Centrica hits a record as it beats domestic gas drag

The energy group announced a 1% increase in profits to a high of £2.4 billion, as high oil and gas prices helped its growing hydrocarbon exploration and production business to leap 33% to £1.02 billion, breaching £1 billion for the first time.

The strong "upstream" performance offset a 30% decline in the group's "downstream" British Gas profit to £522 million as the unit suffered from rising wholesale prices.

British Gas profits were squeezed further as record mild weather in the spring and autumn, combined with austerity-inspired energy efficiency to reduce its customers' gas and electricity consumption by 21% and 4%.

Centrica chief executive Sam Laidlaw said: "Centrica faced very difficult market conditions in 2011. Sharply rising wholesale commodity prices in the first half of the year meant that the UK residential energy supply business had become loss making, necessitating a significant increase in retail tariffs in August."

British Gas hiked its electricity and gas prices by 16% and 18% in August following a 30% jump in wholesale prices in the first half of the year that pushed the unit into a loss in the spring and summer.

Centrica's North American business, which supplies energy to households and businesses in the United States and produces gas in Canada, turned in a good performance, with profits up a third at £312 million.

Centrica, whose profits in 2011 were boosted by the growth of its oil and gas exploration business, is expected to see its earnings rise again this year after making three North Sea investments in the past four months.

In its most recent such deal, Centrica yesterday paid Total of France £245 million for stakes in seven North Sea oil and gas fields. Mindful of the criticism levelled at British Gas and the other "big six" energy providers, in the face of high utility bills and growing fuel poverty, Laidlaw pledged to do what he could to keep utility bills at a minimum.

However, he cautioned that British Gas only made a profit of 4%-5% after tax and that the group was at the mercy of the wholesale gas price. "The external environment remains challenging," he added.

Centrica's shares rose by 3p, or 1%, to 296p.