TIDMSQZ
RNS Number : 2657L
Serica Energy plc
30 September 2016
Serica Energy plc
("Serica" or the "Company")
Interim Results
London, 30 September 2016 - Serica Energy plc (AIM: SQZ)
announces its interim financial results for the six months ended 30
June 2016. The results are summarised below and copies are
available at www.serica-energy.com and www.sedar.com.
Highlights:
UK North Sea Erskine Field
-- Strong production in January-February averaging over 3,200 boepd net.
-- Production then interrupted by blockage in downstream
condensate export route and scheduled maintenance programme.
-- Field back on stream on 29 August and now performing well,
averaging over 2,700 boepd net to 28 September.
Other Assets
-- Work continues on optimising Columbus development plan in
conjunction with other asset owners in the area.
-- Two carried wells on material prospects in the UK planned for
2017/18: blocks 22/19c - Serica 15% (Rowallan Prospect) and 113/27c
- Serica 20% (Doyle Prospect).
-- No significant remaining exploration work obligations.
-- Work continues offshore Ireland and Namibia to seek farm-in partners.
Financial
-- Net loss after tax for 1H16 of US$2.8 million as results impacted by field shut-in.
-- End period cash position of US$20.8 million at 30 June 2016.
-- Erskine field back producing in late August and generating cash return at current oil prices.
-- Cash at 29 September US$13.1 million after second
stage-payment to BP and ongoing Erskine costs, but before September
sales receipts.
-- Cash resources successfully managed during period of shut-down and now expected to build.
-- Operating and G&A costs reduced materially to accommodate low oil prices.
Tony Craven Walker, Serica's Chairman commented:
"Though the blockage in the Erskine condensate offtake route
impacted first half income, the field is now back onstream and
underlying reservoir performance continues to offer strong
encouragement. Our net reserves, which have increased over 50% to
4.2 million boe as of 1 January 2016 according to NSAI estimates,
will now hopefully be producing in a stronger oil price environment
than at the start of the year. We also welcome the plans of Shell,
the new Lomond facility operator, to target further cost reductions
and improve offtake route reliability".
Enquiries:
Serica Energy
plc
Tony Craven +44 (0)20
Walker tony.cravenwalker@serica-energy.com 7487 7300
Peel Hunt
+44 (0)20
Richard Crichton richard.crichton@peelhunt.com 7418 8900
+44 (0)20
Ross Allister ross.allister@peelhunt.com 7418 8900
Instinctif
+44 (0)781
David Simonson david.simonson@instinctif.com 347222
+44 (0)20
George Yeomans george.yeomans@instinctif.com 7457 2020
NOTES TO EDITORS
Serica Energy is an oil and gas exploration and production
company with exploration, development and production assets in the
UK and exploration interests in the Atlantic margins offshore
Ireland and West Africa. The Company is in partnership with other
companies in its licences offshore UK, Ireland, Morocco and
Namibia. Further information on the Company can be found at
www.serica-energy.com.
The technical information contained in the announcement has been
reviewed and approved by Clara Altobell, Head of Operations at
Serica energy plc. Clara Altobell (MSc in Petroleum Engineering
from Imperial College, London) has 20 years of experience in oil
& gas exploration, production and development and is a member
of the Society of Petroleum Engineers (SPE) and the Petroleum
Exploration Society of Great Britain (PESGB).
The Company is listed on AIM under the ticker SQZ and is a
designated foreign issuer on the TSX. To receive Company news
releases via email, please contact serica@instinctif.com and
specify "Serica press releases" in the subject line.
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:
geological, geophysical and technical risk, 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.
INTERIM REPORT FOR THE SIX MONTH PERIODED 30 JUNE 2016
The following Interim Report of the operations and financial
results of Serica Energy plc ("Serica") and its subsidiaries
(together the "Group") contains information up to and including 28
September 2016 and should be read in conjunction with the unaudited
interim consolidated financial statements for the period ended 30
June 2016, which have been prepared by and are the responsibility
of the Company's management and have not been reviewed by the
Company's independent auditors.
References to the "Company" include Serica and its subsidiaries
where relevant. All figures are reported in US dollars ("US$")
unless otherwise stated.
The results of Serica's operations detailed in the interim
financial statements are presented in accordance with International
Financial Reporting Standards ("IFRS").
The Company's shares are listed on AIM in London. Although the
Company delisted from the TSX in March 2015, the Company is a
"designated foreign issuer" as that term is defined under National
Instrument 71-102 - Continuous Disclosure and Other Exemptions
Relating to Foreign Issuers. The Company is subject to the foreign
regulatory requirements of the Alternative Investment Market of the
London Stock Exchange in the United Kingdom.
Serica is an oil and gas company with production, development
and exploration activities based in the UK, Ireland, Namibia and
Morocco.
CHAIRMAN'S REVIEW - UPDATE
After a very strong performance from our Erskine field interest
since its acquisition in June last year and into the early months
of 2016, it proved frustrating that a blockage in the Lomond to
Everest condensate export pipeline interrupted Erskine production
at the end of February. Remedial work to remove a stuck pig and
clear the line of a wax build-up ran into a planned summer Lomond
maintenance shutdown with no further production delivered during
the first half. Though the issues have now been resolved and
Erskine oil and gas production fully restarted on 29 August, this
reduced sales revenue substantially for the first half leading to a
loss after tax of US$2.8 million.
It is important to emphasise that the Erskine field capability
remains strong, that the lost production will be recovered over
coming periods and that it may well be delivered at improved prices
compared to 1H 2016 levels. Average production of over 3,200 boe
per day net to Serica over January and February demonstrated
underlying reservoir capability, further highlighted by a peak
flush-production rate of 5,000 boe net to Serica achieved on one
day soon after restart. This supports the reserve upgrade, reported
by NSAI earlier this year, to 4.2 million boe net to Serica
effective 1 January 2016 compared to our previous estimate of 2.7
million boe net.
As the blockage has illustrated, actual production rates
achieved from Erskine are heavily dependent upon facility
constraints both on the Lomond platform and transportation
infrastructure further down the export routes including the Forties
oil pipeline system and CATS gas pipeline system. The new Lomond
operator, Shell, is currently reviewing the causes of recent
interruptions with a view to improving all aspects of future
facility reliability, an outcome that would benefit both Erskine
and Lomond partners.
Erskine production levels of 2,500-3,000 boe per day, net to
Serica, should be achievable over the remainder of 2016 and into
2017. Erskine and Lomond operators have both achieved overall cost
reductions over the past eighteen months and recognise the
importance of continuing these efforts even as oil prices
stabilise. Equally, the introduction of new production streams to
the Lomond hub, including our own Columbus field as well as a
number of other potential candidates would spread costs to mutual
benefit. Efforts continue to bring these projects to fruition.
