REG - Serica Energy PLC - Results for the six months ended 30 June 2024
10/09/2024 07:00
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RNS Number : 5043D Serica Energy PLC 10 September 2024
Serica Energy plc
("Serica" or the "Company")
Results for the six months ended 30 June 2024
London, 10 September 2024 - Serica Energy plc (AIM: SQZ), a British
independent upstream oil and gas company with operations in the UK North Sea
today announces its unaudited financial results for the six months ended 30
June 2024. The results are included below and copies are available at
www.serica-energy.com (http://www.serica-energy.com) and www.sedar.com
(http://www.sedar.com) .
Chris Cox, Serica's CEO, stated:
"I am delighted to introduce my first set of results as Serica CEO. Prior to
joining, I felt that the Company stood out due to the quality of the team, its
strong financial position, and the opportunities for growth both organically
and through acquisition - my opinion of the Company's potential to create
value for shareholders has only increased since my arrival.
Despite an unjustifiably punitive fiscal regime that may make future
investment on the UKCS challenging - and with the level of capital allowances
remaining uncertain until the Autumn Budget on 30 October - what is clear is
that, thanks to our investment in our assets and our lean operating model, our
producing assets remain cash generative, even after paying taxes at a rate of
75% today and due to rise to 78% from 1 November.
Our confidence in our cash generation outlook, together with our strong
balance sheet, gives us capital allocation options. Paramount amongst these
will always be supporting material shareholder returns which is why we are
announcing today that we are holding the interim dividend flat at 9p per
share. In addition, to sustain the longevity of our model, we want to continue
reinvesting our cash flows into our UK North Sea assets. As a reservoir
engineer, I am encouraged that there are multiple attractive opportunities to
invest in our portfolio to allow us to sustain production and deliver
home-grown low-carbon energy in the medium term. However, we will only be able
to make these investments if the fiscal environment allows us to generate a
fair return on your capital. We also have the option to add to our portfolio
through acquisitions and that is why we will continue, intensively but
prudently, to seek value-accretive M&A, both at home and abroad.
Whatever the outcome of the Autumn Budget, my focus will not waver from
safety, operational delivery, and growth. The potential in the fields we
operate is demonstrated by the positive early signs we are seeing from the
Triton drilling programme, and I have been deeply impressed by the talented
team we have within Serica that will enable us to unlock further value. Serica
will continue to pursue a returns-led investment strategy, and I am confident
that we are set to deliver materially cash-generative production for many
years to come."
Results summary ($ million(1) unless stated)
H1 2024 H1 2023
Average Brent oil price ($/bbl) 84 80
Average gas price (pence per therm) 73 108
Production (boepd) 43,700 49,350(2)
Revenue 462 545(2)
EBITDAX(3) 279 290
Cash Tax paid 72 174
CFFO less Current Tax(3) 193 137
Capital expenditure(3) 124 24
Free cash flow(3) 98 134
Cash 362 562
Total debt (231) (270)
Net cash 131 292
Interim dividend declared (pence per share) 9 9
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(1) Please note that from these Interims and going forward, the Directors have
elected to change the Group's presentational currency from Pounds Sterling to
US Dollars, as the Group believes that the change will give investors and
other stakeholders a clearer understanding of Serica's performance over time
and align with the presentation currency of its peers
(2) Pro-forma, following the acquisition of Tailwind on 23 March 2023
(3) See Reconciliation of non-IFRS measures for further detail
Highlights
Production in first half of 2024 in line with guidance, with positive initial
drilling results
· Production of 43,700 boepd the first half of 2024 (H1 2023 pro
forma: 49,350 boepd)
- Production split of 60% gas, and 40% liquids
· Operating costs were around $19/boe in H1 2024 (H1 2023:
$17.5/boe)
· Five well-drilling campaign on Triton ongoing:
- The B6 well (formerly B1z sidetrack) on the Bittern field (SQZ:
64.6%) has been tied into the Triton FPSO. Promising data were collected
during drilling and we eagerly anticipate initial flow rates in coming days
- The GE-05 well on the Gannet field (SQZ: 100%) has now been drilled
to TD and completed safely and ahead of schedule, with initial signs looking
positive and production from the well expected to start in November 2024
Material cash generation supporting shareholder returns
· Cash inflow from operations of $301 million and EBITDAX of $279
million
- Cash tax paid of $72 million in H1 2024. Serica's tax liabilities,
apart from the EPL, are partially shielded due to the tax losses acquired with
Tailwind, the balance of which remained at over $1 billion at 30 June
- Capital expenditure of $124 million, comprising largely the light
well intervention vessel ('LWIV') campaigns on BKR and initial stages of
Triton well investments
· Free cash flow of $98 million in H1 2024 (H1 2023: $134 million)
· Following the share buyback of £15 million ($19 million), interim
dividend of 9p declared today, unchanged on 2023. This reflects the Company's
confidence in its medium-term robust cash generation outlook, with the
expectation of generating over half a billion dollars of cash flow after
currently committed investments over the coming three years at current
commodity prices, after factoring in the expected tax regime
- The interim dividend is payable on 21 November 2024 to shareholders
registered on 25 October 2024, with an ex-dividend date of 24 October 2024
· Given the importance of capital allowances to the economics of
future investments in our UK portfolio, we will provide further guidance on
our future ability to reinvest in our portfolio as part of our medium-term
capital allocation policy following the Autumn Budget
Strong balance sheet provides platform for future growth
· Serica's robust liquidity position underpins the Company's ability
to make targeted growth investments, both through continuing to unlock the
potential in our assets and by investing in value accretive M&A
opportunities
· During the period we completed our acquisition of a 30% working
interest in the Buchan Horst field from Jersey Oil & Gas
· The Company has been and will continue to be very active in screening
cash-generative M&A opportunities at home and in the wider North Sea, as
well as increasingly in other geographies, but we will remain disciplined and
will only conclude such transactions where we are confident of the potential
to deliver value to shareholders
Outlook and guidance
· Due to unplanned downtime at the Triton hub, full year average
production is expected to be at the bottom end of the previously stated
41-46,000 boepd guidance range
· Full-year capital expenditure is expected to be around $260
million pre-tax, in line with expectations
· The cash payment of both the 2023 Final and the 2024 Interim
dividends, a combined total of $112 million, occurs in H2 2024. Combining this
with the schedule for cash tax payments, which is also weighted to the second
half, means that these cash outflows are expected to be higher in H2 than in
H1, as is typically the case
Regulatory
This announcement is inside information for the purposes of Article 7 of
Regulation 596/2014.
The technical information contained in the announcement has been reviewed and
approved by Fergus Jenkins, VP Technical at Serica Energy plc. Mr. Jenkins
(MEng in Petroleum Engineering from Heriot-Watt University, Edinburgh) is a
Chartered Engineer with over 25 years of experience in oil & gas
exploration, development and production and is a member of the Institute of
Materials, Minerals and Mining (IOM3) and the Society of Petroleum Engineers
(SPE).
Enquiries:
Serica Energy plc +44 (0)20 7487 7300
Martin Copeland (CFO) / Andrew Benbow (Group Investor Relations Manager)
Peel Hunt (Nomad & Joint Broker) +44 (0)20 7418 8900
Richard Crichton / David McKeown / Emily Bhasin
Jefferies (Joint Broker) +44 (0)20 7029 8000
Sam Barnett / Will Soutar
Vigo Consulting (PR Advisor) +44 (0)20 7390 0230
Patrick d'Ancona / Finlay Thomson serica@vigoconsulting.com
Serica will host a live presentation on the Investor Meet Company platform
today at 0900 BST. The presentation is open to all existing and potential
shareholders. Questions can be submitted at any time during the live
presentation. Investors can sign up to Investor Meet Company for free and add
to meet Serica Energy plc via:
https://www.investormeetcompany.com/serica-energy-plc/register-investor
(https://www.investormeetcompany.com/serica-energy-plc/register-investor) .
CHIEF EXECUTIVE OFFICER'S REVIEW
Given the ongoing challenges of running assets on the UKCS, it is not
surprising that I have been asked the question as to why I chose to join
Serica. It is however not a difficult decision - the Company is positioned
well, with a great team, positive ESG performance, demonstrable track record,
robust balance sheet, and a current portfolio of assets that is the bedrock of
a very strong business, with material cash generation and significant upside
potential.
Having worked in this industry, and the North Sea, for over 40 years I am no
stranger to managing uncertainty - primarily as a result of fluctuations in
commodity prices and surprises thrown at us by geology - but in the UK we have
had the additional challenge of successive governments amending the fiscal
regime. As we present these results, the uncertainty around the level,
duration and availability of investment allowances related to the Energy
Profits Levy ('EPL') is at least finally close to being removed. The
maintenance of full allowances for capital investment and confidence in the
cessation of the EPL and its replacement by a long-term sustainable fiscal
regime at the latest by 2030 are crucial for the future of investment into the
domestic oil and gas sector.
These investments are needed not only for new fields, but to extend the life
of current operations and are the lifeblood for companies in our supply chain
across the UK. Serica has spent over a billion Pounds in the UK supply chain
over the last five years, and similar expenditures will be lost going forward
should the tax regime make future investment uneconomic. Investment sustains
production and ultimately increases Government tax revenues, supports the
ability of companies in the North Sea ecosystem to play their part in the UK's
energy transition, and limits global emissions by lessening the need for
higher-carbon imports. Our industry's expenditure also supports highly-skilled
jobs in an already established domestic supply chain across the UK. The skills
which these companies have developed can largely be transferred and will be
required during the energy transition.
