%

a) 2009 comparatives have been restated on the application of IFRIC 12. See note 1 (page 21).

Second quarterRevenue and other operating income increased by 18% to $658 million as a result of higher volumes at Comgs inBrazil, following a recovery in demand within the industrial and power segments, and at Gujarat Gas in India.

T&D total operating profit for the quarter of $174 million was 8% lower, reflecting the timing effect of gas cost recoveryat Comgs, partially offset by higher volumes.

The net recovery of gas costs at Comgs in the quarter was $28 million compared with $89 million in 2009. At the endof the quarter, $19 million of net benefit is due to be passed back to customers in future periods. Excluding the timingeffect of gas cost recovery, operating profit at Comgs increased by 41%, reflecting higher volumes and favourableBrazilian Real foreign exchange movements.

Half yearRevenue and other operating income increased by 22% to $1 272 million, reflecting higher volumes at Comgs andGujarat Gas.

T&D total operating profit was $299 million for the half year.

The net recovery of gas costs at Comgs in the half year was $39 million compared with $122 million in 2009.Excluding the timing effect of gas cost recovery, operating profit at Comgs increased by 38% as a result of highervolumes and favourable Brazilian Real foreign exchange movements, partially offset by lower unit margins.

Other T&D activities operating profit increased by $22 million to $55 million, reflecting higher volumes and prices atGujarat Gas.

Capital investment mainly represents the development of the Comgs pipeline network.


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Power Generation


2010$m


2010$m

2009$m

156 179 -13% Revenue and other operating income 396 383 +3%


45 76 -41% Power Generation 106 115 -8%

(3) (2) +50% Business development and other (9) (6) +50%

42 74 -43% 97 109 -11%

26 12 +117% Capital investment 46 17 +171%

Second quarter and half yearTotal operating profit fell by $32 million to $42 million in the quarter and by $12 million to $97 million in the half year.This reflected the disposal during the quarter of the Groups interest in Seabank Power Limited in the UK and theGroups power plants in the USA, together with the phasing of gas costs at BG Italia Power.


UKIn July, BG Group signed a Share Sale Agreement for the sale of Premier Power Limited, a wholly owned subsidiary ofBG Group, for a total consideration of 99 million (approximately $150 million). Closing of the transaction is subject toreceiving the customary regulatory approvals and is expected in second half 2010.


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Principal Risks and Uncertainties

BG Groups business, results and financial condition could be affected by a broad range of risks and uncertainties. The principal risks

and uncertainties for the remaining six months of the financial year are unchanged from those stated on pages 31 to 33 of theBG Group 2009 Annual Report and Accounts (ARA), a summary description of which is provided below. This summary descriptionis not intended, and should not be used, as a substitute for reading the appropriate pages of the ARA. This section forms part of theinterim management review for the purposes of the Disclosure and Transparency Rules made by the UK Financial Services Authority.

Commodity pricesBG Groups cash flows and profitability are sensitive to natural gas, crude oil and LNG prices (and related price spreads) whichare dependent on a number of factors that impact world supply and demand. Group exposure to commodity prices also variesaccording to a number of other factors, including the mix of production and sales.

Operational performanceBG Groups production volumes (and therefore revenues) are dependent on the continued operational performance ofits producing assets which are subject to a number of operational risks including: reduced availability of those assets;asset integrity and health, safety, security and environment (HSSE) incidents; adverse reserves recovery from the field;the performance of our contractors or JV partners; and exposure to natural hazards, such as extreme weather events.

Reserves development and project deliveryDelivery of production growth from the portfolio will depend to a significant extent upon successful discovery, appraisal anddevelopment of reserves and successful planning and execution of various development and expansion projects. The Groupsmove into unconventional gas (such as shale and coal seam gas) presents further challenges to successful project delivery.The Groups ability to deliver production growth could be affected by a number of factors, including reservoir quality, unexpecteddrilling conditions or costs, rig availability or by inadequate human or technical resources. Principal risks prior to sanction includefailure to fully appreciate sub-surface, project schedule and cost uncertainties, possibly leading to poor investment decisions.Subsequent delivery of projects may be subject to cost and time overruns; HSSE risks; technical, commercial, legal or regulatorycompliance failures; equipment shortages; the availability, competence and capability of human resources and contractors;unscheduled outages; mechanical and technical difficulties; gas pipeline system constraints; and political factors.

Political context and stakeholder relationshipsBG Group needs to work together with governments and national oil companies in order to secure access to new resourcesand ensure successful monetisation of both new and existing resources. The Group faces a range of political risks, includinggovernments altering fiscal terms or taking decisions which have a negative impact on project schedules or costs. The Group willalso be exposed to risk if it does not recognise, and take account of, the interests of the communities in the areas where it operates.

Interest rate and liquidity riskFinancing costs may be affected by interest rate volatility. The Group is also exposed to liquidity risks, including risks associatedwith refinancing borrowings as they mature, the availability of borrowing facilities to meet cash requirements and the risk thatfinancial assets cannot readily be converted to cash without loss of value. Financing risks could have a material impact on theGroups cash flow, balance sheet and financial position.

Fluctuations in exchange ratesGroup financial results will be affected by exchange rate fluctuations. The Groups presentation currency, US Dollars, is thecurrency in which a significant majority of the Groups business activity is conducted and in which a substantial proportion of assetsand liabilities are held. The Group also conducts business and holds asset and liability positions in a number of other currencies.

Credit

BG Groups exposure to credit risk takes the form of a loss that would be recognised if counterparties (including sovereign entities)failed, or were unable, to meet their payment or performance obligations. These risks may arise in all forms of commercialagreements and in relation to amounts owed for physical product sales, the use of derivative instruments, and the investment ofsurplus cash balances. The Group is also exposed to political and economic risk events that exacerbate country risk, which maycause non-payment of foreign currency obligations by government or government-owned entities or otherwise impact successfulproject delivery.

Health, Safety, Security and Environment (HSSE)The Group often operates in harsh, remote, environmentally sensitive areas. Producing and managing hydrocarbons presents aninherent potential for major accidents or incidents and a number of other HSSE risks, including asset integrity failure, leading to aloss of containment of hydrocarbons and other hazardous materials; natural disasters and pandemics; and breaches of security.Risks could result in injury or loss of life, damage to the environment or loss of certain facilities, with an associated loss ordeferment of production and revenues.

Climate change

Policies and initiatives at national and international level to address climate change are likely to affect business conditions anddemand for various types of energy in the medium to long term. Worldwide policy and regulatory actions are driving targetedreductions in greenhouse gas emissions which will in turn influence the future of the energy industry. Policy approaches whichpromote the usage of alternative energy sources (such as renewables, biofuels, hydroelectric power and nuclear power) mayhave an impact on the Groups ability to maintain its position in key markets.


