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LONDON (Alliance News) - Serica Energy PLC shares rose on Monday despite its loss widening in 2014 on the back of significant impairments, as the company puts its focus on the Erskine field in the UK North Sea after purchasing an interest in the project from giant BP PLC in June.
Serica shares were up 13% to 5.20 pence per share on Monday morning.
The international exploration and production company with operations in the UK, Ireland, Morocco and Namibia reported a pretax loss of USD35.6 million in 2014, significantly wider than the USD5.1 million loss in 2013.
The loss widened after the company, which does not generate any revenue, booked USD30.0 million in impairments and write offs, compared to only USD131,000 such accounting entries a year earlier. The impairments were related to the Sidi Moussa and Foum Draa licenses in Morocco, and the Columbus field asset.
"2014 was a torrid year for upstream oil and gas companies and a particularly difficult year for the independents. Serica was no exception. We had to contend with an ever increasing industry cost base, increasing transaction complexity, high taxation levels and an oil price collapse. As a result capital markets showed a reluctance to invest and funds to build our business all but dried up," said Chairman Anthony Walker.
"The past year has been difficult for all independents, but I believe that Serica has weathered the storm and emerges a considerably strengthened company as the direct result of steps taken by management to reduce overhead costs, farm-out licence obligations and, importantly, to conclude the acquisition of a strategically important interest in a producing North Sea field where there is considerable upside for improved performance," he added.
"The acquisition of the interest in Erskine (18%) gives Serica both access to important infrastructure and a meaningful cash flow profile which, if its full potential is realised, will bring considerable benefit to shareholders and open up significant new opportunities for Serica," said Walker.
The Erskine field has around 3.6 million barrels of oil equivalent in producing, proven and probable reserves with a cost per barrel of only around USD4 per barrel. BP were issued with 13.5 million Serica shares under the deal, meaning it holds around a 5% stake in Serica.
Although the focus is primarily on the Erskine field, progress continues on the Columbus field as it continues to hold discussions about export routes and infrastructure access.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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