One of the North Sea's biggest oil and gas producers has told investors it continues to look at potential new drilling opportunities in the area even though the extension of the UK's energy profits levy has raised the bar for the financial returns required from longer-term projects.
Shares in Serica Energy closed yesterday's trading more than 6% lower after the company issued a third quarter update in which it said it is prioritising its most "cash-generative and value accretive" assets. This includes opportunities in the vicinity of its Bruce Hub, as well as expansion through acquisitions.
That said, the company was forced to cut its full-year production forecast following an outage at its Triton hub located approximately 120 miles east of Aberdeen. Activity at the floating production storage and offloading (FPSO) vessel was suspended following problems with gas export compression availability.
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Serica now expects full-year production to be in the vicinity of 37,000 barrels of oil equivalent per day (boepd), down from earlier estimated of 41,000 to 46,000 boepd.
With operations focused in the North Sea - as opposed to a multi-national such as BP or Shell - Serica is among those most disrupted by the extension of the windfall tax on oil and gas profits announced last month by Rachel Reeves in her Autumn Budget. Serica said the extension of the levy to March 2020, together with uncertainty about the longer-term fiscal regime, has "increased the economic threshold for longer-cycle investments".
Nevertheless, the company said the Budget also provided "much-needed" clarity on investment allowances and tax relief.
“The remainder of the Triton well campaign will continue to benefit from full tax relief, and the retention of allowances opens up opportunities in the wider portfolio,” Serica chief executive Chris Cox said.
“Our subsurface team are continuing to work up options for the untapped potential around the Bruce Hub.”
Serica reported average production of 37,800 boepd for the first nine months of 2024, up from 31,500 in the same period a year earlier. The company also reported $139 million of revenue for the third quarter, broadly in line with $135m a year ago.
Shares in Serica closed 8.5p lower to close yesterday's trading at 130.3p.
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