Although where we land on capital allowances in the Autumn Budget is of course
vital for future projects in our portfolio (such as Buchan Horst project and a
range of infill wells), whatever happens on capital relief does not materially
impact our existing operations. Our producing fields are profitable today and
will remain so for many years, and are set to generate over half a billion
Dollars over the next several years assuming commodity prices at current
levels and after taking into account our existing capital commitments. We also
benefit from our low exposure to decommissioning expenditure. This is a strong
base from which to pursue growth both domestically and internationally.
As someone with a subsurface background, I believe that fundamentally the
success of an oil and gas company hinges on the quality of the reservoirs in
the portfolio - it is all about the rocks. Clearly it is also important to
run your facilities safely and efficiently, but if these things are not
running perfectly they can be fixed. You cannot change the rocks. I am assured
that at Serica the rocks are good and, crucially, we have a great subsurface
team with the skills to maximise their potential. I am confident that the same
subsurface strengths will equip us well to add value to assets we acquire in
the future.
The Tailwind acquisition is now bedded in and two of the fives wells in the
2024/25 Triton drilling programme - Bittern B6 and Gannet E GE05 - have been
drilled with very promising results. The B6 well is just being brought onto
production and the Gannet GE05 well is planned for first production in early
November 2024. Both wells encountered excellent quality, oil-filled
reservoirs, and along with the remaining three wells, are expected to enhance
production from the Triton hub.
While the subsurface is good, one of my key priorities is to drive increased
rigour in the management of our facilities. We intend to work hard - including
with our partners on non-operated assets - to boost operational efficiency
with maintenance programmes delivered on schedule and on budget, providing
more consistent and predictable future production. This is an area where the
Company has disappointed in recent years and it will be a key focus of mine.
We need to get better at planning shutdowns, we need to reduce our backlog of
maintenance activities, and we need to optimise our facilities configurations
to maximise the potential that exists in our wellstock. This will not be a
quick fix, but I am convinced that we can and will deliver significant
improvements.
With an efficient subsurface programme, we believe Serica can offset the
natural decline rates from our fields. The viability of sustaining production
levels from our existing assets over the longer term, however, depends
significantly on the future fiscal regime. With an appropriate fiscal regime,
including full tax relief for capital expenditure, we have attractive options
to invest both in our existing producing hubs and the Buchan Horst project.
Buchan Horst is precisely the sort of project that the UK needs, involving the
creation of over a thousand jobs across the UK, the re-use of existing
infrastructure, industry-leading low emissions and domestically produced oil.
We and our partners are keen to have the opportunity to allocate capital to
the project and we hope that Government will deliver a fiscal framework, and
(following the recently announced consultation on Environmental Impact
Assessment guidance) a regulatory environment, which will enable this.
Serica, in common with all businesses, has the challenge of determining where
cashflow should be allocated, but we view a robust competition for capital as
a sign of a business focused on delivering value. Despite the increased call
on our capital from a 'super-tax' now scheduled to stay in place until 2030,
an area in which our capital allocation commitment remains unchanged is direct
shareholder distributions, and these will remain a cornerstone of our value
creation strategy going forward. Given the strength of our balance sheet and
our confidence in future cashflow generation capacity, we have today been able
to announce an unchanged interim dividend of 9 pence per share at a time when
we are also in an intensive capital expenditure phase on our Triton well
programme.
Once there is more clarity on capital allowances (and hence the viability of
further investment opportunities in our portfolio), we will be able to
conclude our analysis of all possible ways to maximise the creation of
shareholder value. This will include giving investors greater medium-term
visibility on our capital allocation policy, including the mix of dividends
and share buybacks. In addition, following recent changes to the UK listing
rules, and as part of our goal to maximise our potential investor base, we are
considering a potential move from the AIM to the Main Market. If, following
the conclusion of our evaluation, our Board concludes that this is in the best
interests of shareholders, we would give ample notice of the timing of such a
move.
We are also very active in seeking compelling M&A opportunities which are
accretive for our shareholders. M&A is an area in which Serica has
delivered in the past and, given the decades of experience of the team in this
area, I am confident that we can and will build on this legacy. With a strong
balance sheet and an exceptionally strong team, we are actively pursuing
opportunities internationally as well as at home. However, while we appreciate
it may be frustrating for some shareholders, we cannot predict whether and
when we will be able to announce a transaction and we will make no apologies
for waiting to ensure that we deliver the right deal rather than any deal.
It is my firm belief that Serica has the platform to adapt to the
circumstances and take advantage of the opportunities to deliver returns to
shareholders. To that end, I have set some clear priorities :
· A continuing focus on ensuring safe, reliable, and responsible
operations
· A drive towards industry-leading, predictable operational
performance through a structured programme of process improvements
· Reprioritisation of our organic investment opportunities in light
of sub-surface potential and the evolving fiscal and regulatory regimes in the
UKCS
· Manage capital allocation to balance long-term value growth with
sustainable direct shareholder distributions
· Leaving no stone unturned in uncovering and delivering M&A
that is accretive to shareholder returns and diversifies our portfolio
As a management team we are focused on delivering on these priorities in order
to create long-term value for shareholders. I look forward to updating you on
our progress.
REVIEW OF OPERATIONS
Serica's assets contain 140 mmboe of oil and gas net to the Company, as of 31
December 2023, evenly split between oil and gas. The Company continues to
pursue a returns-led approach to organic investment, investing in its assets
to add value through increased production, decarbonisation, and extended field
life. The current work programme, with the focus on the five-well Triton
drilling campaign, is expected to sustain production around current levels
into 2026.
Production by field (boepd)
Field H1 2024 H1 2023 FY 2023
Bruce Hub
Bruce 6,700 7,200 6,500
Rhum 16,700 16,300 12,500
Total 23,400 23,500 19,000
Triton Hub
Bittern 3,500 5,600 4,000
Evelyn 4,600 4,700 3,800
Gannet E 5,700 7,800 6,100
Guillemot 400 200 200
Total 14,200 18,300(1) 14,100
Other production assets
Erskine 500 1,700 1,300
Columbus 1,800 2,300 2,200
Orlando 3,800 3,500 3,500
Total 6,100 7,500 7,000
TOTAL 43,700 49,300 40,100
(1) Pro-forma, following the acquisition of Tailwind on 23 March 2023
Bruce Hub
Bruce Field - Blocks 9/8a, 9/9b and 9/9c, Serica 98% and operator
Production from the field has been steady in H1 2024, averaging circa 6,700
boepd (H1 2023: 7,200 boepd) net to the Company.
The Bruce Hub LWIV 2024 programme on the Helix Well Enhancer was successfully
completed in May, with the Bruce M5 well returning to production late in that
month leading to an uptick in June produced volumes.
The summer programme of Bruce field platform well interventions commenced in
July with a planned duration of 90 days. This programme includes a range of
activities designed to enhance production and routine integrity monitoring.
Serica has also taken advantage of required export system work in July and
August, including the brief routine outage of the Forties Pipeline System, to
carry out two short periods of maintenance work.
The Bruce field is geologically complex, highly faulted with multiple
reservoir zones, but this complexity also creates opportunity. No wells have
been drilled on Bruce since 2012, and we are conducting extensive subsurface
work on identifying material potential for further infill drilling. However
this drilling will only proceed should the fiscal regime (including capital
allowances) be supportive.
Rhum Field - Blocks 3/29a, Serica 50% and operator
The Rhum field continues to produce consistently and in line with
expectations, with minimal capital work. Average field production in H1 2024
totalled circa 16,700 boepd (H1 2023: 16,300 boepd) of gas net to Serica.
Keith Field - Block 9/8a, Serica 100%
The well intervention to re-instate production from the K1 well, which has not
produced since 2022, was successfully completed in May 2024. Due to the
ongoing topside optimisation and well intervention work on Bruce, K1 is
expected to come online in Q4.
Triton Hub
Bittern 64.63%, Evelyn 100%, Gannet E 100%, Guillemot West & North West
10%, Belinda 100%
Triton Area production uptime was impacted in H1 2024 by an unplanned shutdown
from 5-30 May following a trip on the single gas export compressor that is
currently available. Full production was re-established following the trip and
work to restore two-compressor operations, reducing the current operating
vulnerability, will be performed by the end of the year. This work, which will
increase future resilience of production, will not have an impact on Triton
production in H2.
The operator, Dana, commenced the summer shutdown for annual maintenance work
on Triton on 1 July. This was originally planned for 40 days but the work
programme experienced some delays, with production only partially restarting
on 1 September, just over three weeks later than originally scheduled. Average
net Triton Area production in H1 2024 was 14,200 boepd (H1 2023 pro forma:
18,300 boepd) of oil and gas.
Encouraging results from Triton drilling campaign
Serica's current capital expenditure programme includes the five-well drilling
campaign in the Triton area, with opportunities arising from relatively young,
shallower reservoirs in well-established plays. The well campaign is estimated
to deliver payback within two years.
The programme has started off promisingly, with the B6 horizontal well (a
sidetrack from the B1 well) on the Bittern field being drilled during June and
July. The data collected while drilling is very promising and we eagerly await
the imminent commencement of production in order to assess the long-term
potential.
The GE-05 well on the Gannet field has now been drilled to TD safely and
ahead of schedule, with initial signs looking very positive and production
from the well expected to start at the beginning of November 2024.
Following the completion of the GE-05 well, the rig will drill wells on the
Guillemot NW and Evelyn fields, before finishing the campaign with a well on
the Belinda development on which Serica took a final investment decision in
April. The Belinda development well is scheduled to be drilled in the first
half of 2025 with first oil expected in the first half of 2026 following
tie-in work.
Other Production Assets
Erskine Field - Blocks 23/26a (Area B) and 23/26b (Area B), Serica 18%
Erskine encountered some production issues during H1 2024 with production
levels averaging 500 boepd net (H1 2023: 1,700 boepd net). The field was
shut-in on 26 January 2024 due to a compressor problem on the host Lomond
platform. Although production was re-established in early May, it was taken
offline shortly thereafter for the planned Lomond turnaround. Erskine
production restarted on 26 August, with a rig-based intervention to return the
W1 well to production having been successfully completed in July. The field
has produced consistently at a rate of over 2,000 boepd net to Serica since
restart.
