Serica Energy plc ("Serica" or "the Company")
Results for the year ended 31 December 2024
London, 1 April 2025 - Serica Energy plc (AIM: SQZ), a British independent upstream oil and gas company with operations in the UK North Sea, today announces its audited financial results for the year ended 31 December 2024. The results are included <mark style="background-color:yellow">below</mark> and copies are available at www.serica-energy.com and www.sedar.com.
Chris CoxSericas CEOstated
"The highly positive results of the drilling campaign at Triton are not yet being reflected in our production and cashflow due to ongoing issues at the Triton FPSO. Our frustration is exacerbated by the fact that the Triton area alone could be delivering up to 30,000 boepd net to Serica with the addition of the wells already drilled.
We are confident, after detailed discussions with the Operator, Dana, of the work required to fix the issues, and we are pleased that the joint venture has agreed a plan to take advantage of the current downtime to bring forward the maintenance work scope originally scheduled for July. This removes the need for a summer maintenance shutdown, which combined with the activities undertaken should significantly increase uptime going forward.
I have previously stated my confidence in the excellence of the Serica subsurface team and the potential of the rocks across our portfolio, and we have increasing clarity on the work needed to convert that potential into shareholder value. Ongoing analysis has seen a small decrease in our 2P reserves but materially increased our 2C resources - and there is more to come as work continues. This indicates the strength of our organic pipeline, with a clear route to converting resources to reserves - the Kyle redevelopment looks particularly attractive, and multiple infill drilling opportunities around the Bruce Hub have been identified.
With the above in mind, we have elected to implement a prudent rebalancing of our capital allocation approach, giving us increased flexibility over the medium-term to allocate capital to the areas where it will deliver best value for shareholders. This adjustment will allow us to invest in the exciting drilling and development programmes in our portfolio and be opportunistic in accretive M&A, all while retaining our highly competitive shareholder distributions."
Results summary ($ million unless stated)
2024
2023
Average realised Brent oil price ($/bbl)
75
67
Average realised gas price (pence per therm)
76
94
Production (boepd)1
34600
40100
Revenue1
727
917
Operating costs
330
273
EBITDAX
379
475
Cash Tax paid
153
348
Adjusted CFFO less tax
403
250
Capital expenditure2
260
97
Free cash flow
(1)
16
Cash
148
335
Total debt
219
271
Adjusted Net (debt) / cash3
(83)
99
Final dividend declared (pence per share)
10
14
Attributable shareholder returns4
114
112
1 2023 figures are pro forma following the completion of Tailwind acquisition on 23 March 2023
2 Includes pre-FID expenditure on E&E assets
3 Net of unamortised fees
See Reconciliation of non-IFRS measures
4 Attributable shareholder returns reflects Interim and Final Dividends in respect of the relevant year plus quantum of share buybacks
Highlights
• Working to deliver more reliable and predictable production
• Production of 34,600 boepd in 2024 (2023 pro forma: 40,100 boepd), of which 64% was gas, impacted by unscheduled downtime at the Triton FPSO
• Production of c.27,600 boepd in Q1 2025, at a reduced level due to the shutdown of the Triton FPSO in February and March
• Following discussions with Dana Petroleum, the operator, the Triton joint venture partners have decided to bring forward the summer maintenance period, integrating it into the current work programme
This will deliver increased uptime for the remainder of the year versus previous expectations
Production from Triton is now expected to resume in June, with no further planned shutdowns in 2025
The availability of the second compressor upon resumption will also mitigate the cause of instability that impacted 2024
• Positive subsurface results set to boost production
• With our ongoing drilling programme, Serica was one of the most active operators of development drilling in the UK North Sea last year and remains so in 2025
• Initial results from this drilling activity have been encouraging, and the Triton FPSO produced over 25,000 boepd net to Serica on 23 January 2025, the day prior to production halting in the aftermath of Storm Éowyn, boosted by production from the first two wells in the five well Triton drilling campaign, Bittern B6 and Gannet GE05
• Drilling on the subsequent two wells, the W7Z well on the Guillemot North West field (Serica: 10%) and the EV02 well on the Evelyn field (Serica: 100%), is now complete, with both wells showing encouraging results
W7Z is set to be hooked up for production shortly after the restart of production, with EV02 to then follow
• The COSL Innovator rig has now relocated and drilling has begun on the BE01 well on the Belinda field (Serica 100%), the final well of the campaign, with first production expected in early 2026
• Material increase in 2C resources
• 2P reserves of 117.5 mmboe as at end-2024 (140 mmboe at end-2023), broadly evenly split between oil (55.1 mmboe) and gas (62.4 mmboe), following production of 12 mmboe in 2024