The strong build of cash resources over the period from Erskine
acquisition in mid-2015 until the interruption at the end of
February, left the company well-placed to weather a period such as
this and renewed production from Erskine should allow the Company
to continue to build its financial strength.
Though Erskine has necessarily been a focus during this period,
management has continued to work on Columbus offtake options and
seeking investment opportunities to complement our existing asset
portfolio.
Further work has been carried out on optimising a Columbus
development plan. This includes greater collaboration with other
field and infrastructure owners to maximise overall economic
recovery from the wider area and cost cutting measures including
the potential to drill a production well direct from the Lomond
platform. This work is aimed at demonstrating full operational
integrity and extending availability of downstream infrastructure,
including the Lomond platform, which is a pre-requisite for a
development decision.
On the exploration front, we look forward to the drilling of
wells on our UKCS 22/19c and 113/22 blocks targeted for late 2017
or 2018, both of which are subject to cost carries and are
targeting material prospects. We are also progressing the farm-out
of our Namibian acreage, with a number of interested parties.
Overall, though the line blockage deferred income during 2016,
Erskine is now back on stream and performing well. Meanwhile, work
on improving offtake route reliability and cost structures is
expected to more than compensate any short-term negative impact. In
addition to benefitting Erskine, this will help to enhance the
economics of a Columbus development and improve the opportunities
for other undeveloped fields in the area to use the Lomond hub. We
therefore see this area as offering further value-adding potential
for Serica to pursue.
REVIEW OF OPERATIONS
UK Operations
Production
Central North Sea: The Erskine Field - Blocks 23/26a (Area B)
and 23/26b (Area B)
All of Serica's production comes from the Erskine field, a gas
and condensate producing field located in the UK Central North Sea
and acquired from BP in June 2015. Serica has an 18% working
interest and its partners are Chevron 50% (operator) and Shell 32%.
Erskine fluids are processed and exported via the Lomond platform,
which is 100% owned and operated by Shell, who acquired Lomond and
a share in Erskine from BG in February this year.
Earlier this year, an independent audit of the Erskine field
estimated proven plus probable reserves of 4.2 million boe net to
Serica as of 1 January 2016. This represents an increase of 50%
compared to pre-acquisition reserves estimates. The increase is due
to a combination of high field production rates and an expectation
of continued lower annual operating costs, resulting in a deferment
of the projected field cessation date.
The field continued to perform strongly at the beginning of the
year, demonstrating good reservoir capability, with high export
facility availability and consistent delivery from the wells,
averaging over 3,200 boe per day net to Serica in January and
February. However, this was followed by a period of field shut-in
during 2016, which is explained in more detail in the paragraphs
below. Going forward, production efficiency is expected to
increase, with no major maintenance shut-down currently scheduled
for 2017 and an ongoing objective of the Lomond operator to reduce
the frequency of maintenance shut-downs. The other major causes of
downtime have also been addressed, with a cleaning and monitoring
programme for the condensate export pipeline that runs between
Lomond and the Everest platform, and the planned installation of a
back-up export pump.
During January, Shell, as Lomond operator, started a maintenance
programme to clean and inspect the condensate export pipeline that
runs between Lomond and the Everest platform. This involved sending
cleaning devices, known as 'pigs', down the pipeline. On 27
February a pig became stuck in the pipeline, causing a blockage and
export ceased. The blockage was caused by the pig encountering a
build-up of wax in the line that had been deposited over time by
the export fluids. The operation to clear the blockage took more
than two months due to the engineering requirements to gain access
to the blockage with wax dissolving solution and allowing optimal
time to soak and dissolve the wax, whilst planned maintenance work
was brought forward.
Shell's maintenance shut-down period on Lomond was scheduled to
occur during May and June, coinciding with the planned CATS gas
transmission system maintenance period in June. The work to clear
the pipeline blockage was still in progress when the planned Lomond
maintenance commenced. On completion of this work, further wax
treatment was required before restarting Erskine production in
July. However, after producing for a few days, a failure of an
export pump on Lomond occurred which required its complete
overhaul. This together with its recommissioning resulted in there
being no Erskine production until the end of August.
When the wells restarted at the end of August, the combined
production rates were higher than any rates observed since the
field was acquired by Serica in 2015, at over 5,000 boe per day net
to Serica on an individual day. This gives a good indication that
the extended shut-down has resulted in reservoir pressure
recharging and offers confidence in the latest reserves estimate.
Since production started at the end of August, there have been some
further restrictions imposed by the Forties Pipeline System, which
exports Erskine condensate to shore, that have meant that Erskine
has not been able to produce at full capacity. Production rates
have averaged approximately 2,700 boepd net during September and
are expected to meet the guidance of 2,500 - 3,000 boepd net for
the remainder of the year.
Going forward, in order to improve facility reliability, there
are plans to complete the Lomond/Everest condensate export pipeline
cleaning programme and to install a second export pump to act as a
back-up. Serica is working in partnership with the operators of
Erskine and Lomond to improve the performance of the processing and
export facilities and ensure ongoing efficiency and longevity. The
OGA is promoting this collaborative industry approach through their
MER (Maximum Economic Recovery) strategy to optimise North Sea
fields.
Development
Central North Sea: The Columbus Field - Blocks 23/16f and
23/21a
The Columbus field is a gas and condensate field in the UK
Central North Sea, located 5km north of the Lomond platform and has
been fully appraised by four wells over blocks 23/16f and 23/21a.
Serica is operator and holds a 50% working interest over the two
blocks. An independent review of the field carried out earlier this
year gave a 'best estimate' (P(50) ) of 6.2 million boe contingent
resources net to Serica. This estimate was based on a single well
development, producing into the Lomond platform. Serica is working
with the OGA and the operator of Lomond to explore low cost
development concepts that will expedite production from Columbus
and ultimately add value to Lomond and Erskine by reducing unit
operating costs over the platform and potentially extend the life
of the platform and fields. These concepts include assessing the
feasibility of drilling a long reach well from the Lomond
platform.
The economic success of a Columbus development depends on low
capital expenditure, reliable export facilities and low operating
costs. These three elements relating to development via Lomond are
currently under evaluation before making a financial investment
decision on Columbus, expected in 2017. Further third party
business across Lomond would enhance its suitability as a host for
Columbus by reducing unit operating costs. Serica, in conjunction
with the OGA, is actively promoting this as part of the MER
strategy.
Exploration
Central North Sea: Block 22/19c - Rowallan Prospect
Serica holds a 15% interest in the licence, operated by ENI and
with JX Nippon and Mitsui as partners. Serica is fully carried on
all associated costs up to and including the drilling of an
exploration well. A well is being planned on the Rowallan prospect,
which is potentially a large HPHT gas condensate prospect. Serica
estimates P(50) prospective resources on Rowallan, net to Serica's
retained 15% interest, to be 20 million boe. The Rowallan prospect
looks very similar to the Culzean field located in nearby Block
22/25a, which is currently under development. Operations to prepare
the site for drilling are expected to start next year, with
drilling likely to commence in 2018. Two similar prospects,
Dundonald and Sundrum have also been identified on the licence.
