Serica Energy today announced its financial results for the six months ended 30 June 2021.

Mitch Flegg, Serica's CEO stated:
“In the current environment Serica’s focus on gas production and investment in new projects is expected to generate very significant returns for shareholders and help support further investment.

In the first half of the year, we continued to pursue our strategy of capital investment in our assets. This has allowed us to recomplete the Rhum R3 well and bring it into production in August and to drill the Columbus development well which is now ready to produce. Serica’s production is over 80% gas and we are delighted that we are already seeing the benefits of our investment strategy in the second half through increasing production levels at a time of record high wholesale gas prices.

We expect first production from Columbus in Q4 this year and then Serica’s share of receipts under the BKR Net Cash Flow Sharing mechanism increases from 60% to 100% on 1 January 2022. Later in 2022 we intend to drill the North Eigg well which, if successful, will enhance gas reserves in the BKR area and potentially extend the life of Bruce and related infrastructure.

Serica is currently responsible for around 5% of UK gas production and our role in enhancing and extending the life of that production and helping to maintain forward supply during a period of energy transition, is essential to meet UK energy needs.”

First Half Performance

• Gross profit of £46.0 million (1H 2020: loss of £19.8 million) and cash flow from operations of £63.8 million (1H 2020: £19.3 million).
• Group 1H average production of 18,900 boe per day net to Serica compared to 21,600 boe per day for 1H 2020 after extended field maintenance shut-ins during H1 following last year’s COVID-19 related deferrals.
• Rhum R3 well workover completed and commenced production in late August 2021. Columbus production well drilled and tied into the export system ready for first production in Q4.
• Capital investment of £43.0 million (2020: £26.6 million) all funded from internal cash resources.

Financial Highlights

• Closing cash balance up at £92.0 million (31 December 2020: £89.3 million) despite significant capex spend.
• Average realised sales price of US$43.30 per boe (1H 2020: US$15.20 per boe) before net hedging gains/losses.
• Average operating cost of US$16.05 per boe for 1H 2021 (1H 2020: US$15.12 per boe) reflected lower production in the period - underlying costs reduced by 10% during 1H 2021 (2020: 10%).
• Operating profit of £5.5 million (1H 2020: loss of £12.7 million) after £30.3 million of unrealised hedging provisions.
• Profit before tax of £2.2 million (1H 2020: £20.4 million). Profit after tax of £1.3 million (1H 2020: £12.4 million) after non-cash deferred tax provision of £0.9 million (1H 2020: £8.0 million).

Operational

• 10% reduction in operating costs during 1H 2021 builds on similar reduction already achieved during 2020. This translates into a reduction in operating costs per boe as new production volumes delivered from R3 and Columbus during 2H 2021.
• The Rhum R3 well workover adds more than 4,000 boe/d to Serica’s share of Rhum gas production capacity.
• Columbus well drilled to measured depth of 17,600ft and flowed predominantly gas at over 8,000 boe/d gross (Serica 50%)

Environmental, Social and Governance

• Additional Rhum R3 production utilises existing facilities reducing BKR emissions intensity and operating cost per boe.
• Single Columbus well also uses existing offtake infrastructure, limiting additional emissions and cost per boe.
• Such investment boosts domestic low emission gas supplies and reduces need for higher emission imports thus supporting the UK’s energy transition.
• Andy Bell has joined the Board as CFO on 3 September and today we announce the appointment of Richard Rose as a Non-Executive Director.

KeyFacts Energy: Serica Energy UK country profile