By Scott Wright
SERICA Energy has declared a new well in a historic North Sea field is producing more than originally forecast, underlining the benefits of an acquisition worth hundreds of millions of pounds announced before Christmas.
Shares in Serica closed up 3.5 per cent after it said initial production rates from a fourth well on the Gannet field have been in excess of 10,000 barrels of oil per day, compared with the 8,000-plus boepd originally forecast.
The North Sea-focused oil and gas company is poised to bring the asset into the fold with its acquisition of Tailwind Energy Investments, first announced shortly before Christmas and expected to complete in March.
The £367 million deal will increase Serica’s production by 40,000 to 45,000 boepd, including production from two main hubs, Bruce and Triton which have separate transportation infrastructure.
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Serica said final commissioning of the Gannet GE-04 well has now been completed, and that production had commenced via the Triton FPSO (floating production and storage offloading) vessel, tied back to the Triton hub.
Gannet is one of eight producing fields in the Triton area in the Central North Sea, which is based around 190 km east of Aberdeen. The oil and gas are produced via the Triton FPSO, which is operated by Dana Petroleum. The GE-04 well was drilled in late 2022 and completed in January.
Serica, which operates the Bruce, Keith and Rhum producing assets, told the City that the well results were above the pre-drill expectation, declaring that initial production rates have exceeded 10,000 boepd.
Mitch Flegg, chief executive of Serica Energy, said. “Including the Tailwind acquisition assets, we have an exciting investment programme of value-adding activities throughout 2023 and 2024 which has started with the Gannet GE-04 well being brought onto production. We are delighted with the strong initial results.
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“This additional production means that the Triton hub is now producing at gross rates not seen for the last 10 years. This performance is a credit to the outstanding work completed by the Tailwind team, their contractors, and Dana Petroleum (E&P) Limited, the Triton operator.
“We look forward to welcoming the Tailwind team to Serica on completion of the acquisition which is expected next month.”
Announcing the proposed acquisition of Tailwind Energy Investments on December 20, Serica declared that the deal would increase its output significantly and make it a top 10 producer on the UK Continental Shelf, and a top three UKCS listed independent producer. It will increase the number of the company’s producing fields to 11 from five, with the enlarged group operating more than 80% of its net production. Serica also said that with the acquisition adding mostly oil reserves, it reduces the concentration of commodity price risk while gas accounts for more than 50% of production.
Further to the deal, the largest shareholder in Tailwind, Mercuria, will become a strategic investor in Serica with a 25.2% stake.
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Serica chairman Tony Craven Walker and chief executive Mr Flegg will retain those positions when the deal is complete, with two Mercuria nominated non-executive directors to join the board.
Mr Flegg said at the time: “I am excited by the announcement of this transaction and by the possibilities it brings for Serica in terms of a new phase of growth. The transaction achieves our strategic objective of materially increasing the scale and diversity of our UKCS portfolio of assets.
“The Tailwind portfolio also brings multiple organic investment opportunities for further material near-term growth in reserves and production.”
Serica warned in early December that the extension of the windfall tax on the extraordinary profits oil and gas companies have been making since prices soared in the wake of Russia’s war on Ukraine would make it “challenging” for the industry to invest in new longer-term projects on the UKCS. But it said then that it remains committed to expanding its portfolio through mergers and acquisitions.
Shares in Serica Energy ended the day up 9p at 263p.
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