Serica Energy PLC · LSE:SQZ
Serica Energy — Shareholder Meeting (June 2017)
27 slides from Serica Energy's shareholder meeting presentation, Jun 29, 2017
Slide 1: Serica Energy AGM Presentation
Serica Energy AGM Presentation 29 June 2017 Serica has established a sound base from which to build further value
Slide 2: Disclaimer
DISCLAIMER The information presented herein is subject to amendment and has not been independently verified. Serica Energy plc (“Serica”) does not represent that the information and opinions contained herein are necessarily adequate or accurate and no liability is accepted for any errors or omission
Slide 3: Results Highlights
RESULTS HIGHLIGHTS Profitable oil 2016 Profit after tax of Strong balance and gas sheet supports producer US$10.8M further growth 40p 30p 20p 10p - Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 H1 2017 Cash balance of Columbus 2,800 boe/d US$30.5M progressing towards FDP Net production at 28 June 2017* * After
Slide 4: Financials: Income Statement
FINANCIALS: INCOME STATEMENT 2016 2015 (US$million) (US$million) 2016 income restricted by six-month Erskine shut-in Revenue 21.4 24.0 2015 includes seven months Erskine post-acquisition income Average 2016 opex of $23/boe reduced to $14/boe during Operating costs (13.5) (6.6) periods of uninterrupt
Slide 5: Financials: Balance Sheet
FINANCIALS: BALANCE SHEET 2016 2015 (US$million) (US$million) Exploration and evaluation assets 53.2 51.9 Columbus investment to date plus retained exploration PP&E 9.1 8.9 Erskine acquisition net of DD&A Deferred tax 9.9 2.4 Partial recognition of future benefits from tax losses Total non-current a
Slide 6: First Half 2017
FIRST HALF 2017 Average production net to Serica (approx. 50% oil, 50% gas) • 3,100 boe/d through to end May • June volumes cut-back to monitor wax-build and allow for four-day pipeline soak • H1 average production of 2,800 boe/d Average market prices January-May of US$53 per bbl (Brent) and 44 penc
Slide 7: Erskine Performance
ERSKINE PERFORMANCE • Production • 2,800 boe/d net in efficiencies H1 2017 rebuilt since acquisition • $14/boe OPEX since Aug 2016 • Strong cash and restart profit generator • Further value • Net remaining targeted through reserves 4,000 improved uptime 3,500 Net boe/d 3.8mmboe* /third party 3,000 b
Slide 8: Erskine 2017 Production
ERSKINE 2017 PRODUCTION • Jan-May 2017 delivered strong performance averaging 3,100 boe/d net to Serica • Rates curtailed in May/June for Erskine well work and wax management, including a four-day shut-in at end June for pipeline wax soak • Planned two-week shut-in for pipeline de-wax and platform m
Slide 9: Erskine Forward Production Plan Net to Serica
ERSKINE FORWARD PRODUCTION PLAN NET TO SERICA 3,000 2,500 Erskine Upside Average boe/day 2,000 Erskine Base 1,500 1,000 500 - 2017 2018 2019 2020 2021 2022 2023 2024 2025 Erskine upside reflects: • Maintaining high uptime to achieve levels similar to Q1 2017 – Regular pigging and pipeline cleaning o
Slide 10: Columbus Development Plans
COLUMBUS DEVELOPMENT PLANS Serica holds 50% equity and operates the Columbus gas condensate field. There are two feasible development options: A joint development with Export via the Arran field to the CATS and Shearwater platform or… FORTIES ... a standalone well to be drilled into Columbus from th
Slide 11: Extended Reach Drilling from Lomond
EXTENDED REACH DRILLING FROM LOMOND • A well can be drilled into Columbus with a jack-up rig brought alongside the platform • Total well step-out 7.5km 85m • Columbus can fill spare capacity in Lomond and Erskine process trains 3,000m Columbus Reservoir • Columbus will reduce unit operating costs ac
Slide 12: Alternative Development into Shearwater
ALTERNATIVE DEVELOPMENT INTO SHEARWATER • A subsea well at Columbus could tie into a future pipeline from Arran to Shearwater • Columbus would share development costs with Arran • Shearwater has spare capacity • Arran is due to sanction in Q2 2018 Shearwater is a competitive alternative if Arran pro
Slide 13: Benefits of Each Development Option
BENEFITS OF EACH DEVELOPMENT OPTION LOMOND SHEARWATER • No reliance on other developments • Simpler well to drill • Earlier production start (2020) • Larger selection of rigs available • Minimal platform modifications • Additional capital costs shared with Arran • No pipeline or subsea equipment • L
Slide 14: Potential Impact of Columbus Net to Serica
