Serica Energy
plc
("Serica" or the
"Company")
Operations
Update
London, 5 February 2024 - Serica Energy plc (AIM:
SQZ), a British independent upstream oil and gas company with
operations in the UK North Sea, provides the following operations
update.
Mitch Flegg, Chief Executive of
Serica, said:
"Pro-forma production in 2023 after including volumes from the
Tailwind assets for the full year was just over 40,000 boe/d net to
Serica. I am pleased that we met our operating cost target with
pro-forma operating costs of around US$19 per boe despite the
significant inflation being experienced by the offshore sector
generally. We are aiming to keep unit operating costs below US$20
per boe during 2024.
Production in 2024 is expected to be higher than in 2023 with
guidance between 41,000 boe/d and 48,000 boe/d for the year. This
reflects a range of outcomes in a year of significant activity
including the speed with which the scheduled drilling and well work
deliver incremental production.
Serica's strategy of investing in its assets continues to be
central to our record of consistently achieving high levels of
reserves replacement, combined with increased levels of production.
We are looking forward, therefore, to the start of the four well
Triton area drilling programme in March, with the benefits of added
production expected to start coming through in the second half of
the year. During 2024 there is also an extensive programme of
interventions in both platform and subsea wells on the Bruce and
Keith fields. The objectives include re-establishing consistent
production from the Keith field.
In
addition, Serica has a healthy portfolio of potential new projects.
This includes the possible developments of the Buchan and Belinda
fields, which offer the prospect of further replacement of produced
reserves and incremental production from 2026 onwards. Our plans
for drilling two Bruce infill wells, the first new wells on the
field since 2012, are progressing and, during the next eighteen
months, we will be participating in the Parkmead operated
Skerryvore exploration well situated in the UK Central North Sea.
As a UK taxpayer, Serica will benefit from tax relief for its share
of the associated development and exploration
costs.
Serica is extremely well placed, therefore, to continue its
track record of replacing reserves and increasing production. This
platform has been achieved while maintaining a very strong balance
sheet, which is both the result and enabler of our strategy to
invest and grow organically and through disciplined
M&A."
Production in 2023
Serica's pro-forma net production in
2023 which includes production from the fields owned by Tailwind
since 1 January 2023 averaged 40,121 boe/d. The gas/liquids split
of production in 2023 was 56:44.
|
FY 2023
boe/d
|
Bruce
|
6,487
|
Rhum
|
12,490
|
Bittern
|
4,012
|
Gannet E
|
6,098
|
Evelyn
|
3,780
|
Guillemot West and North
West
|
237
|
Columbus
|
2,178
|
Erskine
|
1,325
|
Orlando
|
3,514
|
Production in the second half of the
year was lower than the first half due mainly, as previously
reported, to the planned summer shutdowns for both the Bruce and
Triton hubs overrunning to rectify safety
related issues. There were also a number of facilities issues on
Bruce and Triton which caused short-term interruptions to
production late in the year and carrying over into early January.
These are now largely resolved.
Notwithstanding these issues,
production in the fourth quarter of 2023 averaged 45,748
boe/d.
2024 Production Guidance
The production guidance for 2024 is
41,000 to 48,000 boe/d (net to Serica). This represents an increase
on pro-forma production for the combined Serica and Tailwind
portfolios in 2023.
2024 year to date production has
averaged 43,184 boe/d[1]. Erskine has been
shut in since 25th January 2024 due to an issue with a
compressor. It is expected to restart during March.
As a result of the work completed
during the extended Bruce summer shutdown in 2023, an extended
shutdown is not planned in 2024. There is a planned one-week outage
which overlaps with scheduled shutdown of third-party
infrastructure downstream of the Bruce platform.
There is a planned six-week shutdown
of the Triton FPSO during the summer of 2024. This will be
accompanied by a 'walk to work' campaign designed to further
improve the performance of the facilities. It follows successful
'walk to work' campaigns in 2022 and 2023.
These planned maintenance periods
are incorporated into the production guidance.
Investment programme
As previously announced, Serica is
planning an ambitious programme of organic investments during 2024
extending into 2025 and 2026.
The investments in 2024 include four
wells in the Triton area (Bittern B1z sidetrack, Gannet E GE-05,
Guillemot North West EC1 and Evelyn EV-02)[2] and well work on the Bruce and Keith
fields.
