London, 10 April 2018 - Serica Energy plc (AIM: SQZ) today announces its financial results for the year ended 31 December 2017. The results are included below and copies are available at www.serica-energy.com and www.sedar.com.
Operating profit for 2017 of US$14.1 million, a four-fold increase over 2016 operating profit of US$3.4 million
Group profit after tax of US$17.1 million (2016: US$10.8 million) after deferred tax credits of US$6.3 million (2016: US$7.5 million) arising from tax losses brought forward
Revenues boosted by strengthening average realised sales prices of US$53.2 per barrel of oil (2016: US$42.1 per barrel) and 41 pence per therm of gas (2016: 33 pence per therm)
Total cash balances and term deposits at 31 December 2017 of US$34.0 million, increased from US$16.6 million at 31 December 2016
Balance sheet strength maintained with limited capital commitments and borrowingsBKR Assets Acquisition
The acquisition of BP's interests in the Bruce, Keith and Rhum (“BKR”) fields, announced on 21 November 2017 and expected to complete in late Q3 2018, transformational for Serica:
Additional revenue streams counterbalance Serica's current Erskine single fieldexposure
Significant additions to production volumes and reserves
Accelerated utilisation of tax losses enhances value to Serica
Deal structured to control risk and minimise shareholder dilution
Operational Erskine Field
Production averaged just under 2,000 boe per day net to Serica during 2017 despite wax restrictions and December Forties Pipeline System shut-in
Serica's operating and transportation costs maintained at approximately US$15 per barrel for the year despite production interruptions
Capabilities of the Erskine reservoir and wells continue to outperform the projections that Serica made when the asset was first acquired
Work continues to clear early 2018 blockage in Lomond to Everest condensate export line
Serica, as operator of Columbus with a 50% interest, is moving the field towards development:
Columbus partners have selected an offtake route via the proposed Arran-to- Shearwater pipeline
Submission of a field development plan to the OGA targeted for mid-yearExploration
Preparations for a well on the Rowallan prospect in the second half of 2018 are progressing to plan with a site survey completed last December and tendering for a rig underway
Serica is fully carried on all Rowallan well costs on this high pressure, high temperature prospect
Outlook for 2018
Completion of the Lomond to Everest export line bypass during Q3 is expected to deliver more consistent Erskine production performance and sales revenues
Serica's 40% share in 2018 net cash flows from the BKR Assets, accruing under the acquisition agreement, adds to the Company's cash resources upon completion expected in late Q3 2018
Transition work for the BKR Assets acquisition is well underway:
o Consultations with transferring staff close to completion and recruitment for additional positions in progress
o New premises for Aberdeen operations headquarters identified with occupation targeted for mid-summer
o Serica working with BP, OGA and partners to ensure safe and orderly transition
o Identifying and implementing operational efficiencies
o Targeting investment to further enhance the value of its assets
o Seeking complementary acquisitions with a continuing focus on the UK North Sea.
Mitch Flegg, Serica's CEO commented:
“2017 has been a landmark year for Serica, delivering our highest annual profit to date and providing us with the platform to grow further.
Building on a strong set of financial results, the announcement of the BKR Assets acquisition in late November rounded off an excellent year. Though much of our effort is currently directed towards the transition of BKR operations from BP, we continue to seek new opportunities to add to our portfolio of assets. We believe that the UK North Sea, where there are strategic benefits for Serica, will continue to provide new opportunities to grow the business and add shareholder value.
Erskine delivered good performance on average for the year, despite the wax build-up issues and production shut-in. Whilst we continue to attempt to address the current wax build-up we fully support Chrysaor's proposal for a pipeline bypass, as a cost-effective and permanent solution through regular pigging of a new line.
The selection of the Shearwater hub as the optimum offtake route for the Columbus field, and our planned submission of the field development plan scheduled for mid-2018 are significant steps towards first production from the field.
Operationally, we are delighted that work will soon commence on the Rhum R3 well intervention and that preparations continue for drilling a well on the Rowallan prospect in which we have a 15% carried interest. A successfuloutcome in one or both of these projects will have a material impact on Serica.”
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