Acquisitions make for ‘staggering’ Serica transformation

Serica Energy CEO Mitch Flegg.
Serica Energy CEO Mitch Flegg.

Acquisitions for Serica Energy during 2018 have made it “one of the largest independent operators in the North Sea”, according to the firm’s boss.

Chief executive Mitch Flegg described the oil and gas company’s transformation last year as “quite staggering”.

His comments came as London-listed Serica celebrated surging profits, which helped its share price rocket nearly 23% yesterday.

Mr Flegg said Serica had moved into “fifth gear” in a “pivotal” year which saw average net production top 30,000 barrels of oil equivalent (boe) per day.

“I don’t like when people talk about transformational change but it really does apply to us in terms of last year,” he said, adding: “We were a completely different company pre-2018.

“Completing the Bruce, Keith and Rhum (BKR) deal with BP last year has totally transformed where we are. In the previous year we had 2,000 boe per day of production and last year it was 25,000.”

Serica’s reserves at the close of 2017 totalled 3.1 million boe. By the end of 2018, the figure had soared to more than 68.8 million.

Mr Flegg said Serica had also increased its cash position from £34 million at the start of last year to £55m as 2018 drew to a close.

A year ago the firm employed only a handful of staff, but deals with BP, Total, BHP and Marubeni saw its headcount swell to 140 by the end of 2018.

Serica wants to do “more deals” in the North Sea during 2019, he said, adding this would likely see the payroll grow even more.

The firm’s new office at Hill of Rubislaw in Aberdeen, together with its 60-strong workforce, has the “optimal number of staff for the assets we have” but further grpwth could create more Granite City jobs, he said.

He added: “Serica wants to use its operator capability to expand further in the North Sea. When we get to that stage, I’m sure it will necessitate a greater staff requirement.”

Serica completed its BKR stake acquisition from BP late last year, while it also snapped up interests in Bruce and Keith from Total, BHP Billiton and Marubeni.

Serica netted £45.4 million in pre-tax profits during 2018, up from £8.3m the year before.

The London-headquartered firm also reported a £10.5m surge in sales revenue, to £35m, on the back of increased production and higher commodity prices.

Chief executive Mitch Flegg pinpointed the Bruce, Keith and Rhum (BKR) North Sea acquisition from BP as the overriding factor in the strong performance, but stressed that all parts of Serica’s portfolio had “played their part”.

He said: “2018 has been a year of incredible achievement. We intend 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.”

He added: “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 this means that the search for new opportunities is currently focused there.”

“We will continue to look for assets – preferably operated rather than non-operated – where Serica can add value.”

Serica aims to start gas production from the Columbus field in 2021, with output reaching 7,800 barrels of oil equivalent per day at peak.

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