• Rigorous subsurface reassessment of the portfolio, focused on identifying deliverable opportunities, has resulted in a material increase in 2C resources to 88.7 mmboe at end-2024 (30.3 mmboe at end-2023), with the potential to convert significant resources into reserves in the medium-term
• Work is continuing across the portfolio to high-grade the identified opportunities, with capital allocation to focus on those projects that can deliver maximum value to shareholders
• Profitable and cash generative despite active investment programme
• Profit before tax of $160 million (2023: $380 million) with reduction largely reflecting lower volumes sold and slightly reduced realised pricing largely driven by lower realised gas prices and increased gas mix (2024 61% gas as compared to 2023 pro forma 51%)
• Profit after tax of $92 million (2023 $128 million) reflecting a lower P&L tax rate benefitting from the combined impact of loss pool and active capital investment programme
• Adjusted CFFO less tax increased on the prior year to $403 million in 2024 (2023: $250 million), as a result of a significantly lower current tax charge in 2024 due to group relief effects resulting from the Q4 Triton performance
• Cash tax paid in 2024 of $153 million (2023: $348 million)
Group relief in 2024 led to an overpayment of cash tax under the Instalment Payment Regulations. This will result in a $71 million cash tax rebate in 2025
• No cash tax payment was made in the January 2025 instalment, and Serica expects significantly reduced cash tax payments in 2025
• Robust balance sheet and continued tax losses shelter supports investment in growth and returns
• Peer leading Balance Sheet strength with year-end leverage (Adjusted Net Debt to EBITDAX) of 0.2x (2023: Net Cash)
• No near-term expenditure on decommissioning activities, with year-end decommissioning provision of $146 million maintaining Sericas position as having the lowest decommissioning liability per 2P boe compared to all our UK and wider North Sea peers5
• As at 31 December 2024, Serica retained over $1 billion of recognised ring fence tax losses resulting in a year end Deferred Tax Asset of $577 million
upon completion of the Parkmead (E&P) Limited (Parkmead) acquisition Group tax losses will be increased by c.25%
• Cash of $141 million as at latest practicable date of 27 March 2025 (31 December 2024: $148 million), with borrowings of $219 million, essentially flat Net Debt from year end notwithstanding the continued capex programme and lack of Triton production in February and March
• Final dividend declared today of 10 pence per share (2023: 14 pence per share) subject to approval at Sericas 2025 AGM
The final dividend is payable on 25 July 2025 to shareholders registered on 27 June 2025, with an ex-dividend date of 26 June 2025
• Final dividend equates to an estimated $50 million6, bringing total shareholder returns in respect of 2024 to $114 million (including interim dividend of $45 million and $19 million of share buybacks), consistent with the comparable figure for 2023 of $112 million
The Company has elected to adjust the final dividend as part of a prudent rebalancing of the capital allocation mix
This rebalancing enhances flexibility to allocate capital to those areas where it will deliver best value for shareholders, combining a highly competitive level of shareholder returns with investment in exciting growth opportunities and retaining a resilient financial frame
Serica additionally retains capacity within its shareholder authorities to carry out further share buybacks as part of its capital allocation strategy and will look to renew these authorities at its 2025 AGM
• Focused and disciplined value accretive M&A strategy
• Acquisition of Parkmead announced in December, providing optionality regarding future projects and bringing with it carried forward tax loss balances. The deal is moving towards completion, with NSTA consent now received
• The Company continues to be very active in screening cash-generative and value accretive M&A opportunities in both the UK North Sea and other geographies. Serica will remain disciplined and will only conclude transactions with a demonstrable investment case and potential to deliver material value to shareholders
Outlook and guidance
• Following operational issues at Triton in Q1, production guidance for 2025 has been amended to 33,000-37,000 boepd
With maintenance work at the Triton FPSO set to complete in June, and no summer shutdown to then follow, portfolio production in H2 is forecast to be materially ahead of the full-year 2025 guidance range
• Capital expenditure and opex guidance unchanged, at $220-250 million and c.$330 million respectively
• Poised for material cash flows, supporting Sericas strategy and track record of delivering direct returns of capital to investors through a mixture of a material dividend and, selectively, share buy backs
• Work is ongoing regarding a potential move from the AIM to the Main Market of the LSE in 2025
5Serica defines its peers as listed independent E&P companies with material asset positions in the UK, Norway and Denmark
6 Approximated based on 10p per share and TVR ex Treasury shares as of 7 March and US$:GBP FX rate of 1.29
Regulatory
This announcement is inside information for the purposes of Article 7 of Regulation 596/2014.
