Serica Energy Regulatory News (SQZ)

29 Apr 2008 07:00

Serica Energy plc29 April 2008 Serica Energy plc ("Serica" or the "Company") FIRST QUARTER 2008 REPORT TO SHAREHOLDERS London, 29 April 2008 - Serica Energy plc (TSX Venture & AIM: SQZ) todayannounces its financial results for the three months ending 31 March 2008. Theresults and associated Management Discussion and Analysis are included below andcopies are available at www.serica-energy.com and www.sedar.com Q1 2008 Highlights Operational • Significant progress on the development of the Kambuna field, Indonesia o Excellent terms agreed for the sale of gas (average of approximately US$6.00 per mcf expected) o Kambuna production platform successfully installed o Kambuna wells 2, 3 and 4 drilled and ready for completion and initial testing o First production due at the end of 2008 • Columbus Field Development Plan to be submitted to the UK authorities later this year• Acquired additional 25.5% working interest in the Kutai PSC in East Kalimantan, Indonesia• 2D seismic survey completed in Spain, data currently being interpreted Financial & Corporate • Completion of a placing raising approximately US$49 million for the Company• Jonathan Cartwright, Finance Director of Caledonia Investments plc, joined the Board as a non-executive director Forward Programmes South East Asia • Kambuna development continues o Onshore and offshore pipelines to be laid and onshore facilities to be built later this year • Offshore South Vietnam - Exploration well due to be drilled in 2H 08 Europe • Two appraisal wells due to be drilled on the Bream field in Norway in Q3 2008• Site surveys to be completed in the Slyne basin, Offshore Ireland in Q3 2008, ahead of a 2009 drilling programme• Site survey to be carried out in the Chablis gas field, in preparation for drilling an appraisal well Serica's Chief Executive, Paul Ellis commented: "For the remainder of 2008 Serica's priority is the completion of the Kambunafield development programme with first production targeted for the end of theyear. Serica also expects to participate in the drilling or completion of sevendevelopment, exploration or appraisal wells in Western Europe and South EastAsia. Serica's strategic objective is to bring forward its development programmes andto build its production revenue base as rapidly as possible, in order to makethe business self-sufficient and to create shareholder value." Enquiries: Serica Energy plcPaul Ellis, paul.ellis@serica-energy.com +44 (0)20 7487 7300 Chief Executive OfficerChris Hearne, chris.hearne@serica-energy.com +44 (0)20 7487 7300 Finance Director JPMorgan CazenoveSteve Baldwin steve.baldwin@jpmorgancazenove.com +44 (0)20 7588 2828 Tristone Capital LimitedMajid Shafiq mshafiq@tristonecapital.com +44 (0)20 7355 5872 Pelham Public Relations -UKJames Henderson james.henderson@pelhampr.com +44 (0)20 7743 6673Alisdair Haythornthwaite alisdair.haythornthwaite@pelhampr.com +44 (0)20 7743 6676 CHF - CanadaSarah Gingerich sarah@chfir.com +1 416 868 1079 The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release. To receive Company news releases via email, please contact sarah@chfir.com and specify "Serica press releases" in the subject line. MANAGEMENT OVERVIEW During the first quarter 2008 Serica Energy plc ("Serica" or the "Company") hasfocused its efforts on its programme of development wells in the Kambuna field,offshore Indonesia, and reported that excellent terms have been agreed for thesale of gas to be produced from the field. In January the Company announced the completion of a placing of 24,770,354 newordinary shares on both AIM in London and the TSX Venture Exchange in Toronto.The total amount raised for the Company was approximately US$49 million afterexpenses. The funding available from the US$100 million senior debt facility,in conjunction with the finance raised in the placing, provides resources toprogress the Company's exploration, appraisal and development programmes. In March Serica announced that Jonathan Cartwright had joined the Board as anon-executive director. Mr Cartwright is Finance Director of CaledoniaInvestments plc which owns 13% of the Company's ordinary shares. Field Appraisal and Development Kambuna Field, Offshore North Sumatra, Indonesia As reported in the Company's Full Year Results, an independent reserves reportprepared by RPS Energy estimated that, at a 10% discount factor, the post-taxnet present value to Serica of the Proved plus Probable ("2P") Kambuna FieldReserves at constant prices and costs was US$145 million as at 31 December 2007. Total 2P reserves, on a 100% basis, were estimated to be 29.7 million barrelsof oil equivalent, representing a 15% year-on-year increase. Since the reservesreport was prepared, terms were agreed for a second tranche of gas and Sericaultimately expects to achieve an average gas