East Irish Sea: Blocks 113/22a, 113/26b and 113/27c - Doyle
Prospect
Serica holds a 20% working interest in two licences in the East
Irish Sea and is carried for costs on an exploration well up to a
gross cap of GBP11 million. The Doyle gas prospect is located in
shallow water and can be drilled with a low-cost jack-up rig.
Zennor Petroleum, the operator of the licences estimate P(50) gross
resources of 265 bcf and hopes to drill a well in 2017/18.
Ireland
Frontier Exploration Licences 1/09 and 4/13: Rockall Basin
Serica holds a 100% working interest in two licences in the
Irish Rockall Basin, FEL 1/09 and FEL 4/13. Further geological and
geophysical studies have been undertaken to help delineate the
Rockall prospects, which comprise large faulted structures and a
turbidite fan which is analogous to prospects in the Porcupine
Basin. The highest ranked drilling target would penetrate both the
Derryveagh fan prospect and the Aghla More (formally Midleton)
faulted structure. Serica estimates P(50) resources for these
stacked prospects of 4Tcf of gas and 250 million barrels of
condensate. Serica is looking to attract a partner to participate
in this drilling opportunity.
Frontier Exploration Licence 01/06: Slyne Basin
Licence FEL 1/06 (Serica 50% interest and operatorship) contains
three drill-ready oil and gas prospects, the highest ranked being
the Boyne Prospect. All material work obligations have been
completed and Serica is looking for a farm-in partner to enable an
exploration well to be drilled. The Boyne well would target stacked
prospects in the Triassic (Corrib analogue) and Jurassic (Bandon
discovery) formations with a Serica P(50) gross resource estimate
of 115 million barrels.
Namibia
Luderitz Basin: Blocks 2512A, 2513A, 2513B and 2612A (part)
Serica holds an 85% working interest in a licence in the
Luderitz Basin, offshore Namibia. The extensive acreage (over
17,000 square kilometres) contains numerous prospects and leads,
the largest having P(50) gross un-risked prospective recoverable
oil resources of 623 million barrels (with a P(90) to P(10) range
of 138 million to 2.8 billion barrels). This year, a new prospect
was identified, supported by a seismic anomaly which could directly
indicate the presence of hydrocarbons. Although this prospect is
smaller than the main prospect, with estimated P(50) resources of
300 million barrels, it lies in shallower water and would therefore
cost less to drill.
Serica continues to market this opportunity and a number of
companies are reviewing the data. An application to extend the
licence has been made to allow more time to secure a partner to
drill an exploration well on the licence.
Morocco
Sidi Moussa
Serica holds a 5% working interest in the Sidi Moussa licence.
The licence has been extended until August 2017 to allow the
operator, Genel, time to secure a partner and drill a second
exploration well on the licence. Serica has elected not to
participate in the second well, but has an option to buy back in
following completion.
FINANCIAL REVIEW
The completion of the Erskine acquisition on 4 June 2015 brought
a significant new revenue stream comprising sales of oil, gas and
other liquids. The Company accounts for its share of field revenues
and costs post acquisition, hence comparative figures for 1H 2015
include Erskine revenues and costs only for the period from 4 June
to 30 June 2015, the period end.
Group loss after tax from continuing operations of US$2.8
million for 1H 2016 compares to a loss of US$0.6 million for 1H
2015. Following the strong full year 2015 financial figures,
results for 1H 2016 have been adversely impacted by the extended
Erskine field shut-in.
Erskine asset overview
In June 2015 the Company completed the acquisition of an 18%
interest in UK blocks 23/26a (Area B) and 23/26b (Area B)
containing the Erskine Field, from BP. The transaction provided
Serica with an immediate and long-term cash flow stream, is tax
efficient for the Company, accelerating recovery of past tax losses
in the UK, and is in line with Serica's strategy to unlock the
value of its existing assets and provide a basis from which it can
generate future growth.
The field performed strongly in the period post-acquisition on 4
June 2015 through to 27 February 2016 when it was suspended due to
a blockage in the Shell Lomond to Everest condensate line. Work to
clear this was intended to be complete by mid-April but was
aggravated by wax deposits in the area of the blockage. Efforts to
clear the line were concluded but a two month maintenance shut-down
was already planned on the Lomond platform to correspond with a
one-month shutdown of the CATS system through which Erskine gas is
exported. The field fully recommenced production on 29 August.
The impact of the extended field shut-in on reported 1H 2016
results is frustrating, but production net to Serica has averaged
over 2,700 boepd since the 29 August restart, and the field is
still expected to generate good cash flow throughout Q4 2016 and
beyond, even if oil prices remain at current levels. All of the oil
is sold at monthly average spot prices and from 1 October 2016 all
of the gas is sold in the market at monthly average spot
prices.
Results from operations
A high level summary of the income statement results for
continuing operations is given below.
Income statement - continuing operations
Serica generated a 1H 2016 gross loss of US$2.6 million (1H
2015: gross profit US$1.1 million) from its 18% interest in the
Erskine Field.
Sales revenues
The Company currently generates all its sales revenue from the
Erskine field in the UK North Sea. Revenue is earned from gas, oil
and NGL product streams.
In the period 1 January to 27 February 2016, prior to the field
shut-in for the blockage in the Lomond-Everest pipeline, net
Erskine field gas production averaged 10.4 mmscf per day together
with average condensate production of 1,610 barrels per day. Taking
into account the field shut-in from end February to the period end
of 30 June, average net production rates for 1H 2016 were 3.3 mmscf
per day for gas and 513 barrels per day for condensate. Average
daily production rate comparatives for the full 1H 2015 period are
not provided as production in 1H 2015 only covered a 26 day period
post acquisition. In the period from 4 June to 31 December 2015,
net Erskine field gas production averaged 8.6 mmscf per day
together with average condensate production of 1,462 barrels per
day.
The 1H 2016 gas production was sold at prices averaging US$4.1
per mscf (1H 2015: US$4.9 per mscf) and generated US$2.4 million of
revenue net to Serica. NGL products are derived from associated gas
production and earned revenue of US$0.9 million net to Serica.
Oil sales in 1H 2016 were US$5.5 million from 149,000 lifted
barrels at an average realised price of US$36.6/bbl. As oil and NGL
liftings in the period included significant overlifts above
produced volumes, recorded 1H 2016 sales revenues were therefore
adjusted down by US$3.1 million, representing the increase in
overlift in the period.
Separate to the oil revenue earned from liftings, the Company
also earned US$0.4 million net of premium in the period from its
oil hedges, included within other income.
