• 4 minutes Is $60/Bbl WTI still considered a break even for Shale Oil
  • 7 minutes Oil Price Editorial: Beware Of Saudi Oil Tanker Sabotage Stories
  • 11 minutes Mueller Report Brings Into Focus Obama's Attempted Coup Against Trump
  • 15 minutes Wonders of Shale- Gas,bringing investments and jobs to the US
  • 5 hours Adsorbent natural gas tanks are revolutionary.
  • 5 hours Evil Awakens: Fascist Symbols And Rhetoric On Rise In Italian EU Vote
  • 4 hours Apartheid Is Still There: Post-apartheid South Africa Is World’s Most Unequal Country
  • 18 mins Visualizing How Much Oil Is In An Electric Vehicle (Hint: a heckuva lot)
  • 7 hours IMO2020 To scrub or not to scrub
  • 1 hour Total nonsense in climate debate
  • 50 mins Theresa May to Step Down
  • 20 hours Look at the LONGER TERM bigger picture of international oil & gas. Ignore temporary hiccups.
  • 1 day Will Canada drop Liberals, vote in Conservatives?
  • 13 hours IMO 2020 could create fierce competition for scarce water resources
  • 1 day Canada's Uncivil Oil War : 78% of Voters Cite *Energy* as the Top Issue
  • 1 day Trump needs to educate US companies and citizens on Chinese Communist Party and People's Liberation Army. This is real ECONOMIC WARFARE. To understand Chinese warfare read General Sun Tzu's "Art of War" . . . written 500 B.C.
  • 21 mins BBC: Proposal to spend 25% of EU budget on climate change
  • 1 day IRAN makes threats, rattles sabre . . . . U.S. makes threats, rattles sabre . . . . IRAQ steps up and plays the mediator. THIS ALLOWS BOTH SIDES TO "SAVE FACE". Then serious negotiations start.

U.K Gas Supplier Centrica Sees Profits Drop Despite Cold Winter

Bitterly cold weather in Britain and much of the United States may have meant an increase in the consumption of gas to warm homes and businesses, but this increased volume couldn’t help Centrica, the UK energy conglomerate that owns British Gas and Direct Energy, a North American utility.

The cold snap during the first three months of this year increased average British gas consumption by fully 10 percent, while US consumption rose by 1 percent. Yet because of the long, steep drop in the price of crude, the company said it is suffering financially in its oil and gas production sectors.

One result is that Centrica has had to reduce the value of its once plentiful assets in the North Sea, now that operations there are becoming less productive and more expensive. The price of Brent crude from the region has dropped from more than $110 per barrel in June 2014 to the mid-$60 range today.

Related: Who Is Saudi Arabia Really Targeting In Its Price War?

As a result, Centrica warned in a statement on April 27 that increased sales won’t necessarily translate into generous profits. “Improved year-on-year profitability downstream [retail sales] is expected to be more than offset by the impact of lower commodity prices on the upstream [production] business,” it said.

The bad news is only a continuation of 2014. For example, the profits of British Gas, owned by Centrica, plunged by 23 percent to about $670 million, in large part because the utility lost nearly a half-million customers and average bills declined around $150 due to lower consumption during a warm year. Overall, Centrica’s profits were down by fully 35 percent last year.

Related: EU Could End Russian Gas Bullying In One Fell Swoop

Even politics has become part of the mix. Centrica’s statement said its earnings “remain subject to the usual variables of commodity prices, weather and asset performance, and the uncertain outcomes of the UK general election.”

Like many large energy companies, Centrica is working to maintain its financial strength by saving money at a time when earning it is difficult. In its statement, the company said it is likely to meet its goal of cutting capital expenditures by about $12 million this year and an additional 40 percent cut to less than $100 million in 2016.

Related: A Closer Look At The World’s 5 Biggest Oil Companies

Despite these cuts, Centrica said it would invest more than $75 million to hire 350 new employees over the next three years in an effort to improve service for British Gas customers.

Because of heavy losses in 2014, Centrica suggested it may cut its dividend by 30 percent to maintain its credit rating for investors. But the very next month, Moody’s downgraded the rating anyway.

Moody’s chief analyst for Centrica, Helen Francis, said the credit rating service acted “primarily because lower energy prices and generally poorer trading conditions have hurt the company’s profitability and weakened its financial profile to a level that can no longer support [a higher] rating, despite efforts to implement restorative measures.”

By Andy Tully of Oilprice.com

More Top Reads From Oilprice.com:



Join the discussion | Back to homepage

Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News