Serica Energy Plc · LSE:SQZ
Serica Energy — FY2023 Earnings Presentation
25 slides from Serica Energy's earnings presentation, Apr 24, 2024
Slide 1: Focused On Value: 2023 Full Year Results and Outlook
Focused On Value 2023 Full Year Results and Outlook
Slide 2: Disclaimer
Disclaimer This document has been prepared by Serica Energy PLC (the "Company") and is for information purposes only. The information contained in this document is being made available to, and is only directed at, persons to whom it may lawfully be communicated to ("Relevant Persons"). Any person wh
Slide 3: Presenters
Presenters Dave Latin Martin Copeland Chairman and Interim CEO CFO • Appointed to Serica Board in 2021 • Joined as CFO in February 2024 • Non-Executive Chairman since July 2023 and Interim CEO • 30+ year career in Investment Banking across the energy effective 24 April 2024 space including financing
Slide 4: Introduction
Introduction Dave Latin, Chairman and Interim CEO Annual Results I 24 April 2024 4
Slide 5: Serica investment case at a glance
Serica investment case at a glance •• UKCS UKCS portfolio portfolio focused around two focused around 1. Diversified two production productionportfolio hubs hubs •• Balance Balance of of oil oil and and gas gas 2. Debt-free •• Established Established North Sea operator North Sea operator •• Producti
Slide 6: 2023 highlights
2023 highlights Investment Growth Returns • Completed acquisition of • Production 40.1 kboe/d1 • EBITDAX £381 million despite Tailwind in March compared to 26.2 kboe/d in 2022 average NBP gas price half that in • Successful multi well • Net 2P reserves additions of 24 2022 intervention campaign on m
Slide 7: Key operational metrics
Key operational metrics 2023 2022 Comment Addition of Tailwind in 2023 Production 40.1 kboe/d1 26.2 kboe/d Longer than planned summer shutdowns of Bruce and Triton hubs Significant inflationary pressures in offshore costs Unit opex ~US$19/boe2 US$16/boe Planned shutdown overruns Reserves Replacement
Slide 8: Reserves replacement across the portfolio
Reserves replacement across the portfolio Proforma Net Proven and Probable Reserves1 140 • Reserves estimate based on 5 7 9 2 5 19 49 independent Competent Person’s 120 7 Report 49 100 • Balance of oil and gas 80 • 179% reserves replacement ratio2 mmboe 84 72 • Upward revisions include 60 • Bruce in
Slide 9: Maintaining strong production
Maintaining strong production Serica + Tailwind Portfolios Average Net Weekly Production (boe/d) • 2024 YTD1 production about 45,400 boe/d Completion of Tailwind acquisition • 2024 production guidance narrowed to 41-46,000 boe/d • Triton drilling campaign slipped to April 2024 start • Erskine produc
Slide 10: 2024 well programme underway
2024 well programme underway Field Activity Serica interest 2024 2025 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May June Bruce Well work 98.00% Keith Well work 100.00% Bittern B1z sidetrack 64.63% Gannet E GE-05 well 100.00% Guillemot NW EC1 well 10.00% Evelyn EV02 well 100.00% Belinda BE0
Slide 11: Strong projected returns from Triton well campaign
Strong projected returns from Triton well campaign Committed 5 well programme comprising sidetrack, infill wells and Belinda field development Belinda sanctioned • Final investment decision taken and OPRED approval received • NSTA approval of Field Development Plan expected shortly • Development wel
Slide 12: Financial Results
Financial Results Martin Copeland, CFO Annual Results I 24 April 2024 12
Slide 13: FY 2023 performance at a glance
FY 2023 performance at a glance Production1 Unit operating cost1 EBITDAX2 Profit before tax Net Income 40.1 kboe/d ~US$19/boe £381 million £306 million £103 million Total Capex2 Current tax3 CFFO4 post tax2 Dividends Paid Adjusted Net Cash2 £79 million £183 million £195 million £89 million £78 milli
Slide 14: Income Statement
