SERICA Energy has decided to quit Ireland to focus on the UK North Sea where the oil and gas firm sees much better prospects.
The company announced its decision the morning after Irish premier Leo Varadkar said the country planned to phase out exploration for oil and gas to help tackle climate change.
However, Serica boss Mitch Flegg insisted the firm’s activities would support the transition to a low carbon energy world, which is seen as essential to slow global warming.
Read more: Oil services tycoon 'frustrated' by climate change activists
He said: “Eighty per cent of our production is gas and gas is part of the solution to my mind, not part of the problem. In the UK we’ve done a fantastic job of switching away from coal and to a certain extent away from oil … gas is part of the energy transition.”
Mr Flegg was speaking after Serica posted a £52 million first half profit that reflected the benefit of the acquisition of stakes in three prominent North Sea fields last year. It lost £8m last time.
He underlined the firm’s appetite for more big deals in the Central and Northern North Sea, off Scotland.
Another North Sea-focused firm that has used acquisitions to support growth, RockRose Energy, posted a 450 per cent increase in first half profits yesterday.
Read more: North Sea dealmaker ready to raise acquisition stakes as shakeup in area continues
The activities of the firms highlight the part independents are playing in stoking activity in the North Sea as the area emerges from the slump triggered by the sharp fall in the crude price since 2014.
Both have acquired assets from bigger fish amid a shake up in the area which has seen some US majors shift investment to their home market and other giants focus on bumper fields.
Serica’s decision to quit Ireland after 12 years operating off the country reflects the belief it can generate better returns from investing in producing North Sea fields than exploring in what is still seen as an emerging area.
“We’ve had a good run in Ireland … sadly there hasn’t been the finds to make us want to continue in that country,” said Mr Flegg.
He added: “We need to find like-minded companies to share risk with and at the moment the attitude towards Ireland is not strong enough, the sentiment isn’t there … the time just isn’t right for Ireland.”
Serica is understood to have made the decision to quit Ireland well before Mr Varadkar announced the country’s proposed policy changed at the UN Climate Summit in New York.
The company’s move will be noted with interest. Its interests off Ireland include acreage in the Rockall Basin area west of Scotland, in which sector-watchers see potential to make big finds.
Read more: Oil strike West of Shetland fuels hopes of boom in frontier area
“It is likely that in the future there will be exploration drilling that will lead to more discoveries but this is a number of years away,” said Serica of the Rockall basin.
Mr Flegg said Serica had proved in the first half that it could deliver good returns from investing in North Sea assets that others had lost interest in.
The company generated £90m cash from operations after completing the acquisition of interests in the Bruce, Keith and Rhum fields in the North Sea from BP and other firms in November. The deals involved an initial outlay of just £12.8m, with up to a further £39m payable depending on the assets’ performance.
The acquisition of a 50% stake in Rhum created complications as the remaining 50% is held by the Iranian national oil firm. Serica had to gain a licence from the US authorities to ensure the field’s operations did not fall foul of sanctions imposed on Iran at Donald Trump’s behest. Mr Flegg is confident the licence will be renewed after it expires at the end of October.
Read more: Iran poser for North Sea oil and gas company
RockRose Energy grew first half profits to $27.8m (£22m) before tax from $5.1m last time.
The growth followed the acquisition of Dutch North Sea assets from Dyas in October last year.
After the period end RockRose completed the acquisition of a $140m North Sea portfolio from American giant Marathon, which was agreed in February.
Led by former investment banker Andrew Austin, RockRose said yesterday: “Significant financial resources are now available to take advantage of current market conditions and continue to grow our portfolio of development and production assets.”
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