Centrica saw a dip in full-year earnings, while those of its North Sea producer Spirit Energy held in line with 2022 as higher gas prices offset declining output.
Centrica (LON:CNA) reported pre-tax profits of £6.4 billion for full year 2023, though adjusted operating profits – which exclude gains made from the sell-off of Spirit Energy’s Norwegian assets – stood at a more modest £2.8bn, down from £3.3bn in 2022.
The London-listed energy giant, whose portfolio spans upstream oil and gas production, electricity generation and the retail British Gas business, hailed its “strong liquidity and a robust balance sheet” with free cash flow of £2.2bn for the year.
Retail takings soared to just under £800m, while the company’s wider “Infrastructure” arm – comprised of upstream gas producer Spirit Energy, UK nuclear assets and Centrica Energy Storage+ – saw adjusted operating profit fall to just over £1bn.
Despite that, earnings from the remains of the Spirit business held at £235m -a minor fall on the £245m seen in 2022 – as lower production volumes were largely offset by higher gas prices, and supported by the group’s hedging strategy.
Centrica announced it would place Spirit in “run-off” mode in 2021, hiving off its Norwegian business and spurring a wave of job cuts. At the time, it said the remainder of its Dutch and UK assets would receive no further investment.
Its latest results show production declined by 15%, from 17.5 million boe in 2022 to 14.8 million last year – of which around 1 million boe was liquids.
Nevertheless, the group reiterated plans that will see the Spirit-operated Morecambe Bay gas fields continue to operate “into the next decade”, with production having previously been planned to stop around 2025.
Rough with the smooth
Centrica Energy Storage+ reported adjusted operating profit of £312m, though recorded an £82m impairment on the flagship Rough gas storage asset as a result of a reduction in both forecast gas prices and forecast summer/winter gas price spreads.
Having re-opened Rough as a gas storage asset in the second half of 2022, capacity was nearly doubled to 54bcf in June 2023, with “good operational reliability” reported through the year. The asset also holds a third party exemption that could allow it to operate until at least 2030.
Plans remain afoot to overhaul the facility in line with energy transition efforts.
“We continue to develop plans to enable us to increase capacity at the asset, and ultimately convert to a hydrogen storage facility, with any material investment subject to an appropriate regulatory support mechanism,” Centrica said.
Centrica last summer said its ambition was to convert Rough into the “largest long duration low-carbon energy storage facility in the world,” accommodating natural gas and hydrogen. The conversion could deliver net zero electricity by 2035, and create around 5,000 skilled jobs as well as aiding decarbonisation at UK industrial clusters, the company says.
At the time the firm said it “stands ready” to invest £2bn to make that happen but would need “the right regulatory support framework”.
Dividend hike
Despite the slide in full-year earnings Centrica also upped its full year dividend per share by one-third to 4p, taking total cash returns to shareholders for the year to £800m. At the same time, it launched a £1bn share buyback programme due to run until July 2024.
“We’ve done a lot we can be proud of in 2023: we’ve paid over £1 billion in tax; we’ve created over 1,000 new UK based jobs as we continue to invest in customer service; and we’ve improved security of supply through doubling the capacity of the Rough gas storage facility, through extending the life of the Morecambe Bay gas field into the 2030s, and through investing to extend the life of our nuclear power stations,” said group chief executive Chris O’Shea.
He said this performance has so far continued into early 2024.
“As you would expect, sharply lower commodity prices and reduced volatility will naturally lower earnings in comparison to 2023 as we return to a more normalised environment. Our performance over the past year has reinforced our confidence in delivering against our medium-term sustainable profit ambitions and continuing to create value for shareholders.”
Looking ahead, the group outlined plans to invest an average of £600m-£800m per year out to 2028, largely in clean power and customer technologies. Other potential routes include development of carbon capture and hydrogen schemes, though it cautioned it would “continue to review whether investment in new nuclear would be appropriate”.
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