NORTH Sea-focused Serica Energy has seen its shares rise three per cent to a record high after well results underlined the potential of a field it is preparing to bring into production.

The company said the well on the Columbus field east of Aberdeen had flowed gas and liquid condensate at the upper end of the pre-drill range of expected outcomes.

The results will reinforce directors’ confidence that Serica’s decision to invest in Columbus amid the challenges posed by the fallout from the coronavirus crisis will be vindicated.

The company expects to produce 7,000 barrels oil equivalent daily from Columbus. It expects to bring the field onstream in the fourth quarter of this year.

The start of production will be a landmark in a development that has been years in the planning.

Serica discovered Columbus in 2006.

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The company decided to proceed with the development after other firms developed new pipeline infrastructure in the area which improved the economics of the project.

It faced complications earlier this year after encountering technical challenges while drilling the development well on Columbus, which the company said in May would cost around £4m to overcome.

The Herald: Serica Energy chief executive Mitch FleggSerica Energy chief executive Mitch Flegg

However chief executive Mitch Flegg said yesterday that Serica’s directors were delighted the company had achieved the objectives of a challenging but ultimately very successful campaign.

He noted: “This is a significant milestone for Serica, demonstrating our ability to successfully lead a development project as well as being a proven efficient production operator.”

Serica is also preparing to increase production from the giant Rhum gas field off Shetland. It expects to start pumping gas in the third quarter from a well that was originally drilled in 2005 but never brought into production.

The company acquired its interest in Rhum from BP in 2018.

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The cash flow generated from the additional Rhum production and the Columbus output will provide Serica with additional firepower as it looks to capitalise on other growth opportunities in the North Sea.

Mr Flegg recently underlined Serica’s appetite for material North Sea acquisitions and said the company was eyeing potential targets.

He thinks the fact the bulk of Serica’s output is gas will work in its favour.

Gas prices have recovered strongly from the slump triggered by the coronavirus crisis, helped by the rollout of coronavirus vaccines. Oil prices have not recovered as strongly, possibly reflecting the continued impact of reduced activity in sectors such as aviation.

Industry leaders expect demand for gas to remain strong amid the drive to reduce carbon dioxide emissions. They reckon it could be used as a less carbon-intensive alternative to coal while renewable energy generating capacity is developed on the required scale.

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Shares in London-based Serica closed up 4.8p at 154p. They sold for around 115p a year ago.

Serica has an operations centre in Aberdeen.

The Columbus field will be tied in to the Shell-operated Shearwater production platform by way of a pipeline installed to handle output from the Arran field. This is also operated by Shell.

Serica has a 50% operated interest in Columbus. North Sea-focused Waldorf Production and Tailwind Energy have stakes in the field.