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First Quarter Business Highlights

This results announcement also represents BG Groups half-yearly financial report for the purposes of the Disclosure

and Transparency Rules (DTR) made by the UK Financial Services Authority. In order to comply with the requirementsof the DTR, included in this section (which forms part of the interim management report for the purpose of the DTR) arethe first half business highlights which are not included earlier in this results announcement.

Exploration and Production first quarter business highlights

BrazilIn March, BG Group announced the completion of a drill stem test on the Tupi North-East well in BM-S-11(BG Group 25%) in the Santos Basin, offshore Brazil. Potential production from the well is estimated at around30 000 bopd. BG Group and partners also completed a further successful Tupi appraisal well, situated12.5 kilometres north of the Tupi discovery well. Further evaluation of the well data is ongoing and work on optimisingfield development options continues to advance.

UK/NorwayIn the North Sea, BG Group and its partner approved submission of the Field Development Plan for the Gaupe(formerly Pi) project to the Norwegian Ministry. The Gaupe project will be developed via a tie-back to BG Groupsexisting Armada infrastructure in the UK. Production is due to begin by 2012.

BG Group and partners continue to progress towards first production from the Jasmine field in 2012. In the first fourmonths of 2010, five of the nine major contracts related to this significant development were awarded, including thedrilling rig and fabrication of the jacket and topsides.

USAIn April, BG Group signed an agreement to purchase Common Resources, L.L.C. (Common) jointly with EXCOResources, Inc. (EXCO) for approximately $446 million ($223 million net to BG Group). Common owns producingassets, gathering lines and acreage in potentially highly productive areas in Shelby, San Augustine and NacogdochesCounties, Texas. The assets acquired include seven producing wells and approximately 29 200 net acres prospective

for the Haynesville and Bossier shales. BG Group and EXCO will each acquire 50% of Common, and development ofthese assets will be governed by the existing joint venture. The acquisition completed in May. On completion of theacquisition, BG Groups total estimated net reserves and resources in the USA amounted to around 5 tcf.


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Liquefied Natural Gas first quarter business highlights

Australia

In February, BG Group announced it had signed the plant Engineering, Procurement and Construction contracts withBechtel companies for the Queensland Curtis LNG (QCLNG) liquefaction plant in Queensland. Under the contracts,Bechtel has been issued interim notices to proceed with engineering works and the procurement of plant long-leaditems, including compressors and storage tanks. QGC has begun to commit to contracts under plans to procure long-lead items during first half 2010, valued at more than US$3 billion.

In February, BG Group and Australia Pacific LNG (APLNG) agreed a framework for the development of jointly ownedcoal seam gas tenements ATP 648P and ATP 620P. BG Group also entered into conditional gas purchase agreementswith APLNG under which BG Group expects to buy around 190 petajoules (PJ) of gas over an initial period of aroundtwo years from APLNG, reducing thereafter to an average of 25 PJ per annum.

In March, BG Group signed a LNG sales contract with the China National Offshore Oil Corporation (CNOOC)concluding negotiations announced in May 2009 for the supply of 3.6 mtpa of LNG over a 20-year period. CNOOC willbe supplied with LNG manufactured at the QCLNG facility which is planned to come onstream by 2014. BG Group may

also supply CNOOC from the Group's global LNG portfolio. Additionally, CNOOC will acquire a 5% equity interest inthe reserves and resources of certain BG Group tenements in the Walloons Fairway of the Surat Basin in Queensland.CNOOC will also become a 10% equity investor in the first of two liquefaction trains which will form the first phase ofthe QCLNG development. In addition, BG Group and CNOOC have agreed to participate jointly in a consortium toconstruct two LNG ships in China that will be owned by the consortium.

All of these agreements are conditional on relevant approvals and on BG Group making a final investment decision onQCLNG, expected later this year.

In March, BG Group announced it had signed Heads of Agreement with Tokyo Gas Co., Ltd. (Tokyo Gas), for thesupply of LNG from the Groups QCLNG project. Tokyo Gas will buy 1.2 mtpa from 2015 which will be supplied fromthe QCLNG facility and also from the Groups global LNG portfolio. Additionally, Tokyo Gas will acquire a 1.25%interest in the reserves and resources of certain BG Group tenements in the Walloons Fairway of the Surat Basin inQueensland. Tokyo Gas will also become a 2.5% equity investor in the second of the two liquefaction trains. BG Group

and Tokyo Gas intend to execute fully termed agreements by the end of 2010. These agreements will represent thefirst purchase by a Japanese company of LNG from coal seam gas.

SingaporeIn March, the Group announced it had agreed long-term contracts for the sale of a total of 1.5 mtpa of regasifiedLNG to six power generating companies in Singapore. This is the first tranche of contracts to be confirmed under theLNG aggregator agreement entered into by BG Group and the Energy Market Authority of Singapore in June 2009.BG Group has the sole right to supply up to 3 mtpa to the Singaporean market under gas sales agreements with a termof up to 20 years.

In total, BG Group has now secured up to 9.5 mtpa of long-term LNG sales in Chile, China, Japan and Singapore.

Power Generation first quarter business highlights

In March, BG Group signed a sale and purchase agreement for the sale of its power plants in the USA for a totalconsideration of $450 million. The transaction completed in second quarter 2010.

In April, BG Group signed a sale and purchase agreement for the sale of its 50% interest in Seabank Power Limitedin the UK for a total consideration of 211.7 million (approximately $320 million). The transaction completed in secondquarter 2010.


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Statement of Directors responsibilities

The Directors confirm that this condensed set of financial statements for the six months ended 30 June 2010 hasbeen prepared in accordance with IAS 34 Interim Financial Reporting, as adopted by the European Union, andthat the interim management report herein includes a fair review of the information required by the Disclosure andTransparency Rules 4.2.7 and 4.2.8.

The Directors of BG Group plc are listed in the 2009 Annual Report and Accounts.

By order of the Board

_________________

Frank ChapmanChief Executive

_________________

Ashley AlmanzaChief Financial Officer

Legal Notice

Certain statements included in these results contain forward-looking information concerning BG Groups strategy,operations, financial performance or condition, outlook, growth opportunities or circumstances in the countries,sectors or markets in which BG Group operates. By their nature, forward-looking statements involve uncertainty

because they depend on future circumstances, and relate to events, not all of which are within BG Groups control orcan be predicted by BG Group. Although BG Group believes that the expectations reflected in such forward-lookingstatements are reasonable, no assurance can be given that such expectations will prove to have been correct. Actualresults could differ materially from those set out in the forward-looking statements. For a detailed analysis of thefactors that may affect our business, financial performance or results of operations, we urge you to look at the RiskFactors included in BG Group plcs Annual Report and Accounts 2009. No part of these results constitutes, or shallbe taken to constitute, an invitation or inducement to invest in BG Group plc or any other entity, and must not berelied upon in any way in connection with any investment decision. BG Group undertakes no obligation to update anyforward-looking statements, whether as a result of new information, future events or otherwise, except to the extentlegally required.


