Serica Energy gets two UK blocks in out-of-round award

Serica Energy announced on Wednesday that its wholly-owned subsidiary, Serica Energy UK, has received an out-of-round award of a 100% interest in the UK petroleum licence P2501, blocks 3/24c and 3/29c.

The AIM-traded firm said the blocks are located in the area adjacent to the Serica-operated Rhum field.

It said the award contained the HPHT North Eigg and South Eigg prospects.

The primary prospect is North Eigg, which the company said was estimated to contain 360 billion cubic feet at P50, and potentially more than one trillion cubic feet at P10 of recoverable gas.

It said the North Eigg prospect was interpreted to share many geological similarities with the Rhum field.

The prospect was “clearly defined” on 3D seismic, and formed a structural trap sealed against the East Shetland bounding fault.

Serica said it had committed to drilling an exploration well within three years, and in the event of a commercial discovery said it intended to develop the field via a subsea tie-back to the Serica-operated and 98%-owned Bruce facilities.

As well as providing Serica with potentially significant additional reserves, a tie-back to the Bruce platform said it would reduce unit operating costs and extend the economic life of the strategic North Sea infrastructure.

“We are delighted to have received this out-of-round award,” said chief executive officer Mitch Flegg.

“Since we completed our acquisition of the Bruce, Keith and Rhum (BKR) assets just over a year ago, our strategy has been to optimise economic returns through a hub strategy that includes operating efficiencies, investment and securing new third-party business in the BKR catchment area.

“Not only is this award an important step in our BKR hub strategy, it reinforces exploration as a material part of Serica's upstream business.”

Flegg said they were exploration prospects, and so there was no guarantee of success.

“In the event of a commercial discovery, the optimal development option will be a tie-back to the Bruce platform, which we would seek to fast track.

“In the meantime, our other efforts to enhance the value of the BKR assets will continue unabated.

“These include planning for the rig intervention in 2020 designed to bring the Rhum-3 well into production for the first time and efforts to bring new third-party business to the Bruce facilities.”

At 0911 GMT, shares in Serica Energy were up 2.35% at 124.5p.