North Sea oil: Serica Energy in UK windfall tax regime call

The chief executive of a North Sea oil and gas company has said UK fiscal regime “problems” need to be addressed urgently to restore confidence in the sector.

London-listed Serica Energy posted “commendable” results for the six months ended June 30 and hailed investment but warned of “uncertainties” and the current UK Government fiscal regime amid an ongoing push against measures such as the windfall tax.

Gas prices slid from 136 pence per therm in the first half of 2022 to 96 pence per therm this year,  and oil prices went from $108 per barrel to $64 per barrel over the same period, with the company still posting an operating profit of £159 million, although down from £196m for the same period last year.

 Its combined portfolio produced 49,350 boe (barrels of oil equivalent) per day against 38,100 boe per day for the same time last year, which was split between 55% gas and 45% oil.

 An interim dividend of 9 pence per share against 8 pence per share last year was also announced.

Mitch Flegg, Serica chief executive, said: “Serica's current circumstances and optimism reflected in its investment plans should not mask the fact that we share the widespread concerns within the sector about the health of the UK's offshore upstream industry given the current fiscal regime and future uncertainties.

“We welcome the UK Government's recent Call for Evidence regarding long term fiscal policy. However, the problems we see need to be addressed urgently in order to restore confidence in the sector."

 He also said: "The completion of the Tailwind acquisition in March represented a step change in the scale and diversity of Serica, achieving a longstanding strategic goal.

“We have stated consistently our intention to continue investing in the enlarged portfolio, to add to it in a disciplined fashion if the right opportunities arise and to make further cash returns to shareholders.”

Production guidance for 2023 has been amended to 40-45,000 boe per day because of a slower-than-expected ramp-up of production from Bruce and Triton hubs.

 Neil Shah, at Edison Group, said: “Serica's acquisition of Tailwind Energy in March 2023 marked a transformative boost in the company's scale and diversity, a true electrifying surge in Serica's energy ambitions.

“From a financial standpoint, Serica’s performance is commendable. And as a cherry on top, shareholders can expect an interim dividend of 9 pence per share, a step up from last year's 8 pence per share.”

Shares in Serica Energy closed at 253.8p, down 5.3%, or 14.2p.

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