TIDMSQZ
RNS Number : 3926U
Serica Energy PLC
23 November 2023
Serica Energy plc
("Serica" or the "Company")
Acquisition of Interest in Greater Buchan Area
London, 23 November 2023 - Serica Energy plc (AIM: SQZ) is
pleased to announce the execution of agreements for the acquisition
by its wholly owned subsidiary, Serica Energy (UK) Limited, of 30%
non-operated interests in the P2498 and P2170 licences (together
the Greater Buchan Area ("GBA")) from Jersey Oil & Gas ("JOG")
(the "Transaction"). Completion is subject to regulatory, partner
and interested party approvals and is expected to occur early in
2024. Following completion, the partners in the GBA will be Serica
Energy (UK) Limited (30%), NEO Energy (50% and operator) and JOG
(20%).
As a result of the Transaction, Serica will have the option of
participating in the re-development of the Buchan field and other
potential developments in the GBA.
Greater Buchan Area
The GBA encompasses several oil and gas accumulations some 150
km north-east of Aberdeen, in the Outer Moray Firth. The largest of
these accumulations is the Buchan field which produced for over
thirty years, ceasing production in 2017 owing to the end of the
useable life of the floating production facility. The Concept
Select Report submitted to the NSTA for the re-development of
Buchan is based on a new production hub located at the Buchan field
utilising the floating production, storage and offloading ("FPSO")
vessel currently operating on the UK Western Isles fields and
planned to come off-station in the second half of 2024. The
acquisition of the FPSO by NEO on behalf of the participants in the
Buchan joint venture was announced on 17 November 2023.
A phased development is envisaged involving the re-development
of the Buchan field in Phase 1 and the possible development of the
J2 and Verbier discoveries in Phase 2. Mid-case contingent
resources from the Buchan field alone are estimated to be in region
of 70 million barrels of oil equivalent, making it the third
largest pre-development field in the UKCS. There are other
discoveries and prospects in close proximity which might provide
additional tie-back opportunities to the FPSO.
The NSTA has issued a no objection letter following the
submission of the Concept Select Report in support of the Buchan
re-development programme. A proposed Field Development Plan ("FDP")
for Buchan is expected to be submitted to the NSTA shortly, with
approval of the FDP potentially in the second half of 2024.
The development concept includes limited works on the FPSO in
order to prepare it for re-deployment. These works involve the
installation of water injection booster pumps, produced water
injection modifications and preparation of the vessel for future
electrification. Following the recent Innovation and Targeted Oil
& Gas ("INTOG") licence awards, there is the possibility of
third-party floating wind power developments located close to the
GBA. It is anticipated that the FPSO will be connected to one of
these, should they become available. Oil export is planned to be
via shuttle tankers.
Subject to project sanction and regulatory approval, the target
for first production is late 2026. Peak production rates are
expected to be around 35,000 barrels per day. Gross development
costs are estimated to be in the order of GBP850-950 million, which
under the current fiscal terms, are expected to qualify for tax
relief at a rate of approximately 91%.
Transaction Summary
The Transaction is structured as a farm-in, with modest up-front
and contingent consideration payments, and a carry of pre-Financial
Investment Decision ("FID") and development costs.
In return for a 30% working interest in the GBA licences, on
completion Serica will make a cash payment to JOG of US$ 6.8
million [1] . subject to the adjustments between buyer and seller
to reflect an economic date for the transaction of 1 April
2023.
Serica is not committed under the terms of the Transaction to
participate in the GBA developments. In the event of participation
at each relevant stage, Serica will make further payments to JOG as
follows:
-- US$7.5 million on approval of the Buchan FDP by the NSTA.
-- A 7.5% carry of the Buchan field pre-FID and development
costs (paying 37.5% for a 30% working interest). The development
cost carry is capped at 7.5% of the budget approved by the Buchan
Joint Venture for the development of the Buchan field at the time
of the FDP. Subject to the cap, the development cost carry equates
to a 1.25 carry ratio for development costs; the same as the
arrangement agreed between JOG and NEO Energy earlier this
year.
-- US$3 million on approval by the NSTA of a J2 FDP.
-- US$3 million on approval by the NSTA of a Verbier FDP.
Mitch Flegg, Chief Executive of Serica commented:
"We are delighted with this transaction which gives Serica a
significant interest in the proposed Greater Buchan Area project,
potentially adding a third production hub and further resilience to
Serica's North Sea portfolio. In common with our other hubs, the
GBA plan involves utilising existing infrastructure - in this case
an FPSO - with the possibility of exploiting multiple accumulations
in the area. Moreover, the development has been designed to deliver
an industry-leading low level of carbon emissions, consistent with
Serica's objective of reducing the overall carbon intensity of its
activities.
The transaction demonstrates the benefits of Serica's strong
balance sheet. Our financial strength enables us to take advantage
of suitable opportunities to expand the portfolio and we will
continue to take a very proactive approach to business development,
while also investing in our existing portfolio and paying dividends
to shareholders. The transaction is structured such that most of
the consideration payable by Serica is contingent and linked to
making progress in the project.
Our participation will also be financially efficient with Serica
benefiting from tax reliefs on its investment.
We congratulate Jersey Oil & Gas for having created and
progressed the GBA project before recently transferring
operatorship to NEO Energy. We look forward to working with them
and NEO, including the latter's experienced and well-respected
project team."
Regulatory
This announcement is inside information for the purposes of
Article 7 of Regulation 596/2014.
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)
/ Stephen Lambert (VP Legal and External
Relations)
+44 (0)20 7418
Peel Hunt (Nomad & Joint Broker) 8900
Richard Crichton / David McKeown /
Georgia Langoulant
+44 (0)20 7029
Jefferies (Joint Broker) 8000
Sam Barnett / 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.
Serica completed the acquisition of the entire issued share
capital of Tailwind Energy Investments Ltd on 23 March 2023.
Following the addition of the Tailwind assets to its portfolio,
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.
Futher 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.
[1] The up front and contingent amounts of consideration are
denominated in a mix of GBP and US$. The US$ equivalent amounts are
reported based on a conversion date of US$1.23 to GBP1.
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END
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