price close to US$6.00 per thousandcubic feet, about 10% higher than that assumed in the reserves report. Significant progress was made during the quarter on development activities inthe Kambuna field, in which Serica holds a 65% interest and which it operates.The Kambuna No. 3 and No. 4 deviated development wells are being drilled fromthe Kambuna production platform, installed earlier this year at the location ofthe Kambuna No. 2 well, the first of the three planned development wells.Kambuna No. 3 was drilled to a total depth of 7,483 ft true vertical depth belowmean sea level ("TVDSS"). The well entered the target Belumai reservoir at adepth of 7,166 ft TVDSS and encountered gas-bearing sands over an interval of107 ft with a net pay of 77 ft (67 vertical ft). Kambuna No. 4 was drilled to atotal depth of 7,408 ft TVDSS. The well entered the Belumai reservoir at 7,140ft TVDSS and encountered gas-bearing sands over an interval of 115 ft with a netpay of 107 ft (66 vertical ft). There was no indication of a gas-water contactin any of these wells and all three are now being completed for production. Onshore and offshore facilities and a 14-inch offshore pipeline are planned tobe installed later this year, with production targeted to commence in December2008. Columbus Field, UK Central North Sea Rising UK gas prices encourage the early development of Serica's Columbusdiscovery and Serica expects to submit the Columbus Field Development Plan tothe UK authorities later this year. Serica is the operator of the Columbusfield in Block 23/16f and holds a 50% interest. Following the two appraisalwells drilled in 2007, that have confirmed the Columbus field developmentpotential, Serica has acquired a new 3D seismic survey that is now beingcalibrated with the well results. This will lead to a better understanding ofthe extent of the field outside of the immediate vicinity of the wells and willbe used to calculate new reserve estimates. The Columbus gas-condensate fieldlies in close proximity to existing production infrastructure, providing thepotential to commence production as soon as arrangements for oil and gastransportation have been made and development wells have been drilled andtied-in. The main options being considered involve the completion of horizontalproduction wells with sub-sea tie-back to a host production platform. Chablis Field, UK Southern North Sea Serica operates Block 48/16b, which contains the Chablis gas discovery, andholds a 100% interest in the block. A site survey vessel has been contractedand the survey will shortly be carried out in preparation for drilling the firstChablis appraisal well. The field is in close proximity to existing productioninfrastructure and would be produced via a sub-sea tie-back to a host platform.On successful appraisal, Serica will work closely with infrastructure owners toachieve the earliest production from the field. Bream Field, Offshore Norway In the Egersund Basin Licence PL407, preparations are well in hand for thedrilling of two Bream oil field appraisal wells that operator BG Norge indicateswill be drilled starting in 3Q08. The aim of these wells is to obtainsufficient subsurface information to be able to put forward a Field DevelopmentPlan to the Norwegian authorities in 2009. Serica has a 20% interest in theBream field. Exploration Indonesia In the Biliton PSC in the Java Sea, two exploration wells were drilled inDecember 2007 and January 2008. Neither well contained hydrocarbons and costsassociated with the Biliton PSC have been expensed in the 2007 financialstatements with a further small amount in Q1 2008. In the Kutai PSC in East Kalimantan, Serica acquired an additional 25.5% workinginterest in February 2008. Serica is the operator of the Kutai Block and nowholds a 78% interest. The Company is evaluating more than 2,000 squarekilometres of 3D seismic data and has already contracted to acquire further 3Dand 2D seismic data this year in order to select locations for its 2009 drillingprogramme. Vietnam Serica holds a 33.33% interest in the Block 06/94 PSC, which is operated byPearl Energy and lies in the Nam Con Son Basin about 350 kilometres offshoreSouth Vietnam. The Ocean General semi-submersible drilling rig has beencontracted to drill the first exploration well in 2H08 in the south-western partof the block where oil and gas prospects have been identified. A further 1,000square kilometre 3D seismic survey is expected to be acquired in May 2008 inorder to evaluate further the prospectivity of the acreage. Ireland Serica is the operator and holds a 100% interest in Blocks 27/4, 27/5 (west) and27/9, which cover an area of 611 square kilometres in the Slyne Basin off thewest coast of Ireland and lie 42 kilometres south of the Corrib gas field, whichis currently being developed by Shell. Four significant prospects have