Centrica looking overseas to secure future

Centrica in planning more investment in North America while cherrypicking North Sea opportunities. Picture: Contributed

As Britain’s domestic oil and gas reserves decline, exploration companies are increasingly looking abroad to secure supplies.

Centrica said today that it was likely to concentrate on “only the very best North Sea investments”, with North America “potentially a more attractive region”.

The group, which unveiled a dip in overall full-year profits, plans to invest some £900 million a year in exploration and production (E&P) projects over the next three years, with an increasing proportion of capital spend in North America.

While the figure is down about 20 per cent on previous forecasts, the firm stressed that it would have limited impact on near-term production. It also said it had the “flexibility to consider acquisitions, if the economics are attractive and a… good fit with our existing portfolio”.

The group is involved in large-scale North Sea gas field developments Valemon and Cygnus, the latter of which is the largest gas discovery in the southern North Sea in the past 25 years. It said both projects remained “attractive opportunities”.

Finance director Nick Luff would not rule out further changes to the company’s upstream portfolio, adding that Centrica was “constantly talking to all major gas suppliers in the world”.

Last year, the firm signed £14 billion worth of gas supply deals, one with US energy group Cheniere to import liquefied natural gas and an extension to its supply agreement with Qatargas.

Across the group, 2013 operating profits were 2 per cent lower than the year before at £2.7bn. At its residential energy arm – trading as British Gas and Scottish Gas – profits came in at £571m, down 6 per cent on 2012’s haul but unlikely to calm public anger over rising energy bills.

The firm proposed a final dividend of 12.08p, giving a total payout for the year of 17p, an increase of 4 per cent on the year before. Earnings per share (EPS) in 2014 are expected to fall partly due to the impact of damaged networks and equipment during a cold spell in North America.

Jonathan Jackson, head of equities at Killik & Co, said: “The group highlights that market conditions are set to remain challenging in 2014 and believes trading is in line with recent market forecasts, other than a one-off impact from extreme weather conditions in the US.

“With the level of political pressure facing the company expected to remain intense, we recommend investors look elsewhere for equity income.” Deutsche Bank analyst Martin Brough added: “The company guidance that adjusted EPS is expected to be lower year-on-year is likely to bring down consensus estimates.

“We expect a high single-digit consensus downgrade.”

Shares in Centrica closed up 6.6p at 320.6p.

Chief executive Sam Laidlaw said: “We have made good strategic progress across the group in 2013, investing along the gas value chain to secure long-term, affordable energy supplies for our customers.”