Gas firm’s profits up after cold winter

Giant utility continues to struggle after slump in oil price takes toll

PROFITS at British Gas are set to rise after the energy supplier revealed a boost in consumption after a colder than normal start to the year.

Owner Centrica added that British Gas had stemmed the flow of customers leaving the business, with the number of accounts on its books staying at 14.8 million following a 5 per cent cut in gas tariffs from the end of February.

The FTSE 100 company reported improved profitability in its supply business in the first quarter of the year but said this was more than offset by lower commodity prices in its upstream production arm.

It also announced that it had set aside an additional £50 million over the next three years to improve customer service.

Recruitment for the first 350 new jobs will begin next month, with vacancies in Manchester, Leeds, Cardiff and Edinburgh.

As well as a drive to reduce call waiting times, there will be extra training for British Ga s’ customer ser vice employees, who number more than 5,000.

In 2014, British Gas operating profits fell 23 per cent amid a half-million fall in customer accounts.

CENTRICA, which owns Scottish Gas, has said Budget tax cuts will provide little benefit for its North Sea arm this year as the slump in the oil price continues to take a toll on the business.

The giant utility said increased gas usage amid cold first quarter weather would boost profits, but the benefits will be more than offset by the impact of lower commodity prices on the exploration and production unit.

Two months after announcing plans for deep cuts in spending at the E&P business, Centrica said changes announced in the March Budget were positive for the division.

However, in an interim management statement, the company said: “Given current low levels of profitability the impact on 2015 earnings is expected to be limited.”

The comments highlight features of the Budget changes that may make it unlikely they will provide the short term boost to activity that industry figures say the North Sea needs.”

The cuts included reductions in the rate of taxation payable on profits.

The amount of benefit a company enjoys will depend on what profits they are making, if any.

It is feared many fields in the North Sea have been operating at a loss.

In its latest annual activity survey published in February Oil & Gas UK said around a third of the fields in the North Sea lost money at $50 per barrel oil.

The price of crude has risen to around $65 since then. However, that leaves it well adrift of the levels recorded until the price peaked at $115 in June.

The increase in the oil price and the Budget tax changes do not appear to have persuaded Centrica to modify the plans to make deep cuts in spending at the oil and gas business, which it announced in February. Led by chief executive Iain Conn, Centrica said the E&P business remains on track to cut capital spending on new developments and the like by 40 per cent, £400m, to around £650m in 2016.

The company also said it is still on course to achieve a £100m reduction in cash production costs by 2016.

It did not give details of where the cuts will be made but they are expected to impact heavily on the company’s North Sea business.

Centrica became a major player in the UK North Sea through the £1.3 billion takeover of Aberdeenbased Venture production in 2009.

The company produces thousands of barrels oil equivalent daily from a range of North Sea fields,

Given current low levels of profitability the impact on 2015 earnings is expected to be limited

including the Trees cluster off eastern Scotland. Centrica runs its North Sea operations from Aberdeen and employs around 400 people in the city.

The company has said 40 jobs in Aberdeen may be impacted by a restructuring of the international side of the business.

It also has oil and gas operations in North America.

The number of customers on Centrica’s books held steady at 14.8m in the first quarter following a five per cent cut in gas tariffs from the end of February.

It has set aside an additional £50m over the next three years to improve customer service.

Recruitment for 350 related new jobs is set to begin next month, with vacancies in Edinburgh, Manchester, Leeds and Cardiff.