Cost of sales and depletion charges
Cost of sales is driven by production from the Erskine field and
comprises field operating costs and a depletion charge against the
asset's net book amount. Direct field operating costs and depletion
charges in 1H 2016 cover the full six month period whereas the 1H
2015 comparatives only cover the 26 day period post the completion
of the asset acquisition on 4 June 2015.
The overall 1H 2016 charge of US$8.4 million (1H 2015: US$1.1
million) comprised field operating costs of US$8.0 million (1H
2015: US$0.9 million) and non-cash depletion of US$0.4 million (1H
2015: US$0.2 million).
The most significant elements of the field opex are as follows:
Erskine's contribution to the running costs of the Lomond
facilities, direct standalone Erskine field operating costs, other
transportation costs for use of the FPS and CATS pipelines, and
charges for any necessary surface or sub-surface maintenance work.
Significant operational expenditure continues during periods of
field shut-down when no revenue is earned. The 1H 2016 expense also
includes an agreed level of contribution from the Erskine partners
to the exceptional costs incurred by the Lomond operator to resolve
the Lomond/Everest pipeline blockage issue.
Operating costs are billed in GBP sterling and, following the
decline in the strength of GBP sterling against the US$ in June
2016, the reported US$ equivalent figures are expected to reduce
during 2H 2016 compared to US$ oil revenue streams.
Depletion charges principally represent the costs of Erskine
acquisition spread over the estimated remaining commercial life of
the field.
The US$ reported value of any movements in product
over/underlift have been classified within revenue.
Other expenses and income
The Company generated a loss before tax from continuing
operations of US$3.9 million for 1H 2016 compared to a loss before
tax of US$0.6 million for 1H 2015.
Other income of US$0.4 million in 1H 2016 (1H 2015: US$nil)
represented hedging gains net of premium.
Pre-licence expenditure of US$0.1 million for 1H 2016 has
increased from the 1H 2015 charge of US$0.02 million although
activity on new business in the period is still at relatively low
levels as the Company continues its focus on its existing UK
Central North Sea asset portfolio. Pre-licence costs included
direct costs and allocated general administrative costs incurred on
oil and gas activities prior to the award of licences, concessions
or exploration rights.
Asset write-offs of US$0.03 million in 1H 2016 (1H 2015: US$0.2
million) relate to minor exploration and evaluation ("E&E")
assets where no further prospectivity is envisaged.
Administrative expenses of US$1.0 million for 1H 2016 decreased
from US$1.5 million for 1H 2015. Following the severe drop in oil
prices during 2H 2014 and consequent impact upon the financial
resources available to companies such as Serica, management
reviewed all of its expenditure commitments and reduced its
personnel, office and other costs substantially. The Company has
therefore seen the benefit of the savings achieved in the 1H 2016
results. GBP sterling overheads have also benefitted from the
weaker average GBP sterling exchange rate compared to US
dollars.
Foreign exchange
Serica retains certain non-US$ cash holdings and other financial
instruments relating to its operations. The US$ reporting currency
value of these may fluctuate from time to time causing reported
foreign exchange gains and losses. Serica maintains a broad
strategy of matching the currency of funds held on deposit to the
expected expenditures in those currencies. Management believes that
this mitigates most of any actual potential currency risk from
financial instruments.
Foreign exchange charges of US$0.4 million for 1H 2016 (1H 2015:
gains of US$0.1 million) largely reflect a reduction in the
reported US$ equivalent of GBP sterling cash balances caused by the
weakening of GBP against the US$ after the EU referendum result.
Unrealised losses on the revaluation of GBP cash balances have been
partially offset by realised gains on settlement of significant GBP
creditors.
Finance revenue of US$0.035 million in 1H 2016 increased from
negligible levels in 1H 2015, and consisted of bank interest
receivable.
Finance costs of US$0.1 million were incurred in 1H 2016 (1H
2015: US$0.013 million) largely comprising the interest accruing on
the long-term liability payable to BP.
The income statement deferred taxation credit of US$1.1 million
arose from the recognition of a corresponding deferred tax asset on
the Erskine field interest.
Balance Sheet
During 1H 2016, total investments in E&E assets increased by
US$0.8 million from US$51.8 million to US$52.6 million. Activity on
the Company's exploration portfolio continues to be relatively
limited at this stage in the oil and gas cycle. US$0.3 million was
incurred in the UK on the Columbus development and other
exploration licences. In Ireland, US$0.2 million was incurred on
exploration work on the Rockall licences and US$0.1 million on the
Slyne interest. In Africa, US$0.2 million was incurred in respect
of the Luderitz basin licence interests in Namibia.
The property, plant and equipment balance of US$8.5 million as
at 30 June 2016 entirely comprises the net book amount of the
Erskine asset acquisition costs less depletion charges to-date.
Trade and other receivables at 30 June 2016 totalled US$0.9
million, a decrease of US$3.3 million from the 2015 year-end
balance of US$4.2 million. The 2015 year-end balance included
US$3.2 million from December oil, gas and LPG sales earned from the
Erskine field so the decrease in balance during the 1H period is
largely due to there being no significant sales debtors as at 30
June 2016 following the Erskine field shut-in.
Cash and cash equivalents decreased from US$21.6 million to
US$20.8 million during 1H 2016. All cash has been received from
Erskine field December 2015 and 1H 2016 sales. These inflows were
offset by payments for Erskine opex, other E&E costs on work
across the portfolio in the UK, Ireland and Namibia, and ongoing
administrative costs and corporate activity. Significant
operational expenditure continues during periods of field shut-down
when no revenue is earned.
Short term trade and other payables totalled US$6.4 million at
30 June 2016. This balance largely comprises capital and
operational expenditure for the Erskine interest, and the US$2.8
million (including accrued interest) short-term tranche of Erskine
consideration which was paid to BP on 1 July 2016.
The US$3.2 million over-lift liability as at 30 June 2016
reflects the over-lift position of oil and two NGL products for the
Erskine field.
Long-term liabilities of US$5.6 million as at 30 June 2016
comprise two of the three tranches of outstanding consideration
payable to BP following the acquisition of the Erskine producing
asset. The aggregate outstanding sum is payable in three equal
tranches of US$2.8 million plus accrued interest on 1 July 2016
(now settled), 1 July 2017 and 1 July 2018 respectively.
Decommissioning at the end of Erskine field life will be met by
BP, with Serica being responsible for any costs above a fixed 18%
net level of GBP31.32 million adjusted for inflation. No provision
for decommissioning liabilities for the Erskine field is recorded
as at 30 June 2016 as the Company's current estimate for such costs
is under the agreed capped level to be funded by BP.
