Centrica adds to North Sea assets with Total deal

Scottish Gas parent Centrica added to its growing portfolio of North Sea assets yesterday, buying stakes in seven producing fields from Total for £246 million.

The company, which has been building its oil and gas reserves in recent months, said the deal increased its scale in the central North Sea and was expected to add “immediate strong cash flow”.

Mark Hanafin, managing director of Centrica Energy, said the acquisition marked another step in the growth of the firm’s upstream oil and gas business.

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“This acquisition in the North Sea provides a good fit with our existing portfolio and strategy, bringing strong cash flow and adding value,” he added.

“It underlines our commitment to invest where we see attractive opportunities, securing future energy supplies for the UK.”

The fields are in three major areas of the central North Sea – the Alba field, Greater Armada and the Mungo and Monan cluster – and will boost Centrica’s oil and gas reserves by some 5 per cent.

The group’s increased share in the fields, all operated by other companies, gives it an estimated 22 million barrels of oil equivalent (mboe) of reserves in the region. They are expected to produce 9,300 barrels of oil equivalent per day in 2012.

The oil and gas is mostly un-contracted and linked directly to the UK market, where Centrica sells directly to consumers, operating under its British Gas and Scottish Gas brands.

It marks the latest investment in production from the British energy giant. Last month, the firm bought ConocoPhillips’ share of the Statfjord gas field, which straddles UK and Norwegian waters, for £142m, while in November it bought £1 billion of oil and gas assets from Norway’s energy giant Statoil.

Centrica has also moved to secure its long-term gas supplies by signing a £13bn ten-year deal with Norway relating to assets it does not own.

In July, the group warned that the Chancellor’s tax grab on the North Sea may force it to switch some of its investment programme towards Norwegian waters and to other territories such as Trinidad.

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John Musk, an analyst at RBC Capital Markets, said Centrica had, in short order, increased its production profile from 50 mboe a year to around 70 mboe, including the recent Statoil and Statfjord deals.

“For 2012, taking account of when the various deals will complete, we estimate that production is likely to be around 63 mboe,” he said.

He said that, although the newly acquired capacity would add about £100m to Centrica’s earnings before tax and interest, the impact on its earnings per share would be limited because of the 70 per cent effective tax rate on the assets, all in the UK section of the North Sea.

Centrica’s shares showed little reaction as investors awaited the firm’s full-year results, due today. It is set to report record overall profits of £2.5bn, up 4 per cent on 2010, as its burgeoning upstream business smashes through the £1bn barrier for the first time. That is expected to offset a poor performance from its retail arm as UK consumers used less gas and electricity in this year’s milder winter.

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