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Presentation of Non-GAAP measures

Business PerformanceBusiness Performance excludes disposals, certain re-measurements and impairments (see below) as exclusionof these items provides a clear and consistent presentation of the underlying operating performance of the Groupsongoing business.

BG Group uses commodity instruments to manage price exposures associated with its marketing and optimisationactivity in the UK and USA. This activity enables the Group to take advantage of commodity price movements. It isconsidered more appropriate to include both unrealised and realised gains and losses arising from themark-to-market of derivatives associated with this activity in Business Performance.

Disposals, certain re-measurements and impairmentsBG Groups commercial arrangements for marketing gas include the use of long-term gas sales contracts. Whilstthe activity surrounding these contracts involves the physical delivery of gas, certain UK gas sales contracts areclassified as derivatives under the rules of IAS 39 and are required to be measured at fair value at the balance sheet

date. Unrealised gains and losses on these contracts reflect the comparison between current market gas prices andthe actual prices to be realised under the gas sales contract and are disclosed separately as disposals,re-measurements and impairments.

BG Group also uses commodity instruments to manage certain price exposures in respect of optimising the timingand location of its physical gas and LNG sales commitments. These instruments are also required to be measuredat fair value at the balance sheet date under IAS 39 and where practical have been designated as formal hedges.However, IAS 39 does not always allow the matching of fair values to the economically hedged value of the relatedcommodity, resulting in unrealised movements in fair value being recorded in the income statement. Thesemovements in fair value, together with any unrealised gains and losses associated with discontinued hedgeaccounting relationships that continue to represent economic hedges, are disclosed separately as disposals,re-measurements and impairments.

BG Group also uses financial instruments, including derivatives, to manage foreign exchange and interest rateexposure. These instruments are required to be recognised at fair value or amortised cost on the balance sheet inaccordance with IAS 39. Most of these instruments have been designated either as hedges of foreign exchangemovements associated with the Groups net investments in foreign operations, or as hedges of interest rate risk.Where these instruments cannot be designated as hedges under IAS 39, unrealised movements in fair value arerecorded in the income statement and disclosed separately as disposals, re-measurements and impairments.

Realised gains and losses relating to the instruments referred to above are included in Business Performance. Thispresentation best reflects the underlying performance of the business since it distinguishes between the temporarytiming differences associated with re-measurements under IAS 39 rules and actual realised gains and losses.

BG Group has also separately identified profits and losses associated with the disposal of non-current assets, andimpairments of non-current assets as they require separate disclosure in order to provide a clearer understandingof the results for the period.

For a reconciliation between the overall results and Business Performance and details of disposals,re-measurements and impairments, see the consolidated income statements (pages 15 and 16), note 2 (page 22)and note 3 (page 23).

Joint ventures and associatesUnder IFRS the results from jointly controlled entities (joint ventures) and associates, accounted for under the equitymethod, are required to be presented net of finance costs and tax on the face of the income statement. Given therelevance of these businesses within BG Group, the results of joint ventures and associates are presented beforeinterest and tax, and after tax. This approach provides additional information on the source of BG Groups operatingprofits. For a reconciliation between operating profit and earnings including and excluding the results of joint venturesand associates, see note 3 (page 23).

Net borrowings/fundsBG Group provides a reconciliation of net borrowings/funds and an analysis of the amounts included within net

borrowings/funds as this is an important liquidity measure for the Group.


14/33

BG Group plc



Independent review report to BG Group plc

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearlyfinancial report for the six months ended 30 June 2010, which comprises the consolidated income statement,consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changesin equity, consolidated cash flow statement and related notes. We have read the other information contained inthe half-yearly financial report and considered whether it contains any apparent misstatements or materialinconsistencies with the information in the condensed set of financial statements.

Directors responsibilitiesThe half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors areresponsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rulesof the United Kingdom's Financial Services Authority.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRS as adoptedby the European Union. The condensed set of financial statements included in this half-yearly financial report has been

prepared in accordance with International Accounting Standard 34, Interim Financial Reporting, as adopted by theEuropean Union.

Our responsibilityOur responsibility is to express to the company a conclusion on the condensed set of financial statements in thehalf-yearly financial report based on our review. This report, including the conclusion, has been prepared for and onlyfor the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and forno other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or toany other person to whom this report is shown or into whose hands it may come save where expressly agreed byour prior consent in writing.

Scope of reviewWe conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410,Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing

Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries,primarily of persons responsible for financial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted in accordance with International Standardson Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become awareof all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

ConclusionBased on our review, nothing has come to our attention that causes us to believe that the condensed set of financialstatements in the half-yearly financial report for the six months ended 30 June 2010 is not prepared, in all materialrespects, in accordance with International Accounting Standard 34 as adopted by the European Union and theDisclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP

Chartered Accountants28 July 2010London

(a) The maintenance and integrity of the BG Group plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration ofthese matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim financial report since it was initially presentedon the web site.

(b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.


15/33

BG Group plc



Consolidated Income Statement

Second Quarter2010 2009 Restated(a)

Notes

BusinessPerform-

ance(b)

$m

Disposals,re-measure-

ments andimpairments

(Note 2)(b)

$m

TotalResult

$m

BusinessPerform-

ance(b)$m



(Note 2)(b)$m

TotalResult

$m

Group revenue 4 160 4 160 3 478 3 478

Other operating income 2 (33) (443) (476) 11 20 31

Group revenue and other operating income 3 4 127 (443) 3 684 3 489 20 3 509

Operating costs (2 729) (2 729) (2 168) (2 168)

Profits and losses on disposal of non-current

assets and impairments 2 (41) (41) Operating profit/(loss)

(c) 3 1 398 (484) 914 1 321 20 1 341

Finance income 2, 4 94 84 178 19 (5) 14

Finance costs 2, 4 (62) (94) (156) (62) (1) (63)

Share of post-tax results from joint venturesand associates 3 92 92 77 77

Profit/(loss) before tax 1 522 (494) 1 028 1 355 14 1 369

Taxation 2, 5 (587) 197 (390) (558) (7) (565)

Profit/(loss) for the period 3 935 (297) 638 797 7 804

Attributable to:

BG Group shareholders (earnings) 899 (297) 602 754 7 761

Non-controlling interest 36 36 43 43

935 (297) 638 797 7 804

Earnings per share basic 6 26.6c (8.8c) 17.8c 22.4c 0.3c 22.7c

Earnings per share diluted 6 26.4c (8.7c) 17.7c 22.3c 0.2c 22.5c

Total operating profit/(loss) including shareof pre-tax operating results from jointventures and associates

(d) 3 1 532 (484) 1 048 1 448 20 1 468

a) See note 1 (page 21).

b) See Presentation of Non-GAAP measures (page 13) for an explanation of results excluding disposals, certain re-measurements and impairments and presentation of theresults of joint ventures and associates.

c) Operating profit/(loss) is before share of results from joint ventures and associates.

d) This measurement is shown by BG Group as it is used as a means of measuring the underlying performance of the business.

