Serica Energy has announced its financial results for the year ended 31 December 2018.

Corporate Highlights

• Acquisitions comprising 98% of the Bruce field, 100% of the Keith field and 50% of the Rhum field completed and operatorship transferred on 30 November 2018
• Net US$28 million receipt at completion with initial consideration more than offset by share of net field cash flows from 1 January 2018 up to completion
• Columbus Field Development Plan ("FDP") approved by the Oil and Gas Authority ("OGA") and Joint Venture Partners
• Net 2P reserves at year end have increased to 68.8 million boe reflecting an increase in Erskine reserves and addition of Columbus reserves

Financial

• Gross profit increased by 30.6% to US$25.2 million (2017: US$19.3 million) reflecting one month of post completion BKR income plus two and a half months of income from Erskine after an extended shut-in to complete a bypass of the condensate export line
• Operating profit of US$9.1 million (2017: US$14.1 million) was impacted by one-off BKR transition costs of US$11.7 million
• Group profit after tax of US$74.7 million (2015: US$17.1 million) showed a 337% increase.  This figure includes a bargain purchase gain of US$52.9 million on the BKR acquisitions calculated in accordance with IFRS 
• Cash balances and term deposits stood at US$91.8 million at 31 March 2019, compared to US$54.9 million at 31 December 2018, a US$36.9 increase during the first three months of 2019

Operational

Bruce, Keith and Rhum Fields (Serica 98%, 100%, 50%)

• Full year production (net to the BKR interests acquired by Serica) for 2018 amounted to over 24,000 boe/d.

Erskine Field (Serica 18%)

• The Erskine field has performed strongly since production was restarted on 24 October 2018 after replacing a section of Lomond to CATS riser condensate export line
• Production has averaged over 3,100 boe per day net to Serica during the five-month period to end March 2019
• An updated independent audit of Erskine field reserves, following the Lomond export facilities upgrade, has increased Serica's share of estimated remaining 2P reserves to 5.7 million boe as at 31 December 2018, an 84% increase over the 3.1 million boe estimated at 31 December 2017

Columbus Development (Serica 50%)

• Serica submitted an FDP to the OGA in June 2018 and was granted development and production consent in October 2018. Development work started as soon as FDP approval was received. First gas is targeted for 2021
• Columbus resources have been re-classified as reserves by independent reserves auditors who ascribe to Serica net 2P reserves of 6.2 million boe within the Columbus development area as of 1 January 2019

Exploration

• The Rowallan exploration well (22/19c-7) was drilled to target the high pressure, high temperature Rowallan Prospect. The well encountered 182 metres of sandstones and shales but did not contain hydrocarbons. Serica was fully carried on all costs associated with this licence and so did not incur any costs in the planning and drilling of the Rowallan exploration well
• The Company was awarded four licences on the UK Continental Shelf in the UK's 30th Offshore Licensing Round

Outlook

• The Company continues to see strong income flows since the turn of the year. Net production from the Bruce, Keith, Rhum and Erskine fields has totalled over 30,000 boe/d in Q1 2019

Other

• Serica announces the appointment of Jefferies as joint broker to the Company with immediate effect. Peel Hunt will continue to act as Nominated Advisor and joint broker to the Company

Commenting on the results, Mitch Flegg, Serica's CEO stated:
"2018 has been a year of incredible achievement. Serica has established itself as one of the leading independent UKCS operating companies and has assembled a talented and motivated operating team. We intend to use these skills to continue to optimise the value of all of our assets. In particular we aim to extend the field life of the BKR assets by concentrating on enhancing recovery and reducing costs through eliminating unnecessary complexity. The multi-disciplinary team is already delivering exceptional results as demonstrated by the continued strong production during the first four months of Serica BKR operatorship.

We also aim to expand the portfolio at all stages - exploration, appraisal, development and production. Our operating expertise is based around the Central and Northern North Sea and (coupled with tax synergies) this means that the search for new opportunities is currently focused on the UKCS. Serica's growth has been supported by our commitment to identify opportunities based on value rather than volume. We will continue to look for assets (preferably operated rather than non-operated), where Serica can add value when the current operator may be unable to do so."

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