RATINGS RATIONALE

The rating of (P)Baa1 is two notches below the senior unsecured rating of A2 for BGEH. This reflects the features of the Hybrid, which 1) is very long-dated, 2) includes issuer call options in November 2017, in November 2022 with a 25 basis point step-up, and at every annual interest payment date thereafter including in November 2037 with a 100 basis point step-up, 3) is very deeply subordinated and 4) provides BG Energy Capital with the option to defer coupons on a cumulative basis. Under Moody's revised rating implementation guidance for assigning equity credit to hybrids dated July 2010, the Hybrid is eligible for Basket C treatment (50% equity credit).

Moody's issues provisional ratings in advance of the final sale of securities and these ratings reflect Moody's preliminary credit opinion regarding the transaction only. Upon a conclusive review of the final documentation, Moody's will endeavour to assign a definitive rating to the Hybrid. A definitive rating may differ from a provisional rating.

Moody's notes that the proposed issuance of hybrid notes is in line with BGEH's conservative financial policies and objective to maintain long-term credit ratings at the mid-single-A level. This transaction is part of a range of actions initiated by management with a view to underpinning the group's capital structure and enhancing its financial flexibility in the context of the very large capital expenditure programme currently undertaken by BGEH, which includes, in particular, some major growth projects in Australia and Brazil, and is expected to result in substantial negative free cash flow in the period 2012-2014. Combined with the timely execution of the portfolio rationalisation programme currently undertaken by the group, Moody's believes that this should help ensure that BGEH's credit metrics do not deviate from the guidance provided for the A2 rating for any prolonged period of time.

However, BGEH's ratings also consider the risks associated with the group's ambitious growth plans, project execution risks, emerging market exposure, the highly competitive markets in which the group operates, and its commodity price exposure, which affects the predictability of its cash flow. While we acknowledge the benefits derived from the group's integrated business model across the gas chain and, in particular, its strong competitive position in the fast-growing LNG market, the A2 rating also reflects its lower downstream diversification than oil & gas majors operating large refining and marketing businesses.

The ratings are also underpinned by the company's: (i) large and rapidly growing oil & gas reserves, albeit still substantially smaller than those of the largest integrated players; (ii) production, operating and geographic diversity; (iii) low operating cost base; (iv) increasing integration; and (v) conservative financial policies reflected in management's stated objective to maintain long-term credit ratings at the mid-single-A level.

BGEH's rating outlook is stable. While the step-up in investments of the past few years extending into a period of high capex reduces headroom within the rating category, we expect the group to actively manage its balance sheet and keep its metrics (bar any minor temporary deviation) in line with guidance, including retained cash flow to net debt at around 50% on a three-year-average basis, positive cash flow after sustaining capex and dividend, and balance sheet gearing within the 25% ceiling set by management.

However, failure by the group to execute in a timely manner its portfolio rationalisation programme, significant delays and cost overruns affecting the execution of its major projects and/or some marked weakening in its operating performance would likely cause BGEH's financial metrics to deviate from our guidance and put downward pressure on the ratings.

Conversely, a rating upgrade appears unlikely at this stage considering BGEH's ambitious capex plans for the next few years.

The principal methodology used in rating BGEH was the Global Integrated Oil & Gas Industry Methodology published in November 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

BG Energy Holdings Ltd is a direct subsidiary of BG Group plc and the holding company for all of the group's subsidiaries. Headquartered in Reading, England, BG Group plc is an integrated gas company with operations spanning exploration and production, the production and regasification of liquefied natural gas, and gas transportation and distribution. In 2011, the company generated revenues of USD21.1 billion and operating profit of USD7.4 billion, reporting an average daily gas and liquids production of 641,000 barrels of oil equivalent (boe) on proved reserves of 3.25 billion boe.

REGULATORY DISCLOSURES

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Francois Lauras VP - Senior Credit Officer Corporate Finance Group Moody'sInvestors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Olivier Beroud Managing Director Corporate Finance Group JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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