The notes on pages 21 to 29 form an integral part of these condensed financial statements.


16/33

BG Group plc



Consolidated Income Statement

Half Year2010 2009 Restated(a)

Notes

BusinessPerform-

ance(b)

$m



(Note 2)(b)

$m

TotalResult

$m

BusinessPerform-

ance(b)$m



(Note 2)(b)$m

TotalResult

$m

Group revenue 8 662 8 662 7 810 7 810

Other operating income 2 112 (303) (191) 129 64 193

Group revenue and other operating income 3 8 774 (303) 8 471 7 939 64 8 003

Operating costs (5 512) (5 512) (4 923) (4 923)

Profits and losses on disposal of non-current

assets and impairments 2 (418) (418) Operating profit/(loss)

(c) 3 3 262 (721) 2 541 3 016 64 3 080

Finance income 2, 4 159 103 262 28 13 41

Finance costs 2, 4 (125) (94) (219) (122) (17) (139)

Share of post-tax results from joint ventures andassociates 3 171 171 169 169

Profit/(loss) before tax 3 467 (712) 2 755 3 091 60 3 151

Taxation 2, 5 (1 386) 255 (1 131) (1 283) (33) (1 316)

Profit/(loss) for the period 2 081 (457) 1 624 1 808 27 1 835

Attributable to:

BG Group shareholders (earnings) 2 019 (457) 1 562 1 742 27 1 769

Non-controlling interest 62 62 66 66

2 081 (457) 1 624 1 808 27 1 835

Earnings per share basic 6 59.8c (13.6c) 46.2c 51.9c 0.8c 52.7c

Earnings per share diluted 6 59.4c (13.5c) 45.9c 51.5c 0.7c 52.2c

Total operating profit/(loss) including shareof pre-tax operating results from jointventures and associates

(d) 3 3 527 (721) 2 806 3 272 64 3 336


b) See Presentation of Non-GAAP measures (page 13) for an explanation of results excluding disposals, certain re-measurements and impairments and presentationof the results of joint ventures and associates.

c) Operating profit/(loss) is before share of results from joint ventures and associates.

d) 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 in the period, see note 8 (page 28).


17/33

BG Group plc



Consolidated Statement of Comprehensive Income


2010$m

2009Restated

(a)

$m2010

$m

2009Restated

(a)

$m

638 804 Profit for the period 1 624 1 835

5 (236) Hedge adjustments net of tax(b)

(160) (505)

1 2 Fair value movements on available-for-sale assets net of tax(c)

1 9

(331) 1 382 Currency translation adjustments (401) 1 512

(325) 1 148 Other comprehensive (expense)/income, net of tax (560) 1 016

313 1 952 Total comprehensive income for the period 1 064 2 851

Attributable to:

284 1 882 BG Group shareholders 1 008 2 756

29 70 Non-controlling interest 56 95

313 1 952 1 064 2 851


b) Income tax relating to hedge adjustments is a $23 million charge for the quarter (2009 $84 million credit) and a $50 million credit for the half year (2009 $193 millioncredit).

c) Income tax relating to fair value movements on available-for-sale assets is a $1 million credit for the quarter (2009 $1 million charge) and a $1 million credit for the halfyear (2009 $1 million charge).



18/33

BG Group plc



Consolidated Balance SheetAs at

30 Jun2010

$m

As at31 Dec

2009Restated(a)

$m

As at30 Jun

2009Restated(a)

$m

As at31 Dec

2008Restated(a)

$m

Assets

Non-current assets

Goodwill 739 781 724 600

Other intangible assets 8 578 9 290 8 740 6 422

Property, plant and equipment 21 947 20 131 17 146 15 146

Investments 3 086 2 953 2 567 2 345

Deferred tax assets 204 137 136 110

Trade and other receivables 203 125 136 136

Commodity contracts and other derivative financial instruments 388 608 656 1 345

35 145 34 025 30 105 26 104

Current assets

Inventories 712 769 667 808

Trade and other receivables 4 335 4 721 4 470 5 199

Current tax receivable 371 173 228 131

Commodity contracts and other derivative financial instruments 997 1 635 2 027 2 211

Cash and cash equivalents 1 779 1 119 1 028 1 485

8 194 8 417 8 420 9 834

Assets classified as held for sale 228

Total assets 43 567 42 442 38 525 35 938

Liabilities

Current liabilities

Borrowings (1 907) (1 158) (841) (404)

Trade and other payables (3 607) (4 186) (3 410) (5 222)

Current tax liabilities (1 837) (1 579) (1 722) (1 614)

Commodity contracts and other derivative financial instruments (1 303) (1 390) (1 779) (2 088)

(8 654) (8 313) (7 752) (9 328)

Non-current liabilities

Borrowings (5 308) (5 024) (3 845) (2 727)

Trade and other payables (66) (63) (59) (55)

Commodity contracts and other derivative financial instruments (571) (849) (896) (760)

Deferred income tax liabilities (3 118) (3 147) (3 105) (2 955)

Retirement benefit obligations (282) (279) (312) (256)

Provisions for other liabilities and charges (1 523) (1 537) (1 458) (1 333)

(10 868) (10 899) (9 675) (8 086)

Liabilities associated with assets classified as held for sale (105)

Total liabilities (19 627) (19 212) (17 427) (17 414)

Net assets 23 940 23 230 21 098 18 524

Equity

Total shareholders equity 23 653 22 909 20 843 18 343

Non-controlling interest in equity 287 321 255 181Total equity 23 940 23 230 21 098 18 524




19/33

BG Group plc



Consolidated Statement of Changes in EquityCalled up

sharecapital$m

Sharepremiumaccount

$m

Hedgingreserve$m

Translationreserve$m

Otherreserves$m

Retainedearnings$m

Total$m

Non-con-

trollinginterest$m

Total$m

Equity as at 31 December 2009(restated

(a)) 574 444 150 1 697 2 710 17 334 22 909 321 23 230

Total comprehensive income forthe period (115) (440) 1 563 1 008 56 1 064

Issue of shares 1 52 53 53

Purchase of own shares (2) (2) (2)

Adjustment in respect ofemployee share schemes 37 37 37

Dividends on ordinary shares (352) (352) (352)

Dividends to non-controllinginterest (90) (90)

