Serica Energy Plc · LSE:SQZ
Serica Energy — Investor Day (July 2023)
39 slides from Serica Energy's investor day presentation, Jul 5, 2023
Slide 1: Growing Our Business
GROWING OUR BUSINESS Serica Energy Capital Markets Day 5 July 2023
Slide 2: Welcome
WELCOME STEPHEN LAMBERT, VP LEGAL & EXTERNAL RELATIONS 2
Slide 3: 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 4: Today's Speakers
TODAY’S SPEAKERS Welcome Stephen Lambert VP Legal and External Relations Past, Present & Finance ESG Future Andy Bell Clara Altobell CFO VP ESG and Business Innovation Mitch Flegg CEO Operations Operations Mike Killeen Carol Stewart VP Operations North Sea Business Manager M&A Q&A Steve Edwards Q&A
Slide 5: Past, Present and Future
PAST, PRESENT AND FUTURE MITCH FLEGG, CEO 6
Slide 6: 8 Years of Growth
8 YEARS OF GROWTH Share Price (p/share) 2P Reserves (mmboe) 500 Tailwind 200 Announced Serica (SQZ) Share Price (p) & Net 2P Reserves (mmboe) 450 180 400 Legend 160 350 Share Price R3 & 140 Columbus 300 Net 2P Reserves 120 250 BKR 100 Completed 200 EPL1 80 BKR Announced 150 60 Erskine EPL2 100 Acqui
Slide 7: A North Sea Company of Consequence
A NORTH SEA COMPANY OF CONSEQUENCE TOP 10 UKCS Producers (kboe/d) Chart Title UK Listed Independents 172 133 133 121 92 82 51 50 49 40-47 Source: Wood Mackenzie estimates for 2023 except Serica which is Company guidance 8 Serica Energy Capital Markets Day 5 July 2023
Slide 8: Diverse and Balanced Production Portfolio
DIVERSE AND BALANCED PRODUCTION PORTFOLIO 2023 net production guidance 40-47,000 boe/d 47% oil, 53% gas 11 producing fields 2 producing hubs 200+ staff 80% of production In London, Aberdeen operated by Serica and offshore Main production hubs have no overlap in transportation infrastructure 9 Serica
Slide 9: Impressive Year to Date Production
IMPRESSIVE YEAR TO DATE PRODUCTION Combined Average Net Weekly Production (boe/d) • Net production for the combined 70,000 Serica and Tailwind portfolios has averaged over 49,000 boe/d YTD 60,000 • Both Bruce and Triton hubs have 50,000 performed well 40,000 • Several planned maintenance periods dur
Slide 10: Strong Results
STRONG RESULTS Unit Operating Costs (US$/boe) Operating Profit (£million) • Serica has delivered improved financial 2022 15.7 2022 476 metrics over the past 5 years 2021 2021 • This is the result of 16.5 246 • Successful re-investment 2020 14.1 2020 -18 programmes 2019 12.6 2019 88 • Successful rese
Slide 11: Consistently Replaced Production
CONSISTENTLY REPLACED PRODUCTION • Erskine net 2P reserves 3.6 mmboe when acquired Serica 2P Reserves since 2018 (mmboe) and 3.3 mmboe now despite 5.6 mmboe produced 140 in last 8 years 120 • Replaced >100% of BKR production since 2018 100 • In total, >30 million boe produced since 2018 but 80 total
Slide 12: Rhum - A Case Study
RHUM - A CASE STUDY • Rhum was a prolific gas field previously operated by BP, Rhum Field gross production producing from only two wells • Serica assumed operatorship in late 2018 mmscf/d 250 50000 • A third Rhum well had been drilled in 2004 but had 45000 never been put into production due to techn
Slide 13: Rhum - A Case Study
RHUM - A CASE STUDY • Rhum was a prolific gas field previously operated by BP, Rhum Field gross production producing from only two wells • Serica assumed operatorship in late 2018 mmscf/d 250 50000 • A third Rhum well had been drilled in 2004 but had 45000 never been put into production due to techn
Slide 14: Rhum - A Case Study
RHUM - A CASE STUDY • Rhum was a prolific gas field previously operated by BP, Rhum Field gross production producing from only two wells Total Bruce CO2 emissions • Serica assumed operatorship in late 2018 mmscf/d tonnes/month 250 50,000 • A third Rhum well had been drilled in 2004 but had 45,000 ne
Slide 15: Continuing Investment in Production Hubs
CONTINUING INVESTMENT IN PRODUCTION HUBS BRUCE TRITON Guillemot NW infill well Gannet E GE-05 infill well Evelyn phase 2 well Bruce and Keith Light Well Intervention Campaigns Bittern B1z sidetrack Planned activity in 2023/24 Serica Energy Capital Markets Day 5 July 2023 16
Slide 16: Targeting Further Growth
TARGETING FURTHER GROWTH • Maintaining standards of operating safely and responsibly • Continuing investment in our existing assets focusing on projects with quick payback • Financially disciplined and technically driven approach to future acquisitions • Opportunistic approach in the UKCS • Expandin
Slide 17: Finance
FINANCE ANDY BELL, CFO 18
Slide 18: Balanced Financial Management
BALANCED FINANCIAL MANAGEMENT • Very strong balance sheet: • Net cash of £217 million as at 21 June 2023 • Low decommissioning liabilities • Result of acquisition structuring and operating performance • Six acquisitions to date - structured to support ongoing investment irrespective of market and co
Slide 19: Low Decommissioning Liabilities
LOW DECOMMISSIONING LIABILITIES Serica and Tailwind acquired core assets on terms that limit our decommissioning liabilities1 • Erskine – Costs expected to be fully covered by seller2 • Bruce/Keith/Rhum • Liabilities remain with sellers apart from 3.75% for Bruce and 8.33% for Keith • Additional con
Slide 20: Taxation