The start date of the B1z sidetrack
is now expected to be in March 2024. This well and the subsequent
three wells are scheduled to take about three months each, meaning
that drilling will continue into 2025. Serica has also exercised an
option to keep the rig for a further well following completion of
the fourth well in the programme (EV-02).
Production from the B1z sidetrack is
expected to start shortly after the completion of drilling.
Production from each of the other three wells is expected to start
around thirty days after the completion of drilling each
well.
The Bruce and Keith Light Well
Intervention Vessel ("LWIV") campaign is on track to take place
between March and May. This follows previous campaigns in 2022 and
2023, which have delivered low-cost incremental production. It is
hoped to restart production from the Keith field during 2024
following successful preparation work on the Keith subsea
facilities carried out in 2023. Additional well interventions from
the Bruce platform are scheduled for the second half of
2024.
The estimated cost to Serica of the
currently approved capital investment in its producing assets in
the Bruce and Triton hubs is approximately £210 million, before tax
relief. Most of the expenditures are expected to be incurred in
2024.
Looking further forward, both the
Buchan field redevelopment and Belinda field development projects
are moving towards potential sanction. The Environmental Statement
and draft Field Development Plan for the Buchan project have been
submitted, with completion of Serica's acquisition of a 30%
interest is expected to occur during February. As previously
reported, the Belinda draft Field Development Plan was submitted in
September 2023.
Serica is also maturing plans for
two infill wells on the Bruce field with the aim of drilling in
2026.
The Skerryvore joint venture, in
which Serica holds a 20% interest, is working towards drilling a
licence commitment exploration well during late 2024 or the first
half of 2025.
Abandonment costs in 2024 are
forecast to be about £14 million (pre-tax) net to Serica. These
will be incurred mainly on the final decommissioning of the Arthur
field, situated in the UK Southern North Sea, which was held by
Tailwind Energy.
Operating costs
Despite the significant inflationary
pressures being experienced by all operators in the UK North Sea,
Serica achieved unit operating costs in 2023 of around US$19/boe
based on pro-forma production of 40,121 boe/d.
The Company's target in 2024 is to
maintain unit operating costs at below US$20/boe.
Balance Sheet
Year-end cash and cash equivalents
stood at £291 million and borrowings at £210 million. This is after
payment during 2H 2023 of:
· two
instalments of 2023 taxes totalling £139 million (final payment
approximately £58 million in Q1 2024), and
· dividends of £89 million being the total of the 2022 final and
2023 interim amounts.
Cash and cash equivalents included
£28 million of cash security temporarily lodged with a third party
in respect of decommissioning obligations pending the issue of
letters of credit to replace the security. This is expected to
occur shortly.
Organisation
Martin Copeland has assumed the role
of Serica's CFO and has been appointed to the Board effective
today, 5 February 2024. Martin succeeds Andy Bell, who has resigned
from the Board. Andy will continue to support Serica during the
transition and preparation of the 2023 Annual Report.
Sell-side Analysts Event
A presentation will be published
later this week on Serica's website to accompany the previously
reported event for sell-side analysts being hosted by the Company
on 7th and 8th February.
Regulatory
This announcement is inside
information for the purposes of Article 7 of Regulation
596/2014.
Enquiries:
Serica Energy plc
|
+44
(0)20 7390 0230
|
Mitch Flegg (CEO) / Stephen Lambert
(VP Legal and External Relations)
|
|
|
|
Peel Hunt (Nomad & Joint Broker)
|
+44
(0)20 7418 8900
|
Richard Crichton / David McKeown /
Georgia Langoulant
|
|
|
|
Jefferies (Joint Broker)
|
+44
(0)20 7029 8000
|
Sam Barnett / Will Soutar
|
|
|
|
Vigo Consulting (PR Advisor)
|
+44
(0)20 7390 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.
Serica has a balance of gas and oil
production. The Company is responsible for about 5% of the natural
gas produced in the UK, a key element in the UK's energy
transition.
Serica's producing assets are
focused around two main hubs: the Bruce, Keith and Rhum fields in
the UK Northern North Sea, which it operates, and a mix of operated
and non-operated fields tied back to the Triton FPSO. Serica also
has operated interests in the producing Columbus (UK Central North
Sea) and Orlando (UK Northern North Sea) fields and a non-operated
interest in the producing Erskine field in the UK Central North
Sea.
Serica's portfolio of assets
includes several organic investment opportunities which are
currently being pursued or are under consideration.
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.