TIDMSQZ
RNS Number : 3776M
Serica Energy PLC
21 January 2021
Serica Energy plc
("Serica" or the "Company")
OFAC License Renewal and Corporate Update
London, 21 January 2021 - Serica Energy plc (AIM: SQZ) is
delighted to announce that it has received a renewed License and
secondary sanctions assurance from the US Office of Foreign Assets
Control ("OFAC") relating to the North Sea Rhum field, in which the
company has a 50% interest. The License and assurance will allow
certain U.S. and U.S.-owned or controlled entities and also
non-U.S. entities to continue providing goods, services and support
to Rhum beyond 28 February 2021; when the current License was due
to expire. This will enable operations and production from the Rhum
field to continue unaffected.
The previous OFAC License was valid for a period of 16 months.
In this case OFAC has issued the License for a period up to 31
January 2023. The License may be renewed on application by Serica
assuming the conditions continue to be met.
Serica today also releases a Corporate Update presentation for
the year ended 31 December 2020 which can be found on the Company's
website at www.serica-energy.com
Production
-- Estimated net production from Serica's interests in Bruce,
Keith, Rhum ("BKR") and Erskine averaged 23,800 boe/d during 2020.
This was significantly impacted by the 45-day shut down for caisson
repairs on Bruce during Q1. Without this shutdown net production
would have averaged around 27,000 boe/d
-- 2020 operating costs (including production, processing,
transportation and insurance) are provisionally estimated to be
around $14/boe (2019: $12.60/boe). Although 2020 absolute operating
costs were reduced compared to 2019 the increase when expressed in
$/boe was due to the reduction in production for the Bruce caisson
shutdown and does not reflect an increase in the underlying
trend
Commodity Prices
-- Full year 2020 average market gas price was approximately
25p/therm and the average market oil price was approximately
$43/bbl equating to a combined price of approximately $20/boe
before realised cash hedging income of approximately GBP12.3
million
-- As over 80% of Serica's production is gas, the Company is
pleased to note that spot gas prices have continued to strengthen
with an average market price of approximately 60p/therm for 2021
to-date
Financial
-- The company has a healthy cash balance, no borrowings and
limited decommissioning liabilities
-- Cash flow set to increase materially - on 1 January 2022
Serica's share of BKR Net Cash Flow will increase from 60% to 100%
under the relevant agreements with BP, Total E&P and BHP.
Serica's share has increased from 40% in 2018 and 50% in 2019 to
60% in 2020/21 and will be 100% thereafter
ESG
-- Over 80% of our production is natural gas, which has
significant environmental advantages over other fossil fuels and so
is a key element of the Energy Transition
-- Preliminary figures indicate that since Serica assumed
operatorship of Bruce two years ago we have eliminated 62% of all
flaring from the platform
-- Preliminary figures indicate a 10% reduction in carbon
emissions from the Bruce platform in 2020
R3 intervention
-- After the previously reported rig and weather-related
problems, operations have continued on the R3 intervention project.
The problems encountered by the previous operator in 2005 were that
a hydrate plug had formed in the well and wireline debris had also
been left in the well. Serica has successfully remedied both
issues, recovering the wireline 'fish' and dissociating the hydrate
plug by heating
-- The ongoing operations are to remove the 2005 downhole
completion before recompleting the well
-- The removal of the 2005 completion is taking longer than
anticipated due largely to the unexpectedly poor condition of the
equipment being recovered from the well
-- As a result, R3 operations are now expected to continue into March 2021
Columbus
-- The Maersk Resilient rig which will be used to drill the
Columbus development well is due on hire before the end of Q1
2021
-- Serica has a 50% interest in Columbus which will be drained
by a single producing well tied into the Arran to Shearwater
pipeline. Production will be processed on the Shearwater
platform
-- Production expected to commence in early Q4 2021, with
initial gross production forecast to be around 7,000 boe/d of which
75% is gas
Outlook
-- We have entered 2021 with considerably improved gas prices
though with notable volatility so will continue to carry downside
protection at an appropriate level
-- We will continue to prioritise the health and safety of our
workers whilst the COVID-19 threat remains and to work on our
carbon reduction programmes and other ESG objectives
-- We believe 2021 will bring new opportunities to grow through
acquisition against a more confident industry backdrop
-- However, we will continue to screen all opportunities
vigorously and prioritise delivering shareholder value over simple
additions to scale
Mitch Flegg, Chief Executive of Serica Energy, commented:
"The early renewal of the OFAC License for a period of two years
is excellent news. We are grateful to the UK Government and
regulatory authorities which have supported us in this process.
The License renewal comes on the back of a busy period during
which Serica has continued to build on its firm foundations both
operationally and financially whilst also working hard to position
itself as a key contributor to the UK's net zero goals. Our
activities within our ESG framework are having a material positive
impact on our emissions across the portfolio and we remain highly
focused on this hugely important aspect of our work. We will seek
to drive additional value from the portfolio through our work
programme this year and deliver an attractive combination of growth
and returns for our investors.
These firm foundations and strong balance sheet allow us to
continue to seek opportunities to grow our portfolio through
investment and M&A activity. Serica will not overpay in order
to quickly grow our portfolio. We are focused on identifying value
rather than volume and will continue to look for the right
opportunities where Serica can utilise its skills to add value to
assets that no longer fit the objectives of the current
owners."
Regulatory
This announcement contains inside information.
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
Vigo Communications +44 (0)20 7390 0230
Patrick d'Ancona / Chris McMahon / Simon Woods serica@vigocomms.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.
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 associated condensate are exported onshore via the
Forties Pipeline System.
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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