Columbus Field - Blocks 23/16f and 23/21a (part), Serica 75% (operator)
During the first half of 2024, Columbus production has been steady despite
some short-term Shearwater offtake facility outages.
Average net Columbus production of gas and condensate in H1 2024 for Serica's
75% interest was 1,800 boepd (H1 2023: 2,300 boepd for a pro-forma 75%
interest).
Orlando Field - Block 3/3b, Serica 100%
Orlando produced steadily in H1 2024, although post period end there has been
one unplanned shut-in with and a scheduled shut-in of 28 days to come in late
October for planned annual maintenance on Ninian, its host platform.
Average Orlando field production in H1 2024 was 3,800 boepd (H1 2023: 3,500
boepd) net to Serica.
Development
Buchan Horst Field - Blocks 20/5a, 205d, 21/1d & 21/1a. Serica 30%
In February 2024 Serica completed the acquisition of a 30% working interest in
the Greater Buchan Area ('GBA') licences P.2498 and P.2170 with co-venture
partners Jersey Oil & Gas (20%) and NEO Energy (50% and operator). The GBA
encompasses several oil and gas accumulations some 150 km north-east of
Aberdeen in the Outer Moray Firth.
Buchan Horst is one of the largest remaining undeveloped fields on the UKCS,
with an estimated 21 mmboe of 2C resources net to Serica, with the potential
for 10,000 boepd peak net production. The project has the potential to
increase low-carbon oil production for the UK while supporting over 1,000 UK
jobs.
The draft FDP for the project has been submitted to the NSTA. However, the
field partners' ability to take FID on this project depends in large part on
the future fiscal regime and the outcome of the consultation on environmental
guidance recently announced by the UK Government. Field partners are awaiting
clarity around the UK regulatory and fiscal framework ahead of deciding next
steps.
Exploration assets
North Eigg - Blocks 3/24c and 3/29c, Serica Energy (UK) Limited 100% and
operator
Abandonment of the North Eigg exploration well has been completed and the
previously retained licence area will be relinquished in Q4 2024.
Skerryvore - Blocks 30/12c (part), 30/13c (split), 30/17h, 30/18c and 30/19c
(part), Serica Energy (UK) Limited: 20% working interest, operator Parkmead
The P2400 Licence is located in the Central North Sea, 60 km south of the
Erskine field. Current equity holders are Serica 20%, Parkmead 50% (operator)
and CalEnergy 30%. The commitment work programme includes drilling an
exploration well on the Skerryvore prospect currently scheduled to be by end
September 2025.
Licence Awards in the UK 33rd licensing round
The Kyle licence in UK block 29/2c (Serica 100% and operator) is a previously
producing oil field, 20 km southeast of Triton and represents a potential
redevelopment tie-back to existing Serica equity infrastructure. Studies in
order to determine whether there is a viable project are continuing.
FINANCIAL REVIEW
SUMMARY OF H1 2024 UNAUDITED FINANCIAL RESULTS
Following the acquisition of Tailwind in the prior year and the refinancing of
the Group's RBL in January 2024, the Directors have elected, with effect from
1 January 2024, to change the Group's presentation currency from Pounds
Sterling to US Dollars. The Group believes that the presentation currency
change will give investors and other stakeholders a clearer understanding of
Serica's performance over time and align with the presentation currency of its
peers.
As a result of this change, the results for the six months ended 30 June 2023
and the balance sheet as at 31 December 2023 have been restated in US Dollars
($).
Further analysis of the summary metrics provided in the Summary Financial
Information table below is detailed in the following pages of this Financial
Review.
Summary Financial Information Units H1 2024 H1 2023 PF H1 2023
Production and sales realised prices
Production kboepd 43.7 39.3 49.3
Sales volumes mmboe 7.9 6.8 8.6
Natural Gas (net of NTS system charges) p/th 67 95 97
Crude Oil $/Bbl 78 65 66
NGLs $/MT 432 464 466
Income Statement Restated Restated
Revenue $ million 462 422 545
EBITDAX((1)) $ million 279 290 n/a
Profit before taxation $ million 188 268 n/a
Profit after taxation $ million 82 98 n/a
Basic earnings per share cents 21 30 n/a
Other key financial figures
Capital expenditure((1)) $ million 124 24
Operating cashflow $ million 301 330
CFFO less current tax((1)) $ million 193 137
Share buyback $ million 19 -
(1) See Reconciliation of non-IFRS measures for further detail.
Production for H1 2024 was 43.7 kboepd, compared to 39.3 kboepd for H1 2023
and 49.3 kboepd for H1 2023 on a pro forma basis. Market sales prices for oil
and, to a greater extent, gas for the period were lower than for H1 2023 with
NBP gas prices averaging 73p/th (H1 2023: 108p/th) and Brent crude averaging
$84/bbl (H1 2023: $80/bbl). Total operating costs increased broadly in line
with production volumes but with an additional impact from inflation over the
year.
Serica generated EBITDAX of $279 million compared to $290 million for H1 2023
and a profit before taxation of $188.5 million for H1 2024 compared to $267.9
million for H1 2023. After book tax of $106.0 million (H1 2023: $169.4
million), profit after tax for the period was $82.5 million compared to $98.5
million for H1 2023.
Sales revenues
Restated Restated
Revenue Units H1 2024 H1 2023 PF H1 2023
Total revenue $ million 462 422 545
Gas Sales $ million 195 267 281
Crude Oil $ million 252 141 250
NGLs $ million 15 14 14
The total H1 2024 sales revenue was $461.6 million, compared to pro forma H1
2023 sales revenue of $544.9 million. The reduction in like for like sales
revenue is largely driven by the impact of the May 2024 Triton unplanned
outage combined with marginally lower realised commodity prices, primarily
driven by gas.
Sales comprised gas revenue of $194.5 million (PF H1 2023: $281.0 million),
oil revenue of $251.7 million (PF H1 2023: $249.8 million) and NGL revenue of
$15.4 million (PF H1 2023: $14.1 million). The fall in gas revenue was driven
by lower realised pricing (67 pence per therm as compared to 97 pence per
therm PF H1 2023) whilst the like for like oil revenue was relatively flat
reflecting marginally lower production volumes offset by higher realised oil
prices ($78 per barrel as compared to $66 per barrel PF H1 2023). Like for
like NGL revenues were relatively flat, with slightly higher sales volumes
offset by marginally lower realised prices for NGLs ($432 per metric tonne as
compared to PF H1 2023: $466 per metric tonne).
Total product sales volumes for the period comprised approximately 229 million
therms of gas (PF H1 2023: 235 million therms), 3.2 million lifted barrels of
oil (H1 PF 2023: 3.9 million barrels) and 35,600 metric tonnes of NGLs (PF H1
2023: 30,200 metric tonnes). This amounted to product sales in the period of
7.9 million boe (PF H1 2023: 8.6 million).
Gross profit
The gross profit for H1 2024 was $206.8 million compared to $236.6 million for
H1 2023. Overall cost of sales of $254.7 million compared to $185.2 million
for H1 2023. This comprised $156.4 million of field operating and lifting
costs (H1 2023: $123.4 million), movements in oil over/underlift charge of
$11.2 million (H1 2023: credit of $17.1 million), and $87.1 million of
non-cash depletion charges (H1 2023: $78.9 million).
Restated
Cost of sales Units H1 2024 H1 2023
Total operating costs $ million 255 185
Field operating costs $ million 151 121
Lifting costs $ million 6 2
Movement in over / underlift $ million 11 (17)
DD&A $ million 87 79
The increase in total operating costs largely reflected higher production
volumes for the enlarged business. Operating costs as reported per boe were
approximately $19 per boe, increased from $17.5 per boe for H1 2023, with the
increased unit rate mainly due to the reduced production from the unplanned
Triton Area shut-in during May 2024.
EBITDAX, operating profit before net finance costs and tax
EBITDAX for H1 2024 was $279 million compared to $290 million for H1 2023.
Restated
Operating profit to EBITDAX((1)) Units H1 2024 H1 2023
Operating profit $ million 202 269
Add back DD&A $ million 87 79
Add back E&E costs $ million 2 8
Add back / (Deduct) unrealised hedging $ million 15 (25)
Deduct contract revenue - other $ million (29) (16)
(Deduct) / Add back transaction costs and other $ million - 14
Add back share-based payments $ million 2 3
Deduct gain on acquisition $ million - (42)
EBITDAX((1)) $ million 279 290
(1) See Reconciliation of non-IFRS measures for further detail.
The operating profit for H1 2024 was $201.8 million compared to $269.0 million
(inclusive of a restated gain on acquisition of $41.9 million on the Tailwind
transaction) for H1 2023. The restated gain on acquisition now reflected in
the restated H1 2023 figures represents the final gain on acquisition as
disclosed in the 2023 year-end financial statements, which included
adjustments made during the 12-month post-acquisition measurement period in
accordance with IFRS 3.
Net hedging expense of $18.4 million (H1 2023: $9.2 million income) comprised
unrealised hedging losses of $14.9 million (H1 2023: gains of $25.1 million)
and realised hedging losses of $3.5 million (H1 2023: $15.9 million losses).
Unrealised hedging losses arose from the movement in valuation of Serica's H1
2024 period-end commodity hedge positions, primarily gas derivatives which
were entered into during H1 2024 to comply with minimum hedging requirements
under the Group's RBL facility as well as to manage commodity price risks.
Realised hedging expense during H1 2024 primarily related to UKA Emission
Trading Scheme ('UKA ETS') swaps.