Equity as at 30 June 2010 575 496 35 1 257 2 710 18 580 23 653 287 23 940

Called upshare

capital$m

Sharepremiumaccount

$m

Hedgingreserve

$m

Translationreserve

$m

Otherreserves

$m

Retainedearnings

$mTotal

$m

Non-con-trollinginterest

$mTotal

$m

Equity as at 31 December 2008(restated

(a)) 571 348 889 (725) 2 710 14 550 18 343 181 18 524

Total comprehensive income forthe period (544) 1 522 1 778 2 756 95 2 851

Issue of shares 1 25 26 26

Purchase of own shares (4) (4) (4)Adjustment in respect ofemployee share schemes 45 45 45

Dividends on ordinary shares (323) (323) (323)

Dividends to non-controllinginterest (21) (21)

Equity as at 30 June 2009(restated

(a)) 572 373 345 797 2 710 16 046 20 843 255 21 098




20/33

BG Group plc



Consolidated Cash Flow Statement


2010$m

2009Restated

(a)

$m2010

$m

2009Restated

(a)

$m

Cash flows from operating activities

1 028 1 369 Profit before tax 2 755 3 151

(92) (77) Share of post-tax results from joint ventures and associates (171) (169)

513 443Depreciation of property, plant and equipment and amortisation of intangibleassets 1 039 849

496 (39) Fair value movements in commodity based contracts 375 (95)

41 Profits and losses on disposal of non-current assets and impairments 418

274 107 Unsuccessful exploration expenditure written off 284 268

(23) (7) Decrease in provisions (19) (3)

(178) (14) Finance income (262) (41)

156 63 Finance costs 219 139

9 19 Share-based payments 25 29

99 (386) Decrease/(increase) in working capital 168 (658)

2 323 1 478 Cash generated by operations 4 831 3 470

(459) (449) Income taxes paid (1 009) (1 079)

1 864 1 029 Net cash inflow from operating activities 3 822 2 391

Cash flows from investing activities

26 85 Dividends received from joint ventures and associates 37 112

486 3

Proceeds from disposal of property, plant and equipment and intangible

assets 486 3327 Proceeds from the sale of investments 327

(2 726) (1 772) Purchase of property, plant and equipment and intangible assets (4 103) (2 943)

(6) (36) Loans to joint ventures and associates (4) (49)

(247) (75) Business combinations and investments (294) (775)

(2 140) (1 795) Net cash outflow from investing activities (3 551) (3 652)

Cash flows from financing activities

(42) (43) Net interest paid(b) (89) (71)

(344) (323) Dividends paid (345) (323)

(31) (19) Dividends paid to non-controlling interest (32) (19)

1 675 1 118 Net proceeds from issue and repayment of borrowings 838 1 152

11 12 Issue of shares 53 26 Purchase of own shares (2) (4)

1 269 745 Net cash inflow from financing activities 423 761

993 (21) Net increase/(decrease) in cash and cash equivalents 694 (500)

811 1 004 Cash and cash equivalents at beginning of period 1 119 1 485

(25) 45 Effect of foreign exchange rate changes (34) 43

1 779 1 028 Cash and cash equivalents at end of period(c)

1 779 1 028


b) Includes capitalised interest for the second quarter of $13 million (2009 $9 million) and for the half year of $27 million (2009 $15 million).

c) Cash and cash equivalents comprise cash and short-term liquid investments that are readily convertible to cash.



21/33

BG Group plc



Notes

1. Basis of preparationThese primary statements are the condensed financial statements (the financial statements) of BG Group plc for thequarter ended and the half year ended 30 June 2010. The financial statements do not comprise statutory accountswithin the meaning of Section 434 of the Companies Act 2006, and should be read in conjunction with the AnnualReport and Accounts for the year ended 31 December 2009 which have been prepared in accordance with IFRS asadopted by the EU, as they provide an update of previously reported information. The latest statutory accountsdelivered to the registrar were for the year ended 31 December 2009 which were audited by BG Groups statutoryauditors PricewaterhouseCoopers LLP and on which the Auditors Report was unqualified and did not containstatements under Sections 498(2) or 498(3) of the UK Companies Act 2006. These financial statements have beenprepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU, the requirements of theDisclosure and Transparency Rules issued by the Financial Services Authority and the accounting policies, methods ofcomputation and presentation as set out in the 2009 Annual Report and Accounts (except as disclosed below). Thesefinancial statements have been reviewed, not audited, by PricewaterhouseCoopers LLP.

The preparation of the financial statements requires management to make estimates and assumptions that affect thereported amount of revenues, expenses, assets and liabilities at the date of the financial statements. If in the futuresuch estimates and assumptions, which are based on managements best judgement at the date of the financialstatements, deviate from the actual circumstances, the original estimates and assumptions will be modified asappropriate in the year in which the circumstances change.

With effect from 1 January 2010, BG Group has presented its results in US Dollars. Accordingly, 2009 results havebeen translated from Pounds Sterling to US Dollars using monthly average rates of exchange. Comparative assets andliabilities have been translated from Pounds Sterling to US Dollars at closing rates of exchange. Further information onthe procedures used to restate comparative information into US Dollars can be found on page 114 of the 2009 AnnualReport and Accounts.

Presentation of resultsThe presentation of BG Groups results separately identifies the effect of:

The re-measurement of certain financial instruments; and

Profits and losses on the disposal and impairment of non-current assets and businesses.

These items, which are detailed in note 2 to the financial statements (page 22) are excluded from BusinessPerformance in order to provide readers with a clear and consistent presentation of the underlying operatingperformance of the Groups ongoing businesses.

New accounting standards and interpretations

IFRIC 12 Service Concession Arrangements is applicable to BG Group for the period beginning 1 January 2010.This interpretation provides guidance on the accounting by operators for public-to-private service concessionarrangements and requires infrastructure considered to be under the control of a regulator rather than an operator tobe recognised as an intangible concession asset and amortised over the concession period. Prior to the adoption ofIFRIC 12 such infrastructure was recognised as property, plant and equipment of the operator and depreciated overits useful economic life. The interpretation also requires additions to the infrastructure incurred by the operator to beaccounted for as a construction contract with the regulator, with revenues and associated costs recognised in theincome statement on a percentage of completion basis.

BG Group has concluded that the Comgs concession in Brazil falls within the scope of IFRIC 12 and has appliedthe interpretation from 1 January 2010, restating comparative information as necessary. On 1 January 2010,infrastructure associated with the transmission and distribution network operated by Comgs of approximately$1.6 billion (30 June 2009 $1.4 billion; 1 January 2009 $1.1 billion) was recognised as intangible assets resulting in acorresponding decrease to property, plant and equipment. The application of IFRIC 12 has resulted in an increase torevenue and operating costs of $61 million in the 6 months to 30 June 2010 (2009 $43 million). There has been no

change to total operating profit or earnings for the Group.

