Serica Energy - Acquistion of Total E&P's Interests in Bruce and Keith Fields, North Sea

Posted by OilVoice Press - OilVoice


Transaction highlights

Following completion of the BKR Transaction and transfer of operatorship of the Bruce, Keith and Rhum fields to Serica UK, the board believes the BK Acquisition will further strengthen 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.

·         Further increase in reserves and production

o   Serica's pro-forma net 2P reserves as at 1 July 2018 are expected to increase by approximately 11mmboe from approximately 49mmboe post completion of the BKR Transaction to approximately 60mmboe post completion of the BK Acquisition

o   Net production in 1H 2018 from the BK Assets was approximately 4,700boe/d, of which 83% is gas

o   The BK Acquisition is expected to be immediately cash flow and value accretive following completion

·         Structured to mitigate financial risk and maintain balance sheet resilience

o   Existing net cash resources are not expected to be impacted by the BK Acquisition

o   Bulk of consideration deferred and contingent

o   Initial cash consideration of US$5 million expected to be funded by Serica UK's share of net cash flows from the BK Assets between 1 January 2018 and completion of the BK Acquisition

o   Future payments linked to the performance of the BK Assets, allowing both parties to share the benefits of improving field recoveries and production efficiencies

·         Further increased scale in line with strategic growth plans

o   The BK Acquisition, coupled with transfer of operatorship of the Bruce, Keith and Rhum fields to Serica UK, should enable Serica to unlock increased value from the BK Assets

o   No additional resources will be required. Existing infrastructure and expanded team already being put into place as part of the BKR Transaction

o   The BK Acquisition will further increase Serica's scale and profile, improve its ability to attract further growth funding and investment opportunities for both organic growth and further acquisitions

Mitch Flegg, Chief Executive of Serica Energy, commented:

“We are delighted to have reached agreement with Total E&P to increase our stakes in the Bruce and Keith fields to 78.25% and 59.83% respectively. This further acquisition, following on from the BKR Transaction and coupled with the transfer of operatorship of the Bruce, Keith and Rhum fields to Serica UK, places us in a strong position to unlock increased value from the assets and benefit from economy of scale. This is exactly in line with the Government's intention to maximise the economic recovery of assets in the North Sea, and we believe that both of these acquisitions will benefit our shareholders, partners and employees.”

“This acquisition is a logical next step for us. It provides us with further scale, builds on our asset base and moves us closer towards our objective of being a highly efficient, profitable mid-tier operator focused on the UK North Sea, where we believe there is plenty of potential for further growth. For our shareholders we are building considerable additional value whilst protecting our balance sheet through another innovatively structured deal that benefits both parties."

“Completion of the transaction with Total E&P is anticipated to take place immediately after completion of the BKR Transaction with BP which requires certain regulatory consents, including a Licence from the US Office of Foreign Assets Control (“OFAC”) relating to ongoing operations on the Rhum field.  We and BP are actively engaged in advance stage discussions with both UK and US governments to provide the basis on which the necessary Licence consents can be obtained and thereby enable continuing operations on the Rhum field after expiry of the existing OFAC Licence.  As the BKR Assets make a significant and important contribution to UK offshore gas production we are seeking to ensure that an appropriate Licence will be granted and are working closely with all parties to this end.” 

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Serica EnergyAcquisitionTotalTotal E&PNorth SeaBruce FieldKeith FieldUnited Kingdom UK

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