UPDATE: Centrica Buys 22% Of UK N Sea Gas Producer Venture

The U.K.'s largest gas and electricity retailer, Centrica PLC (CNA.LN), said Wednesday it has bought a 22.3% stake in North Sea gas producer Venture Production PLC (VPC.LN) for GBP239.4 million.

Centrica said it may in the future make a full cash offer for Venture, but there is no certainty at this stage.

It has already acquired 33,016,611 Venture shares at 725 pence a share.

Centrica doesn't produce enough gas to supply all of its retail customers in the U.K. and its earnings are highly exposed to volatility in wholesale gas prices. One of the company's strategic goals is to reduce this exposure by acquiring gas producing assets.

"Venture remains one of our top picks in the exploration and production sector," said a research note from analysts at Collins Stewart. "While volume growth will be fairly modest this year, reserves growth should be strong and should presage stronger volumes in 2010-2011."

The Venture stake will increase Centrica's net gas production by 7.7%. Venture produced an average of 45,000 barrels of oil equivalent of hydrocarbons a day in 2008, compared with Centrica's output of 128,000 boe a day. The bulk of both companies' production was natural gas.

It is also in talks with Electricite de France SA (1024251.FR) about taking a 25% stake in its nuclear subsidiary British Energy, aimed at diversifying Centrica's electricity production.

At 1156 GMT Centrica shares were up 1.1%, or 3p, at 150p. Venture shares were up 24.9%, or 145p, at 725p, in a flat broader market.

-By James Herron, Dow Jones Newswires; +44 (0)20 7842 9317; james.herron@dowjones.com

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