A number of other amendments to accounting standards issued by the IASB are applicable from 1 January 2010. Theyhave not had a material impact on the Groups financial statements for the half year ended 30 June 2010.


22/33

BG Group plc



2. Disposals, re-measurements and impairments


2010$m 2009$m 2010$m 2009$m

(443) 20Revenue and other operating income re-measurements of commoditybased contracts (303) 64

(41) Profits and losses on disposal of non-current assets and impairments (418)

(10) (6) Net finance (costs)/income re-measurements of financial instruments 9 (4)

197 (7) Taxation 255 (33)

(297) 7 Impact on earnings (457) 27

Second quarter and half year: Revenue and other operating income

Re-measurements included within revenue and other operating income amount to a charge of $443 million for thequarter (2009 $20 million credit), of which a charge of $65 million (2009 $7 million credit) represents non-cashmark-to-market movements on certain long-term UK gas contracts. For the half year, a charge of $303 million inrespect of re-measurements is included within revenue and other operating income (2009 $64 million credit), ofwhich a charge of $23 million represents non-cash mark-to-market movements on certain long-term UK gas contracts(2009 $63 million credit). Whilst the activity surrounding these contracts involves the physical delivery of gas, thecontracts fall within the scope of IAS 39 and meet the definition of a derivative instrument. In addition,re-measurements include a $378 million charge for the quarter (2009 $13 million credit) and a $280 million charge forthe half year (2009 $1 million credit) representing unrealised mark-to-market movements associated with economichedges.

Second quarter and half year: Disposals and impairments of non-current assetsDuring the second quarter, BG Group completed the disposal of its power plants in the USA and its Canadian E&Passets. This resulted in a pre-tax profit on disposal of $16 million (post-tax $11 million) in the quarter. The Group also

completed the sale of its investment in the Seabank power plant in the UK, which resulted in a pre and post-tax creditto the income statement of $142 million. Also during the second quarter, a pre-tax impairment charge of $191 million(post-tax charge $138 million) was recognised against certain assets in the E&P segment. Other disposals andimpairments resulted in a pre-tax charge to the income statement of $8 million (post-tax $4 million) in the quarter.

In July 2010, BG Group signed a Share Sale Agreement for the sale of Premier Power Limited. Accordingly, as at30 June 2010, this asset was classified as held for sale at its carrying value.

During the first quarter, BG Group signed a Sale and Purchase Agreement for the sale of its power plants in the USAand also committed to sell its Canadian E&P assets and its investment in the Seabank power plant in the UK.Accordingly, these assets were reclassified as held for sale and revalued to the lower of their carrying amount and fairvalue less costs to sell. This resulted in a pre-tax impairment charge of $377 million (post-tax charge $263 million)against the Groups US power and Canadian E&P assets in the quarter.

Second quarter and half year: Net finance costs

Re-measurements presented in net finance costs include certain derivatives used to hedge foreign exchange andinterest rate risk, partly offset by foreign exchange movements on certain borrowings.


23/33

BG Group plc



3. Segmental analysis

Profit for the periodBusiness

Performance

Disposals,re-measurements

and impairments Total ResultAnalysed by operating segment

Second Quarter2010

$m2009

$m2010

$m2009

$m2010

$m2009

$m

Group revenue

Exploration and Production 2 072 1 748 2 072 1 748

Liquefied Natural Gas 1 492 1 111 1 492 1 111

Transmission and Distribution 658 556 658 556

Power Generation 156 171 156 171

Less: intra-group sales (218) (108) (218) (108)

Group revenue 4 160 3 478 4 160 3 478

Other operating income(a)

(33) 11 (443) 20 (476) 31

Group revenue and other operating income 4 127 3 489 (443) 20 3 684 3 509Operating profit/(loss) before share of results from joint ventures and associates

Exploration and Production 738 728 (247) 20 491 748

Liquefied Natural Gas 454 386 (383) 71 386


Power Generation 16 35 146 162 35

Other activities 30 (8) 30 (8)

1 398 1 321 (484) 20 914 1 341

Pre-tax share of operating results of joint ventures and associates

Exploration and Production 8 8

Liquefied Natural Gas 86 79 86 79



134 127 134 127

Total operating profit/(loss)






1 532 1 448 (484) 20 1 048 1 468

Net finance income/(costs)Finance income 94 19 84 (5) 178 14

Finance costs (62) (62) (94) (1) (156) (63)

Share of joint ventures and associates (13) (17) (13) (17)

19 (60) (10) (6) 9 (66)

Taxation

Taxation (587) (558) 197 (7) (390) (565)


(616) (591) 197 (7) (419) (598)

Profit for the period 935 797 (297) 7 638 804

a) Business Performance Other operating income is attributable to segments as follows: E&P $(13) million (2009 $(16) million), LNG $(20) million (2009 $19 million) and

Power $nil (2009 $8 million).


24/33

BG Group plc



3. Segmental analysis continued

Business

Performance


and impairments Total Result

Half Year2010

$m2009

$m2010

$m2009

$m2010

$m2009

$m

Group revenue(a)

Exploration and Production 4 325 3 557 4 325 3 557

Liquefied Natural Gas 3 071 3 064 3 071 3 064

Transmission and Distribution 1 272 1 045 1 272 1 045


Less: intra-group sales (402) (224) (402) (224)

Group revenue 8 662 7 810 8 662 7 810

Other operating income(b)

112 129 (303) 64 (191) 193

Group revenue and other operating income 8 774 7 939 (303) 64 8 471 8 003Operating profit/(loss) before share of results from joint ventures and associates

Exploration and Production 1 931 1 562 (277) 65 1 654 1 627

Liquefied Natural Gas 998 1 127 (265) 733 1 127

Transmission and Distribution 272 286 (1) 272 285

Power Generation 41 36 (179) (138) 36

Other activities 20 5 20 5

3 262 3 016 (721) 64 2 541 3 080

Pre-tax share of operating results of joint ventures and associates

Exploration and Production 7 7

Liquefied Natural Gas 175 165 175 165



265 256 265 256



Liquefied Natural Gas 1 173 1 292 (265) 908 1 292




3 527 3 272 (721) 64 2 806 3 336

Net finance income/(costs)Finance income 159 28 103 13 262 41

Finance costs (125) (122) (94) (17) (219) (139)


1 (127) 9 (4) 10 (131)

Taxation

Taxation (1 386) (1 283) 255 (33) (1 131) (1 316)


(1 447) (1 337) 255 (33) (1 192) (1 370)

Profit for the period 2 081 1 808 (457) 27 1 624 1 835

a) External sales are attributable to segments as follows: E&P $3 968 million (2009 $3 367 million), LNG $3 026 million (2009 $3 030 million), T&D $1 272 million

(2009 $1 045 million) and Power $396 million (2009 $368 million). Intra-group sales are attributable to segments as follows: E&P $357 million (2009 $190 million) andLNG $45 million (2009 $34 million).

b) Business Performance Other operating income is attributable to segments as follows: E&P $28 million (2009 $5 million), LNG $84 million (2009 $109 million) and Power$nil (2009 $15 million).


