TIDMSQZ
RNS Number : 5220I
Serica Energy PLC
05 December 2022
Serica Energy plc
("Serica" or the "Company")
Operations Update
London, 5 December 2022 - Serica Energy plc (AIM: SQZ), a
British independent upstream oil and gas company with operations
centred on the UK North Sea and over 85% gas production, provides
the following operations update.
North Eigg
The North Eigg exploration well 3/24c-6B has been drilled to a
total depth of 16,728 feet in the Jurassic Heather formation and
initial analysis indicates that, whilst the well has encountered
hydrocarbons, commercial quantities have not yet been established.
At the well location, the objective sands were thinner than had
been prognosed but a total of 16 feet of hydrocarbon-bearing sands
were encountered, and these have confirmed the presence of
hydrocarbons at a deeper depth than in the adjacent producing Rhum
field.
A full suite of wireline logging data has been acquired and our
analysis is ongoing. We aim to determine if a future sidetrack
location can be designed to better evaluate the volumes of
hydrocarbon in this new discovery. It is our intention that the
well will be suspended pending the results of this further work
prior to future potential re-entry and sidetrack.
Final well costs will not be known until after the rig is off
hire, but it is likely that the net after tax cost of the well to
Serica will be around GBP13 million.
Production
Serica production performance in the second half of 2022
continues to benefit from the investment programmes that the
company has continually undertaken since the acquisition of
interests in Bruce, Keith and Rhum in 2018. Serica's net production
is as follows:
Jul 22 Aug 22 Sep 22 Oct 22 Nov 22
Bruce /
Keith (boe/d) 5,6611 8,644 8,111 7,829 7,070
Rhum (boe/d) 13,046 11,269 14,784 17,115 18,641
Erskine (boe/d) 807 1,225 1,321 2,113 1,794
Columbus (boe/d) 1,712 6062 1,591 1,274 1,472
Total (boe/d) 21,226 21,744 25,807 28,331 28,977
Serica's net production YTD has averaged 25,955 boe/d and full
year 2022 production is expected to be within the existing guidance
range of 26,000 to 28,000 boe/d. Serica's production continues to
be more than 85% gas.
Commodity Prices and Hedging
Commodity prices, particularly gas, have remained strong during
the second half of 2022 although somewhat lower in October and
November. Monthly average market prices have been as follows:
Jul 22 Aug 22 Sep 22 Oct 22 Nov 22
Gas - NBP (p/th) 222.5 362.5 240.0 103.9 119.9
Oil - Brent ($/bbl) 111.9 100.4 89.8 93.3 92.1
1 Bruce and Rhum production figures were impacted by the planned
14-day preventative maintenance
shutdown in late July and early August
2 Columbus and Erskine field production was also impacted by
planned maintenance shutdowns
Due to Serica's increasing financial strength, the company has
not entered into any new gas price hedging since July 2021 and has
no immediate plans to do so. Serica continues to hold a modest
remaining hedging programme with less than 20% of gas production
covered in the second half of 2022, thereby allowing the company to
benefit from full market prices on over 80% of its production. The
existing gas hedges will reduce to zero during the next twelve
months.
At the start of this year Serica held hedges covering a total of
146 million therms 3 . This number will have dropped to below 32
million therms by the end of 2022. Margin call requirements on
these hedges had stood at over GBP300 million earlier in the year
but have now reduced to significantly below GBP100 million.
Forward Programme
Serica continues to provide responsibly sourced gas to the UK
domestic market, protecting security of supply, and reducing
reliance on higher carbon intensity imports as part of the
transition to a lower carbon future. We will continue to invest in
our assets to maintain production levels and provide jobs.
The recent action by the UK Government to increase the marginal
rate of tax on the UK Upstream Oil & Gas sector to 75% with no
floor to prices, will make it challenging for the industry to
invest in new longer-term UKCS projects. Nevertheless, we remain
committed to expanding our portfolio through M&A.
Mitch Flegg, Chief Executive of Serica Energy, commented:
" Although the North Eigg exploration well has not delivered the
result we had hoped for, it has demonstrated the presence of
hydrocarbons and provided a huge amount of high-quality data. In
particular, the presence of hydrocarbons at deeper than expected
depths will lead to a re-evaluation of both North Eigg and South
Eigg.
Elsewhere, our production performance has been strong, and we
will continue to invest in our existing portfolio in order to
maintain this performance. In parallel, as a significant North Sea
operator, Serica will continue to selectively review new potential
projects to maintain our North Sea presence whilst also seeking
greater clarity and stability on the taxation regime to enable
these projects to proceed.
While we believe in the importance of the UK Oil & Gas
sector, we are now considering opportunities in other countries
alongside those in the UK as we continue to seek to expand our
portfolio and create value for all of our stakeholders ."
3 Structured as part swaps and part fixed pricing under
GSA's
Regulatory
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014, as retained in the UK
pursuant to S3 of the European Union (Withdrawal) Act 2018.
The technical information contained in the announcement has been
reviewed and approved by Fergus Jenkins, VP Technical at Serica
Energy plc. Mr. Jenkins (MEng in Petroleum Engineering from
Heriot-Watt University, Edinburgh) is a Chartered Engineer with
over 25 years of experience in oil & gas exploration,
development and production and is a member of the Institute of
Materials, Minerals and Mining (IOM3) and the Society of Petroleum
Engineers (SPE).
Enquiries:
+44 (0)20 7390
Serica Energy plc 0230
Mitch Flegg (CEO) / Andy Bell (CFO)
+44 (0)20 7418
Peel Hunt (Nomad & Joint Broker) 8900
Richard Crichton / David McKeown
+44 (0)20 7029
Jefferies (Joint Broker) 8000
Tony White / Will Soutar
+44 (0)20 7390
Vigo Consulting (PR Advisor) 0230
Patrick d'Ancona / Finlay Thomson serica@vigoconsulting.com
NOTES TO EDITORS
Serica Energy is a British independent oil and gas exploration
and production company with a portfolio of UKCS assets. Over 85% of
Serica's production is natural gas, a key element in the UK's
energy transition, and the Company is responsible for 5% of the gas
produced in the UK. The Company is pursuing growth opportunities
that promote UK energy security, fit within the parameters of the
UK North Sea Transition Deal and where it can add value by
deploying its proven technical and commercial expertise.
Serica operates the producing Bruce, Keith and Rhum fields in
the UK Northern North Sea, and the producing Columbus field in the
UK Central North Sea. Serica also holds a non-operated interest in
the producing Erskine field in the UK Central North Sea.
Further information on the Company can be found at
www.serica-energy.com . The Company's shares are traded on the AIM
market of the London Stock Exchange under the ticker SQZ and the
Company is a designated foreign issuer on the TSX. To receive
Company news releases via email, please subscribe via the Company
website.
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END
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