TIDMSQZ
RNS Number : 4127G
Serica Energy plc
06 November 2018
Serica Energy plc ("Serica" or the "Company")
Acquisition of Marubeni Interests in Bruce and Keith
London, 6 November 2018 - Serica Energy plc (AIM: SQZ) is
pleased to announce that Serica Energy (UK) Limited ("Serica UK")
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 (the "Transaction").
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 ("Marubeni Assets") owned by Marubeni Oil
& Gas (UK) Limited ("Marubeni"). 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
o 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
o 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
o 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
o Firm negative consideration plus 2018 net cash flows to-date
will be due to Serica at completion
-- In line with strategic growth plans
o The Transaction is expected to enhance Serica's capability to
unlock value from the Bruce/Keith/Rhum area
o No additional management and administrative resources will be
required
Principal terms of the Transaction
The cash consideration for the Transaction is a payment of US$1
million by Marubeni to Serica, to be adjusted for working capital
and interim period cash flows from the effective date of 1 January
2018. The net 2P Reserves attributable to the Marubeni Assets as at
1 August 2018 are estimated to amount to approximately
0.95mmboe.
Marubeni will not receive a share of cash flow from the Marubeni
Assets following completion and there is no other deferred or
contingent consideration.
Serica will be liable for all the costs of decommissioning
facilities and wells arising in relation to the interest being
acquired from Marubeni. Serica will also be responsible for the
provision of its share of security against future obligations
calculated in accordance with the Bruce and Keith Decommissioning
Security Agreements.
Completion of the Transaction is conditional inter alia on:
-- Completion of the BP Transaction;
-- Relevant third-party consents; and
-- OGA approvals.
The SPA also contains customary warranties in relation to the
Marubeni Assets from Marubeni for a transaction of this nature.
Mitch Flegg, Chief Executive of Serica Energy, commented:
"We are targeting completion of the transactions with BP, Total
E&P, BHP and Marubeni on 30 November 2018 and our ownership in
Bruce will then increase to 98% and in Keith to 100%. On that date
over 110 staff will transfer from BP to Serica to join the team
that we have recruited in our new operational headquarters in
Aberdeen.
It is our intention to build on the excellent work that has been
performed by BP and its partners in Bruce, Keith and Rhum. With our
consolidated ownership of the three fields, and as operator, we
will be in a strong position to deliver enhanced returns from these
assets and extend their operating lives for the benefit of our
shareholders and fellow stakeholders in the North Sea and
Aberdeen."
About the Assets
The net 2P Reserves attributable to the Marubeni Assets as at 1
August 2018 are estimated to amount to approximately 0.95 mmboe.
These reserves are in addition to the estimated 2P Reserves of
approximately 62.7mmboe attributable to Serica assuming completion
of the BP Transaction, Total E&P Transaction and BHP
Transaction.
The Bruce field was discovered in June 1974 and is located in
the UK Northern North Sea, 350 km northeast of Aberdeen at a water
depth of 122 metres and with an area of approximately 75 km(2).
Field development was approved in 1990 and production started in
1993. Production is primarily gas with associated condensate and
NGLs. The field produces from 11 reservoir units, separated by
faulting and has had a cumulative production since 1993 of over
3tcf. To date there are over 60 well penetrations in the field with
21 producing wells.
The Keith field lies 6.8 km to the southwest of the Bruce field
in a water depth of 120 meters and has been developed as a subsea
tie-back to the Bruce complex. The Keith field was confirmed as a
separate field to Bruce after drilling in 1987 and first came on
production in 2000, with a second phase of development in 2002. No
further capital programmes are planned on Keith as the field is in
the final stages of its producing life. Subject to completion of
the Total E&P Transaction, Serica UK intends to continue
production from its single well as long as economically viable, but
the well is currently scheduled to cease production in 2019.
Wet gas from the Bruce and Keith fields is processed at the
Bruce complex and then transported via a 6 km spur line through the
Frigg pipeline to St. Fergus for Natural Gas Liquids extraction.
Dry gas is delivered as part of a commingled gas stream at St.
Fergus into the National Transmission System. NGLs are extracted at
St. Fergus and transported via a 12-inch diameter, 22 km pipeline
to Cruden Bay. The condensate is separated at the Bruce complex
then exported via a 24-inch diameter line, 254 km to the Forties
Unity platform. The liquids are then transported via the 36-inch
diameter Forties pipeline 240 km to Cruden Bay, then overland to
Grangemouth.
The Marubeni Assets include the Bruce field facilities which
comprise three bridge-linked platforms. There is a production
platform housing a crew of up to 168 with production and utilities
equipment. The second platform is a drilling platform, with the
third platform hosting reception and compression facilities.
The Marubeni Assets being acquired generated an operating profit
before interest, taxation, depletion and amortisation of US$3.65
million for the year ended 31 December 2017 based on unaudited
financial information extracted from the Marubeni accounting
records.
Summary of Assets (Net 2P Reserves as of 1 August 2018)
Erskine BP Assets Total E&P BHP Assets Marubeni Enlarged
Assets Assets Group
Oil & Liquids mmbls 1.58 4.72 2.88 1.18 0.29 10.65
------- -------- ---------- ---------- ----------- --------- ---------
Gas mmscf 8,737 236,263 42,525 16,589 3,907 308,021
------- -------- ---------- ---------- ----------- --------- ---------
Combined mmboe 3.03 45.46 10.21 4.04 0.95 63.69
------- -------- ---------- ---------- ----------- --------- ---------
Technical Information
The technical information contained in the announcement has been
reviewed and approved by Clara Altobell, VP Technical at Serica
Energy plc. Clara Altobell (MSc in Petroleum Engineering from
Imperial College, London) has over 20 years of experience in oil
& gas exploration, production and development and is a member
of the Society of Petroleum Engineers (SPE) and the Petroleum
Exploration Society of Great Britain (PESGB).