TAXATION • UKCS currently subject to very high levels of tax following introduction of EPL 1 and 2 • Tailwind transaction valuations took account of both rounds of EPL • Tailwind brought significant tax losses to mitigate overall tax impact1 • Around US$1.4bn Corporation Tax losses, US$1.2bn Supplem
Slide 21: Dividend Payer
DIVIDEND PAYER Dividend (pence per share) • Dividend payments increased from £8 million in 2019 to £76 million in respect of 2022 2022 22 • Company intends to maintain level of dividend and to grow it where financial 2021 9 performance supports this • Primary focus remains on identifying 2020 3.5 or
Slide 22: ESG
ESG CLARA ALTOBELL, VP ESG & BUSINESS INNOVATION 23
Slide 23: Teamwork and Dedication to Emissions Reduction
TEAMWORK AND DEDICATION TO EMISSIONS REDUCTION • Environmental responsibility part of the Serica culture • Staff-led Emissions Reduction Group identified and executed flare and emissions reduction improvements • Carbon intensity at lowest level since Serica became operator • Extensive disclosure of
Slide 24: Producing Responsibly
PRODUCING RESPONSIBLY • Serica aims to reduce emissions on Bruce in Bruce Hub Scope 1 Emissions Reduction Plan line with North Sea Transition Deal (NSTD) targets for UKCS • Bruce emissions in 2022 were 14% lower than in 2018 (NSTD reference year) • Zero routine flaring by 2030 • Emissions Reduction
Slide 25: Scope 3 Emissions Focus
SCOPE 3 EMISSIONS FOCUS Reducing emissions from logistics • Reduced helicopter size • Scheduling warehouse deliveries • Close tracking of drilling and diving operations • Collaboration with other operators • Sharing platform support vessel • Multi-well decommissioning campaign Scope 3 Emissions: BKR
Slide 26: Supporting Technology
SUPPORTING TECHNOLOGY Serica providing cash and ‘in-kind’ support to Net Zero Technology Centre projects • Mocean wave to energy • Arc Marine eco mattresses • Flare gas efficiency project • Alternative fuel gas project • Platform electrification from wind power study (WINTOG) 27 Serica Energy Capita
Slide 27: Investing in People and Communities
INVESTING IN PEOPLE AND COMMUNITIES • High level of staff engagement in charity, education, equality and environmental activities • Affiliated with groups supporting diversity in gender, race, neurodiversity and armed forces veterans • ‘Young Person’s Guaranteed Employer’ • Added ESG Policy and Stra
Slide 28: Operations
OPERATIONS CAROL STEWART, NORTH SEA BUSINESS MANAGER 29 MIKE KILLEEN, VP OPERATIONS
Slide 29: Managing Our Assets
MANAGING OUR ASSETS The strategy for our production hubs is to maximise economic life, by investing in the assets EXTENDING to create value. FIELD LIFE: The key themes underpinning this strategy are: ADDING VALUE • Fulfilling our responsibilities in a manner consistent with Serica's HSE and ESG poli
Slide 30: Investing in Bruce
INVESTING IN BRUCE NSTA Bruce CoP Emissions Bruce COP pre- Serica Targets as per CPR Field Life Extension Maintain base platform reliability & integrity Maintain well / Subsea infrastructure / Pipelines integrity – Invest for the future Process upgrades / Replacements i.e. becoming more efficient –
Slide 31: Exploiting Triton Hub Potential
EXPLOITING TRITON HUB POTENTIAL • Triton Hub has hydrocarbon resources to be economically viable for a further 10+ years • Life extensions studies in 2019/2020 demonstrated that the Triton FPSO properly maintained can be used well into the 2030s • Emissions Reduction Action Plan in place • Serica is
Slide 32: Depth in the Portfolio
DEPTH IN THE PORTFOLIO Serica’s equity production is bolstered by interests in three small fields tied back to different non-operated host facilities, each providing steady rates of production: • Columbus • One well subsea tie back to Shearwater platform, operated by Shell • Shearwater Area investme
Slide 33: M&A
M&A STEVE EDWARDS, CIO 34
Slide 34: Adding Value Not Volume
ADDING VALUE NOT VOLUME • M&A remains a key part of Serica’s strategy • Focus on UK has worked well but area of interest being widened to outside UK in response to basin maturity and uncertainties in fiscal and licencing regimes • Serica remains open to corporate and asset deals in UKCS but also loo
Slide 35: Expanding Our Horizons
EXPANDING OUR HORIZONS Production 8 • Denmark, Netherlands and Norway managing offshore 7 Production (MMboe/d) industries as source of national resources 6 5 • Fiscal regimes generally more stable than in UK 4 3 • Opportunities in all three although NCS provides greatest 2 range in terms of type and
Slide 36: Disciplined Approach to New Country Entry
DISCIPLINED APPROACH TO NEW COUNTRY ENTRY • Entry via material corporate or asset transaction • Consistent with Serica’s HSE and ESG values • Preference for producing or near producing fields • Brings scope for growth, repeatability and longevity • Operatorship not essential but seeking sufficiently
Slide 37: Conclusion
CONCLUSION MITCH FLEGG, CEO 38
Slide 38: To Summarise
TO SUMMARISE • Serica has built firm foundations based on successful deal-making, operational excellence and prudent investment • Company is positioned for the next phase of growth from organic investment and M&A • UKCS will remain Serica’s heartland for the foreseeable future • Ambition to also est
Slide 39: Q&A
Q&A 40