RE: 65p next stop now30 Nov 2017 11:04
-- Significant increase in Reserves and production
o Serica's pro-forma net 2P Reserves at 1 January 2018 are projected to increase sixteen-fold to 50 mmboe[1]
o Based on H1 2017 production rates Serica's net production would increase approximately seven-fold to over 21,000 boepd[2] of which over 85% is gas
o Acquisition expected to be immediately cash flow and value accretive post-Completion
-- Diversification of production streams and export routes
o Serica's asset and production base will expand from one to four fields, mitigating sole producing asset risk
o Following the Acquisition Serica will be delivering hydrocarbons via three export systems: Frigg, the Central Area Transmission System and the Forties Pipeline System
-- Structured to mitigate financial risk
o Bulk of consideration deferred and contingent
o Initial Consideration expected to be exceeded by Serica's share of net cash flows from the BKR Assets between 1 January 2018 and Completion of the Acquisition anticipated in mid-2018
o Future payments linked to the performance of the BKR Assets, allowing both parties to share the benefits of improving field recoveries and production efficiencies
o The BKR Assets are predominantly gas assets. Gas sales arrangements include price hedging to further mitigate risk
-- Maintains balance sheet strength with no shareholder dilution
o Serica is not raising equity finance to fund the Acquisition
o BP to retain decommissioning liability for existing facilities of the BKR Assets
o Cash flows from the BKR Assets can be used to invest in Maximising Economic Recovery from the BKR Assets and to pursue further growth opportunities
o Existing net cash resources are not expected to be impacted by the Acquisition. These stood at approximately US$34 million on 17 November 2017 and are expected to be further supplemented by production from the Erskine field prior to Completion of the Acquisition
o The Company has no borrowings other than under the Prepayment Facility provided by BP as part of the gas sales arrangements
-- Tax efficient
o Accelerated utilisation of Serica's tax allowances against profits from the Bruce, Keith and Rhum fields
-- Operatorship positions Serica to deliver the full potential of the BKR Assets
o Serica expects to drive value through investment and implementation of efficiencies, focusing on the OGA's target of Maximising Economic Recovery
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