Contract revenue of $28.6 million (H1 2023: $16.1 million) arose from the
partial unwind of an underlying revenue offtake contract that was fair valued
in connection with the Tailwind acquisition in 2023. An original liability of
$66.7 million was recognised which is released to the Income Statement across
2023 and 2024 as the underlying contract unwinds, with the final unwind impact
of $8.1 million to be included in H2 2024.
Exploration expenses and asset write-offs totalled $2.0 million in H1 2024 (H1
2023: $7.9 million which included final charges from the North Eigg
exploration well drilled in 2022).
Administrative expenses for H1 2024 of $11.2 million reflected a full half
year period of the enlarged group activities compared to $9.8 million for H1
2023. The H1 2023 comparable period also separately included transaction costs
of $10.5 million relating to fees and other transaction costs associated with
the acquisition of Tailwind Energy Investments Ltd.
H1 2024 currency gains of $0.6 million compared to H1 2023 losses of $3.5
million reflecting the reduced volatility between Pounds Sterling and US
Dollars in the H1 2024 period. Share-based payments were $2.1 million (H1
2023: $3.0 million).
Profit before taxation and profit after taxation for the period
Profit before taxation for H1 2024 of $188.5 million (H1 2023: $267.9 million)
included a $2.9 million charge arising from an increase in the fair value of
financial liabilities (H1 2023: $1.8 million charge), $6.9 million of finance
revenue (H1 2023: $8.7 million) and $17.3 million of finance costs (H1 2023:
$7.9 million).
Finance revenue of $6.9 million (H1 2023: $8.7 million) primarily represented
interest income earned on cash deposits and decreased as a result of lower
cash balances held in the period compared to H1 2023. Finance costs of $17.3
million (H1 2023: $7.9 million) included interest payable and other charges on
the RBL facility, the discount unwind on decommissioning provisions and other
minor finance costs. The increase reflects the full six-month period of
interest charges and fees on the RBL in H1 2024 compared to the shorter
post-acquisition period in H1 2023.
The H1 2024 taxation charge of $106.0 million (H1 2023: $169.4 million)
comprised current tax charges of $72.7 million (H1 2023: $163.0 million) and a
deferred tax charge of $33.3 million (H1 2023: $6.4 million) relating mainly
to the utilisation of tax losses brought forward, accelerated capital
allowances and the contract revenue unwind during the period. The reduction in
current tax charges mainly reflected lower income and higher capital spend in
H1 2024 as well as the utilisation of brought forward tax losses within the
acquired Tailwind business.
Restated
Reported and Effective tax rate((1)) Units H1 2024 H1 2023
Profit before tax $ million 188 268
Current tax $ million 73 163
Deferred tax charge $ million 33 6
Tax charge for the period $ million 106 169
Book tax rate % 56% 63%
Effective tax rate((1)) % 26% 56%
Applicable ring-fence aggregate tax rate % 75% 75%
(1) See Reconciliation of non-IFRS measures for further detail.
Overall, profit after taxation for H1 2024 was $82.5 million compared to a
profit after taxation of $98.5 million for H1 2023. This resulted in an
earnings per share of 21 cents (H1 2023: 30 cents) after taking into account
the weighted average number of ordinary shares in issue.
GROUP BALANCE SHEET
Serica retains a strong balance sheet following completion of the Tailwind
acquisition including remaining in a net cash position as of 30 June 2024.
This position of balance sheet strength gives the Group flexibility in capital
allocation including the ability to fund its ongoing capital investment
programmes while continuing to support distributions to shareholders.
Completion of a new financing facility in H1 2024 to refinance the RBL assumed
as part of the Tailwind acquisition in 2023 has further boosted the Group's
financial resources and liquidity at a time of continuing uncertainty on the
UK fiscal regime as well as maintaining firepower as Serica continues to seek
new acquisition and investment opportunities.
Restated
Assets 30 June 2024 31 December 2023
$ million $ million
E&E 16 2
PP&E 956 906
Deferred tax asset 75 107
Inventory 15 14
Trade and other receivables 170 176
DSA Security - 35
Cash & cash equivalents 362 335
Total Assets 1,594 1,575
Equity and liabilities 30 June 2024 31 December 2023
$ million $ million
Equity 832 834
RBL borrowings, drawn amounts 231 271
RBL unamortised fees (12) -
Provisions 141 148
Financial liabilities 107 93
Contract liabilities 8 37
Tax payable 69 68
Trade and other payables 149 124
Dividend payable 69 -
Total Equity and Liabilities 1,594 1,575
Total property, plant and equipment increased from $905.8 million at year end
2023 to $955.7 million at 30 June 2024.
PP&E additions comprised book capital expenditure including accruals
during H1 2024 of $135.2 million across various field assets. This included
expenditure on the Bruce and Keith LWIV campaigns of $49.8 million, $18.2
million early project spend on the Belinda development for which FDP was
received in May 2024, drilling expenditure of $31.8 million on the Bittern B6
(formerly B1Z) well which was completed shortly after period end in July,
preparations for the second and third Triton area drilling programme wells
GE05 (Gannet E) and EV02 (Evelyn), life extension work for the Triton FPSO and
other asset work including water injection pipeline replacement work scope on
the Bittern field. There were also increases from right of use assets of $5.0
million offset by depletion charges for H1 2024 of $87.1 million, other
depreciation charges of $0.5 million and currency translation adjustments of
$2.6 million. Depletion charges represent the allocation of field capital
costs over the estimated producing life of each field and comprise costs of
asset acquisitions and subsequent investment programmes.
The net deferred tax asset of $75.1 million at 30 June 2024 compares to $107.1
million at year end 2023. This comprised the recognition of deferred tax
assets in relation to tax losses and future relief available on
decommissioning, partially offset by deferred tax liabilities arising on
PP&E balances. Deferred tax liabilities arising upon the Group's PP&E
balances will be released in future periods as those balances are depleted.
Decommissioning security advances of $35.1 million at 31 December 2023 were
recovered and added to cash balances during H1 2024 when replaced shortly
after completion of the new RBL facility by security in the form of letters of
credit issued under the new financing facility.
The increase in cash balances from $335.4 million at 31 December 2023 to
$362.2 million at 30 June 2024 reflected cash flow from operations of $301.1
million mainly offset by $72.4 million of cash tax payments, capital
expenditures paid of $123.8 million, $19.0 million in respect of our inaugural
share buyback programme conducted between April and June and $52.5 million on
debt repayments in the period.
Current trade and other payables increased to $149.0 million at 30 June 2024
from $124.0 million at the end of 2023 reflecting the significant ongoing
capex projects in the period. UK corporation tax payable of $68.7 million at
30 June 2024 (31 December 2023: $68.3 million) reflects liabilities for
corporation tax, supplementary charge, and the EPL.
Derivative financial liabilities of $20.5 million at 30 June 2024 represent
the mark to market valuation of gas ($13.5 million), oil ($4.2 million) and
UKA ETS ($2.8 million) hedging swap and collar products in place at the period
end. New gas and oil hedging arrangements were entered into during H1 2024 to
comply with minimum hedging requirements under the Group's RBL facility as
well as to manage commodity price risks where management considered this
prudent and/or available on attractive market terms. The 31 December 2023
liability of $5.6 million largely represented the valuation of UKA ETS swaps
in place at the year end.
The dividend payable of $68.8 million at 30 June 2024 (31 December 2023: $nil)
represents the final cash dividend in respect of FY2023 of 14.0 pence (17.7
cents) per share approved at the annual general meeting on 27 June 2024 and
paid in July.
Contract liabilities of $8.1 million at 30 June 2024 (31 December 2023: $36.7
million) reflect the outstanding portion of an underlying revenue offtake
contract that was fair valued in connection with the Tailwind acquisition in
March 2023. An original liability of $66.7 million was recognised which is
released to the Income Statement across 2023 and 2024 as the underlying
contract unwinds.
Non-current financial liabilities of $86.9 million (31 December 2023: $82.8
million) comprise remaining deferred consideration projected to be paid under
the BKR acquisition agreements of $47.2 million (31 December 2023: $44.9
million) and royalty liabilities of $39.7 million (31 December 2023: $37.9
million) for amounts payable to third parties under the terms of Triton asset
acquisitions previously made by Tailwind. Current liabilities at 31 December
2023 reflected the final contingent consideration payment of shares issued in
March 2024 in respect of the Tailwind acquisition.
Provisions of $141.2 million (31 December 2023: $148.8 million) predominantly
relate to future decommissioning obligations and are split between current
balances of $8.0 million (31 December 2023: $16.5 million) and non-current of
$133.2 million (31 December 2023: $132.3 million). The small decrease from the
prior year balance of $148.8 million was mainly due to expenditure in the
period on the ongoing Arthur field programme partially offset by a charge from
the unwinding of the discount applied. Increases were partially offset by
currency translation adjustments.
Interest bearing loans of $218.9 million at 30 June 2024 represent drawn
amounts of $231.0 million net of unamortised facility fees of $12.1 million
under a new $525 million RBL facility entered into in January 2024 which
replaced the previous RBL facility assumed with the Tailwind acquisition (31
December 2023: $271.2 million).
The initial drawdown under the new RBL facility was $283.5 million (covering a
repayment of $271.2 million for the previous RBL and $12.3 million of interest
and new facility fees) in January 2024 and a repayment of $52.5 million was
made in February 2024. The redetermined total amount available for drawdown
under the facility at 30 June 2024 was at a level capped by the facility size
of $525 million.
CASH BALANCES AND FUTURE COMMITMENTS
Current cash position and price hedging
At 30 June 2024 the Group held adjusted net cash of $131.2 million as compared
to adjusted net cash of $99 million at 31 December 2023.