The technical information contained in the announcement has been reviewed and approved by Fergus Jenkins, VP Technical at Serica Energy plc. Mr. Jenkins (MEng in Petroleum Engineering from Heriot-Watt University, Edinburgh) is a Chartered Engineer with over 25 years of experience in oil & gas exploration, development and production and is a member of the Institute of Materials, Minerals and Mining (IOM3) and the Society of Petroleum Engineers (SPE).
Enquiries
Serica Energy plc
+44 (0)20 7487 7300
Martin Copeland (CFO) / Andrew Benbow (Group Investor Relations Manager)
Peel Hunt (Nomad & Joint Broker)
+44 (0)20 7418 8900
Richard Crichton / David McKeown / Emily Bhasin
Jefferies (Joint Broker)
+44 (0)20 7029 8000
Sam Barnett / Will Soutar
Vigo Consulting (PR Advisor)
+44 (0)20 7390 0230
Patrick dAncona / Finlay Thomson
serica@vigoconsulting.com
Serica will host a live presentation on the Investor Meet Company platform today at 0900 BST. The presentation is open to all existing and potential shareholders. Questions can be submitted at any time during the live presentation. Investors can sign up to Investor Meet Company for free and add to meet Serica Energy plc via
https//www.investormeetcompany.com/serica-energy-plc/register-investor.
CHAIRS STATEMENT
I am pleased to introduce my second set of results as the Chair of Serica Energy. 2024 was a year in which we accomplished a great deal, but it was not without its challenges both internally and externally. It was a year in which we delivered a tremendously successful drilling programme, but we experienced unplanned outages that hit our production, and of course meant that our revenues did not benefit as they should have done. It was also a year in which uncertainty about government policies dominated the political landscape for operators in the UK North Sea, something on which there have been recent tentative signs of changing for the better. During the year, we also saw a significant change in the management team, and I am confident that we have the right team to drive the Company forward and thrive in the face of current challenges.
UK political challenges
The adverse impact of multiple increases and extensions to the Energy Profits Levy (EPL) in the last few years can be seen in the decline of production and activity in the UK North Sea. During 2024 the new Labour Government was formed, promising a further increase in the tax burden for UK oil and gas producers further eroding investor confidence in the long-term prospects of the basin. Although a small increase in the overall tax rate to 78% did materialise, the government listened to the industrys representations and preserved 100% first-year tax allowances for capital investment. This was essential with the alternative being a rapid curtailment of a valuable national resource.
The energy debate is sometimes posited as a choice between domestically produced oil and gas and renewable sources. The fact is that the UK needs all of the above. Homegrown oil and gas supports quality jobs in our communities, enhances the UKs security, enables an equitable energy transition, and generates government tax revenues. Serica alone has paid over £500 million of tax during the last five years.
Between now and achieving net zero in 2050, the Climate Change Committees energy transition pathway estimates that the UK will need 13-15 billion barrels equivalent of oil and gas, during which period the UK is projected to import more than half its essential oil and gas requirements. Although production from the UK North Sea is in decline, the steepness of that decline is in part due to government policies over recent years. Of the barrels that the UK needs, only an estimated four billion are set to be produced in the North Sea, worth an estimated value of £200 billion to the UK economy. This figure could rise to seven billion barrels with supportive fiscal and regulatory frameworks in place, generating a further estimated £150 billion for the UK. Oil and gas in the UK North Sea remains a very valuable national resource and it is common sense to prioritise its exploitation over imports.
At the time of writing, the UK Government has recently launched two formal consultations on UK North Sea licensing and taxation. In addition, we await the outcome of the consultation on guidance for Environmental Impact Assessments for new projects. The combined impact of these three processes will be pivotal in determining the future of the North Sea and we hope that the government pursues policies that are consistent with, rather than effectively negate, the decision to retain full first-year tax allowances for investment.
I am proud of the role Serica is playing in the countrys energy debate. We have been and will continue to be at the forefront of the industry in speaking up in favour of homegrown oil and gas. A Town Called Bruce, the film we helped create with the GMB, illustrated the positive impact that we and our peers have on jobs and communities throughout the UK.