Serica Energy feeling 'in a strong position' to add value

Small oil producer-explorer Serica Energy said it had enjoyed a strong fourth quarter and with its strong financial position it felt well placed to add further value for shareholders in the year ahead.

For 2016 calendar year, gross profits shrank almost 60% to $6.6m after a six-month production shut-in earlier in the year but post-tax profits were up two thirds to $10.8m thanks to deferred tax credits arising from tax losses brought forward.

But the Erskine well, in which is holds an 18% stake, performed very well in the final three months, with improved off-take facility uptime, allied to rising commodity prices and lower opex per barrel costs.

Year-end cash balances of $16.6m increased to $25.7m by the end of March before receipt of estimated March net sales income of $3.5m.

Serica's net production averaged more than 3,200 barrels of oil equivalent in Q1 at average prices of $54 per barrel for oil and 48p per therm for gas.

Production guidance for the year was reiterated at 2,500-3,000 boe per day net to Serica, which took oil price hedges at $50/bbl for Q2 and gas hedges at 40p per therm, cut to 38p per therm for Q3, covering approximately 50% of forecast production over those periods.

"Following an especially good performance in terms of production rates and efficiencies, lower opex and improved sales prices since the restart of Erskine field production in late August, we enter 2017 with a strong balance sheet, no borrowings, growing cash resources and increasing opportunities to add value from our existing oil and gas resources," said chairman Tony Craven Walker.

He said the AIM company's immediate focus is to broaden and expand its producing asset base through progressing the 50%-owned Columbus field to development and by acquiring additional production where Serica should be able to add value.

"The UK North Sea, where there are strategic benefits, tax efficiencies and opportunities on offer and where we feel we have an edge, remains a prime area of focus."

Drilling on the Rowallan prospect in the North Sea, in which it has a 15% carried interest, is soon to kick off, with a successful outcome potentially having have a "material impact", he added.

Authorities in Ireland and Namibia have recently granted licence extensions to enable further evaluation.