POTENTIAL IMPACT OF COLUMBUS NET TO SERICA 6,000 Columbus 5,000 Erskine Average boe/day 4,000 Upside 3,000 Erskine Columbus production – Base subject to development decision 2,000 1,000 0 2017 2019 2021 2023 2025 2027 2029 Columbus would sustain and build Serica’s cash flow 14 8
Slide 15: Columbus Option Selection Timeline
COLUMBUS OPTION SELECTION TIMELINE 2017 2018 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Lomond development Lomond commercial design negotiations Selection and project sanction Shearwater screening Shearwater detailed engineering Shearwater/Arran commercial negotiations Field Development Plan Columbus first gas is 2020
Slide 16: Rowallan: Exploration Drilling in 2018
ROWALLAN: EXPLORATION DRILLING IN 2018 Jurassic & Triassic Fields Highlighted Rowallan Prospect Serica Equity 22/19c 15% fully carried through 1st well Operator ENI Rowallan prospect Triassic: Skagerrak Formation Reservoir Middle Jurassic: Pentland Formation 22/19c Columbus Water depth 100 metres Ma
Slide 17: Rowallan Is in a Prime Location
ROWALLAN IS IN A PRIME LOCATION Regional Top Triassic Depth Map Close to producing oil fields and source kitchen 17
Slide 18: Rowallan Prospect Cross Section
ROWALLAN PROSPECT CROSS SECTION West East Scale: 1km Depth m subsea 2,500 3,000 3,500 4,000 Rowallan 4,500 Reservoir Target Middle Jurassic 5,000 Triassic 5,500 18 Rowallan is a robust structural closure on high quality data
Slide 19: Rowallan: Potential Material Field
ROWALLAN: POTENTIAL MATERIAL FIELD ROWALLAN • P50 resource estimate comparable with initial reserves of major fields in CNS • Erskine, Shearwater and Culzean are all High Pressure, High Temperature gas condensate fields • Technology has advanced for drilling and development of HPHT fields P50 resour
Slide 20: Rowallan Drilling Timeline
ROWALLAN DRILLING TIMELINE 2017 2018 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Well Planning Well site survey Long lead items Spud well* Reach target* * Expected drill time from spud to target approximately 100 days 20 All Serica drilling costs on Rowallan are carried
Slide 21: Potential Impact of a Rowallan Discovery
POTENTIAL IMPACT OF A ROWALLAN DISCOVERY 8,000 Columbus 7,000 6,000 Erskine Average boe/day Rowallan could add up to 8,000 boe/d net to Serica from Upside 5,000 2024 if successful (P50 case) 4,000 Erskine Base 3,000 2,000 1,000 0 2017 2019 2021 2023 2025 2027 2029 A Rowallan discovery could deliver
Slide 22: Serica Frontier Exploration
SERICA FRONTIER EXPLORATION Namibia • Luderitz licence extended into next two-year phase • No well commitment but Serica seeking farm-in partner for early drilling • Extensive 3D seismic programme identified a range of prospects Ireland • Two-year extensions secured on Rockall and Slyne licences 4/1
Slide 23: Serica Performance
SERICA PERFORMANCE Share price performance since Erskine acquisition in June 2015 STEADY Cash build during H1 2017 CASH US$16.8 million GENERATION before payment of 3rd Erskine US$2.9 million tranche 2017 Guidance 2,500 – 2,750 boe/d net to account for H2 maintenance Since acquisition Erskine EXTEND
Slide 24: Comparative Sector Performance
COMPARATIVE SECTOR PERFORMANCE • Serica has performed strongly against its peer group since 2015 • Key points – mid-2015 Erskine acquisition and resulting cash flow performance • Focused on production efficiencies, partner alignment and cost control • Achieved without recourse to shareholders • Achi
Slide 25: Positioned for Further Growth
POSITIONED FOR FURTHER GROWTH Serica’s competitive advantage • Strong performance in a tough market increases its industry profile • Healthy balance sheet increases options and builds capability • Growing cash balance (US$30.5 million at 28 June 2017) creates capacity • Tax losses (US$166 million) p
Slide 26: Forward Growth Strategy
FORWARD GROWTH STRATEGY Serica’s immediate objectives: • Diversify risk of a single producing asset through acquisition of additional production where the Company can add value and increase opportunity • Achieve scale to improve shareholder liquidity and increase financing capacity • Bring Columbus
Slide 27: Conclusion
CONCLUSION Serica is emerging from the industry downturn considerably stronger and able to absorb ongoing weak oil prices Improved production uptime, lower operating costs and extensive tax losses support continuing cash flow generation With growing cash resources, a low-cost production base and pen