Acquisition of Marubeni Interests in Bruce and Keith
Tuesday 6 November 2018
Serica Energy plc announced that Serica Energy (UK) Limited has signed a further sale and purchase agreement (“SPA”) to acquire additional interests in the Bruce and Keith fields and associated infrastructure in the UK North Sea.
Under the SPA, Serica UK will acquire the 3.75% interest in the Bruce field and the 8.33% interest in the Keith
field and associated infrastructure owned by Marubeni Oil & Gas (UK) Limited. The structure of the Transaction differs from the other deals that Serica has entered into with BP, Total E&P and BHP, in that Serica will acquire the decommissioning obligations of Marubeni, but will receive in turn a cash consideration from Marubeni, and there will be no deferred or contingent consideration. This reflects in part the small interest in Bruce being acquired.
The Transaction has an effective date of 1 January 2018 and completion is subject to completion of the previously announced acquisition of interests in the Bruce, Keith and Rhum fields from BP (“BP Transaction”). The Transaction is also subject to inter alia certain regulatory, government and partner consents with completion targeted for 30 November 2018.
The Transaction together with the previously announced purchases from BP, Total E&P and BHP will result in Serica consolidating its ownership of the Bruce and Keith fields to 98% and 100% respectively post-completion.
Transaction highlights
Following completion of the BP Transaction and acquisition of further interests in the Bruce and Keith fields from Total E&P UK Limited (“Total E&P Transaction”) and BHP Billiton Petroleum Great Britain Limited (“BHP Transaction”) and transfer of operatorship of the Bruce, Keith and Rhum fields to Serica UK, the board believes the Transaction will further consolidate 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. The Transaction is expected to be immediately cash flow and value accretive following completion.
- Further increase in reserves and production
- Serica’s pro-forma net 2P reserves as at 1 August 2018 are expected to increase by approximately 0.95mmboe from approximately 62.7mmboe i post completion of the BP Transaction, Total E&P Transaction and BHP Transaction to approximately 63.7mmboe post completion of the Transaction
- Net production in 1H 2018 from the Marubeni Assets was approximately 410boe/d, of which 81% was gas
- Decommissioning liability more than covered by expected cash flow
- Serica is assuming liability for the decommissioning of the Marubeni Assets (a 3.75% interest in Bruce and an 8.33% interest in Keith). Serica expects to generate ample cash flow from the Marubeni Assets to meet these liabilities.
- Immediate benefit to cash position
- Firm negative consideration plus 2018 net cash flows to-date will be due to Serica at completion
- In line with strategic growth plans
- The Transaction is expected to enhance Serica’s capability to unlock value from the Bruce/Keith/Rhum area
- No additional management and administrative resources will be required