Despite bleak news for the company through 2022, Spirit Energy managed to triple profits to £245m during the year, contributing to parent firm Centrica’s record takings.
The North Sea operator, which Centrica placed in “run-off” mode last year, launching job cuts, bolstered its operating profits during 2022 as gas prices soared, from £68m in 2021.
Centrica sold off Spirit Energy’s Norway arm last year, leaving only the UK and Netherlands branches.
The firm had 350 employees in Aberdeen alone in 2020 and 800 across the entire UK – the firm did not say how many people would be laid off as a result of the redundancy consultation process.
The remaining Netherlands and UK-based parts of Spirit that are owned by Centrica were said to have no further investments planned in oil and gas production.
Despite the outlook for the firm being bleak with news of layoffs last year, Centrica has hailed improved performance from Spirit, including “good gas production volumes” from the subsidiary.
The firm also received a shot in the arm last week with the announcement it will repurspose its Morecambe gas field for CCUS, delivering thousands of jobs, including work for its north-east Scotland office.
Strategy
Moving forward, Centrica said the North Sea operator will “realise value from its remaining portfolio of assets in the UK and the Netherlands, including pursuing opportunities to leverage infrastructure for net zero projects, while minimising further investment in oil and gas exploration and development.”
Spirit Energy will use cash from its operations to meet decommissioning obligations with cash flows being retained within the company until projected future pre-tax decommissioning costs are 1.5 times covered.
By the end of last year, pre-tax decommissioning liabilities for the Centrica-owned operator stood at £1.2bn and 90% of these fees could be met with the firm’s cash flow.
Spirit Energy’s key asset is a 61.2% non-operated stake in Cygnus, one of the largest gas fields in the UK, which is operated by Neptune Energy.
Elsewhere it operates the Morecambe Bay Hub in the Irish Sea and has operated holdings in a number of subsea tie-back fields and a normally unmanned installation in the North Sea.
Gas production was overall up by 3% to 16.3mmboe, reflecting strong operational performance at the Greater Markham Area and Cygnus.
Volumes
The volume from Centrica Storage’s Rough field, which is not controlled by Spirit Energy, increased by 9% in 2022 to 3.2mmboe, with a strong performance as a production asset in the first half of the year, with the asset then returning to gas storage operations in September 2022.
However, the total volumes of production from the retained Spirit Energy were down 2% from the year previous to 17.5 million barrels of oil equivalent per day (mmboe).
These production levels brought Spirit Energy’s total gas and liquids realisations to over £1.5 billion throughout the last year.
