Serica Energy plc (AIM: SQZ) today announces its financial results for the six months ended 30 June 2019.

Highlights

• Successful consolidation of Bruce, Keith and Rhum (“BKR”) operations has created a new leading North Sea operator.
• Combined production net to Serica of 31,000 barrels of oil equivalent per day (“boe/d”) compared to approximately 26,000 boe/d for 2018 including BKR volumes for the full year.
• Field operating costs per boe reduced by over 30% compared to previous year - reflects both higher production volumes and a lower cost base.
• Operating profit of £52.5 million (1H 2018: loss of £7.9 million) after non-cash depletion charges of £37.3 million (1H 2018: £0.1 million).
• Mid-year cash and term deposits at £88.2 million – a 105% increase on the year end.
• Very healthy balance sheet with strong cash build, no bank debt and limited decommissioning liabilities.

Financial highlights

• Financial statements now presented in pounds sterling (“£”) following completion of BKR acquisitions in late 2018 which brought substantial increases in sterling-based revenues and costs. 2018 comparative numbers restated from US$ to £.
• Operating cash inflow of £89.8 million (1H 2018: outflow of £5.3 million).
• Operating costs of US$12.30 per boe (£9.50 per boe) compared to full year 2018 costs of over US$18 per boe including BKR costs. Realised average sales price of US$34 per boe (£26.30 per boe) compared to US$45 per boe for full year 2018, including BKR revenues, reflecting lower gas prices in 2019.
• Group profit after tax of £30.0 million (1H 2018: loss of £6.1 million) after a non-cash deferred taxation accounting provision of £21.9 million (1H 2018: credit of £1.8 million).
• Combined cash balances and term deposits rose to £88.2 million at 30 June (31 December 2018: £43.1 million) after repayments of £41.5 million for net cash flow sharing and £2.0 million for the gas prepayment facility.

Outlook

• Steady cash growth, no current bank debt and bulk of liabilities directly relating to future asset cash flows provide strong balance sheet enabling company to pursue further value-accretive opportunities.
• Full year net production expected to be towards upper end of 26,000-30,700 boe/d guidance range.
• Focussed on further improving operational performance.
• Serica’s retained share of cash flows from its BKR interests acquired from BP, Total E&P and BHP increases from 50% for 2019 to 60% for 2020 and 2021 and 100% thereafter.
• The Board continues to assess the appropriate timing to commence dividend payments for shareholders.

Mitch Flegg, Serica's CEO, commenting on the first half, said
“The first half of 2019 has demonstrated the financial benefits of the transactions that we completed at the end of last year, and which have transformed Serica into a leading North Sea operator.

As a major new operator, we have focused on instilling a strong corporate culture committed to safe and environmentally conscious operations whilst also driving increased operating efficiencies. The combination brings benefits to all stakeholders, staff and shareholders alike, and the effects are demonstrated in the strong first half financial performance. Our operating team has been able to significantly increase production levels and significantly reduce operating costs resulting in operating margins of £16.80 per boe for 1H 2019 notwithstanding low first half gas prices. Our balance sheet is now amongst the strongest in our peer group. We anticipate this performance continuing into the second half and beyond.

We continue to focus on further improving our asset performance. Production operations at the Rhum field are subject to the renewal of a license from the US Office of Foreign Assets Control to extend the existing license which expires at the end of October. Serica has met all the obligations required under the existing license and has submitted an application for the renewal of the license. The Bruce, Keith and Rhum fields are maintaining good performance, providing 4.4% of UK’s gas production, with all Bruce wells producing for the first time for some years and Erskine continues to outperform since installing a new section of the Lomond export line.”

Link to Serica Energy UK country profile