Energy announces results for Y/E 31 December 2016
Thursday, Apr 06, 2017
Serica Energy has announced its financial results for the year ended 31 December 2016.

Results Highlights

Financial

  • Gross profit for 2016 of US$6.6 million (2015: US$16.1 million) notwithstanding a six-month production shut-in earlier in the year.
  • Strong Erskine well performance, improved off-take facility uptime, allied to rising commodity prices and lower opex per barrel costs, delivered a particularly strong Q4 2016.
  • Group profit after tax of US$10.8 million (2015: US$6.5 million) boosted by deferred tax credits arising from tax losses brought forward. 
  • Cash balances of US$16.6 million at 31 December 2016, increasing to US$25.7 million by end March 2017 before receipt of estimated March net sales income of US$3.5 million.
  • No borrowings or material commitments at year-end, minimal corporate overheads and with cash balances growing significantly through Q1 2017.

Operational

Erskine Field (Serica 18%)

The Erskine field has performed well since production was restarted on 29 August 2016 and is benefitting from more favourable commodity prices.  Since restart:

  • Production averaged over 3,150 boe per day net to Serica to end March 2017.
  • Production efficiencies averaging as much as 90% in recent months.
  • Serica's operating and transportation costs averaging below US$14 per boe. 
  • Cash generation from production continues to benefit from significant tax efficiencies.
  • An updated independent audit by Netherland, Sewell & Associates ("NSAI") of the Erskine field confirmed Serica's share of estimated proven plus probable reserves at 3.8 million boe as of 1 January 2017.

Columbus Field (Serica 50%)

Serica, as field operator, is pushing forward to realising Columbus development potential:

  • Two potential development options are under review in collaboration with nearby operators:
    • An extended reach development well drilled from the Lomond platform delivering capital cost efficiencies and easier maintenance access; or, 
    • A subsea well completion tied into a proposed third-party pipeline to the Shearwater platform.
  • Serica is working towards selection of the best alternative and a full Field Development Plan by the end of 2017 with a view to commencing development work in 2018.  First gas is targeted for late 2019.
  • Columbus contingent resources net to Serica estimated by NSAI at 6.2 mmboe.

Exploration

Serica's exploration portfolio offers material upside for minimal near-term expenditure:

  • North Sea:  Well planning for the Rowallan prospect advanced.  Site survey and long-lead items approved by partners for 2017 with drilling planned for 2018. Serica fully carried on costs to completion of first well.  Serica estimates potential net P50 resources at 20 mmboe.
  • Ireland, Rockall Basin:  Two-year extension on licence 4/13 secured in order to bring in a partner to join in drilling an exploration well.
  • Ireland, Slyne Basin:  Equity position increased from 50% to 100% on licence 01/06.  Two-year extension granted to enable further evaluation of the potential for commercial oil first identified by the 2009 Bandon oil discovery.
  • Namibia:  Luderitz licence 47 renewed and extended to enable review work to continue and partners to be secured.

Outlook for 2017

Serica's strong financial position leaves it well placed to add further value for shareholders:

  • Strong start to the year with Serica's net production averaging over 3,200 boe in Q1 at average prices of $54 per barrel for oil and 48 pence per therm for gas.
  • Production guidance for the year reiterated at 2,500-3,000 boe per day net to Serica.
  • Oil hedges at US$50/bbl (Q2 2017) and gas hedges at 40p per therm (Q2 2017)/38p per therm (Q3 2017) covering approximately 50% of forecast production over those periods.
  • Working with partners to extract full value from producing and development assets.
  • Further growth opportunities are available and under consideration.
Tony Craven Walker, Serica's Chairman commented:

'Serica has continued to strengthen its financial position after a particularly strong fourth quarter. 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.

We are looking to build on this strong financial base.  Our immediate focus is to broaden and expand our producing asset base through progressing the Columbus field to development and by acquiring additional production where we believe Serica can 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.

On the exploration front, we are delighted that operations have now commenced in preparation for drilling a well on the Rowallan prospect on which we have a 15% carried interest.  A successful outcome of this well would have a material impact on Serica.  In Ireland and Namibia we have received licence extensions from the authorities and continue to progress our holdings where we see real future potential.'

For more information, please visit: http://www.serica-energy.com

Featured Profile

Featured Videos

Featured Case Studies