Serica Energy stays in profit despite choking on a ‘pig’ for six months in flagship N. Sea oil field

Despite a six-month shutdown at its flagship North Sea platform, exploration minnow Serica Energy still managed to pump out a full year gross profit of $6.6 million in the year ending 31 December 2016.

Not surprisingly, this was down by some two-thirds on the $16.1 million reported the previous year.

But group profit after tax of US$10.8 million was boosted by deferred tax credits arising from tax losses brought forward.

With its flagship Erskine oil well back in production from 29 August, the year ended positively for Serica, with production averaging more than 3,150 boe per day net to Serica to end March 2017.

An updated independent audit by Netherland, Sewell & Associates of the Erskine field confirmed Serica’s share of estimated proven plus probable reserves at 3.8 million boe as of 1 January 2017.

Serica’s operating and transportation costs averaged below $14 per boe during 2016.

All of Serica’s production comes from its 18% interest in Erskine, a gas and condensate producing field located in the Central North Sea, acquired from BP in June 2015.

Following a strong January and February 2016 when production averaged over 3,200 boe per day net to Serica, the field was subject to an extended shut-in from 27 February when a ‘pig’ cleaning device become stuck in the export pipeline.

The operation to clear the line took 10 weeks due to the engineering requirements to gain access to the blockage with wax solvent and then to allow for time to soak and dissolve the wax. Rather than restarting in mid-May, the planned June shut-in for maintenance work on the Lomond platform was brought forward with the eventual full restart of Erskine occurring on 29 August 2016.

Serica’s Executive Chairman Tony Walker said: “Our gross profit for 2016 of $6.6 million was achieved despite a six-month production shut-in earlier in the year to resolve pipeline issues and during a difficult period for oil and gas prices. This robust performance puts Serica in a very strong position within the sector.

“We ended the year with no borrowings or material commitments and with cash balances growing significantly. This performance has continued post the year-end.

“This strong financial position enables us to look for new opportunities to add further value for shareholders and we are reviewing a number of such opportunities.

“In view of the strategic benefits, synergies and tax efficiencies, our immediate focus remains on the North Sea where there are opportunities on offer as the oil majors restructure their asset portfolios and make way for smaller, more cost efficient operators.

“The market is, as ever, competitive, particularly from new sources of private equity, and the vibrancy of the market has been demonstrated by a number of recently announced transactions.”

• BP has announced a 40% cut in wages – to £9.3 million – for chief executive Bob Dudley following a non-binding shareholder revolt last year, when almost 60% voted against his pay deal.