Regulatory
This announcement is inside information for the purposes of
Article 7 of Regulation 596/2014.
Enquiries
Serica Energy plc
Tony Craven Walker
Executive Chairman tony.cravenwalker@serica-energy.com +44 (0)20 7457 2020
Mitch Flegg
CEO mitch.flegg@serica-energy.com +44 (0)20 7457 2020
Peel Hunt
Richard Crichton richard.crichton@peelhunt.com +44 (0)20 7418 8900
Ross Allister ross.allister@peelhunt.com +44 (0)20 7418 8900
James Bavister james.bavister@peelhunt.com +44 (0)20 7418 8900
Instinctif
David Simonson david.simonson@instinctif.com +44 (0)20 7457 2020
Catherine Wickman catherine.wickman@instinctif.com +44 (0)20 7457 2020
George Yeomans george.yeomans@instinctif.com +44 (0)20 7457 2020
Notes to Editors
Serica Energy is an oil and gas exploration and production
company with exploration, development and production assets in the
UK and exploration interests in the Atlantic margins offshore
Ireland and Namibia. Serica holds an 18% non-operated interest in
the Erskine field in the UK Central North Sea and a 50% operated
interest in the Columbus field scheduled to commence development in
2019. OGA approval of the Columbus FDP was granted in October
2018.
In November 2017 Serica announced the BP Transaction under which
Serica UK will acquire interests in the Bruce, Keith and Rhum
fields in the North Sea and associated infrastructure from BP.
Under the terms of the BP Transaction Serica UK will acquire a 36%
interest in Bruce, a 34.83% interest in Keith and a 50% interest in
Rhum. The deal has an effective date of 1 January 2018. Completion
of the BP Transaction is targeted to take place on 30 November
2018.
In August 2018, Serica announced the Total E&P Transaction
under which further interests in the Bruce and Keith fields and
associated infrastructure in the UK North Sea are to be acquired
from Total. Under the terms of the Total E&P Transaction,
Serica UK will acquire a 42.25% interest in the Bruce field and a
25% interest in the Keith field and associated infrastructure. The
Total E&P Transaction also has an effective date of 1 January
2018 and completion will be subject to completion of the BP
Transaction.
Most recently, Serica announced the BHP Transaction under which
further interests in the Bruce and Keith fields and associated
infrastructure in the UK North Sea are to be acquired from BHP.
Under the terms of the BHP Transaction, Serica UK will acquire a
16.0% interest in the Bruce field and a 31.83% interest in the
Keith field and associated infrastructure. The BHP Transaction also
has an effective date of 1 January 2018 and completion will be
subject to completion of the BP Transaction.
The BP Transaction was deemed a reverse takeover, an admission
document was published and shareholders approved the BP Transaction
at a General Meeting of the Company on 18 December 2017. There are
still a number of conditions precedent which need to be satisfied
ahead of completion of the BP Transaction. As part of the BP
Transaction, operatorship of the Bruce, Keith and Rhum fields will
be transferred from BP to Serica, along with approximately 110 BP
staff.
The Transaction presents Serica with an opportunity to further
increase its reserve and production base by assuming a greater
interest in assets already well known to the Company and without
any dilution for shareholders.
Further information on the Company, the BP Transaction, the
Total E&P Transaction, the BHP Transaction and this Transaction
can be found at www.serica-energy.com.
The Company is listed on the AIM market of the London Stock
Exchange under the ticker SQZ and is a designated foreign issuer on
the TSX. To receive Company news releases via email, please
subscribe via the Company website.
Glossary
Term Meaning
"2P" proved plus probable reserves;
"bbls" barrel of 42 US gallons;
"boe" barrel of oil equivalent;
"boe/d" barrels of oil equivalent per day;
"Dry Gas" Dry Gas is a natural gas containing
insufficient quantities of hydrocarbons
heavier than methane to allow their
commercial extraction or to require
their removal in order to render the
gas suitable for fuel use;
"mmbbls" million barrels of oil;
"mmboe" million barrels of oil equivalents;
"mmscf" million standard cubic feet;
"NGLs" natural gas liquids extracted from
gas streams;
"possible reserves" possible reserves are those additional
Reserves that are less certain to
be recovered than probable reserves.
It is unlikely that the actual remaining
quantities recovered will exceed the
sum of the estimated proved + probable
+ possible reserves;
"probable reserves" probable reserves are those additional
Reserves that are less certain to
be recovered than proved reserves.
It is equally likely that the actual
remaining quantities recovered will
be greater or less than the sum of
the estimated proved + probable reserves;
"proved reserves" proved reserves are those Reserves
that can be estimated with a high
degree of certainty to be recoverable.
It is likely that the actual remaining
quantities recovered will exceed the
estimated proved reserves;
"Reserves" estimates of discovered recoverable
commercial hydrocarbon reserves;
"Wet Gas" Wet Gas is a natural gas containing
sufficient quantities of hydrocarbons
heavier than methane to allow their
commercial extraction or to require
their removal in order to render the
gas suitable for fuel use.
[i] Throughout this document reserve figures are taken from the
latest Serica internal management estimates dated 1 August
2018.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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