LONDON—U.K. utility Centrica PLC said Thursday it would shrink
its oil and gas exploration and production business, exit wind
ventures, slash costs and cut thousands of jobs in an effort to
return the company back to its core energy supply business.
The move comes as the company's oil and natural gas division has
been under pressure from the sharp decline in oil prices, which are
around half of what they were in the first half of last year,
pulling down profits in its U.K. and North American energy supply
business.
Centrica said it would cut back its exploration and production
arm, which includes oil and gas fields in the U.K. North Sea,
offshore Norway and in Canada, to 40 million to 50 million barrels
of oil equivalent a year from around 75 million barrels of oil
equivalent a year.
Centrica aims to release £ 0.5 million to £ 1 billion ($780
million to $1.56 billion) of proceeds by 2017 from the sale of oil
and gas assets and the wind business, it said.
Chief Executive Iain Conn, who came to Centrica from BP PLC
where he was head of the oil giant's refining and marketing
division, said that the strategic review of the company that was
launched at the beginning of the year concluded that the U.K.'s
biggest energy supplier needed to return to its core business.
"Our purpose is to provide energy and services to satisfy the
changing needs of our customers, and as such we will focus our
growth ambitions on our customer-facing activities," said Mr. Conn,
who took the helm at Centrica at the beginning of the year.
Centrica said head count would be cut by a net 4,000 as overall
head count would be reduced by 6,000 across the company, but 2,000
new jobs would be created. The company said it was targeting cost
efficiencies of £ 750 million a year over five years.
The results of the review came as the company reported a 3% fall
in underlying earnings as the impact of lower oil and natural gas
prices on its exploration and production business undermined
increased profits at its retail supply arm.
Profits rose at the company's residential supply business in the
U.K.—British Gas—and its North America business Direct Energy, as
colder-than-normal winter weather resulted in higher-than-expected
energy consumption.
Group adjusted operating profit, or earnings before interest and
tax and excluding exceptional items such as disposals and
impairments, fell 3% to £ 1 billion in the first half of 2015 from
£ 1.03 billion a year earlier.
Revenue was down 2% at £ 15.45 billion, compared with £ 15.7
billion a year earlier.
Write to Selina Williams at selina.williams@wsj.com
Corrections & Amplifications
Centrica said it was targeting cost efficiencies of £ 750
million a year over five years. In an earlier version of this
article, the cost efficiencies targeted were mistakenly said to be
£ 750 million over five years.
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