The liberalization of the European natural gas sector radically changed the structure of the competitive environment which in turn forced companies to make changes in order to stay in the market. In Italy the liberalization process also had a strong impact on the strategies adopted by the companies involved. This situation instigated various studies of the changing nature of performance through the analysis of company profits and financial positions throughout the first three years following the market liberalization. This paper focuses on the changes in performance in the natural gas retail market by analyzing the profit and financial position of the companies concerned over the first three years following the market liberalization. The balance sheets of 105 Italian companies in this sector are analysed, after which a cluster analysis is performed employing the most significant performance indexes. The companies are then analysed within each cluster with respect to age, size, geographical location. The analysis is further developed by studying the strategies in terms of business diversification adopted by the operators in response to the radically altered competitive environment. The results of our analysis show that the majority of companies attained a high level of performance, although this positive outcome was mitigated by the gradual decrease of the average values of performance indicators during the period concerned. There appear to be several reasons for this decline: the performance observed during the three-year period was strongly influenced by regulatory factors; increased competition resulted in reduced profit margins; and exceptionally mild climatic conditions over this period significantly decreased the volume of gas sales. Finally, it should be noted that the best performance was achieved by companies based in northern Italy which were members of longstanding groups and were single rather than multi-business companies. This result contrasts with the failure of the business diversification strategy, which was widely adopted by enterprises from the utility sectors following the liberalization process.