Commodity Prices Boost Serica
Rising oil and UK gas prices boosted UK independent Serica’s performance in 2H 2016 as output from the UK Central North Sea Erskine field resumed after a six-month shut-in; the weaker sterling also contributed.
The company had no income resulting from the shut-in but it is now “in a strong position to take advantage of new opportunities to grow its asset base,” it said January 10.
Serica's share of Erskine oil and gas production ended the year averaging about 3,150 barrels of oil equivalent/day, exceeding 2,500-3,000 boe/day guidance. In recent months Erskine has managed 20,000-23,000 boe/day gross (3,600 - 4,100 boe net to Serica), it said, following improvement work at the Lomond platform through which Erskine output is exported.
Serica said it was "encouraging that the second half of the year saw improved commodity prices. The Brent oil benchmark has averaged $50/b since Erskine restart while UK gas prices have shown an even stronger rise from 30 pence/therm in the first half of the year to over 40p/th since the end of August, with over 45p/th realised in November and December."
And a low-price gas sales contract (about 30p/th) that covered about a quarter of its Erskine gas production terminated September 30, allowing Serica the full benefit of the higher prices since then.
Operating costs since August are averaging well below our guidance of $20/boe, including transportation costs, reflecting overall cost reductions, sustained production rates and also the impact of the lower £/$ exchange rate. In addition to continuing cost control and improved production uptime, future costs per barrel can also be reduced through the introduction of new third party throughput to Lomond including the Columbus field.
Recent analysis by industry lobby group Oil & Gas UK suggests that average operating costs of $16/b are now being achieved through the UK North Sea as a whole, setting a benchmark for all operators that should sustain profitable North Sea operations even during future periods of low commodity prices.
Serica, as operator of the Columbus gas and condensate field, continues work on export options and Lomond seems the likeliest route to shore. An initiative from UK offshore regulator, the Oil & Gas Authority, to encourage all parties within North Sea hub areas to work more closely together to maximise combined economic benefit and reserves recovery has already brought all parties within the Lomond hub area into closer co-operation. In addition to the Lomond and Erskine producing fields, this incorporates Serica's Columbus development plus several other fields in the area.
The costs of Serica's most likely next two exploration wells, on the Rowallan prospect in Central North Sea block 22/19c and on the Doyle prospect in East Irish Sea block 113/27c, are both subject to carry arrangements. The company is also continuing to pursue opportunities to farmdown its interest in Namibia and its Irish offshore acreage.
In Namibia, an application to extend the company’s Luderitz Basin licence (Serica 85%) to December 2018 is awaiting final signature; Serica says that will enable it to use its $50mn 3D seismic survey and pre-drill scoping to engage potential co-investors.
William Powell