Cash balances and future commitments
Current cash position, capital expenditure commitments and other
obligations
At 30 June 2016, the Group held cash and cash equivalents of
US$20.8 million. The cash balance had decreased to US$13.1 million
as at 28 September 2016 following the US$2.8 million payment of a
further tranche of Erskine consideration to BP in July, ongoing
payments towards Erskine field opex (including a contribution to
the exceptional costs for the clearance of the pipeline blockage)
but before September sales receipts due in October. Following the
full restart of Erskine production on 29 August 2016, the Group
expects to build its cash resources and cash balances during Q4
2016 from Erskine sales revenue.
During Q3 2016 the Group acquired oil price put options covering
750 bbls per day at US$35/bbl for the period from 1 October 2016 to
31 March 2017. The Group's gas sales contract with SSE expires on
30 September 2016 from which date gas sales will be on a spot
market basis and, accordingly, the Group also acquired gas price
put options covering 40,000 therms per day at 35p/therm for Q4 2016
and 38p/therm for Q1 2017.
Erskine field commitments
Net revenues from the Erskine field are expected to cover
ongoing field expenditures as well as the three remaining tranches
of US$2.775 million (excluding interest) cash consideration payable
to BP. The first of these was settled on 1 July 2016 and the second
and third are due on 1 July 2017 and 2018 respectively.
Management believe there are sufficient resources to meet the
current committed programme for 2016 and 2017 but remains conscious
that a single field income stream exposes it to operational and
infrastructure risks and the consequent need for adequate working
capital to cover associated fluctuations in revenue. The field has
a history of intermittent production performance whilst operational
expenditure continues during periods of field shut-down when no
revenue is earned.
Non-Erskine commitments
The Group has no significant exploration commitments.
In the UK, the Group's costs of the exploration well on 22/19c
will be fully carried by a third party, and although a carry on the
exploration well on the Doyle prospect is subject to a cap, no
overrun is currently forecast. The Group has no significant
commitments on its other exploration licences.
The Company will continue to give priority to the careful
management of existing financial resources. Although a key
objective for the Group is to get the Columbus development back on
track, the Group would seek to use alternative means of finance to
fund its share of development costs.
Other
Asset values and Impairment
At 30 June 2016 Serica's market capitalisation stood at US$39.3
million (GBP29.3 million), based upon a share price of GBP0.1113,
which was exceeded by the net asset value at that date of US$71.4
million. By 28 September 2016 the Company's market capitalisation
had increased to US$51.0 million. Management conducted a thorough
review of the carrying value of the Group's assets and determined
that no significant write-downs were required.
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
Approved on behalf of the Board
Antony Craven Walker
Executive Chairman
29 September 2016
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
Group Income Statement
For the period ended 30 June
Six Six
months months Year
ended ended ended
30 June 30 June 31 Dec
Notes 2016 2015 2015
Continuing operations US$000 US$000 US$000
(Unaudited) (Unaudited) (Audited)
Sales revenue 4 5,739 2,186 24,017
Cost of sales 5 (8,372) (1,067) (7,934)
Gross (loss)/profit (2,633) 1,119 16,083
Other income 389 - -
Pre-licence costs (126) (22) (117)
Impairment and write-off of E&E assets 7 (25) (185) (8,186)
Other asset write-offs - - (170)
Administrative expenses (991) (1,525) (2,705)
Foreign exchange (loss)/gain (391) 81 (430)
Share-based payments (49) (96) 9
Operating (loss)/profit from
continuing operations (3,826) (628) 4,484
Finance revenue 35 2 38
Finance costs (107) (13) (202)
(Loss)/profit before taxation (3,898) (639) 4,320
Taxation credit for the period 11 1,121 - 2,433
(Loss)/profit after taxation and
(loss)/profit for the period (2,777) (639) 6,753
Discontinued operations
(Loss)/profit for the period 6 (5) 30 (264)
(Loss)/profit for the period (2,782) (609) 6,489
Earnings per ordinary share (EPS)
(Loss)/profit on continuing operations
Basic and diluted EPS (US$) (0.01) (0.002) 0.03
(Loss)/profit for the period
Basic and diluted EPS (US$) (0.01) (0.002) 0.03
Total Statement of Comprehensive Income
There are no other comprehensive income items other than those
passing through the income statement.
Serica Energy plc
Consolidated Balance Sheet
30 June 31 Dec 30 June
2016 2015 2015
US$000 US$000 US$000
Notes (Unaudited) (Audited) (Unaudited)
Non-current assets
Exploration & evaluation assets 7 52,577 51,814 59,009
Property, plant and equipment 8 8,518 8,894 10,635
Other receivables - - 247
Deferred tax asset 3,554 2,433 -
------------
64,649 63,141 69,891
------------ ---------- ------------
Current assets
Inventories 392 453 226
Trade and other receivables 934 4,165 1,515
Cash and cash equivalents 20,820 21,602 13,900
------------ ---------- ------------
22,146 26,220 15,641
------------ ---------- ------------
TOTAL ASSETS 86,795 89,361 85,532
------------ ---------- ------------
Current liabilities
Trade and other payables (6,434) (9,407) (7,916)
Overlift (3,236) (166) (2,104)
Non-current liabilities
Trade and other payables (5,691) (5,621) (8,338)
TOTAL LIABILITIES (15,361) (15,194) (18,358)
------------ ---------- ------------
NET ASSETS 71,434 74,167 67,174
============ ========== ============
Share capital 9 229,308 229,308 229,308
Other reserves 20,674 20,625 20,730
Accumulated deficit (178,548) (175,766) (182,864)
TOTAL EQUITY 71,434 74,167 67,174
============ ========== ============
Serica Energy plc
Statement of Changes in Equity
For the year ended 31 December 2015 and period ended 30 June
2016
Group Share Other
capital reserves Deficit Total
US$000 US$000 US$000 US$000
At 1 January 2015
(audited) 227,958 20,634 (182,255) 66,337
Loss for the period - - (609) (609)
Total comprehensive
income - - (609) (609)
Share-based payments - 96 - 96
Issue of shares 1,350 - - 1,350
At 30 June 2015 (unaudited) 229,308 20,730 (182,864) 67,174
Profit for the period - - 7,098 7,098
--------- ---------- ---------- --------
Total comprehensive
income - - 7,098 7,098
Share-based payments - (105) - (105)
At 31 December 2015
(audited) 229,308 20,625 (175,766) 74,167
Loss for the period - - (2,782) (2,782)
--------- ---------- ---------- --------
Total comprehensive
income - - (2,782) (2,782)
Share-based payments - 49 - 49
At 30 June 2016 (unaudited) 229,308 20,674 (178,548) 71,434
========= ========== ========== ========
Serica Energy plc
Consolidated Cash Flow Statement
For the period ended 30 June
Six Six
months months Year
ended ended ended
30 June 30 June 31 Dec
2016 2015 2015
US$000 US$000 US$000
(Unaudited) (Unaudited) (Audited)
Operating activities:
(Loss)/profit for the period (2,782) (609) 6,489
Adjustments to reconcile loss for the period
to net cash flow from operating activities
Taxation credit (1,121) - (2,433)
Net finance (income)/costs (317) 11 164
Depletion and amortisation 414 155 1,341
Oil and NGL overlift increase/(reduction) 3,070 (1,485) (3,407)
Other income 407 - -
Other asset write offs - - 170
Impairment of E&E assets 25 185 8,186
Other non-cash movements 391 (788) 431
Share-based payments 49 96 (9)
Decrease/(increase) in receivables 3,211 884 (2,137)
Decrease /(increase) in inventories 61 28 (369)
Decrease in payables (2,631) (440) (865)
Cash generated from operations 777 (1,963) 7,561
Taxation paid - - -
Net cash in/(out)flow from operations 777 (1,963) 7,561
------------ ------------ ----------
Cash flows from investing activities:
Purchase of E&E assets (788) (3,151) (3,957)
Purchase of P, P & E (38) - -
Cash inflow arising on acquisition of oil & gas asset - 9,089 8,874
Interest received 37 2 11
Net cash (out)/inflow from investing activities (789) 5,940 4,928
------------ ------------ ----------
Cash flows from financing activities:
Finance costs paid (2) - (254)
Net cash outflow from financing activities (2) - (254)
------------ ------------ ----------
Cash and cash equivalents
Net (decrease)/increase in period (14) 3,977 12,235
Effect of exchange rates on cash and cash equivalents (768) 30 (526)
Amount at start of period 21,602 9,893 9,893
Amount at end of period 20,820 13,900 21,602
============ ============ ==========
Serica Energy plc
Notes to the Unaudited Consolidated Financial Statements
1. Corporate information
The interim condensed consolidated financial statements of the
Group for the six months ended 30 June 2016 were authorised for
issue in accordance with a resolution of the directors on 29
September 2016.