beenidentified on the blocks and Serica has contracted a vessel for a site survey,which must be completed at least three months before drilling is due to takeplace. It had been hoped that this survey would be acquired in April but, dueto continuing bad spring weather in the Atlantic, it has now been scheduled forthis summer. Because of the short weather window for Atlantic drilling, Sericanow plans to commence exploration drilling on the blocks in the summer of 2009. Norway In Licence PL406, immediately to the south of Serica's Bream field Block PL407,a 3D seismic survey is already underway in order to confirm the location of anexploration well to be drilled in 2009. Operator Premier Oil expects shortly tofinalise a rig contract for the drilling programme. Serica holds a 20% interestin Blocks PL406 and PL407. Spain Serica holds a 75% interest and operatorship in its four exploration Permitsonshore northern Spain. The 315 kilometre 2D seismic survey, which commenced in2007, was completed in the first quarter and the data is currently beinginterpreted. Forward Programme For the remainder of 2008 Serica's priority is the completion of the Kambunafield development programme, which includes completing three production wells,laying an offshore and onshore pipeline and building the required onshore gasand condensate reception facilities. In addition, exploration and appraisalwells will be drilled in Western Europe and South East Asia and a fielddevelopment plan will be prepared for the Columbus field in the UK North Sea.Serica expects to participate in the drilling or completion of seven wellsduring 2008. Serica's strategic objective is to bring forward its development programmes andto build its production revenue base as rapidly as possible, in order to makethe business self-sufficient and to create shareholder value by demonstratingthe potential of the Company's exploration, appraisal and development portfolioin South East Asia and Western Europe. The first stage in this process is toachieve revenue from the Kambuna field, which the Company expects to startproduction at the end of this year. MANAGEMENT'S DISCUSSION AND ANALYSIS The following management's discussion and analysis ("MD&A") of the financial andoperational results of Serica Energy plc and its subsidiaries (the "Group")contains information up to and including 25 April 2008 and should be read inconjunction with the attached unaudited interim consolidated financialstatements for the quarter ended 31 March 2008. The interim financial statementsfor the three months ended 31 March 2008 have been prepared by and are theresponsibility of the Company's management, and the Company's independentauditors have not performed a review of these financial statements. References to the "Company" include Serica and its subsidiaries where relevant.All figures are reported in US dollars ("US$") unless otherwise stated. Summary of Activities Serica's activities are centred on the UK and Indonesia, with other interests inNorway, Spain, Ireland and Vietnam. The Group has no current oil and gasproduction, with the main emphasis placed upon its near term developments andfuture exploration drilling programmes. In 2008 to date, work has continued onadvancing the Indonesian development, moving the Columbus field developmentoptions forward and managing its portfolio of interests. Further details arenoted in the Management Overview. The results of Serica's operations detailed below in this MD&A, and in thefinancial statements, are presented in accordance with International FinancialReporting Standards ("IFRS"). Results of Operations Serica generated a loss of US$3.3 million for the three months ended 31 March2008 ("Q1 2008") compared to a loss of US$1.6 million for the three months ended31 March 2007 ("Q1 2007"). 2008 2007 2007 2007 2007 Q1 Q4 Q3 Q2 Q1 US$000 US$000 US$000 US$000 US$000 Sales revenue - - - - - Expenses: Administrative expenses (1,973) (2,665) (1,658) (1,728) (1,846)Foreign exchange (loss)/gain (55) 384 31 (36) 15Pre-licence costs (188) (74) (76) (124) (101)Asset write offs (375) (9,282) - - -Share-based payments (375) (514) (485) (464) (499)Depletion and depreciation (58) (63) (34) (26) (26) Operating loss before net financerevenue and taxation (3,024) (12,214) (2,222) (2,378) (2,457) Finance revenue 576 498 663 791 862Finance costs (878) (321) - - - Loss before taxation (3,326) (12,037) (1,559) (1,587) (1,595) Taxation credit/(charge) - 353 2,796 - - (Loss)/profit for the period (3,326) (11,684) 1,237 (1,587) (1,595) Basic and diluted loss per share (0.02) (0.08) N/A (0.01) (0.01)Basic and diluted earnings per share N/A N/A 0.01 N/A N/A Administrative expenses of US$2.0 million for Q1 2008 increased from US$1.8million for the same period last year. The increase reflects the growing scaleof the Company's activities over the past twelve