25/33

BG Group plc



3. Segmental analysis continued

Business

Performance


and impairments Total Result

Second Quarter2010

$m2009

$m2010

$m2009

$m2010

$m2009

$m






1 502 1 456 (484) 20 1 018 1 476


1 532 1 448 (484) 20 1 048 1 468

Less: Pre-tax share of operating resultsof joint ventures and associates (134) (127)

Add: Share of post-tax results fromjoint ventures and associates 92 77

Net finance income/(costs) 22 (49)

Profit before tax 1 028 1 369

Taxation (390) (565)

Profit for the period 638 804

BusinessPerformance

Disposals,re-measurementsand impairments Total Result

Half Year2010

$m2009

$m2010

$m2009

$m2010

$m2009

$m



Liquefied Natural Gas 1 173 1 292 (265) 908 1 292



3 507 3 267 (721) 64 2 786 3 331


3 527 3 272 (721) 64 2 806 3 336

Less: Pre-tax share of operating results

of joint ventures and associates (265) (256)Add: Share of post-tax results fromjoint ventures and associates 171 169

Net finance income/(costs) 43 (98)

Profit before tax 2 755 3 151

Taxation (1 131) (1 316)

Profit for the period 1 624 1 835


26/33

BG Group plc



4. Net finance income


2010$m

2009$m

2010$m

2009$m

(31) (33) Interest payable (65) (63)

(27) (20) Interest on obligations under finance leases (53) (39)

13 9 Interest capitalised 27 15

(17) (18) Unwinding of discount on provisions(a)

(34) (35)

(94) (1) Disposals, re-measurements and impairments (Note 2) (94) (17)

(156) (63) Finance costs (219) (139)

94 19 Interest receivable 159 28

84 (5) Disposals, re-measurements and impairments (Note 2) 103 13

178 14 Finance income 262 41

22 (49) Net finance income/(costs)(b) 43 (98)

a) 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 liabilitiesoffset by the expected return on the plans assets.

b) Excludes Group share of net finance costs from joint ventures and associates for the quarter of $13 million (2009 $17 million), and for the half year of $33 million(2009 $33 million).

5. TaxationThe taxation charge for the second quarter before disposals, re-measurements and impairments was $587 million(2009 $558 million) and the taxation charge including disposals, re-measurements and impairments was $390 million(2009 $565 million).

For the half year, the taxation charge before disposals, re-measurements and impairments was $1 386 million(2009 $1 283 million) and the taxation charge including disposals, re-measurements and impairments was$1 131 million (2009 $1 316 million).

The Group share of taxation from joint ventures and associates for the second quarter was $29 million(2009 $33 million) and for the half year was $61 million (2009 $54 million).

The effective tax rate for the half year is based on the best estimate of the weighted average annual income tax rateexpected for the full year.

6. Earnings per ordinary share


2010 2009 2010 2009

$mcents per

share $mcents per

share $mcents per

share $mcents per

share

602 17.8 761 22.7 Earnings 1 562 46.2 1 769 52.7

297 8.8 (7) (0.3)

Disposals, re-measurementsand impairments (after tax andnon-controlling interest) 457 13.6 (27) (0.8)

899 26.6 754 22.4

Earnings excluding disposals,re-measurements andimpairments 2 019 59.8 1 742 51.9

Basic earnings per share calculations in 2010 are based on the weighted average number of shares in issue of3 380 million for the quarter and 3 378 million for the half year.

The earnings figure used to calculate diluted earnings per ordinary share is the same as that used to calculate earningsper ordinary share given above, divided by 3 400 million for the quarter and 3 400 million for the half year, being the

weighted average number of ordinary shares in issue during the period as adjusted for dilutive equity instruments.


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7. Reconciliation of net borrowings(a) Half Year$m

Net borrowings as at 31 December 2009 (4 775)Net increase in cash and cash equivalents 694

Cash inflow from changes in borrowings

(838)

Inception of finance lease liabilities/assets (362)

Foreign exchange and other re-measurements 227

Current borrowings classified as held for sale 7

Net borrowings as at 30 June 2010(a)(b)

(5 047)

Net borrowings attributable to Comgs were $726 million (31 December 2009 $829 million).

As at 30 June 2010, BG Group's share of the net borrowings in joint ventures and associates amounted toapproximately $1.7 billion, including BG Group shareholder loans of approximately $1.4 billion. These net borrowingsare included in BG Group's share of the net assets in joint ventures and associates which are consolidated inBG Group's accounts.

a) Net borrowings/funds are defined on page 32.

b) Net borrowings comprise:

As at30 Jun

2010

$m

As at31 Dec

2009

$m

Amounts receivable/(due) within one year

Cash and cash equivalents 1 779 1 119

Overdrafts, loans and finance leases (1 907) (1 158)

Derivative financial instruments(c)

124 48

(4) 9

Amounts receivable/(due) after more than one year

Loans and finance leases(d)

(5 178) (5 024)

Derivative financial instruments(c) 135 240

(5 043) (4 784)

Net borrowings (5 047) (4 775)

c) These items are included within commodity contracts and other derivative financial instrument balances on the balance sheet.

d) Includes finance lease receivable of $130 million included within non-current assets on the balance sheet.


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7. Reconciliation of net borrowings Half Year continued

Liquidity and Capital Resources

All the information below is as at 30 June 2010The Groups principal borrowing entities are: BG Energy Holdings Limited (BGEH), including wholly owned subsidiaryundertakings, the majority of whose borrowings are guaranteed by BG Energy Holdings Limited (collectively BGEH),and Comgs and Gujarat Gas which conduct their borrowing activities on a stand-alone basis.

BGEH had a $2.0 billion US Commercial Paper Programme, of which $570 million was unutilised, and a $2.0 billionEurocommercial Paper Programme, of which $1 749 million was unutilised. BGEH also had a $7.5 billion Euro MediumTerm Note Programme, of which $5.2 billion was unutilised. In July 2010, BG Group issued a500 million bond due in2019 under its Euro Medium Term Note Programme.

BGEH had aggregate committed multicurrency revolving borrowing facilities of $0.375 billion which expire in 2010,$1.090 billion which expire in 2011 and $1.040 billion which expire in 2012. There are no restrictions on the applicationof funds under these facilities, which were undrawn.

In addition, BGEH had uncommitted borrowing facilities including multicurrency lines, overdraft facilities of 45 millionand credit facilities of $20 million, all of which were unutilised.

