Serica: Results for the Year Ended 31 December 2017
Thursday 12 April 2018
Serica Energy plc announced its financial results for the year ended 31 December 2017.
Financial
- Operating profit for 2017 of US$14.1 million, a four-fold increase over 2016 operating profit of US$3.4 million.
- Group profit after tax of US$17.1 million (2016: US$10.8 million) after deferred tax credits of US$6.3 million (2016: US$7.5 million) arising from tax losses brought forward.
- Revenues boosted by strengthening average realised sales prices of US$53.2 per barrel of oil (2016: US$42.1 per barrel) and 41 pence per therm of gas (2016: 33 pence per therm).
- Total cash balances and term deposits at 31 December 2017 of US$34.0 million, increased from US$16.6 million at 31 December 2016.
- Balance sheet strength maintained with limited capital commitments and borrowings.
BKR Assets Acquisition
The acquisition of BP’s interests in the Bruce, Keith and Rhum (“BKR”) fields, announced on 21 November 2017 and expected to complete in late Q3 2018, transformational for Serica:
- Additional revenue streams counterbalance Serica’s current Erskine single field exposure.
- Significant additions to production volumes and reserves.
- Accelerated utilisation of tax losses enhances value to Serica.
- Deal structured to control risk and minimise shareholder dilution.
Operational
Erskine Field
- Production averaged just under 2,000 boe per day net to Serica during 2017 despite wax restrictions and December Forties Pipeline System shut-in.
- Serica’s operating and transportation costs maintained at approximately US$15 per barrel for the year despite production interruptions.
- Capabilities of the Erskine reservoir and wells continue to outperform the projections that Serica made when the asset was first acquired.
- Work continues to clear early 2018 blockage in Lomond to Everest condensate export line.
- Engineering and procurement commenced for export pipeline bypass to avoid future wax restrictions with expected completion in Q3 2018.
Columbus Field
Serica, as operator of Columbus with a 50% interest, is moving the field towards development:
- Columbus partners have selected an offtake route via the proposed Arran-toShearwater pipeline.
- Submission of a field development plan to the OGA targeted for mid-year.
Exploration
- Preparations for a well on the Rowallan prospect in the second half of 2018 are progressing to plan with a site survey completed last December and tendering for a rig underway.
- Serica is fully carried on all Rowallan well costs on this high pressure, high temperature prospect.
- The Company has participated in three licence applications in the UKCS 30th Offshore Licensing Round.
Outlook for 2018
- Completion of the Lomond to Everest export line bypass during Q3 is expected to deliver more consistent Erskine production performance and sales revenues.
- Serica’s 40% share in 2018 net cash flows from the BKR Assets, accruing under the acquisition agreement, adds to the Company’s cash resources upon completion expected in late Q3 2018.
- Transition work for the BKR Assets acquisition is well underway:
- Consultations with transferring staff close to completion and recruitment for additional positions in progress.
- New premises for Aberdeen operations headquarters identified with occupation targeted for mid-summer.
- Serica working with BP, OGA and partners to ensure safe and orderly transition.
- Serica’s management believes that the increased scale and diversification that the BKR deal brings, along with the associated operating capability, will provide a platform from which to further grow the business through:
- Identifying and implementing operational efficiencies.
- Targeting investment to further enhance the value of its assets.
- Seeking complementary acquisitions with a continuing focus on the UK North Sea.