Serica Energy confident despite production challenges

Serica Energy said in an update on Monday that its pro-forma net production in 2023 averaged 40,121 barrels of oil equivalent per day, including production from the fields owned by Tailwind since 1 January 2023.

The AIM-traded firm said its gas-to-liquids production split in 2023 was 56-44, with notable contributions from Bruce at 6,487 barrels of oil equivalent per day, Rhum with 12,490 daily equivalent barrels, and Bittern with 4,012 daily barrels.

However, production in the second half was lower due to planned shutdowns, safety-related issues, and facility interruptions.

Despite the challenges, production in the fourth quarter rebounded, averaging 45,748 barrels of oil equivalent per day.

Looking ahead to 2024, Serica set production guidance in the range of 41,000 to 48,000 equivalent daily barrels net, representing an increase compared to 2023.

However, Erskine had been temporarily shut down since 25 January due to a compressor issue, and was expected to restart in March.

Serica said it anticipated a more stable operational year in 2024, with no extended shutdown planned for Bruce, only a one-week outage coinciding with third-party infrastructure shutdown.

There was a scheduled six-week shutdown for the Triton floating production, storage and offloading (FPSO) vessel during the summer, accompanied by a 'walk to work' campaign to enhance facility performance.

The company also announced ambitious organic investment plans for 2024, extending into 2025 and 2026.

That would include drilling four wells in the Triton area and conducting well work on the Bruce and Keith fields.

The B1z sidetrack was expected to start in March, with drilling continuing into 2025, and production from the wells expected to follow shortly after drilling completion.

Serica said it was committed to managing unit operating costs, aiming to keep them below $20 per barrel of oil equivalent in 2024, despite inflationary pressures in the UK North Sea sector.

Looking at its balance sheet, Serica reported year-end cash and cash equivalents of £291m and borrowings of £210m, taking into account tax payments and dividends made in the second half of 2023.

The company also noted the inclusion of £28m in cash security temporarily lodged with a third party for decommissioning obligations, pending the issuance of letters of credit.

In terms of organisational changes, Martin Copeland had taken over as Serica's chief financial officer (CFO) and was appointed to the board, effective 5 February.

Copeland succeeded Andy Bell, who resigned from the board but would continue to assist Serica during the transition and preparation of the 2023 annual report.

“Pro-forma production in 2023 after including volumes from the Tailwind assets for the full year was just over 40,000 barrels of oil equivalent per day net to Serica,” said chief executive officer Mitch Flegg.

“I am pleased that we met our operating cost target with pro-forma operating costs of around $19 per barrel of oil equivalent despite the significant inflation being experienced by the offshore sector generally.

“We are aiming to keep unit operating costs below $20 per barrel during 2024.”

Flegg said Serica was “extremely well placed” to continue its track record of replacing reserves and increasing production.

“This platform has been achieved while maintaining a very strong balance sheet, which is both the result and enabler of our strategy to invest and grow organically and through disciplined mergers and acquisitions.”

At 1136 GMT, shares in Serica Energy were down 8.43% at 182.65p.

Reporting by Josh White for Sharecast.com.