Comgs had committed borrowing facilities of Brazilian Real (BRL) 1 857.9 million, of which BRL 438.7 million wasunutilised, and uncommitted borrowing facilities of BRL 140.8 million, of which BRL 70 million was unutilised.

8. Dividends

Half Year

2010 2009

$mcents

per share $mcents

per share

Prior year final dividend, paid in the period 352 10.43 323 9.61

The final dividend of 10.43c ($352 million) in respect of the year ended 31 December 2009 was paid on 21 May 2010to shareholders (28 May 2010 to ADR holders) on the register at the close of business on 16 April 2010. The interimdividend of 9.82c ($332 million) in respect of the year ended 31 December 2010 is payable on 10 September 2010 toshareholders on the register as at 6 August 2010.


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9. Capital investment: geographical analysis


2010$m 2009$m 2010$m 2009$m

318 260 Europe and Central Asia 596 467

1 830 570 Americas and Global LNG 2 961 972

304 814 Africa, Middle East and Asia 554 1 332

318 117 Australia 560 862

2 770 1 761 4 671 3 633

10. Quarterly information: earnings and earnings per share2010

$m2009

$m2010

cents2009cents

First quarter

Total Result 960 1 008 28.4 30.0

Business Performance 1 120 988 33.2 29.4

Second quarter

Total Result 602 761 17.8 22.7

Business Performance 899 754 26.6 22.4

Third quarter

Total Result 796 23.7

Business Performance 782 23.3

Fourth quarter

Total Result 754 22.4

Business Performance 965 28.6Full year

Total Result 3 319 98.7

Business Performance 3 489 103.8

11. Commitments and contingencies

Details of the Groups commitments and contingent liabilities as at 31 December 2009 can be found in note 23,page 104 of the 2009 Annual Report and Accounts.

The Groups capital commitments have increased by $6.0 billion in the six month period to 30 June 2010 reflectingthe ongoing development of the Groups major growth projects. There have been no material changes to the Groupsother commitments and contingent liabilities in the six month period to 30 June 2010.

12. Related party transactionsThe Group provides goods and services to, and receives goods and services from, its joint ventures and associates. Inaddition, the Group provides financing to some of these parties by way of loans. Details of related party transactions forthe year ended 31 December 2009 can be found in note 24, page 106 of the 2009 Annual Report and Accounts. Therehave been no material changes in these relationships in the period ending 30 June 2010. No related party transactionshave taken place in the first six months of the current financial year that have materially affected the financial position orthe performance of the Group during that period.


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Supplementary information: Operating and financial data

Second Quarter

First

Quarter Half Year2010 2009 2010 2010 2009

Production volumes (mmboe)

7.1 8.0 7.9 oil 15.0 16.1

8.8 9.4 9.0 liquids 17.8 18.0

41.4 41.1 44.4 gas 85.8 82.3

57.3 58.5 61.3 total 118.6 116.4

Production volumes (boed in thousands)

78 88 88 oil 83 89

97 103 100 liquids 98 99

455 452 493 gas 474 455

630 643 681 total 655 643

$75.86 $59.27 $76.45 Average realised oil price per barrel $76.17 $51.19

$66.43 $47.82 $62.81 Average realised liquids price per barrel $64.52 $40.53

45.16c 54.04c 65.22cAverage realised UK gas price per produced therm

56.38c 73.02c

(29.97p) (36.23p) (41.00p) (36.15p) (50.28p)

33.35c 24.72c 32.64c Average realised International gas price per produced therm 32.99c 30.37c

34.80c 29.88c 37.37c Average realised gas price per produced therm 36.13c 37.39c

$4.91 $3.34 $4.48 Lifting costs per boe $4.69 $3.27

$7.77 $5.42 $6.95 Operating expenditure per boe $7.35 $5.44

1 006 933 607 Development expenditure (including acquisitions)($m) 1 613 1 507

Gross exploration expenditure ($m)

1 126 356 341 capitalised expenditure (including acquisitions) 1 467 1 426

92 93 94 other expenditure 186 184

1 218 449 435 gross expenditure 1 653 1 610

Exploration expenditure charge ($m)

274 107 10 capitalised expenditure written off 284 268

92 93 94 other expenditure 186 184

366 200 104 exploration charge 470 452

LNG cargoes

21 26 14 delivered to US 35 35

32 30 41 delivered to global markets 73 76

53 56 55 total 108 111

159.0 164.4 173.6 LNG managed volumes (Tbtu) 332.6 344.6


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Supplementary information: Operating and financial data continued

BG Groups exposure to the oil price varies according to a number of factors including the mix of production and sales.

Management estimates that, other factors being constant and assuming a constant relationship between commodityprices, a $1.00 rise (or fall) in the Brent price would increase (or decrease) E&P business operating profit in 2010by approximately $90 million to $110 million.

Management estimates that in 2010, other factors being constant, a 10 cent strengthening (or weakening) in theUS Dollar would increase (or decrease) operating profit by approximately $10 million to $30 million.


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Glossary

In BG Groups results some or all of the following definitions are used:

bcf billion cubic feet

bcfd billion cubic feet per day

boe barrels of oil equivalent

boed barrels of oil equivalent per day

bopd barrels of oil per day

CAGR compound annual growth rate

Capital investment Comprises expenditure on property, plant and equipment, other intangible assets andinvestments, including business combinations

E&P Exploration and Production

FPSO Floating Production Storage and Offloading system

Gearing ratio net borrowings as a percentage of total shareholders funds (excluding the re-measurementof commodity financial instruments and associated deferred tax) plus net borrowings

IAS International Accounting Standard issued by the IASB

IASB International Accounting Standards Board

IFRIC International Financial Reporting Interpretations Committee

IFRS International Financial Reporting Standards

kboed thousand barrels of oil equivalent per day

LNG Liquefied Natural Gas

Managedvolumes

Comprises all LNG volumes contracted for purchase and having related revenue and other

operating income recognised in the applicable period

m million

mmboe million barrels of oil equivalentmmbtu million british thermal units

mmcfd million cubic feet per day

mmcmd million cubic metres per day

mmscfd million standard cubic feet per day

mmscm million standard cubic metres

mmscmd million standard cubic metres per day

mtpa million tonnes per annum

Net borrowings/funds

Comprise cash, current asset investments, finance lease liabilities/assets, currency and interestrate derivative financial instruments and short and long-term borrowings

PJ Petajoule (1 petajoule = 0.943 bcf)

PSC production sharing contractSEC US Securities and Exchange Commission

T&D Transmission and Distribution

Tbtu trillion british thermal units

tcf trillion cubic feet

Total operatingprofit

Group operating profit plus share of pre-tax operating results of joint ventures and associates

UKCS United Kingdom Continental Shelf

Unit operatingexpenditureper boe

Production costs and royalties incurred over the period divided by the net production for the

2010 second quarter n half yr results

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