UKCS: Centrica plans to abandon Spirit EnergySource: Pixabay

UKCS: Centrica plans to abandon Spirit Energy

In its half-year results, Centrica said in a statement that Spirit is not strategically a core business for the company, planning to exit by the end of 2020. Centrica aims to move towards a lower-carbon energy mix and use the revenues from this sale to reduce debt.

Spirit Energy, the E&P joint venture which combines Centrica plc’s E&P business with Bayerngas Norge AS, formed in 2017, is 69% owned by Centrica plc, while the remaining 31% is owned by Bayerngas Norge’s former shareholders.

Their portfolio includes operating assets like Morecambe Bay, Vale and Oda, non-operated interests in Cygnus and other major fields such as Statfjord, and interesting projects like Hejre in Denmark and Nova in Norway.

In 2018, Spirit Energy invested £139m into Hurricane’s three wells drilling campaign in the Great Warwick Area, West of Shetland, to further prove up the potential of an area which holds an estimated 2 billion boe in prospective and contingent resources.

Despite Spirit’s efforts to create a sustainable E&P business, the company is now dealing with low revenues, drop in profits and increase in debts.

Centrica, also facing financial losses, along with a low UK gas price, low volumes from the Rough field in the Southern North Sea and the dry hole costs of its Warwick Deep well, is now considering to rationalise the business and divest non-core assets, to pay debts and keep the shareholders happy.

“Debt levels and cash flow have been a focus for management and shareholders in recent months, and the sale of Spirit should go some way towards allaying their concerns”, states the company.

Centrica posted an operating loss of £446m in the first six months of 2019, compared to a £704m profit in the same period last year, the group debt increased 17% to £3.3billion, and the E&P side of Centrica’s business saw an adjusted operating profit drop of 42% to £148m.