Serica Energy returns to gross margin in the first half

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Serica Energy on Tuesday reported first half gross profit of £ 46million from a year-over-year loss of £ 19.8million, with cash flow from operations improving to 63.8million pounds sterling against 19.3 million pounds sterling.

The AIM-listed company said the group’s average production for the six-month period ended June 30 was 18,900 barrels of oil equivalent per day net for Serica, compared to 21,600 barrels per day in the first half of 2020, after extended outages for field maintenance in the period following postponements related to Covid-19 last year.

It completed the reconditioning of the Rhum R3 well during the period, starting production in late August, while the Columbus production well was drilled and connected to the export system, ready for first production in the fourth quarter.

A capital investment of £ 43million was made during the semester, up from £ 26.6million a year ago, all funded from internal cash resources.

Serica announced a closing cash balance of £ 92million on June 30, up from £ 89.3million at the end of December, despite its “significant” capital expenditure.

Its average realized selling price was $ 43.30 per barrel of oil equivalent over the period, compared to $ 15.20 per barrel in the first half of 2020, before net hedging adjustments.

The company’s average operating cost was $ 16.05 per barrel of oil equivalent, up slightly from $ 15.12 year-over-year, reflecting its declining production, with underlying costs down 10% year over year.

Operating profit was £ 5.5million, compared to a loss of £ 12.7million the previous year, after £ 30.3million of unrealized hedge provisions.

Serica posted pre-tax profit of £ 2.2million, up from £ 20.4million in the first half of 2020, while its after-tax profit fell from £ 12.4million to £ 1.3million pounds sterling, after a non-cash deferred tax provision of 0.9 million pounds sterling. , up from £ 8million a year earlier.

“In the current environment, Serica’s focus on gas production and investing in new projects is expected to generate very significant returns for shareholders and help support new investments,” said CEO Mitch Flegg .

“In the first half of the year, we continued our strategy of capital investment in our assets.

“This allowed us to complete the Rhum R3 well and put it into production in August and to drill the Columbus development well which is now ready to produce. “

Flegg said Serica’s production exceeded 80% gas, with the company “delighted” to see the benefits of its investment strategy already in the second half of the year, increasing production levels at a time of record high wholesale prices. gas.

“We anticipate a first production of Columbus in the fourth quarter of this year, and then Serica’s revenue share under the BKR free cash flow sharing mechanism will increase from 60% to 100% on January 1.”

Later in 2022, Mitch Flegg said the company intended to drill the North Eigg well which, if successful, would increase gas reserves in the BKR area and potentially extend the life of Bruce and others. related infrastructure.

“Serica is currently responsible for approximately 5% of UK gas production and our role in improving and extending the life of that production and in sustaining the supply over time for a period of time. energy transition is essential to meet the UK’s energy needs. “

At 1524 BST, shares of Serica Energy rose 1.26% to 217.71p.


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