Calendar An icon of a desk calendar. Cancel An icon of a circle with a diagonal line across. Caret An icon of a block arrow pointing to the right. Email An icon of a paper envelope. Facebook An icon of the Facebook "f" mark. Google An icon of the Google "G" mark. Linked In An icon of the Linked In "in" mark. Logout An icon representing logout. Profile An icon that resembles human head and shoulders. Telephone An icon of a traditional telephone receiver. Tick An icon of a tick mark. Is Public An icon of a human eye and eyelashes. Is Not Public An icon of a human eye and eyelashes with a diagonal line through it. Pause Icon A two-lined pause icon for stopping interactions. Quote Mark A opening quote mark. Quote Mark A closing quote mark. Arrow An icon of an arrow. Folder An icon of a paper folder. Breaking An icon of an exclamation mark on a circular background. Camera An icon of a digital camera. Caret An icon of a caret arrow. Clock An icon of a clock face. Close An icon of the an X shape. Close Icon An icon used to represent where to interact to collapse or dismiss a component Comment An icon of a speech bubble. Comments An icon of a speech bubble, denoting user comments. Comments An icon of a speech bubble, denoting user comments. Ellipsis An icon of 3 horizontal dots. Envelope An icon of a paper envelope. Facebook An icon of a facebook f logo. Camera An icon of a digital camera. Home An icon of a house. Instagram An icon of the Instagram logo. LinkedIn An icon of the LinkedIn logo. Magnifying Glass An icon of a magnifying glass. Search Icon A magnifying glass icon that is used to represent the function of searching. Menu An icon of 3 horizontal lines. Hamburger Menu Icon An icon used to represent a collapsed menu. Next An icon of an arrow pointing to the right. Notice An explanation mark centred inside a circle. Previous An icon of an arrow pointing to the left. Rating An icon of a star. Tag An icon of a tag. Twitter An icon of the Twitter logo. Video Camera An icon of a video camera shape. Speech Bubble Icon A icon displaying a speech bubble WhatsApp An icon of the WhatsApp logo. Information An icon of an information logo. Plus A mathematical 'plus' symbol. Duration An icon indicating Time. Success Tick An icon of a green tick. Success Tick Timeout An icon of a greyed out success tick. Loading Spinner An icon of a loading spinner. Facebook Messenger An icon of the facebook messenger app logo. Facebook An icon of a facebook f logo. Facebook Messenger An icon of the Twitter app logo. LinkedIn An icon of the LinkedIn logo. WhatsApp Messenger An icon of the Whatsapp messenger app logo. Email An icon of an mail envelope. Copy link A decentered black square over a white square.

Shares woe for Serica Energy despite 53% jump in profits

North Sea firm's boss calls for urgent action to address industry-wide problems.

Serica Energy's Bruce platform at night.
Serica Energy's Bruce platform at night. Submitted pic

North Sea oil and gas firm Serica Energy hit out at “wholly unwelcome” North Sea taxes as it reported a 53% jump in half-year profits.

The London-listed company also announced a 9p interim dividend for shareholders.

But shares in the firm slid more than 5% today, with units of the stock worth 253.8p at market close.

Serica said it shared “widespread concerns” in the industry over the UK’s controversial energy profits levy (EPL), or “windfall” tax.

EPL’s claw-back clause offsets tax take

This is despite short-term tax incentives related to the EPL benefiting some of the company’s projects during the six months to June 30.

An 80% investment allowance linked to the levy means that, combined with other measures, North Sea firms can recover £91.40 for every £100 they spend on new projects. This is in place for the lifetime of the tax, which is due to end in March 2028.

Serica said it was using these allowances for several projects, including work on its Bruce field. It also has a “significant” four-well drilling campaign on its Triton Area assets, covering Bittern, Gannet E, Guillemot NW and Evelyn, in the pipeline for 2014.

Mitch Flegg, chief executive, Serica, said: “The common theme amongst these capital projects is that they are all designed to quickly add production from existing fields without the requirement for substantial new infrastructure. These short-cycle investments benefit from investment allowances under the EPL and have the capability to add significant reserves and production.”

Serica Energy CEO Mitch Flegg.
Serica Energy CEO Mitch Flegg. Image: DC Thomson<br />Picture by KENNY ELRICK 15/01/2019

Mr Flegg said Serica’s reserve-boosting acquisition of Tailwind Energy Investments, completed in March, was a “step change in the scale and diversity” of the company.

He added: “We have stated consistently our intention to continue investing in the enlarged portfolio, to add to it in a disciplined fashion if the right opportunities arise.”

The problems we see need to be addressed urgently in order to restore confidence in the sector.”

Mitch Clegg, CEO, Serica Energy

But he warned: “Serica’s current circumstances and optimism, reflected in its investment plans, should not mask the fact we share the widespread concerns within the sector about the health of the UK’s offshore upstream industry, given the current fiscal regime and future uncertainties.

“We welcome the UK Government’s recent ‘call for evidence’ regarding long term fiscal policy.

“However, the problems we see need to be addressed urgently in order to restore confidence in the sector.”

“The EPL is a wholly unwelcome burden that is already leading to the delay and cancellation of longer-term investment projects across the sector.”

Serica's Bruce platform by day.
Serica’s Bruce platform by day. Image: Graham Read

Rishi Sunak’s government is gathering opinions on how taxation impacts the sector long-term. This won’t cover the EPL as it was introduced as a short-term measure.

London and Aberdeen-based Serica inherited “significant” tax losses through its £644 million acquisition of Tailwind. These pared back its total tax bill for the first half of 2023 to £122.8m, including £61.1m for the EPL, compared with £77.7m a year ago.

serica energy
The Triton floating production storage and offloading vessel, operated by Dana, is used by many of Serica’s assets.

Serica has enjoyed a big boost to output since taking over Tailwind.

First half production totalled 49,350 barrels of oil equivalent (boe) per day, up from 38,100boe during the same period in 2022. The latest total was  55% gas and 45% oil.

Serica reported pre-tax profits of £298.2m for the first six months of 2023, up from £194.4m last year. Revenue for the latest period totalled £340.6m, down from £353.4m previously, as lower commodity prices hit sales.

An investment expert’s view

Neil Shah, head of research at investment research and consultancy firm Edison Group, said: “From a financial standpoint, Serica’s performance is commendable.

“The fiscal backdrop in the UK’s offshore upstream sector remains a concern.

“Despite welcoming the UK government’s recent endeavours into long-term fiscal policy, the sector’s confidence restoration requires prompt attention.”


Serica’s UK North Sea portfolio

Serica’s producing assets are focused around two main hubs: the Bruce, Keith and Rhum fields in the northern North Sea, which it operates, and a mix of operated and non-operated fields tied back to the Triton floating production storage and offloading vessel.

The company also has operated stakes in the producing Columbus (central North Sea) and Orlando (northern North Sea) fields, plus a non-operated interest in the producing Erskine field (central North Sea).

Conversation