Restated
Adjusted Net Cash / (Debt) 30 June 2024 31 December 2023
$ million $ million
Interest bearing loans (219) (271)
Add back unamortised fees (12) -
Cash & Cash Equivalents 362 335
DSA Security - 35
Adjusted Net Cash 131 99
As at 4 September 2024, the Company held cash and cash equivalents of $262.3
million and debt drawings of $231 million. This reduced net cash position is
after settlement of the 2023 final dividend and an initial tax instalment in
respect of 2024, both paid in July 2024 and a period of lower revenues
primarily as a result of the scheduled Triton turnaround stoppage.
Hedging
Serica carries out hedging activity to manage commodity price risk, to meet
its contracted arrangements under its RBL facility and to ensure there is
sufficient funding for future investments. Serica held the following
instruments as at 31 August 2024:
Oil hedges
2024 2025 2026
Weighted Average Units Q3-24 Q4-24 Q1-25 Q2-25 Q3-25 Q4-25 Q1-26
Put Net $/bbl 68 68 - - - - -
Swap price $/bbl 66 70 81 75 75 75 75
Collar floor net $/bbl 68 68 68 69 68 68 69
Total weighted average $/bbl 67 69 72 69 69 69 70
Collar ceiling $/bbl 111 100 96 88 88 86 86
Hedged Volume Kboe/d 11 12 6 6 6 5 4
Gas hedges
2024 2025 2026
Weighted Average Units Q3-24 Q4-24 Q1-25 Q2-25 Q3-25 Q4-25 Q1-26
Put Net p/therm - - - - - - -
Swap price p/therm 71 84 84 87 86 90 93
Collar floor net p/therm - 80 80 70 70 80 80
Total weighted average p/therm 71 82 81 80 78 87 89
Collar ceiling p/therm - 120 125 115 115 130 130
Hedged Volume Kboe/d 2 3 4 5 4 3 3
Included in the H2 2024 hedged volumes are volumes at fixed pricing under oil
offtake agreements for approximately 0.7 million barrels (representing
approximately 22% of forecast H2 2024 oil production) at an average price of
$62.1 per barrel. These are applied to individual oil tanker liftings from the
Triton area FPSO and are expected to be fully utilised during H2 2024.
UKA ETS hedges
In addition Serica continued to hold a small legacy position of fixed price
swaps for UKA ETS products consisting of 66,000 MT at £80/MT for 2H 2024.
Field and other capital commitments
Serica's 2024 investment programme includes a LWIV campaign on the Bruce and
Keith fields and a four-well drilling campaign in the Triton Area (Bittern
B1z, Gannet GE-05, Evelyn Phase 2 (EV02) and a Guillemot NW infill well). In
April 2024 Serica also took FID on the Belinda development which will be
drilled as a fifth well in the Triton programme. Consent for the Belinda
project was received from OPRED and the NSTA in May 2024.
Potential further programmes to enhance current production profiles and extend
field life are under consideration, but will be reviewed carefully in the
light of the outcome of the new UKCS fiscal regime following the Autumn
Budget.
At 30 June 2024, the Group had commitments for future capital expenditure
relating to its oil and gas properties which relate primarily to the remaining
Triton Area five-well programme (including Belinda), the remaining Bruce LWIV
campaign, other capital works on Bruce, Erskine, and decommissioning of the
Arthur field. The Group's only significant exploration commitment is our 20%
working interest share of a commitment well on Licence P2400 (Skerryvore)
currently required to be drilled before October 2025.
Cash projections are run periodically to examine the potential impact of
extended low oil and gas prices as well as possible production interruptions.
Serica currently has substantial net cash resources and relatively low
operating costs per boe which means that the Company is well placed to
withstand such risks and its capital commitments can be funded from existing
cashflow in most scenarios.
Additional Information
Additional information relating to Serica, can be found on the Company's
website at www.serica-energy.com and on SEDAR at www.sedar.com
(http://www.sedar.com) .
Approved on behalf of the Board
Chris Cox
Chief Executive Officer
9 September 2024
Forward Looking Statements
This disclosure contains certain forward looking statements that involve
substantial known and unknown risks and uncertainties, some of which are
beyond Serica Energy plc's control, including: the impact of general economic
conditions where Serica Energy plc operates, industry conditions, changes in
laws and regulations including the adoption of new environmental laws and
regulations and changes in how they are interpreted and enforced, increased
competition, the lack of availability of qualified personnel or management,
fluctuations in foreign exchange or interest rates, stock market volatility
and market valuations of companies with respect to announced transactions and
the final valuations thereof, and obtaining required approvals of regulatory
authorities. Serica Energy plc's actual results, performance or achievement
could differ materially from those expressed in, or implied by, these forward
looking statements and, accordingly, no assurances can be given that any of
the events anticipated by the forward looking statements will transpire or
occur, or if any of them do so, what benefits, including the amount of
proceeds, that Serica Energy plc will derive therefrom.
Serica Energy plc
Condensed Consolidated Income Statement
Six Six
months months Year
ended ended ended
30 June 30 June 31 December
Notes 2024 2023 2023
Continuing operations $000 $000 $000
(Restated(*)) (Restated(*))
Sales revenue 4 461,559 421,843 788,920
Cost of sales 5 (254,725) (185,224) (406,790)
Gross profit 206,834 236,619 382,130
Other (expense)/income 6 (18,449) 9,156 5,848
Contract revenue - other 28,576 16,084 29,951
Exploration expense (1,476) (825) (2,622)
E&E asset write-offs (532) (7,068) (10,871)
Depreciation (502) - -
Administrative expenses (11,223) (9,801) (24,486)
Transaction costs - (10,542) (12,539)
Foreign exchange gain/(loss) 639 (3,521) (4,465)
Share-based payments (2,114) (2,999) (4,942)
Gain on acquisition - 41,889 41,889
Operating profit 201,753 268,992 399,893
Change in fair value of financial liabilities (2,944) (1,811) (9,446)
Finance revenue 6,947 8,672 16,830
Finance costs 7 (17,258) (7,929) (26,906) (26,906)
Profit before taxation 188,498 267,924 380,371
Taxation charge for the period 12 (106,023) (169,439) (252,614)
Profit after taxation and
profit for the period 82,475 98,485 127,757
Earnings per ordinary share (EPS)
Basic EPS on profit for the period ($) 0.21 0.30 0.35
Diluted EPS on profit for the period ($) 0.20 0.29 0.34
* See Note 2
Serica Energy plc
Condensed Consolidated Statement of Comprehensive Income
Six Six
months months Year
ended ended ended
30 June 30 June 31 December
2024 2023 2023
$000 $000 $000
(Restated(*)) (Restated(*))
Profit for the period 82,475 98,485 127,757
Other comprehensive (loss)/profit
Exchange differences on translation (2,685) 20,368 22,594
Other comprehensive (loss)/profit for the period (2,685) 20,368 22,594
Total comprehensive profit for the period 79,790 118,853 150,351
Total comprehensive profit attributable to:
Equity owners of the Company 79,790 118,853 150,351
* See Note 2
Serica Energy plc
Condensed Consolidated Balance Sheet
30 June 31 December
2024 2023
$000 $000
Notes (Restated(*))
Non-current assets
Exploration & evaluation assets 9 16,073 2,457
Property, plant and equipment 10 955,721 905,760
Deferred tax asset 12 75,144 107,071
1,046,938 1,015,288
Current assets
Inventories 14,529 13,860
Trade and other receivables 170,270 176,455
Decommissioning security advances - 35,055
Cash and cash equivalents 362,203 335,433
547,002 560,803
TOTAL ASSETS 1,593,940 1,576,091
Current liabilities
Trade and other payables 149,021 124,012
Corporate tax payable 68,656 68,311
Derivative financial liability 20,483 5,564
Contract liabilities 8,124 36,700
Financial liabilities - 4,627
Provisions 7,970 16,467
Dividends payable 8 68,786 -
Non-current liabilities
Financial liabilities 86,917 82,751
Provisions 133,206 132,291
Interest bearing loans 11 218,890 271,200
TOTAL LIABILITIES 762,053 741,923
NET ASSETS 831,887 834,168
Share capital 13 245,607 245,257
Merger reserve 13 286,590 283,367
Other reserves 39,764 37,650
Treasury/own shares (18,972) -
Currency translation reserve (11,580) (8,895)
Accumulated funds 290,478 276,789
TOTAL EQUITY 831,887 834,168
* See Note 2
Condensed Consolidated Statement of Changes in Equity
Share capital Merger reserve Other reserves Treasury/own shares Currency translation reserve Accumulated funds Total
$000 $000 $000 $000 $000 $000 $000
At 1 January 2023 (Restated(*)) 233,260 - 32,708 - (31,489) 259,656 494,135
Profit for the year - - - - - 127,757 127,757
Other comprehensive income - - - - 22,594 - 22,594
Total comprehensive income - - - - 22,594 127,757 150,351
Issue of shares 11,997 283,367 - - - - 295,364
Share-based payments - - 4,942 - - - 4,942
Dividend payable - - - - - (110,624) (110,624)
At 31 December 2023 (Restated(*)) 245,257 283,367 37,650 - (8,895) 276,789 834,168
Profit for the period - - - - - 82,475 82,475
Other comprehensive income - - - - (2,685) - (2,685)
Total comprehensive income - - - - (2,685) 82,475 79,790
Issue of shares 350 3,223 - - - - 3,573
Share-based payments - - 2,114 - - - 2,114
Treasury/own shares - - - (18,972) - - (18,972)
Dividend payable - - - - - (68,786) (68,786)
At 30 June 2024 245,607 286,590 39,764 (18,972) (11,580) 290,478 831,887
* See Note 2
Serica Energy plc
Condensed Consolidated Cash Flow Statement
Six Six
months months Year
ended ended ended
30 June 30 June 31 December
2024 2023 2023
$000 $000 $000
Note (Restated*) (Restated*)
Cash inflow from operations 14 301,137 329,607 470,022
Taxation paid (72,414) (173,640) (347,588)
Decommissioning spend (4,514) (35) (1,115)
Net cash inflow from operating activities 14 224,209 155,932 121,319
Investing activities:
Interest received 6,947 8,672 16,830
Purchase of E&E assets (12,666) (6,915) (12,027)
Purchase of property, plant & equipment (106,664) (16,742) (85,626)
Acquisition of subsidiary, net of cash acquired - (54,177) (54,177)
Net cash outflow from investing activities (112,383) (69,162) (135,000)
Financing activities:
Issue of ordinary shares 350 461 996
Repayment of borrowings (52,545) (60,000) (102,000)
Proceeds from borrowings - - 43,200
Payments of lease liabilities (415) (368) (786)
Dividends paid/share buyback (18,972) - (110,391)
Finance costs paid (13,572) (6,907) (23,595)
Net cash outflow from financing activities (85,154) (66,814) (192,576)
Cash and cash equivalents
Net increase/(decrease) in period 26,672 19,956 (206,257)
Effect of exchange rates on cash and cash equivalents 98 19,309 18,776
Amount at start of period 335,433 522,914 522,914
Amount at end of period 362,203 562,179 335,433
* See Note 2
Serica Energy
plc
Notes to the Unaudited Condensed Consolidated Financial Statements
1. Corporate information
The interim condensed consolidated financial statements of the Group for the
six months ended 30 June 2024 were authorised for issue in accordance with a
resolution of the directors on 9 September 2024.
