Serica joins top 10 UKCS producers with Tailwind acquisition

Serica Energy plc will join the top 10 producers on the UK Continental Shelf (UKCS) after it agreed to acquire Tailwind Energy Investments Ltd for £367 million.

ASSETS

Serica operates the producing Bruce, Keith and Rhum fields in the UK Northern North Sea, and the producing Columbus field in the UK Central North Sea.

The company also holds a non-operated interest in the producing Erskine field in the UK Central North Sea.

Tailwind was established in 2016 and in 2018 acquired its core assets of the Triton area from Shell and Exxon.

The Triton area comprises eight producing oil fields including Evelyn (operator), Bittern, Guillemot and Gannet (operator).

The company is an existing partner of Serica in the Columbus gas field and operates the Orlando field.

TERMS

The transaction will see Tailwind’s largest ultimate shareholder, Mercuria, become a strategic investor in Serica with a 25.2 % holding.

Terms include the issue of up to 111,048,124 new ordinary shares in Serica, representing up to 28.9% of the company’s enlarged issued share capital.

Serica’s closing price as of 19 December 2022 was 278 pence per share.

Additionally, Serica will pay cash on completion of £58.7 million.

The company will also take on Tailwind’s net debt, which as at 30 November 2022 was c.£277m.

OPERATIONS

Serica said that the deal would see an increase in its scale, portfolio diversity and organic investment opportunities.

Estimated proforma combined production in 2023 will rise to 40,000 boe/d to 45,000 boe/d.

This will put the company in the top 10 UKCS producers and top three UKCS listed independent producers, added the company.

It will also acquire fully developed 2P reserves of 42 million boe to create a combined portfolio with 2P reserves of 104 million boe.

The acquisition will create a balanced spread of production from two main hubs – Bruce and Triton – which have separate transportation infrastructure.

Serica’s producing fields will increase from five to 11 and the enlarged group will operate more than 80% of its net production.

The addition of predominantly oil reserves reduces the risk of commodity prices for Serica which will retain more than 50% of production as gas.

GOVERNANCE

Two Mercuria nominated non-executive directors will join the Serica board on completion.

Steve Edwards and Jacques Tohme will be joining the senior management team and all current Tailwind employees to be offered positions in the enlarged group.

MAJOR OPERATOR

Chairman Tony Craven Walker said that Serica had grown its business by several times over the past five years without any external fund raising.

“We are proud of that achievement and are now a major North Sea operator with proven capabilities, strong balance sheet and significant ongoing cash flow.

“The transaction with Tailwind reinforces these strengths, materially enhancing our asset base as we continue responsibly to provide much needed domestic energy at a time of energy crisis and seek to grow and diversify our portfolio of assets further.”