months. No significant foreign exchange movements impacted Q1 2008 or Q1 2007 results. Pre-licence costs include direct cost and allocated general administrative costincurred on oil and gas interests prior to the award of licences, concessions orexploration rights. The expense of US$0.2 million for Q1 2008 increased fromUS$0.1 million for the same period last year and is attributable to workundertaken during the recent quarter on the 25th Licencing Round in the UK NorthSea. Share-based payment charges of US$0.4 million reflect share option grants madeand compare with US$0.5 million for both Q4 2007 and Q1 2007. Whilst furthershare options have been granted in March 2008, the incremental charge generatedfrom those options has been offset by the decline in charge of the optionsgranted in 2005, 2006 and 2007. Negligible depletion, depreciation and amortisation charges in all periodsrepresent office equipment and fixtures and fittings. Those costs of petroleumand natural gas properties classified as exploration and evaluation assets arenot currently subject to such charges pending further evaluation. The Kambunaasset costs classified as 'development' costs and held within plant, propertyand equipment will be depleted once production commences. Finance revenue comprising interest income of US$0.6 million for Q1 2008compares with US$0.5 million for Q4 2007 and US$0.9 million for Q1 2007. Financerevenue fell during the course of 2007 as average cash deposit balances droppedas expenditure was incurred on drilling programmes. The January 2008 equityplacing raised further funds which have caused the increase in finance revenueearned in Q1 2008 over Q4 2007. The first drawdown on the senior secured debt facility occurred soon after thefacility was arranged in Q4 2007. Finance costs consist of interest payable,issue costs spread over the term of the bank loan facility, and other fees. The taxation credit/(charge) of US$nil in Q1 2008 is represented by a currenttaxation credit of expected tax recoveries on Norwegian expenditure in thequarter, offset by an equivalent deferred income tax charge from the timingdifferences arising from capitalised exploration expenditure. The net loss per share of US$0.02 for Q1 2008 compares to a net loss per shareof US$0.01 for Q1 2007. Summary of Quarterly Results 2008 2007 2007 2007 2007 2006 2006Quarter ended: 31 Mar 31 Dec 30 Sep 30 Jun 31 Mar 31 Dec 30 Sep US$000 US$000 US$000 US$000 US$000 US$000 US$000 Sales revenue - - - - - - -(Loss)/profit for the quarter (3,326) (11,684) 1,237 (1,587) (1,595) (13,456) (3,795)Basic and diluted loss pershare US$ (0.02) (0.08) - (0.01) (0.01) (0.09) (0.03)Basic and diluted earningsper share - - 0.01 - - - - The fourth quarter 2007 loss includes asset write offs of US$9.0 million inregard to the Biliton PSC. The fourth quarter 2006 loss includes asset write offs of US$12.7 million inregard to the Asahan Offshore PSC. Working Capital, Liquidity and Capital Resources Current Assets and Liabilities An extract of the balance sheet detailing current assets and liabilities isprovided below: 31 March 2008 31 December 2007 31 March 2007 US$000 US$000 US$000Current assets: Inventories 6,051 6,991 6,785 Trade and other receivables 22,076 21,906 11,369Tax receivable 3,387 3,387 - Cash and cash equivalents 50,931 22,638 72,175Total Current assets 82,445 54,922 90,329 Less Current liabilities: Trade and other payables (28,979) (23,604) (11,864) Net Current assets 53,466 31,318 78,465 At 31 March 2008, the Company had net current assets of US$53.5 million whichcomprised current assets of US$82.5 million less current liabilities of US$29.0million, giving an overall increase in working capital of US$22.1 million in thethree month period. Inventories decreased from US$7.0 million to US$6.0 million over the period. Trade and other receivables at 31 March 2008 totalled US$22.1 million, whichincluded US$10.2 million upfront deposit payments in respect of the ongoingKambuna drilling programme and significant recoverable amounts from partners inJoint Venture operations in the UK and Indonesia. Other smaller items includedprepayments and sundry UK and Indonesian working capital balances. The taxreceivable represents expected recovery of exploration expenditure from theNorwegian fiscal regime. Cash and cash equivalents increased from US$22.6 million to US$50.9 million inthe quarter. The Company received US$48.6 million from the issue of sharecapital in January 2008, partially offset by cash outgoings in Q1 2008 coveringcapital expenditure on the Kambuna development, operational expenses and otherexploration work. In addition cash receipts of US$0.6 million of interest incomewere also received in the quarter. Trade and other payables of US$29.0 million at 31 March 2008 chiefly includesignificant trade creditors and accruals from the Kambuna drilling