Serica Energy plc ('the Company') is a public limited company incorporated and
domiciled in England & Wales. The Company's ordinary shares are traded on
the AIM in London. The principal activity of the Company is to identify,
acquire and exploit oil and gas reserves.
2. Basis of preparation and accounting policies
Basis of Preparation
The interim condensed consolidated financial statements for the six months
ended 30 June 2024 have been prepared in accordance with International
Accounting Standard 34 "Interim Financial Reporting".
These unaudited financial statements of the Group have been prepared following
the same accounting policies and methods of computation as the consolidated
financial statements for the year ended 31 December 2023 with the exception of
the change in the Group's presentation currency (see below). These financial
statements do not include all the information and footnotes required by
generally accepted accounting principles for annual financial statements and
therefore should be read in conjunction with the consolidated financial
statements and the notes thereto in the Serica Energy plc annual report for
the year ended 31 December 2023. A number of amendments to existing standards
and interpretations were effective from 1 January 2024, but there was no
impact on the H1 2024 condensed consolidated financial statements. The Group
has not early adopted any standard, interpretation or amendment that has been
issued but is not yet effective.
The financial information contained in this announcement does not constitute
statutory financial statements within the meaning of section 435 of the
Companies Act 2006.
The comparative figures for the year ended 31 December 2023, restated to
reflect the change in the Group's presentation currency (see below), are not
the Group's statutory accounts for that financial year. Those financial
statements have been reported on by the Group's auditor and delivered to the
Registrar of Companies. The report of the auditor was unqualified, did not
include a reference to any matters to which the auditor drew attention by way
of emphasis without qualifying its report and did not contain statements under
Section 498 (2) or (3) of the Companies Act 2006.
Change in presentation currency
On 1 January 2024, the Group changed its reporting currency from Pounds
Sterling to US Dollars as the Group believes that the presentation currency
change will give investors and other stakeholders a clearer understanding of
Serica's performance over time and align with the presentation currency of its
peers.
In accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates
and Errors, this change in presentation currency was applied retrospectively
and accordingly, prior year comparatives have been restated.
Financial information included in the consolidated statements for the years
ended 31 December 2022 and 31 December 2023 has been restated in US Dollars as
follows:
- Assets and liabilities in non-US denominated currencies were translated
into US Dollars at the rate of exchange ruling at the relevant balance sheet
date;
- Non-US Dollar income statements and cash flows were translated into US
Dollars at average rates of exchange for the relevant period; and
- Share capital, merger reserve, and all other equity items were
translated at the historical rates prevailing at 31 December 2018, the date at
which previously, the Group had changed its presentation currency from US
Dollars to Pounds Sterling, or the subsequent rates prevailing on the date of
each relevant transaction since.
In preparing these financial statements, the exchange rates used in respect of
the US Dollars ($) and Pounds Sterling (£) are:
Pounds Sterling to US Dollar
Six months ended 30 June 2024 Year ended 31 December 2023 Six months ended 30 June 2023 Year ended 31 December 2022
Average for the period 1.265 1.243 1.233 N/A
At the end of the period 1.264 1.273 1.266 1.209
Business Combination
In March 2023, the Group completed the acquisition of Tailwind Energy
Investments Ltd which was accounted for as a business combination.
The comparative H1 2023 figures now presented reflect the impact of final
measurement period adjustments as disclosed in Serica's 2023 year-end
financial statements, in accordance with IFRS 3 Business Combinations.
Going Concern
The Directors are required to consider the availability of resources to meet
the Group's liabilities for the period ending 31 December 2025, the 'going
concern period'.
As at 4 September 2024 the Group held cash and term deposits of $262.3
million. Following the re-financing completion in January 2024, separate RBL
liquidity headroom of $294 million existed at 4 September 2024 ($231 million
drawn versus $525 million available). See note 11 for further details of the
current RBL facility.
The Group regularly monitors its cash, funding and liquidity position,
including available facilities and compliance with facility covenants. Near
term cash projections are revised and underlying assumptions reviewed,
generally monthly, and longer-term projections are also updated regularly.
Downside price and other risking scenarios are considered. In addition to
commodity sales prices, the Group is exposed to potential production
interruptions and these are also considered under such scenarios. In recent
years, management has given priority to building a strong cash reserve which
can respond to different types of risk.
For the purposes of the Group's going concern assessment management has stress
tested cash projections considering a combination of downward pressure on
commodity prices and extended production outages during the going concern
period. These projections cover a base case forecast and an extreme stress
test scenario for the operations of the Group. RBL repayments have been
assumed based on the current redetermination and no covenant compliance
matters noted.
The base case assumptions for the going concern period included commodity
pricing of 70 pence/therm for gas and $75/bbl for oil for the remainder of
2024 and 75 pence/therm gas and $75/bbl oil for 2025. Production, opex, capex
and tax assumptions are those currently included in standard management
forecasting. The forward-looking price assumptions are considered as
reasonable in light of recent commodity forward pricing and a consensus of
published forecasts from the industry, brokers and other analysts.
The stress test assumptions assume a full six-month shut-in of Triton hub
production for Q4 2024 and Q1 2025 and a full six-month shut-in of BKR hub
production for Q2 and Q3 2025. Production remains at base case levels to the
end of the going concern period outside of these separate production hub
shut-ins. Base case commodity pricing is retained for 2024 but lower commodity
pricing of 50 pence/therm gas and $60/bbl oil are assumed for the 2025 period
in this scenario which are significantly below the range of current market
expectations for the going concern period. Under this scenario, which would
result in lower cash inflows and any repayments of the RBL facility as
redetermined, the Group was able to maintain sufficient cash to meet its
obligations and maintain covenant compliance. A number of mitigating factors
and mitigating actions that are under management control are available to
management in the stress test event. These would mitigate the reduced
operating cash outflows experienced and are not included in the projection.
After making enquiries and having taken into consideration these factors, the
Directors considered it appropriate that the Group has adequate resources to
continue in operational existence for the going concern period. Accordingly,
they continue to adopt the going concern basis in preparing the financial
statements.
Significant accounting policies
A number of new standards, amendments to existing standards and
interpretations were applicable from 1 January 2024. The adoption of these
amendments did not have a material impact on the Group's interim condensed
consolidated financial statements for the period ended 30 June 2024.
The accounting policies adopted in the preparation of the interim condensed
consolidated financial statements are consistent with those followed in the
preparation of the Group's annual financial statements for the year ended 31
December 2023. The impact of seasonality or cyclicality on operations is not
considered significant on the interim consolidated financial statements.
The Group financial statements are now presented in $ and all values are
rounded to the nearest thousand except when otherwise indicated.
Basis of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries Serica Holdings UK Limited, Serica Energy
Holdings BV, Serica Energy Corporation, Asia Petroleum Development Limited,
Petroleum Development Associates (Asia) Limited, Serica Energy (UK) Limited,
PDA Lematang Limited, Serica Energy Investments Limited, NSV Energy Limited,
Serica Energy Meltemi Limited, Serica Energy Mistral Limited, Serica Energy
Sirocco Limited, Serica Energy Chinook Limited and Serica Energy Bora Limited.
Together, these comprise the 'Group'.
The results and financial position of all of the Group entities that have a
functional currency different from the presentation currency are translated
into the presentation currency as follows:
· Assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance sheet;
· Income and expenses for each income statement are translated at
average exchange rates (unless this average is not a reasonable approximation
of the rates prevailing on the transaction dates, in which case income and
expenses are translated at the rate on the dates of each transaction);
· The exchange differences arising on translation for consolidation are
recognised in other comprehensive income; and
· Any fair value adjustments to the carrying amounts of assets and
liabilities arising on the acquisition are treated as assets and liabilities
of the acquired entity and are translated at the spot rate of exchange at the
reporting date.
All inter-company balances and transactions have been eliminated upon
consolidation.
3. Segmental Information
For the purposes of segmental reporting, the Group currently operates a single
class of business being oil and gas exploration, development and production
and related activities in a single geographical area, being presently the UK
North Sea.
