Centrica Full-Year Profit Gains on North Sea Gas Production

Centrica Plc (CNA), the U.K.’s biggest residential gas supplier, said full-year adjusted profit rose 3 percent, boosted by oil and gas production and higher profits from the company’s North American business.

Adjusted earnings rose to 1.33 billion pounds ($2.1 billion) from 1.297 billion pounds a year earlier, the Windsor, England-based company said today in a statement. Revenue was 2 percent higher at 22.8 billion pounds.

Operating profits from the company’s U.K. upstream gas business rose 33 percent to 1.02 billion pounds, boosted by acquisitions in the North Sea. That helped offset declining income from the residential energy and gas division, where the meltdown of nuclear reactors in Japan, unrest in the Middle East and warmer weather crimped margins.

The backdrop in 2011 was “challenging,” Finance Director Nick Luff said on a conference call with reporters. “There were the high oil and gas prices driven by the Arab spring,” as well as volatility and warmer weather, he said. While household energy prices were higher, the average dual-fuel bill was 37 pounds lower in 2011 at 1,024 pounds.

Centrica gained 0.9 percent to 296.2 pence in London. The shares have fallen 12 percent in the past twelve months.

Income from residential energy sales retreated 30 percent to 522 million pounds, Centrica said. The utility boosted domestic gas rates by an average of 18 percent and electricity prices by 16 percent from the middle of August, to benefit from higher winter demand. It trimmed power prices in January, along with other major suppliers including Electricite de France SA and SSE Plc following a decline in wholesale gas prices.

Normal Consumption

“More normal consumption thus far in 2012, as well as a lower forward curve should help underpin margins for the current financial year,” Credit Suisse AG analyst Mark Freshney said in a Feb. 17 note to investors. The company has also trimmed costs across the group, he added.

Adjusted operating profit was 2.42 billion pounds, missing the median estimate of six analysts surveyed by Bloomberg News of 2.5 billion pounds. That compares with a profit of 2.39 billion pounds on that basis a year earlier.

“Whilst gas prices are still high, we would hope for less volatility in 2012,” Luff said. The outlook for this year is “positive,” he said.

The utility’s oil and gas reserves have risen 39 percent since November to 553 million barrels of oil equivalent, according to Mirabaud Securities analyst Agustin Hochschild. Production in 2012 should climb as much as 26 percent to 53 million barrels, he said.

North Sea Fields

Centrica has been buying fields in the North Sea to guard against fluctuations in the price of gas imports and declining production from existing deposits. It paid $1.6 billion to Statoil ASA (STL) in November for fields in the Norwegian North Sea and has announced 1.4 billion pounds in acquisitions this year. It bought a stake in the Statfjord field from ConocoPhillips (COP) in January and added seven producing fields in a $388 million deal with Total SA announced yesterday.

Upstream oil and gas production will increase by more than 25 percent this year, the company said. Gas commitments to the U.K. secured by Centrica exceed 50 billion pounds, Luff added.

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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