programme,and other creditors and accruals from UK and Indonesia. Other smaller itemsinclude sundry creditors and accruals for administrative expenses and othercorporate costs. Long-Term Assets and Liabilities An extract of the balance sheet detailing long-term assets and liabilities isprovided below: 31 March 2008 31 December 2007 31 March 2007 US$000 US$000 US$000 Exploration & evaluation assets 75,393 71,874 45,738Property, plant and equipment 39,274 19,543 316Goodwill 768 768 1,200Financial assets 4,680 4,680 -Long-term other receivables 2,382 1,224 668Financial liabilities (9,829) (9,582) -Deferred income tax liabilities (4,589) (3,910) (955) During Q1 2008, total investments in petroleum and natural gas properties,represented by exploration and evaluation assets, increased by US$3.5 million toUS$75.4 million. Of the Q1 2008 investment in the UK & NW Europe; US$1.0 millionrelated to Spain, US$0.9 million related to Norway, US$0.9 million in the UK andIreland on exploration work and G&A. US$0.2 million was spent in Indonesiaprincipally on exploration work and G&A on the Kutai concession, and US$0.5million in Vietnam. The US$19.7 million increase in property, plant and equipment from US$19.5million to US$39.1 million is substantially caused by expenditure of US$19.6million during the quarter on the Kambuna development. The property, plant andequipment also includes immaterial balances of US$0.4 million for officefixtures and fittings and computer equipment. Goodwill, representing the difference between the price paid on acquisitions andthe fair value applied to individual assets, remained unchanged at US$0.8million. Financial assets represent US$4.7 million of restricted cash deposits. Long-term other receivables of US$2.4 million represented value added tax ("VAT") on Indonesian capital spend, which would be recovered from future production, and the long-term element of expected tax recovery of exploration from the Norwegian fiscal regime. Financial liabilities are represented by the first drawdown under the seniorsecured debt facility, which occurred in Q4 2007. This includes accrued interestpayable and is disclosed net of the unamortised portion of allocated issuecosts. The deferred income tax liability increase of US$0.7 million from US$3.9 millionto US$4.6 million occurred from timing differences arising following therecognition of the Norwegian tax recovery assets. Shareholders' Equity An extract of the balance sheet detailing shareholders' equity is providedbelow: 31 March 2008 31 December 31 March 2007 2007 US$000 US$000 US$000 Total share capital 207,452 158,871 157,817Other reserves 14,104 13,729 12,226Accumulated deficit (60,011) (56,685) (44,651) Total share capital includes the total net proceeds (both nominal value and anypremium on the issue of equity capital). Issued share capital during 2008 wasincreased by the issue of 19,826,954 ordinary shares at £1.02 and 4,943,400 atCdn$2.10. Other reserves include amounts credited in respect of cumulative share-basedpayment charges and the amount of the increment of fair value liability (overcash received) of share warrants eliminated upon exercise of those sharewarrants. The increase in other reserves from US$13.7 million to US$14.1 millionreflects the amortisation of share-based payment charges in Q1 2008. Capital Resources At 31 March 2008, Serica had US$53.5 million of net working capital, US$9.8million of long-term debt and no capital lease obligations. At that date, theCompany had commitments to future minimum payments under operating leases inrespect of rental office premises, office equipment and motor vehicles for eachof the following periods/years as follows: US$000 31 December 2008 28631 December 2009 38931 December 2010 83 During 2007 the Company contracted the Sedco 704 drilling rig for 96 days during2007 and 2008 for UK & NW Europe operations. As at 31 March 2008 the Company hada commitment for a remaining 40 days at a gross cost of US$13.5 million. Sincethe period end the Company has released this commitment in favour of a thirdparty. The Company also has obligations to carry out defined work programmes on its oiland gas properties, under the terms of the award of rights to these properties,over the next twelve months as follows: Nine months ending 31 December 2008 US$24,000,000 These obligations reflect the Company's share of interests in the defined workprogrammes and were not formally contracted at 31 March 2008. The Company is notobliged to meet other joint venture partner shares of these programmes. In the absence of revenues generated from oil and gas production Serica intendsto utilise its existing cash balances, together with the US$100 million seniorsecured debt facility, to fund the immediate needs of its investment programmeand ongoing operations. Off-Balance Sheet Arrangements The Company