4. Sales Revenue
Restated* Restated*
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2024 2023 2023
$000 $000 $000
Gas sales 194,507 266,269 429,987
Gas supply contract revenue - 1,017 1,227
Total gas sales 194,507 267,286 431,214
Oil sales 251,661 140,641 332,265
NGL sales 15,391 13,916 25,441
Total revenue 461,559 421,843 788,920
* See note 2
5. Cost of sales
Restated* Restated*
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2024 2023 2023
$000 $000 $000
Operating costs 150,975 121,282 272,686
Lifting costs 5,408 2,105 8,853
Change in decommissioning estimates expensed - - 461
Movement in liquids overlift / underlift 11,195 (17,110) (11,545)
Depletion (note 10) 87,147 78,947 136,335
254,725 185,224 406,790
* See note 2
6. Group Operating Profit
Restated* Restated*
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2024 2023 2023
$000 $000 $000
Unrealised hedging (losses)/gains (14,918) 25,144 25,317
Realised hedging losses (3,531) (15,988) (19,469)
Other (expense)/income (18,449) 9,156 5,848
* See note 2
Derivative financial instruments
The Group enters into derivative financial instruments with various
counterparties. Commodity and foreign currency derivative contracts are
designated as at fair value through profit and loss (FVTPL), and gains and
losses on these contracts are recognised in the income statement. Derivative
financial instruments held at 30 June 2024 comprised oil, gas swaps and
collars and UKA ETS swaps. At 31 December 2023 they solely comprised UKA ETS
swaps. These were valued by counterparties, with the valuations reviewed
internally and corroborated with readily available market data of forward
pricing (level 2). Details of the Group's derivative financial instruments
currently held are provided in the financial review above.
The mark-to-market of the Group's open contracts as at 30 June 2024 was a
liability of $20.5 million (31 December 2023: $5.6 million).
7. Finance Costs
Restated* Restated*
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2024 2023 2023
$000 $000 $000
Loan interest payable 11,448 6,769 17,237
Loan commitment fees 2,590 780 5,390
Other charges, net FX swaps, and interest payable 459 (1,729) 637
Unwinding of discount on provisions 2,761 2,109 3,642
Total finance costs 17,258 7,929 26,906
* See note 2
8. Dividends payable
A final cash dividend for 2023 of 14.0 pence per share was proposed in April
2024 and approved at the annual general meeting on 27 June 2024. Following the
approval in the H1 2024 period, the dividend payable of £54.4 million ($68.8
million) is recognised as a liability in the Balance Sheet at 30 June 2024.
The dividend was paid in July 2024.
Dividends on ordinary shares paid in 2023
A final cash dividend for 2022 of 14.0 pence per share was proposed in April
2023 and approved at the annual general meeting on 29 June 2023. Following the
approval in the H1 2023 period, the dividend payable of £53.7 million ($68.0
million) was recognised as a liability in the Balance Sheet at 30 June 2023.
The dividend was paid in July 2023.
An interim cash dividend for 2023 of 9.0 pence per share was announced in
September 2023 and was paid in November 2023.
9. Exploration and Evaluation Assets
Total
$000
Cost:
At 1 January 2023 (restated*) 1,210
Additions 12,027
Asset write-offs (10,871)
Currency translation adjustment 91
At 31 December 2023 (restated*) 2,457
Additions 14,166
Asset write-offs (532)
Currency translation adjustment (18)
At 30 June 2024 16,073
Net Book Amount:
30 June 2024 16,073
31 December 2023 (restated*) 2,457
1 January 2023 (restated*) 1,210
* See note 2
10. Property, Plant and Equipment
Fixtures and fittings
Oil and gas properties Right-of-use assets
Total
$000 $000 $000 $000
Cost:
At 1 January 2023 (restated*) 580,639 256 1,042 581,937
Acquisitions 594,088 - 4,245 598,333
Additions 85,626 - - 85,626
Decommissioning asset revisions 20,384 - - 20,384
Currency translation adjustment 31,731 14 55 31,800
31 December 2023 (restated*) 1,312,468 270 5,342 1,318,080
Additions 135,164 - 5,017 140,181
Currency translation adjustment (5,022) (2) (6) (5,030)
At 30 June 2024 1,442,610 268 10,353 1,453,231
Depreciation and depletion:
At 1 January 2023 (restated*) 259,427 256 780 260,463
Charge for the year (note 5) 135,555 - 780 136,335
Charge for the year - other - - 216 216
Currency translation adjustment 15,247 14 45 15,306
At 31 December 2023 (restated*) 410,229 270 1,821 412,320
Charge for the period (note 5) 86,605 - 542 87,147
Charge for the period - other - - 502 502
Currency translation adjustment (2,449) (2) (8) (2,459)
At 30 June 2024 494,385 268 2,857 497,510
Net book amount:
At 30 June 2024 948,225 - 7,496 955,721
At 31 December 2023 (restated*) 902,239 - 3,521 905,760
At 1 January 2023 (restated*) 321,212 - 262 321,474
* See note 2
Acquisition of Tailwind Energy Investments Ltd
On 23 March 2023 the Group acquired Tailwind Energy Investments Ltd, which
included oil and gas assets in the UK North Sea, resulting in an acquisition
of assets with a value of $598.3 million allocated to property, plant and
equipment.
Depreciation and depletion
Depletion charges on oil and gas properties are classified within 'cost of
sales'. Depreciation on other elements of property, plant and equipment is
provided on a straight-line-basis and taken through general and administration
expenses.
11. Interest bearing loans
The Group's loan is carried at amortised cost as follows:
Restated*
30 June 31 December
2024 2023
$000 $000
Reserve based lending - principal 231,000 271,200
Loan commitment fees (12,110) -
Reserve based lending - net of fees 218,890 271,200
Due within one year - -
Due after more than one year 218,890 271,200
218,890 271,200
* See note 2
New Reserve Based Lending ('RBL') facility arrangements effective January 2024
In December 2023 Serica announced the signing of a new $525 million secured
RBL facility. Following the satisfaction of conditions precedent, this
completed in January 2024 and refinanced the Group's previous financing
arrangements of an RBL facility of $425 million of which $272.2 million was
drawn at 31 December 2023.
The RBL facility is a revolving credit facility available in multiple
currencies, it provides significantly increased liquidity to support future
acquisitions and investments and has established new relationships with a
syndicate of leading international banks. The RBL has a maturity date of 31
December 2029 with amortisation commencing on 31 December 2026. The interest
rate for loan drawings is SOFR plus a margin of 3.90% per annum and the
Borrowing Base Assets comprise all of Serica's interests in producing fields
except Serica's largest single producing field the Rhum field, and the
available amount under the facility is subject to semi-annual
redeterminations. The new facility also includes a separate $100 million sub
limit which can be utilised to issue Letters of Credit without the need for
cash security.
The facility agreement also has an uncommitted accordion feature which
provides an option for an additional financing of up to $525 million,
amounting to facilities of up to $1,050 million. The accordion facility can be
exercised within thirty-six months of the facility signing date, subject to
certain conditions.
An amount of $283.5 million was drawn down from the new RBL facility in
January 2024 to repay the previous RBL balance of $271.2 million as well as
previous RBL interest and fees ($1.7 million) and the main portion of new RBL
commitment fees ($10.6 million). In February 2024, the Group made a voluntary
repayment of $52.5 million.
In July, Serica announced that it had completed the first semi-annual
redetermination under its RBL facility. Reflecting the increased reserves,
together with the programme of hedging recently implemented, the borrowing
base has been increased from $463 million up to the full amount of the
committed facility of $525 million.
12. Taxation
The major components of income tax charged in the consolidated income
statement are:
Restated* Restated*
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2024 2023 2023
$000 $000 $000
Current income tax charge 72,728 163,009 228,544
Deferred income tax charge 33,295 6,430 24,070
Total taxation charge for the period 106,023 169,439 252,614
The deferred tax included in the Balance Sheet is as follows:
Restated*
30 June 31 December 2023
2024
$000 $000
Deferred tax assets 559,426 557,716
Deferred tax liabilities (484,282) (450,645)
Total deferred tax asset 75,144 107,071
Reconciliation of net deferred tax asset $000
At 1 January 2024 (restated*) 107,071
Tax charge for the period recognised in profit (33,295)
Currency translation adjustment 1,368
At 30 June 2024 75,144
* See note 2
Recognised and unrecognised tax losses
The Group's Balance Sheet has a deferred tax asset amount of $559.4 million as
at 30 June 2024 (31 December 2023: $557.7 million) arising from ring-fence
losses, decommissioning liabilities and other temporary differences. These
deferred tax assets are expected to be recovered through utilisation against
deferred tax liabilities, primarily related to temporary differences on fixed
assets ($484.3 million) and through future taxable profits.
The Group's deferred tax assets at 31 December 2023 and 30 June 2024 are
recognised to the extent that taxable profits are expected to arise in the
future against which tax losses and allowances in the UK can be utilised. In
accordance with IAS 12 Income Taxes, the Group assessed the recoverability of
its deferred tax assets at 30 June 2024 with respect to ring fence losses and
allowances.
Changes to UK corporation tax legislation
The Energy Profits Levy on the profits earned from the production of oil and
gas in the UK was introduced in 2022. From 1 January 2023, the EPL is charged
at the rate of 35 per cent on taxable profits in addition to ring fence
corporation tax of 30 per cent and the Supplementary Charge of 10 per cent.
The EPL is a temporary measure which at 30 June 2024 was to cease to apply on
31 March 2028. In the H1 2024 financial statements, any temporary differences
subject to the EPL expected to reverse in the period to 31 March 2028 have
been measured to the higher rate.
On 24 May 2024, Finance (No.2) Act 2024, enacted the Energy Security
Investment Mechanism (ESIM). The ESIM operates to remove EPL if both average
oil and gas prices fall to, or below, $74.21 per barrel for oil and 57p per
therm for gas (as adjusted for prior year CPI with effect from 1 April 2024),
for two consecutive quarters. The headline tax rate on UK oil and gas profits
will then return to 40 per cent. The change as currently proposed is not
expected to have a material impact for the Group.
