UK energy company Centrica said Thursday that continued low commodity prices would affect its performance, but added that it would continue to seek cost savings as it rides out the weak operating environment.
In its full-year 2015 earnings statement, Centrica said it was "robust" in the low price environment and that it remained on track to implement its strategy of becoming a more customer-focused business.
"The lower commodity price environment will inevitably continue to have an impact on the earnings and operating cash flow from our E&P and central power generation businesses," CEO Iain Conn said.
But, Conn said, "the actions we have taken since the start of 2015 on the dividend, capital expenditure and costs mean the group is robust in this much lower oil and gas price environment."
He said Centrica's current projections indicate that the company can more than balance sources and uses of cash flow out to 2018 at flat real commodity prices of $35/b Brent oil, 35 pence/therm UK NBP gas and GBP35/MWh UK power.
COST SAVINGS, JOB CUTS
Centrica said it was targeting cost savings of GBP750 million by 2020, including savings of around GBP200 million this year.
It said it expects savings of GBP500 million already by the end of 2018.
Centrica also said 2,000 job cuts had already been announced and that a reduction in direct headcount of around 3,000 roles was expected in 2016.
In addition, it said it was cutting its planned capital expenditure for this year to around GBP500 million with "flexibility to reduce expenditure further in 2017 and 2018 if current low price environment is sustained."
Previous capex guidance for 2016 had been closer to GBP600 million.
In July, Centrica also announced as part of a strategy review that it would refocus its upstream and central power generation businesses.
In 2015, its total gas and liquids output fell by 1% to 78.6 million barrels of oil equivalent (215,300 boe/d).
It said its Norwegian production increased by 16% reflecting consistently high production from Kvitebjorn and Statfjord and a first contribution from the large-scale Valemon project in the North Sea, which came on-stream in January 2015.
UK and Dutch production decreased by 14%, reflecting the natural decline of producing fields and an extended maintenance shutdown at Morecambe, it said.
Centrica also said it delivered cost efficiencies in 2015, including management action to renegotiate contractor rates, headcount reductions in support roles and working with license partners and operators to deliver savings.
"European unit cash production costs were down 6% compared to 2014," it said.
LNG OFFTAKE
Centrica also said its gas midstream business delivered a strong trading performance in the second half of the year, including recognizing a GBP24 million gain following the settlement of a disputed long-term gas field contract.
It also said that it expected to take its first cargo from the fifth train of the US LNG project Sabine Pass in late 2018 or early 2019 following approval from the US FERC for the construction of the train to go ahead.
"We continue to increase our capabilities and presence in global LNG and have completed a number of FOB cargoes, including our first delivery to South America, and have secured further cargoes which are scheduled for delivery in 2016," Centrica said.
