TIDMSQZ
RNS Number : 6186I
Serica Energy plc
15 December 2020
Serica Energy plc
("Serica" or the "Company")
Operations Update
London, 15 December 2020 - Serica Energy plc (AIM: SQZ), a
British independent upstream oil and gas company with operations
centred on the UK North Sea and over 80% gas production, hereby
provides the following operations update.
Highlights
-- Solid production performance delivering 26,300 boe/d total
net production to Serica during the most recent three-month
period
-- Significant strengthening of gas prices important to Serica's
80% gas production portfolio
-- Operational milestone as longest period without a recordable
injury since March 2016 achieved
-- Rhum R3 Intervention Project work continues following delays
due to poor weather and equipment repairs
-- Formal award of four new blocks in the UK 32nd licensing
round confirmed
-- Decision to withdraw from Namibia to focus on Serica's
North Sea-focused portfolio and opportunities
Production Operations
We are pleased to announce that Serica has passed a significant
operational safety milestone with a year elapsed since the last
recordable injury on the Bruce platform. This is the longest period
without a recordable injury since March 2016 and has been achieved
despite the added complexities of operating in a socially distanced
manner due to COVID precautions. This milestone demonstrates the
professionalism, skill and teamwork of everyone on the platform and
throughout the Company.
Production performance from the Bruce hub has been good. During
the most recent three-month period, the preliminary production rate
from Bruce, Keith and Rhum has averaged 24,100 boe/d net to Serica.
Net Erskine production during the same period has averaged 2,200
boe/d giving total net Serica production of 26,300 boe/d for the
period.
As over 80% of Serica's production is gas, the Company is
pleased to note that spot gas prices have continued to strengthen
following the historically low prices encountered earlier this
year. In January, average Heren NBP day-ahead spot prices were
around 28p/therm but then fell significantly during the early
stages of the COVID lock down reaching below 10p/therm on several
days. The average price to date this quarter has exceeded
38p/therm.
Rhum Field: R3 Intervention Project
Offshore operations on the R3 Intervention Project using Awilco
Drilling's WilPhoenix semi-submersible drilling rig, commenced in
October and are ongoing. Progress has been slower than had been
anticipated due mainly to two factors. Poor weather conditions have
resulted in approximately 11 days of weather-related downtime and
the resolution of a technical problem with rig equipment has led to
a further 28 days of downtime. As a result, rig operations will not
be completed before late January 2021.
Serica and its partners have some financial protection against
the effects of both weather and rig-related downtime. During
periods of inactivity due to weather the 'day-rate' paid for the
rig is reduced and for periods of rig downtime longer than 24 hours
no day-rate is payable. Despite this, it is anticipated that the
Serica share of costs associated with the R3 Intervention Project
will increase by some GBP3 million.
The technical problems encountered to date have caused delays
but do not impact the ability to successfully complete the intended
work programme. A further update on the R3 Intervention Project
will be provided when rig operations are completed.
Exploration
UK
We are pleased to announce that the UK Oil & Gas Authority
has formally awarded Serica four new blocks in the UK 32(nd)
licensing round. Blocks 3/25b, 3/30, 4/26 and 9/5a are in the
vicinity of our Bruce hub and include several leads which, if
successful, could be tied back to Serica's existing infrastructure.
The work programme does not include any commitment wells but is
designed to mature these leads to drill-ready status.
Namibia
Serica was originally awarded Licence 047 in Namibia in November
2011, covering Blocks 2512A, 2513A, 2513B and 2612A (part). The
initial work commitment was fulfilled when BP farmed-in to the
licence and funded a 3D seismic survey at no cost to Serica. In
late 2013, BP decided to exit the licence rather than making a
commitment to drill in the next licence period. Serica continued
with its technical work to interpret the seismic and geological
data, and secured extensions to the licence and waivers on area
relinquishment and well commitments.
Following a full review, however, Serica has now elected not to
seek a further renewal period or to continue with a new licence
application and is therefore withdrawing from Namibia to focus on
its North Sea portfolio. The pace of exploration activity in
Namibia has been slower than we hoped, and the development of any
discovery would likely have been expensive, time consuming and
inconsistent with our sustainability objectives.
With the Company's major producing assets now centred in the UK
North Sea our immediate strategy is focused on delivering value
from these assets. Exploration efforts in the immediate future will
be concentrated on prospects in the vicinity of our existing
assets, thereby adding value and extending the life of our
production portfolio.
Mitch Flegg, Chief Executive of Serica Energy, commented:
"We are pleased with the performance of our offshore production
operations over the past three months, which have also benefited
from the significant strengthening of gas prices during that
period. The delays to the Rhum R3 Intervention Project are
frustrating but do not affect its viability or long-term value. We
are not prepared to take shortcuts, despite the slower than hoped
progress, as we remain fully committed to a safe execution of the
originally planned work scope. An update will be given once rig
operations are complete.
Serica is committed to protecting and increasing shareholder
value against the current backdrop of lower oil prices and slowing
industry commitment to deep-water exploration. We have therefore
decided that the expense of maintaining the Namibian licence will
be better redirected to lower-risk, nearer-term opportunities to
build on our North Sea portfolio where we are currently engaged in
an exciting period of value-adding operations.
I would like to thank the National Petroleum Corporation of
Namibia (NAMCOR) and the Ministry for Mines and Energy for their
support and assistance during our time in Namibia."
Additional Information
Rhum is a gas condensate field producing from two subsea wells,
R1 and R2, tied into the Bruce facilities through a 44km pipeline.
Rhum production is predominantly gas which is exported to St Fergus
for delivery into the National Transmission System. Small
quantities of associate condensate are exported onshore via the
Forties Pipeline System. The field has produced at relatively
constant rates through the past year.
The third well, R3, requires intervention work before it can be
brought on production. On 12 October 2020 Serica announced that it
had commenced the intervention work on R3 well on behalf of the
Rhum partners.
Serica also holds a 50% interest and is operator of the Columbus
gas-condensate development where operations are progressing on
schedule towards the drilling of the development well in the first
half of 2021 with first production later in the year.
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:
Serica Energy plc +44 (0)20 7457 2020
Tony Craven Walker, Executive Chairman
Mitch Flegg, CEO
Peel Hunt (Nomad & Joint Broker) +44 (0)20 7418 8900
Richard Crichton / David McKeown / Alexander
Allen
Jefferies (Joint Broker) +44 (0)20 7029 8000
Tony White / Will Soutar
Instinctif Partners +44 (0)20 7457 2020
Mark Garraway / Sarah Hourahane / Dinara +44 (0)7493 867
Shikhametova 435
+44 (0)7580 817
276
serica@instinctif.com
NOTES TO EDITORS
Serica Energy is a British independent oil and gas exploration
and production company with a portfolio of exploration, development
and production assets.
Serica is the operator of the producing Bruce, Keith and Rhum
fields in the UK Northern North Sea, holding interests of 98%, 100%
and 50% respectively. Serica also holds an 18% non-operated
interest in the producing Erskine field in the UK Central North Sea
and a 50% operated interest in the Columbus Development.
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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