Since the balance sheet date there has been a change in UK Government which
has announced its intention to make further changes to the EPL regime which
are described in Note 15 Post Balance Sheet Events.
13. Equity Share Capital
As at 30 June 2024, the share capital of the Company comprised one "A" share
of £50,000 and 393,468,408 ordinary shares of $0.10 each. The "A" share has
no special rights.
The balance classified as total share capital includes the total net proceeds
(both nominal value and share premium) on issue of the Group and Company's
equity share capital, comprising $0.10 ordinary shares and one 'A' share.
Allotted, issued and fully paid: Share Share Total share Merger
Number capital premium capital reserve
Group '000 $000 $000 $000 $000
At 1 January 2023 272,953 27,295 205,965 233,260 -
(restated*)
Shares issued 118,368 11,837 160 11,997 283,367
At 31 December 2023 391,321 39,132 206,125 245,257 283,367
(restated*)
Shares issued 2,147 215 135 350 3,223
At 30 June 2024 393,468 39,347 206,260 245,607 286,590
* See note 2
During H1 2024, 708,505 ordinary shares were issued to satisfy awards under
the Company's share-based incentive schemes and 1,438,849 ordinary shares were
issued in connection with the final tranche of share consideration for the
2023 acquisition of Tailwind Energy Investments Ltd.
Merger relief was applied by the Group's parent entity Serica Energy plc upon
the issue in March 2024 of the 1,438,849 ordinary shares for the acquisition
of Tailwind Energy Investments Ltd. The valuation of the shares issued was
based on the fair value at the date of issue, with the nominal value of the
shares issued credited to share capital and the excess value above nominal
share capital credited to a merger reserve in the consolidated Group accounts.
As at 30 August 2024, the issued share capital of the Company was 393,468,408
ordinary shares, with the total number of voting rights of 390,457,635 shares
in issue.
14. Additional Cash Flow Information
Net cash flows from operating activities consist of:
Six Six
months months Year
ended ended ended
30 June 30 June 31 December
2024 2023 2023
$000 $000 $000
(Restated*) (Restated*)
Operating activities:
Profit for the period 82,475 98,485 127,757
Adjustments to reconcile profit for the period
to net cash flow from operating activities:
Taxation charge 106,023 169,439 252,614
Change in fair value of financial liabilities 2,944 1,811 9,446
Change in provisions - - 461
Gain on acquisition - (41,889) (41,889)
Net finance (income)/costs 10,311 (743) 10,076
Depletion 87,147 78,947 136,335
Oil and NGL over/underlift movement 11,195 (17,110) (11,545)
E&E asset write-offs 532 7,068 10,871
Unrealised hedging losses/(gains) 14,918 (25,144) (25,317)
Movement in gas contract revenue - (1,017) (1,227)
Contract revenue- other (28,576) (16,084) (29,951)
Share-based payments 2,114 2,999 4,942
Other non-cash movements (831) 3,922 3,859
Hedging security advances - 29,402 29,402
Decrease/(increase) in DSA advances 35,055 - (35,055)
(Increase)/decrease in receivables (15,305) 81,119 87,056
(Increase) in inventories (712) (165) (1,222)
Decrease in payables (6,153) (41,433) (56,591)
Cash inflow from operations 301,137 329,607 470,022
Taxation paid (72,414) (173,640) (347,588)
Decommissioning spend (4,514) (35) (1,115)
Net cash inflow from operating activities 224,209 155,932 121,319
* See note 2
15. Post Balance Sheet Events
On 29 July 2024, the UK government announced changes to the Energy Profits
Levy (EPL) to take effect from 1 November 2024. The announcement follows the
recent change of government in the UK and supersedes the previous government's
announcement on 6 March 2024 that EPL would be extended by a further 12 months
from 31 March 2028 to 31 March 2029. The details of the measures are expected
to be finalised in the Budget scheduled to take place on 30 October 2024 and
legislated thereafter in a Finance Bill.
From 1 November 2024 the rate of EPL will be increased by 3 per cent from 35
per cent to 38 per cent, the period to which the EPL applies will be extended
from 31 March 2028 to 31 March 2030, the main EPL investment allowance will be
abolished and the amount of relief available for capital expenditure in
calculating EPL profits will be reduced. The extent of the reduction will not
be known until the 30 October 2024 Autumn Budget.
The government confirmed in the announcement that the Energy Security
Investment Mechanism ('ESIM') would remain unchanged and that there were no
planned changes to the way tax relief for capital expenditure is applied in
the permanent ring fence regime.
As the announced measures had not been enacted at the balance sheet date there
is no impact on the balance sheet as presented. As the full details of the
announced measures are not yet known it is not currently possible to calculate
the potential impact on the balance sheet.
16. Publication of Non-Statutory Accounts
The financial information contained in this interim statement does not
constitute statutory accounts as defined in the Companies Act 2006. The
financial information for the full preceding year is based on the statutory
accounts for the financial year ended 31 December 2023, which are available at
the Company's registered office at 72 Welbeck Street, London W1G 0AY and on
its website at www.serica-energy.com (http://www.serica-energy.com) and on
SEDAR at www.sedar.com (http://www.sedar.com) .
This interim statement will be made available at the Company's registered
office at 72 Welbeck Street, London W1G 0AY and on its website at
www.serica-energy.com (http://www.serica-energy.com) and on SEDAR at
www.sedar.com (http://www.sedar.com) .
Reconciliation of non-IFRS measures
Serica uses certain measures of performance that are not specifically defined
under IFRS or other generally accepted accounting principles ("GAAP"). These
non-IFRS measures, which are presented within the financial review, are
defined below:
EBITDAX: Earnings before interest, tax, depreciation and amortisation,
impairments, transaction costs, unrealised hedging expenses, FX translation
effects, asset revaluation effects, other noncash gains or expenses and
exploration expenditure. This is a useful indicator of underlying business
performance and the definition adopted by Serica is consistent with that
stipulated in the Group's reserve based lending ("RBL") facility. A
reconciliation from Operating Profit to EBITDAX is provided below:
Restated*
$ 000 H1 2024 H1 2023
Operating Profit 201,753 268,992
Add Back Transaction Costs - 10,542
Add Back DD&A 87,147 78,947
Add Back E&E Expenses and licence costs 2,008 7,893
Deduct contract revenue - other (28,576) (16,084)
(Deduct) / Add Back Unrealised Hedging 14,918 (25,144)
Add Back FX Effects (639) 3,521
Add back remeasurements - -
Add back share based payments 2,114 2,999
Deduct Gain on Acquisition - (41,889)
EBITDAX 278,725 289,777
* See note 2
Capital Expenditure (Capex): Comprises the cash spend (prior to tax
allowances) on the acquisition of PP&E assets, the purchase of exploration
and appraisal assets and decommissioning spend. Depicts how much the Group has
spent, on a cash basis, on purchasing fixed assets in order to further its
business goals and objectives. It is a useful indicator of the Group's organic
expenditure on oil and gas assets, and exploration and appraisal assets,
incurred during a period on a pre-tax basis.
Restated*
$ 000 30 June 2024 31 December 2023
Purchase of PP&E Assets 106,664 16,742
Purchase of E&E Assets** 12,666 6,915
Decommissioning Spend 4,514 35
Capital Expenditure 123,844 23,692
* See note 2
** Includes Buchan Horst acquisition cost of $7.5 million
CFFO less current tax: comprises Cash inflow from Operations adjusted by the
tax charge for the year as reflected in Note 12 and also excludes cash
movement arising from the return or posting of security deposits for
decommissioning and hedging. Serica considers that this is a useful measure of
the cash generation of the business prior to the decisions made by the Group
in relation to capital allocation.
Restated*
$ 000 H1 2024 H1 2023
Cash inflow from operations 301,137 329,607
Less current tax (72,728) (163,009)
Changes in hedging security advances - (29,402)
Changes in DSA advances (35,055) -
Adjusted CFFO less tax 193,354 137,196
* See note 2
Free cash flow: net cash flow from operating activities less cash used in
investing activities (excluding acquisition costs) and financing activities.
This measure is considered a useful indicator of the Group's ability to
invest, repay the Group's debt and meet other payment obligations. Group free
cash flow reconciles to net cash flow from operating activities as follows
Restated*
$ 000 H1 2024 H1 2023
Net cash flow from operating activities 254,209 155,932
Net cash flow from investing activities (142,383) (69,162)
Net cash flow from financing activities (85,154) (66,814)
Adjusted by:
Repayment of loans and borrowings 52,545 60,000
Payment of dividends/share buyback 18,972 -
Acquisition Costs - 54,177
Free Cash flow 98,189 134,133
Effective tax rate: Current period tax charge over EBITDAX as presented above.
Restated*
$ 000 H1 2024 H1 2023
Current income tax charge 72,728 163,009
EBITDAX 278,725 289,777
Effective tax rate: current period tax/EBITDAX 26% 56%
* See note 2
Adjusted Net cash / (debt): Total cash and cash equivalents plus the balance
of amounts of cash security temporarily lodged in respect of DSAs prior to the
finalisation of the RBL recognised on the consolidated balance sheet less the
drawn balance under RBL (net of the carrying value of unamortised fees). This
is an indicator of the Group's indebtedness and contribution to capital
structure.
Restated*
$ 000 30 June 2024 31 December 2023
Interest bearing loans (218,890) (271,200)
Add back unamortised fees (12,110) -
Cash and cash equivalents 362,203 335,433
DSA cash - 35,055
Adjusted Net Cash/(Debt) 131,203 99,288
* See note 2
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