Serica Energy plc’s pre-tax profits for 2020 plummeted due to low oil prices and Bruce caisson shut-in but the company managed to continue operations.
No Covid-19 cases or injuries were recorded and the company avoided furloughing staff and government assistance programmes.
Serica also continued to make progress with its environment, social and governance policies with reductions in flaring volumes and emissions.
In its results for the year ended 31 December 2020, the group recorded pre-tax profits of £12.5 million (2019: £108.8m) with average net production of 23,800 boe per day (2019: 30,000 boe per day).
The reduction reflects H1 caisson repairs and other field maintenance work.
Serica reported gross loss of £2.9m (2019: profit of £85.8m) and operating loss of £18.7m (2019: profit of £87.7m) included £38.5m (2019: £52.6m) of non-cash depletion charges.
Cash flow from operations was reported at £44.1m (2019: £137.1m) and capital expenditure of £26.6m (2019: £5.3m).
This followed payments of £21.8m of Bruce, Keith and Rhum (BKR) cash flow sharing and other liabilities (2019: £57.3m), £26.6m capital expenditure (2019: £5.3m) and £8m dividends (2019: nil).
Closing cash and cash equivalents were £89.3m (2019: £101.8m) after capital expenditure and dividend payment with no debt.
The resource base was strengthened as group production of some 8.1million boe for the year
was largely offset by a 12% increase oil and gas reserves, leaving year end reserves of
61.0mboe (2019: 62.3mboe).
OPERATIONAL
A recent independent audit of field reserves reported Serica’s share of estimated remaining 2P reserves as 61.0mboe as at 1 January 2021 (January 2020: 62.3mboe)
The company said that this was largely the result of improved production efficiencies and lower operating costs on the BKR assets since the acquisition by Serica.
The projected BKR field life has now been extended by a further two years.
Bruce, Keith and Rhum fields produced 21,500boe per day net to Serica for 2020
(2019: 27,300) with the reduction largely due to the 45-day shutdown during H1 to effect caisson repairs on the Bruce platform as well as planned maintenance.
Erskine field averaged more than 2,300boe per day net to Serica during 2020 (2019: 2,700boe per day) following a five-week planned maintenance shut-in.
Successful completion of the Rhum R3 workover is expected to accelerate field production, with the potential to bring additional reserves and to provide operational back-up to the existing two wells.
During 2020, Serica also decided to withdraw from Namibia where it had been awarded a licence in 2011 due to slow exploration activity, developmental costs and time.
OUTLOOK
Chief executive Mitch Flegg said that despite many obstacles during 2020, Serica had continued to strengthen its financial and operational foundations.
“The impact of a substantial fall in commodity prices during the year plus a 45-day shut-in of BKR production in 1H to repair a damaged caisson on the Bruce platform was mitigated by the flexible structure of the BKR net cash flow sharing arrangements and the Group’s gas price hedging programme.
“With strong operating, ESG and financial credentials Serica is well-placed to grow through developing the potential of its existing assets as well as building on new opportunities to diversify risk, provide new growth prospects and achieve economies of scale.”