Serica deal with Tailwind Energy will almost double its oil output

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Serica Energy, the North Sea oil and gas firm, expects its production to increase by up to 80 per cent this year as it closes in on a £644 million deal.

It is hopeful that its takeover of Tailwind Energy can be finalised by the end of March once regulatory approvals and financial details are completed.

Serica said its production was equivalent to 26,182 barrels of oil a day across 2022. It forecasts that annual production will be in the region of 40,000 to 47,000 barrels a day in 2023, assuming the Tailwind deal goes through.

It pointed out that net production in January across both companies was equivalent to 43,300 barrels a day. That included Serica’s output being limited after a gas compressor on one of its fields required maintenance work, although that has now been completed.

Aim-listed Serica, which has its operations base in Aberdeen, already produces about five per cent of the UK’s gas from its interests in the Bruce, Keith, Rhum, Columbus and Erskine fields in the North Sea.

Before Christmas it announced the Tailwind proposed takeover in an offer that was a mix of shares and cash and valued the company at about £644 million, including debt.

Those sums were based on Serica’s 278p closing price on December 19 while yesterday the shares closed down by 1½p, or 0.6 per cent, at 238½p.

Serica believes the combination can help it offset about £470 million of tax, put more oil into its production base — currently mainly gas — and extend its reserves with production maintained at more than 40,000 barrels a day through to the end of 2025.

Tailwind, which is privately owned by its management and Swiss commodity trader Mercuria, is weighted towards oil with its main asset — the Triton hub of fields about 120 miles east of Aberdeen.

Mitch Flegg, Serica chief executive, said: “The production performance of both the Serica and Tailwind portfolios has remained strong despite some extremely challenging weather conditions during January.”

Ashley Kelty, at Panmure Gordon, described it as “an encouraging update” and suggested the acquisition will make Serica “a materially larger business and with a much wider portfolio to deliver future growth”.

Original article here:

Author: Greig Cameron, Scottish Business Editor, The Times

Ashley Kelty

Director, Research Analyst, Oil & Gas

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