Serica’s acquisition of Total’s stakes in two North Sea fields is a major step forward for the company, an analyst has said.
Ashley Kelty, of Cantor Fitzgerald Europe, said the deal was a “very cheap” way of bolstering its position in the basin.
Mr Kelty also said cash generated from new production would help the firm develop the Columbus field.
Serice is buying 42.25% of the French oil major’s stake in the Bruce field and 25% of Keith, boosting its production by about 4,700 barrels of oil per day.
Mr Kelty said the addition took Serica’s total production to around 25,000 barrels, more than the likes of Cairn Energy and Faroe Petroleum.
Serica said its upfront payment of £3.8 million would be covered by its share of the profits from the fields this year.
A further £11.5m will be paid in three instalments.
Mr Kelty said: “This is cash generative from the outset, with no cash to be paid upfront as the working capital adjustment will easily exceed the initial £3.8m.
“With high netbacks from production and a substantial pool of tax losses, Serica will be generating significant free cash in the near term, which will be deployed for the Columbus development, and potentially fund the exciting Rowallan development, assuming exploration success later this year.
“We see the acquisition as a very cheap means to bolster the asset position, with the step-change in production and net revenue increasing value enormously.”
He added: “New chief executive Mitch Flegg has transformed this business in less than a year, and the company is punching well above its weight with innovative deal structures and we believe it sets the hurdle much higher for peers looking to catch up.”