Serica Energy plc is a public limited company incorporated and
domiciled in England & Wales. The Company's ordinary shares are
traded on 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 2016 have been prepared in accordance with
International Accounting Standard 34 "Interim Financial Reporting"
as adopted by the European Union.
These unaudited interim consolidated financial statements of the
Group have been prepared in accordance with International Financial
Reporting Standards following the same accounting policies and
methods of computation as the consolidated financial statements for
the year ended 31 December 2015. These unaudited interim
consolidated 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 2015.
A number of new standards, amendments to existing standards and
interpretations were applicable from 1 January 2016. 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 2016.
Going Concern
The Directors are required to consider the availability of
resources to meet the Group's liabilities for the foreseeable
future. The financial position of the Group, its cash flows and
capital commitments are described in the Financial Review
above.
At 30 June 2016 the Company held net current assets of US$12.5
million including cash resources of US$20.8 million with no
borrowings outstanding. The Erskine asset acquisition in 2015 has
brought to Serica a producing interest capable of generating robust
continuing cash flow at current oil and gas prices. Existing
resources plus Erskine revenues are expected to be sufficient to
cover ongoing Erskine costs and the outstanding instalments of the
acquisition price plus other operational, technical and
administrative costs in the short to medium term.
Mindful of the risks of reliance on revenues from a single
field, which are underlined by the recent shutdown in 2016 caused
by pigging problems, management will seek to continue building
Group cash reserves so as to improve its financial resilience. The
financial strategy is to restrict near-term spend on administrative
costs and exploration licences, only committing to exploration
drilling where the costs are substantially carried by third
parties. The Company's costs of the exploration well on 22/19c will
be carried by a third party as will the bulk of the subsequent
Doyle well.
Management continues to seek new business opportunities to add
shareholder value and, where these can offer attractive returns,
appropriate financing structures will be investigated. When the
final decision to proceed with the Columbus development is made,
the Group would consider a range of alternative means of finance to
fund its share of development costs.
After making enquiries and having taken into consideration the
above factors, the Directors have reasonable expectation that the
Group has adequate resources to continue in operational existence
for the foreseeable future. Accordingly they continue to adopt the
going concern basis in preparing the interim financial
statements.
Significant accounting policies
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 2015.
The Group financial statements are presented in US dollars and
all values are rounded to the nearest thousand dollars (US$000)
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 B.V., Serica Energy Corporation,
Asia Petroleum Development Limited, Petroleum Development
Associates (Asia) Limited, Serica Energy (UK) Limited, PDA Lematang
Limited, Serica Glagah Kambuna B.V., Serica Foum Draa B.V., Serica
Sidi Moussa B.V., Serica Energy Rockall B.V., Serica Energy Slyne
B.V. and Serica Energy Namibia B.V.. Together, these comprise the
"Group".
All inter-company balances and transactions have been eliminated
upon consolidation.
3. Segmental Information
The Group's business is that of oil & gas exploration,
development and production. The Group's reportable segments are
based on the location of the Group's assets.
The following tables present revenue, profit and certain asset
and liability information regarding the Group's geographical
reportable segments for the periods ended 30 June 2016 and 2015.
Costs associated with the UK corporate centre are included in the
UK & Ireland reportable segment. Reportable information in
respect of the Group's interest in the producing Kambuna field in
Indonesia is disclosed as a separate segment, with income statement
information for the Kambuna field in Indonesia additionally
classified as 'discontinued'.
Period ended 30 June Continuing Discontinued
2016 UK &
Ireland Africa Total
US$000 US$000 US$000 US$000
Revenue 5,739 - 5,739 -
--------- ------- -------- ----------- -------------
Operating and segment
loss (3,801) (25) (3,826) (5)
Finance revenue 35 -
Finance costs (107) -
Loss before taxation (3,898) (5)
Taxation credit for
the period 1,121 -
--------- ------- -------- ----------- -------------
Loss after taxation (2,777) (5)
UK &
Ireland Africa Kambuna Total
US$000 US$000 US$000 US$000
Other segment information:
Segmental assets 83,576 3,219 - 86,795
Unallocated assets -
Total assets 86,795
-----------
Segment liabilities (15,302) (58) (1) (15,361)
Total liabilities (15,361)
-----------
Period ended 30 June Continuing Discontinued
2015 UK &
Ireland Africa Total
US$000 US$000 US$000 US$000
Revenue 2,186 - 2,186 -
--------- ------- -------- ----------- -------------
Operating and segment
(loss)/profit (443) (185) (628) 30
Finance revenue 2 -
Finance costs (13) -
(Loss)/profit before
taxation (639) 30
Taxation charge for
the period - -
--------- ------- -------- ----------- -------------
(Loss)/profit after
taxation (639) 30
UK &
Ireland Africa Kambuna Total
US$000 US$000 US$000 US$000
Other segment information:
Segmental assets 82,315 2,925 292 85,532
Unallocated assets -
Total assets 85,532
-----------
Segment liabilities (17,942) (415) (1) (18,358)
Total liabilities (18,358)
-----------
Unallocated assets and liabilities comprise financing items
(including cash on deposit).