Income Statement Continued strong operating margins and profitability with impact of Tailwind tax shelter partially offsetting weaker commodity price backdrop £ million 2023 2022 Revenues and EBITDAX reflect lower realised prices (US$63/boe v US$104/boe) NBP Revenue 633 812 average c. 50% of 2022, o
Slide 15: Balance Sheet
Balance Sheet Serica continues to enjoy a very strong Balance Sheet with differentiated low decom provisions and net cash position New Reserve Based Loan Facility Assets 2023 2022 £ million £ million completed in January 2024 E&E Assets 2 1 • Serica reached financial close on its US$525 million mult
Slide 16: Serica has low decommissioning liabilities
Serica has low decommissioning liabilities Reported Decommissioning Liabilities / 2P Reserves (US$/boe) 12 • Metrics based on most recently reported 10 pre-tax decommissioning provisions and 2P reserves of selection of North Sea peers 8 Average excluding Serica: US$7.6/boe • Provisions for decommiss
Slide 17: Cash generative assets supporting investment and dividends
Cash generative assets supporting investment and dividends 2023 includes only 9 months Tailwind contribution and longer than normal summer maintenance End 2022 to end 2023 gross cash bridge (£mm) Opex includes £7 million of lifting costs Includes inter alia realised hedging loss of £16 million and n
Slide 18: Financial risk management – protecting cashflow delivery
Financial risk management – protecting cashflow delivery Serica is implementing a programme of hedging to protect downside risk while retaining upside commodity exposure Oil hedging Gas hedging kbbl/d Oil hedging mmscfd 20 30 25 15 20 15 10 15 15 5 5 5 5 13 2 4 10 5 5 2 2 4 5 5 5 5 10 10 10 10 10 10
Slide 19: Significant cash returns to shareholders
Significant cash returns to shareholders Dividends Paid and Proposed1 100 25 • Proposed final dividend of 14p/share in 90 respect of 20232 80 20 • Dividends of >£200 million paid or 70 proposed to date 60 15 • £15 million share buyback initiated as part £ million p/share 50 of 2024 shareholder cash
Slide 20: Tax losses and capex mitigating impact of increased tax rates
Tax losses and capex mitigating impact of increased tax rates Effective tax rate1 vs. Marginal tax rate (%) • Tax comprises RFCT, Supplementary Effective tax rate on EBITDAX Marginal tax rate Charge and EPL 75.0% • 2022 marginal tax includes pro-rata impact of EPL introduction and increase 55.1% • 2
Slide 21: Capital allocation - framework for the future
Capital allocation - framework for the future Foundational Pillars Safe and reliable Maintenance and Financial risk operations emissions reduction management expenditure (incl hedging) PRIORITY No. 1 PRIORITY No. 2 PRIORITY No. 3 1 Finance costs Owned assets 2 Disciplined M&A Dividends 3 Excess capi
Slide 22: Outlook and closing remarks
Outlook and closing remarks Dave Latin, Chairman and Interim CEO Annual Results I 24 April 2024 22
Slide 23: UK oil and gas producers not in 'windfall' conditions
UK oil and gas producers not in ‘windfall’ conditions Historical and Futures Brent (US$/bbl) Historical and Futures UK NBP (p/therm) 140 900 800 120 700 100 600 NBP Price (p/therm) Brent Price (US$/bbl) 80 500 400 60 Oil and gas prices are within 300 40 historical norms yet tax burden increased thre
Slide 24: Proactive, focused and disciplined M&A
Proactive, focused and disciplined M&A Projects FIDs (resource >10mmboe) Exploration wells 2018-23 25 200 20 150 15 100 10 50 5 0 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 UK Norway Denmark Netherlands UK Norway Denmark Netherlands • Leveraging Serica’s operating capabilities, technic
Slide 25: Our purpose
Our purpose To contribute responsibly towards meeting the world's energy needs through the safe and efficient production of hydrocarbons • Experienced and safe operator • Growing production • Strong balance sheet • Track record of successful M&A • Significant returns to shareholders Annual Results I