Centrica Back in Profit, E&P Reduced
Leading UK utility Centrica reversed a £857mn loss in 2015 into a £2,486mn net profit last year, it said February 23. The 2015 loss had included £1.85bn of exceptional items, whereas 2016 ones were minor.
Upstream operating profit doubled to £187mn, as capital expenditure was down 28% to £518mn. Centrica reduced both unit production costs and the size of its E&P operation, henceforth to be a 40-50mn boe/yr operation following the announced divestment of its Trinidad gas assets and the disposal of Canadian E&P targeted in 2017. Total production was 9% lower at 71,200 boe/d. Centrica is also scaling back power generation and closed its Killingholme gas-fired plant last March.
Its Rough offshore gas storage facility will not be available for injections until at least end-June 2017, and Centrica Storage currently expects to report an increased operating loss in 2017 compared to 2016’s loss of £52mn (2015: £37mn profit).
Rough offshore gas storage facility (Photo credit: Centrica)
UK energy supply customer accounts fell by 3% to 14.25mn, but a cooler 2016 meant that volumes sold increased by 1% for gas, but fell 2% for electricity. UK/Ireland energy supply & services made an operating profit of £906mn, slightly up on 2015. Two weeks ago, Centrica said it would freeze UK standard energy retail prices until August 2017, in part to stabilise its declining market share.
During 2016, the company signed a memo of understanding with Tokyo Gas to consider cargo location swaps, and also signed a firm deal with Jera whereby the latter will buy up to six Centrica cargoes a year at the UK Isle of Grain LNG import terminal from April 2019. A new Centrica deal with Qatargas will extend supplies from there for 5 years starting January 2019 at 2mn mt/yr. In October, Centrica signed a 7-year agreement with shipowner GasLog for a newbuild LNG carrier from 2019 that will tie in with first commercial deliveries under Centrica’s 2.5bn m3/yr contract with Cheniere.
Centrica also said its new technology offshoot, Centrica Innovations, with up to £20mn/yr investment, now has a “presence in Seattle, Houston, London, Cambridge and Tel Aviv”. German utilities were to the fore in launching such smart technology divisions, which look at business opportunities arising from 'The Internet of Things' and how intelligent home-appliances may change how energy suppliers will need to operate in future.
Mark Smedley