SERICA Energy chief executive Mitch Flegg has underlined the company’s appetite for North Sea acquisitions as it moves to complete a deal that will make it a significant producer in the area.
London-based Serica agreed in November to acquire mature North Sea assets East of Shetland from BP for up to around £52m in what it said was a transformational move.
The deal will leave allow Serica to increase the number of its producing fields from one to four.
Mr Flegg reckons the enlarged portfolio will provide Serica with a platform which could support significant growth in the North Sea.
Serica plans to recruit around 30 people to help run a new operations centre in Aberdeen.
It is already running the rule over further acquisition targets.
“We are looking for more production but we are not ruling out any serious opportunities,” said Mr Flegg, noting Serica would consider buying into development projects and exploration acreage.
The interest in expansion reflects directors’ conviction that the downturn triggered by the sharp fall in the oil price since 2014 has created opportunities for independents such as Serica.
Mr Flegg thinks Serica can capitalise on waning interest among majors in what they class as late life assets.
The acquisition of stakes in the Bruce, Keith and Rhum fields is not due to complete until the third quarter. However, Serica expects to be able to extend the lives of the assets and boost returns from them.
“We can extend their lives just by not being BP,” said Mr Flegg.
He noted Serica could invest in work such as enhancing production infrastructure and reservoir stimulation that would not generate the kind of returns needed to interest a giant.
Sector watchers reckon transfers of ownership could pave the way for increased investment in the North Sea.
Mr Flegg noted BP has focused its North Sea investment on big new developments in areas such as West of Shetland.
BP yesterday provided a huge boost for the North Sea industry by announcing plans to develop the Alligin field West of Shetland and the Vorlich find east of Aberdeen, which will involve £420 million investment.
Serica also expects to be active on the exploration front, although drilling in the North Sea has fallen to record lows.
“We think it’s he time to get back into exploration,” said Mr Flegg. He added: “The big thing is costs are down dramatically from where they were a few years ago.”
Serica has an interest in the ENI-operated Rowallan exploration well, which is due to be drilled in the second half. This will be Serica’s first exploration well since 2014.
It grew operating profits to $14.1m (£10m) in 2017, from $3.4m, helped by the increase in the crude price since late 2016.
Serica’s share of output from the Erskine field totalled 722,000 barrels oil equivalent, against 597,000 boe last time. The company acquired its interest in Erskine from BP in 2015.
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