4. Sales Revenue
Six months Six months Year
ended ended ended
30 June 30 June 31 Dec
2016 2015 2015
US$000 US$000 US$000
----------- ----------- -------
Gas sales 2,431 649 9,137
Oil sales 5,457 - 10,377
NGL sales 921 52 1,096
(Increase)/reduction in liquids overlift (3,070) 1,485 3,407
5,739 2,186 24,017
----------- -----------
5. Cost of sales
Six months Six months Year
ended ended ended
30 June 30 June 31 Dec
Six months ended 30 June: 2016 2015 2015
US$000 US$000 US$000
----------- ----------- -------
Operating costs 7,958 912 6,593
Depletion (note 8) 414 155 1,341
8,372 1,067 7,934
----------- -----------
6. Discontinued Operation
During 2013, Serica's sole remaining interest in Indonesia was
its 25% interest in the Glagah Kambuna Technical Assistance
Contract ("TAC"). The TAC covered an area of offshore North Sumatra
and contained the Kambuna gas field.
Following the developments of the Kambuna business segment in
the second half of 2013, the financial results of the Kambuna field
are now disclosed as 'discontinued' operations and separate from
the results of the continuing business segments. The TAC was
formally terminated on 31 December 2013 and the facilities handed
over to Pertamina.
Results of discontinued operations
This discontinued operation has no significant further activity
and generated a loss of US$5,000 in 1H 2016 (profit of US$30,000 in
1H 2015).
The loss of US$0.3 million for the full 2015 year comprised a
final assessment for asset write-offs and minor operator expense as
residual matters are closed out.
No revenue was earned in either the 1H 2016 or 1H 2015 period
and there are no taxation components within discontinued
operations.
Basic and diluted Earnings per ordinary share (EPS) on the
result for 1H 2016 amounted to US$nil (1H 2015: US$nil).
7. Exploration and Evaluation Assets
Total
US$000
Cost:
At 1 January 2015 (audited) 75,343
Additions 2,157
Asset write-offs (13,122)
At 31 December 2015 (audited) 64,378
Additions 788
Asset write-offs (25)
At 30 June 2016 (unaudited) 65,141
=========
Provision for impairment:
At 1 January 2015 (audited) (17,500)
Impairment reversal for the period 4,936
At 31 December 2015 (audited) (12,564)
Impairment charge for the period -
At 30 June 2016 (unaudited) (12,564)
=========
Net Book Amount:
30 June 2016 (unaudited) 52,577
=========
31 December 2015 (audited) 51,814
=========
1 January 2015 (audited) 57,843
=========
E&E asset write offs in the Income Statement in 1H 2016
consisted of a minor charge against costs incurred on the Sidi
Moussa block in Morocco.
The aggregate impairment and write-off charge against E&E
assets in 2015 was US$8.2 million and comprised E&E asset
write-offs of US$13.1 million and an impairment reversal of US$4.9
million million against the Columbus asset in the UK. The 2015
E&E asset write-offs of US$13.1 million related to the costs
incurred on relinquished UK licences (US$3.5 million), a charge of
US$5.8 million on the UK P1482 licence, a US$3.7 million charge
against the Slyne asset in Ireland, and a US$0.1 million charge in
Morocco.
8. Property Plant and Equipment
Oil and Computer Fixtures, Total
gas / IT equipment fittings
properties and equipment
US$000 US$000 US$000 US$000
Cost:
At 1 January 2015
(audited) - 189 901 1,090
Acquisitions 10,235 - - 10,235
Disposals - (189) (901) (1,090)
At 31 December 2015
(audited) 10,235 - - 10,235
Additions 38 - - 38
At 30 June 2016 (unaudited) 10,273 - - 10,273
Depreciation and
depletion:
At 1 January 2015
(audited) - 189 901 1,090
Charge for the period
(note 5) 1,341 - - 1,341
Disposals - (189) (901) (1,090)
At 31 December 2015
(audited) 1,341 - - 1,341
Charge for the period
(note 5) 414 - - 414
At 30 June 2016 (unaudited) 1,755 - - 1,755
------------ ---------------- --------------- --------
Net book amount:
At 30 June 2016 (unaudited) 8,518 - - 8,518
============ ================ =============== ========
At 1 January 2016
(audited) 8,894 - - 8,894
============ ================ =============== ========
At 1 January 2015
(audited) - - - -
============ ================ =============== ========
The property, plant and equipment balance of US$8.5 million as
at 30 June 2016 entirely comprises the net book amount of the
Erskine asset acquisition costs capitalised on completion of the
transaction on 4 June 2015. This includes non-cash consideration in
the form of 13,500,000 ordinary shares issued to BP at nominal
value of US$0.10 each as part of the acquisition consideration.
9. Equity Share Capital
The share capital of the Company comprises one "A" share of
GBP50,000 and 263,679,039 ordinary shares of US$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 US$0.10
ordinary shares and one 'A' share.
Allotted, issued and fully paid: Share Share Total
capital premium Share capital
Group Number US$000 US$000 US$000
At 1 January 2015 250,179,040 25,108 202,850 227,958
Shares issued (i) 13,500,000 1,350 - 1,350
At 31 December 2015 and 263,679,040 26,458 202,850 229,308
Shares issued - - - -
At 30 June 2016 263,679,040 26,458 202,850 229,308
i) On 4 June 2015, the Company issued 13,500,000 ordinary shares
at nominal value of US$0.10 each to BP as part of the acquisition
of an 18% interest in UK blocks 23/26a (Area B) and 23/26b (Area B)
containing the Erskine field.
As at 29 September 2016 the issued voting share capital of the
Company is 263,679,039 ordinary shares and one "A" share.
10. Share-Based Payments
Share Option Plans
Following a group reorganisation in 2005, the Company
established an option plan (the "Serica 2005 Option Plan") to
replace the Serica Energy Corporation Share Option Plan (the
"Serica BVI Option Plan"). There are no options outstanding under
the Serica BVI Option Plan, nor can further options be granted
under the Serica BVI Option Plan. No further options will be
granted under the Serica 2005 Option Plan as the ability to do this
expired on this plan's 10(th) anniversary in November 2015.
A new plan, the Serica Energy plc Company Share Option Plan
("Serica CSOP"), was approved for adoption at the Company's AGM in
June 2016. This will govern all future grants of options by the
Company to Directors, officers, key employees and certain
consultants of the Group. The Directors intend that the maximum
number of ordinary shares which may be utilised pursuant to the
Serica CSOP will not exceed 10% of the issued ordinary shares of
the Company from time to time in line with the recommendations of
the Association of British Insurers.
