UK producer Serica enjoys price fillip as output grows
UK independent producer Serica reported a strong improvement in the first half of the year September 28 and it is looking forward to even more of the same as its production rises at a time of protracted record spot gas prices. The company's output is weighted 80-20 in favour of gas and the company has been investing for growth.
CEO Mitch Flegg said: "In the current environment Serica's focus on gas production and investment in new projects is expected to generate very significant returns for shareholders and help support further investment."
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This year it brought the recompleted the Rhum R3 well into production in August, which adds more than 4,000 barrels of oil equivalent (boe)/d to Serica's share. And it drilled the Columbus development well which it expects to start producing in Q4. That will deliver 8,000 boe/d gross, or 4,000 boe/d net. Later in 2022 it plans to drill the North Eigg well which, if successful, will enhance gas reserves in the Bruce-Keith-Rhum area and potentially extend the life of Bruce and related infrastructure.
Serica said it produces around 5% of UK gas production and "its role in enhancing and extending the life of that production and helping to maintain forward supply during a period of energy transition, is essential to meet UK energy needs."
It made a gross profit of £46.0mn, compared with a loss of £19.8mn in HI 2020 and cash flow from operations was £63.8mn, compared with last year's £19.3 mn. This was despite a drop in output from 21,600 barrels of oil equivalent/day to 18,900 boe/d in the wake of extended field maintenance shut-ins.
Capital investment of £43.0mn was up sharply from last year's £26.6mn and funded from internal cash resources. This left it with a closing cash balance up at £92.0mn, relative to £89.3mn at the end of 2020. Its output was sold at an average $43.30/boe, almost triple last year's $15.20/boe before net hedging gains/losses.
Its operating profit of £5.5mn was up from the loss in H1 2020 of £12.7mn after £30.3mn of unrealised hedging provisions. Profit after tax was £1.3mn, down from £12.4mn after non-cash deferred tax provision of £0.9mn, down from last year's £8.0mn.