Acquisition of Total E&P’s Interests in Bruce and Keith
Friday 3 August 2018
Serica Energy plc announced that Serica Energy (UK) Limited has signed a Sale and Purchase Agreement (“SPA”) to acquire further interests in the Bruce and Keith fields and associated infrastructure in the UK North Sea from Total E&P UK Limited (“BK Acquisition”). Under the SPA, Serica UK will acquire a 42.25% interest in the Bruce field and a 25% interest in the Keith field and associated infrastructure. The BK Acquisition has an effective date of 1 January 2018 and completion will be subject to completion of the previously announced acquisition of interests in the Bruce, Keith and Rhum fields from BP (“BKR Transaction”). The BK Acquisition is also subject to inter alia certain regulatory, government and partner consents with completion targeted for the end of Q3 2018.
Transaction highlights
Following completion of the BKR Transaction and transfer of operatorship of the Bruce, Keith and Rhum fields to Serica UK, the board believes the BK Acquisition will further strengthen Serica’s position as one of the leading mid-tier independent oil and gas producers on the UK Continental Shelf and will provide incremental benefits to the Company.
- Further increase in reserves and production
- Serica’s pro-forma net 2P reserves as at 1 July 2018 are expected to increase by approximately 11mmboe from approximately 49mmboe post completion of the BKR Transaction to approximately 60mmboe post completion of the BK Acquisition
- Net production in 1H 2018 from the BK Assets was approximately 4,700boe/d, of which 83% is gas
- The BK Acquisition is expected to be immediately cash flow and value accretive following completion
- Structured to mitigate financial risk and maintain balance sheet resilience
- Existing net cash resources are not expected to be impacted by the BK Acquisition
- Bulk of consideration deferred and contingent
- Initial cash consideration of US$5 million expected to be funded by Serica UK’s share of net cash flows from the BK Assets between 1 January 2018 and completion of the BK Acquisition
- Future payments linked to the performance of the BK Assets, allowing both parties to share the benefits of improving field recoveries and production efficiencies
- Further increased scale in line with strategic growth plans
- The BK Acquisition, coupled with transfer of operatorship of the Bruce, Keith and Rhum fields to Serica UK, should enable Serica to unlock increased value from the BK Assets
- No additional resources will be required. Existing infrastructure and expanded team already being put into place as part of the BKR Transaction
- The BK Acquisition will further increase Serica’s scale and profile, improve its ability to attract further growth funding and investment opportunities for both organic growth and further acquisitions