As at 30 June 2016, the Company has granted 24,332,460 options
under the Serica 2005 Option Plan, 8,466,330 of which were
outstanding. 600,000 of the 8,466,330 options outstanding at 30
June 2016 under the Serica 2005 Option Plan are exercisable only if
certain performance targets being met. These include the following
options subject to market conditions; In April 2011, 200,000
options were awarded to an employee exercisable only if certain
operational performance targets are met. In November 2012, 400,000
options were granted to a consultant subject to performance
conditions. The 2,500,000 options granted to a director in July
2015 were all awarded at exercise prices higher than the current
market price at the time of the grant to establish firm performance
targets.
The Company calculates the value of share-based compensation
using a Black-Scholes option pricing model (or other appropriate
model for those Directors' options subject to certain market
conditions) to estimate the fair value of share options at the date
of grant. There are no cash settlement alternatives. The estimated
fair value of options is amortised to expense over the options'
vesting period. US$49,000 has been charged to the income statement
in continuing operations for the six month period ended 30 June
2016 (2015 - US$96,000) and a similar amount credited to the
share-based payments reserve, classified as 'Other reserve' in the
Balance Sheet.
The options granted were consistently valued in line with the
Company's valuation policy. Assumptions for options granted in 2015
included a weighted average risk-free interest rate of 3%, no
dividend yield, a weighted average expected life of three years,
and a volatility factor of expected market price of in a range from
50-70%.
The following table illustrates the number and weighted average
exercise prices (WAEP) of, and movements in, share options during
the period:
Serica BVI Option Plan Number WAEP Cdn$
Outstanding as at 1 January 2015 700,000 1.11
Expired during the period (700,000) 1.11
Outstanding at 31 December 2015 - -
Serica 2005 Option Plan GBP
Outstanding at 1 January 2015 10,680,460 0.44
Forfeited during the period (5,193,940) 0.43
Expired during the period (885,190) 0.50
Granted during the period 4,000,000 0.13
Outstanding at 31 December 2015 8,601,330 0.30
Expired during the period (135,000) 1.035
Outstanding at 30 June 2016 8,466,330 0.28
------------ ----------
In January 2016, 135,000 share options under the Serica 2005
Option Plan expired.
Share Options
As at 30 June 2016, the following director and employee share
options were outstanding:
Expiry Date Amount Exercise cost
GBP
January 2017 60,000 61,200
May 2017 210,000 218,400
March 2018 318,000 238,500
January 2020 1,155,000 785,400
April 2021 50,000 15,685
January 2022 1,123,330 240,112
October 2022 400,000 116,000
January 2023 300,000 81,750
November 2023 400,000 72,000
January 2024 450,000 58,500
June 2025 1,500,000 99,000
July 2025 1,000,000 120,000
July 2025 1,000,000 180,000
July 2025 500,000 120,000
11. Taxation
The major components of income tax credited/(charged) in the consolidated income statement
are:
Six months Six months Year
ended ended ended
30 June 30 June 31 Dec
2016 2015 2015
US$000 US$000 US$000
Current income tax charge - - -
Deferred income tax credit 1,121 - 2,433
Total taxation credit for the period 1,121 - 2,433
--------------- ---------------
Recognised and unrecognised tax losses
Following the acquisition of a producing UK asset in 2015, the
Group has recognised a deferred tax asset of US$3.5 million as at
30 June 2016 in respect of certain carried forward losses that are
expected to be utilised in the foreseeable future to offset the
taxable profits that the acquired asset is expected to
generate.
The Group has UK ring fence tax losses of US$171.3 million
available as at 31 December 2015 that are available indefinitely
for offset against future ring fence trading profits of the company
in which the losses arose.
Changes to UK corporation tax legislation
Legislation to reduce the main rate of UK corporation tax to 18%
effective 1 April 2020 was introduced in Finance Act 2015. From 1
January 2015, the rate of Supplementary Charge (SC) was 20%, which
reduced the headline rate of tax from 62% to 50% for ring-fenced
trading profits. In March 2016 it was announced that the rate of SC
would be reduced from 20% to 10% with effect from 1 January 2016.
This was substantively enacted on 6 September and further reduces
the headline rate of tax to 40% for ring-fenced trading
profits.
12. 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 2015, which are available at the Company's registered
office at 52 George Street, London W1U 7EA and on its website at
www.serica-energy.com and on SEDAR at www.sedar.com.
This interim statement will be made available at the Company's
registered office at 52 George Street, London W1U 7EA and on its
website at www.serica-energy.com and on SEDAR at www.sedar.com.
GLOSSARY
bbl barrel of 42 US gallons
bcf billion standard cubic feet
boe barrels of oil equivalent (barrels of oil, condensate and LPG plus the heating equivalent
of gas converted into barrels at a rate of 6,000 standard cubic feet per barrel)
boepd barrels of oil equivalent per day
bpd barrels of oil per day
CATS Central Area Transmission System
CPR Competent Persons Report
FEED Front End Engineering Design
FPS Forties Pipeline System
HPHT High Pressure High Temperature
mscf thousand standard cubic feet
mmbbl million barrels
mmboe million barrels of oil equivalent
mmscf million standard cubic feet
mmscfd million standard cubic feet per day
NGL Natural Gas Liquid
P(10) A high estimate that there should be at least a 10% probability that the quantities recovered
will actually equal or exceed the estimate
P(50) A best estimate that there should be at least a 50% probability that the quantities recovered
will actually equal or exceed the estimate
P(90) A low estimate that there should be at least a 90% probability that the quantities recovered
will actually equal or exceed the estimate
Proved Reserves Proved reserves are those Reserves that can be estimated with a high degree of certainty to
be recoverable. It is likely that the actual remaining quantities recovered will exceed the
estimated proved reserves.
Probable Reserves Probable reserves are those additional Reserves that are less certain to be recovered than
proved reserves. It is equally likely that the actual remaining quantities recovered will
be greater or less than the sum of the estimated proved + probable reserves.
Possible Reserves Possible reserves are those additional Reserves that are less certain to be recovered than
probable reserves. It is unlikely that the actual remaining quantities recovered will exceed
the sum of the estimated proved + probable + possible reserves
Reserves Estimates of discovered recoverable commercial hydrocarbon reserves calculated in accordance
with the Canadian National Instrument 51--101
Contingent Resources Estimates of discovered recoverable hydrocarbon resources for which commercial production
is not yet assured, calculated in accordance with the Canadian National Instrument 51--101
Prospective Resources Estimates of the potential recoverable hydrocarbon resources attributable to undrilled
prospects,
calculated in accordance with the Canadian National Instrument 51--101
TAC Technical Assistance Contract
tcf trillion standard cubic feet
UKCS United Kingdom Continental Shelf
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR AKCDKOBKDPCB
(END) Dow Jones Newswires
September 30, 2016 02:00 ET (06:00 GMT)