Serica Energy upbeat on 2022 progress to date

Upstream oil and gas company Serica Energy said in an update on Wednesday that production performance in 2022 was benefitting from its “significant investment” in the Rhum R3 well reintervention, the Columbus development project and now the LWIV campaign.

The AIM-traded firm said its average net production in July averaged more than 29,150 barrels of oil equivalent per day, with year-to-date average net production of 26,832 barrels per day.

It said over 85% of its net production was gas.

The board left its 2022 full-year production guidance unchanged at between 26,000 and 30,000 barrels of oil equivalent per day, including the impact of the planned summer shutdown season, when key maintenance would be performed on producing assets.

Serica said its first-ever light well intervention vessel (LWIV) campaign had concluded without any safety incidents or environmental issues.

The campaign was part of its ongoing programme to add value and extend the life of its Bruce facilities.

It said the initial well, Bruce M1, was re-entered for the first time since 1998.

After a successful scale removal and water shutoff, a “significant” reperforation and new perforation campaign was executed, and the well returned to production.

Production rates from the well had increased from around 400 barrels of oil equivalent per day before intervention, to more than 1,800 barrels per day in July.

A similar programme was followed on the second well, Bruce M4, and production rates there had increased from around 450 barrels per day to over 2,400 barrels per day.

“The results from these two wells are at the upper end of the range of expectations and it is expected that there will be an uplift to our independently assessed reserves,” the board said in its statement.

“This programme has increased confidence that further uplift can be achieved from future well interventions.

“Capital investment in the Bruce and Keith fields qualifies for investment relief under the recently-announced Energy Profits Levy.”

Serica said plans to perform similar interventions on other Bruce and Keith wells, both subsea and from the platform, were now being accelerated.

At North Eigg, meanwhile, operations had started on the “high-impact and potentially transformational” exploration well.

The gas prospect is located close to Serica's operated fields and infrastructure, and was estimated to contain 60 million barrels of oil equivalent, and potentially more than 236 million barrels of recoverable resources.

It shared a number of geological similarities with the adjacent Rhum field, the board said, and was “clearly defined” on 3D seismic, which was interpreted as a structural trap sealed against the East Shetland-bounding fault.

The well was being drilled by the Transocean Paul B. Loyd Jr. harsh environment semi-submersible drilling rig, with results expected in October.

If successful, the development scheme could be via a tie-back to the nearby Serica-operated and 98%-owned Bruce facilities.

Tying back to Bruce would minimise development emissions, reduce overall carbon intensity of the Bruce facilities and extend infrastructure life.

Finally, at Columbus, Serica said that earlier in July it reached the milestone of having produced a gross one million barrels of oil equivalent.

Although production rates were lower than anticipated, the field was benefiting from strong commodity prices.

“I am delighted with the significant progress that Serica has continued to make during 2022,” said chief executive officer Mitch Flegg.

“The impact of the substantial investment programmes undertaken in the last three years has seen increased production levels providing responsibly sourced gas to the UK domestic market, protecting security of supply, and reducing the UK's reliance on imports as part of the transition to a lower carbon future.

“Commodity prices have been exceptionally strong during the period with a resulting positive impact on income.”

Flegg noted that Serica had no debt, “limited” decommissioning liabilities and growing cash reserves, leaving it “well positioned” to continue to invest in further projects and other opportunities to add shareholder value.

“We have just completed a well intervention campaign on Bruce that has boosted net production by over 3,000 barrels of oil equivalent per day, and provides further evidence of the value in Serica's assets that can be realised through measured and expert operatorship.

“Operations have also commenced on the North Eigg exploration well with potential for transformational results, while we are now accelerating further well intervention work on Bruce and Keith following the success of the recently completed campaign.”

At 1244 BST, shares in Serica Energy were up 3.4% at 350p.

Reporting by Josh White at Sharecat.com.