SCOTTISH Gas owner Centrica has slashed the valuation of its oil and gas business by £476 million after the fall in commodity prices last year posed challenges.

Centrica’s exploration and production arm saw profits fall by around 70 per cent to £160m in 2019 from £521m.

However, Centrica said it expects to receive initial bids for its majority stake in the North Sea-focused Spirit Energy operation business in the current quarter. Spirit accounts for much of Centrica’s oil and gas activity.

Spirit has interests in the West of Shetland area which is generating attention in the industry.

Energy giant underlines potential of West of Shetland oil prospects

Centrica puts its stake in Spirit up for sale last year. It plans to focus on the supply of energy and related services to consumers and businesses.

However, the group posted a £1.1 billion annual loss sending its shares plunging.

Outgoing chief executive Iain Conn said the business had faced a “challenging environment”. He highlighted the impact of the introduction of the energy price cap in the UK at the beginning of last year and falling natural gas prices.

But Mr Conn appeared to take comfort from the fact that the rate at which Centrica lost customers slowed during the year.

Energy watchdog caught in price wars crossfire

The number of UK energy supply customer accounts the company had was down by 286,000. Many customers have both electricity and gas supplied by the company.

“That is half the decline rate of the year before, and a quarter of 2017,” said Mr Conn, who will stand down this year.

Competition from new players has been a factor in Centrica’s market share falling from 24% when Mr Conn took over in 2015, to 19% towards the end of last year, according to figures from Ofgem.

SSE sells household suppy arm to Ovo for £500m

Centrica said the £476m write down in respect of the exploration and production business was “predominantly due to the reduction in near-term prices and long-term price forecasts and a conclusion that certain field reserves levels were not sufficient for development”.

It did not identify the fields concerned.

The company noted that Spirit took part in a drilling campaign off Shetland with Hurricane Energy, which has made big finds in the area.

The campaign produced mixed results. Two wells struck oil while a third proved to be a disappointment.

Shares in Centrica closed down 12.96p at 71.82.