BG Group got killed by the oil price slump

Hercules 265 rig fire that has caused collapse of the drill floor and derrick after a July 23, 2013 night explosion is shown in this U.S. Coast Guard photo released by the Bureau of Safety and Environmental Enforcement (BSEE) on July 24, 2013. The shallow-water Gulf of Mexico drilling rig has partially collapsed off the coast of Louisiana after catching fire because of a ruptured natural gas well, U.S. regulators said on Wednesday. Coast Guard/BSEE/Handout via ReutersOil prices are burning a hole in BG’s books

The oil price collapse was one of the biggest stories over the past few months and now we know just how bad this was for BG Group.

The oil and gas explorer released a pretty devastating set of first quarter results this morning with BG’s earnings collapsing by 41% to $US1.59 billion. That’s over $US1 billion dollars less than it made in the same period last year.

Unsurprisingly the damage came from its exploration and production arm, where revenues collapsed by 56%.

It’s not hard to see why – BG said the average price it sold its oil tumbled from $US108.95 per barrel this time last year to just $US52.16.

Still, things are looking up for BG investors. The company has already agreed to sell itself to Shell for $US70 billion, a deal due to complete next year.

As long as oil stays low the deal makes sense for Shell as buying up BG’s assets is more cost effective than trying to find new oil reserves of its own.

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