Serica Energy plc: Completion of the Acquisition of BP's Interests in Bruce, Keith and Rhum Fields and Re-Admission to Trading on AIM
Friday 30 November 2018
Serica Energy plc announced the completion of the acquisition of interests in the Bruce, Keith and Rhum fields and associated infrastructure in the UK North Sea from BP (“BKR Acquisition”) by Serica Energy (UK) Limited and the re-admission of its Ordinary Shares to trading on AIM on 30 November 2018.
Completion of the subsequent acquisitions of interests in Bruce and Keith and associated infrastructure from Total E&P UK Limited, BHP Billiton Petroleum Great Britain Limited and Marubeni Oil & Gas (UK) Limited (the “BK Transactions”) are conditional on the completion of the BKR Acquisition and are expected to occur imminently. Serica will make a separate announcement later on 30 November in relation to the BK Transactions.
Following completion of the BKR Acquisition and the BK Transactions, Serica UK will be the operator of the Bruce, Keith and Rhum fields and hold a 98% interest in the Bruce field, a 100% interest in the Keith field, and 50% interest in the Rhum field.
As the BKR Acquisition constitutes a reverse takeover under the AIM rules, admission of the Ordinary Shares has been cancelled on completion and the Ordinary Shares have been readmitted to trading on AIM from this morning.
Under the net cash-flow sharing arrangements with BP, Total E&P UK and BHP, Serica is due to receive a 40% share of the net cash flow, adjusted for notional tax of 40%, for the period from the effective date of 1 January 2018 to completion on 30 November 2018. Additionally, Serica is due to receive 100% of the net cash flow (also on a notional post-tax basis) from Marubeni for the same period. This amounts to approximately US$50 million before payment by Serica of initial consideration of approximately US$22 million.
BKR and BK Transaction Highlights
- Significant increase in reserves and production post BKR and BK completion
- Serica’s pro-forma net 2P Reserves increased over 20-fold to 63.7 mmboe1
- Net production from the assets acquired has averaged in excess of 23,000 boepd YTD of which over 85% is gas
- Acquisitions expected to be immediately cash flow and value accretive
- Diversification of production streams and export routes
- Serica’s asset and production base expanded from one to four fields, mitigating sole producing asset risk
- Serica will now be delivering hydrocarbons via three export systems: Frigg, the Central Area Transmission System and the Forties Pipeline System
- Acquisitions mitigate financial risk and maintain balance sheet strength
- Bulk of consideration deferred and contingent
- Combined initial consideration of US$22 million exceeded by Serica’s share of net post-tax cash flows from the BKR Assets and, subject to completion, the BK Assets between 1 January 2018 and Completion of approximately US$50 million
- Future payments linked to the performance of the BKR Assets and BK Assets, allowing all parties to share the benefits of improving field recoveries and production efficiencies
- Serica has not raised any equity finance to fund the Acquisitions
- BP, Total E&P UK and BHP are retaining decommissioning liability for existing facilities of the BKR Assets and BK Assets related to the respective interests acquired or, on completion, to be acquired from each of them
- Operatorship positions Serica to deliver the full potential of the acquired assets
- Serica expects to drive value through investment and implementation of operational efficiencies, focusing on the OGA's target of Maximising Economic Recovery
- 111 employees join Serica from BP with the BKR Assets, together with a further 21 employees externally recruited
- Serica’s management experience and skill sets will be combined with those of existing BP staff, who now become an integral part of Serica's team
- New Aberdeen office established to house Serica personnel and manage North Sea operations
- Increased scale to support strategic growth plans
- The Acquisitions increase Serica's prominence and profile and improve its ability to attract new investment opportunities and access funding as required
- The Enlarged Group’s diversified asset base, increased scale and operating capabilities will position Serica for both organic growth and further acquisitions