has not entered into any off-balance sheet transactions orarrangements. Critical Accounting Estimates The Company's principal accounting policies are detailed in note 2 to theattached financial statements. International Financial Reporting Standards havebeen adopted. The cost of exploring for and developing petroleum and natural gasreserves are capitalised. Unproved properties are subject to periodicimpairment tests whilst the costs of proved properties are depleted over thelife of such producing fields. In each case, calculations are based uponmanagement assumptions about future outcomes, product prices and performance. Financial Instruments The Group's financial instruments comprise cash and cash equivalents, bank loansand borrowings, accounts payable and accounts receivable. It is the management'sopinion that the Group is not exposed to significant currency, interest orcredit risks arising from its financial instruments other than as discussedbelow: Serica has exposure to interest rate fluctuations; given the level ofexpenditure plans over 2008/9 this is managed in the short-term throughselecting treasury deposit periods of one to six months. Cash and treasurycredit risks are mitigated through spreading the placement of funds over a rangeof institutions each carrying acceptable published credit ratings to minimisecounterparty risk. Where Serica operates joint ventures on behalf of partners it seeks to recoverthe appropriate share of costs from these third parties. The majority ofpartners in these ventures are well established oil and gas companies. In theevent of non payment, operating agreements typically provide recourse throughincreased venture shares. It is the management's opinion that the fair value of its financial instrumentsapproximate to their carrying values, unless otherwise noted. Share Options As at 31 March 2008, the following director and employee share options wereoutstanding: - Expiry Date Amount Exercise cost Cdn$ Jun 2008 400,000 720,000 Feb 2009 247,499 494,998 May 2009 100,000 200,000 Dec 2009 275,000 275,000 Jan 2010 600,000 600,000 Jun 2010 1,100,000 1,980,000 Exercise cost £ Nov 2010 561,000 544,170 Jan 2011 1,275,000 1,319,625 May 2011 180,000 172,800 June 2011 270,000 259,200 Nov 2011 120,000 134,400 Jan 2012 1,056,000 1,077,120 May 2012 405,000 421,200 August 2012 1,200,000 1,182,000 March 2013 1,812,000 1,359,000 March 2013 850,000 697,000 Business Risk and Uncertainties Serica, like all exploration companies in the oil and gas industry, operates inan environment subject to inherent risks. Many of these risks are beyond theability of a company to control, particularly those associated with theexploring for and developing of economic quantities of hydrocarbons: volatilecommodity prices; governmental regulations; and environmental matters. Disclosure Controls and Procedures and Internal Controls over FinancialReporting Serica's management, including the Chief Executive Officer and Chief FinancialOfficer, has reviewed and evaluated the effectiveness of the Company'sdisclosure controls and procedures in accordance with Multilateral Instrument52-109 and Canadian securities regulations as of 31 March 2008. Management hasconcluded that, as of 31 March 2008, the disclosure controls and procedures wereeffective to provide reasonable assurance that material information relating tothe Company and its consolidated subsidiaries would be made known to them byothers within those entities, particularly during the period in which thisreport was being prepared. Management has designed internal controls over financial reporting to providereasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance withIFRS. There have been no changes in the Company's internal controls overfinancial reporting during the period that have materially affected, or arereasonably likely to materially affect, the Company's internal controls overfinancial reporting. Nature and Continuance of Operations The principal activity of the Company is to identify, acquire and subsequentlyexploit oil and gas reserves primarily in Asia and Europe. The Company's financial statements have been prepared with the assumption thatthe Company will be able to realise its assets and discharge its liabilities inthe normal course of business rather than through a process of forcedliquidation. The Company currently has no operating revenues, and during thethree month period ended 31 March 2008 the Company generated a loss of US$3.3million from continuing operations. At 31 March 2008, the Company held cash andcash equivalents of US$50.9 million and a financial asset of restricted cash ofUS$4.7 million. Outstanding Share Capital As at 25 April 2008, the Company had 176,418,310 ordinary shares issued andoutstanding. Additional Information Additional information relating to Serica can be found on the Company's websiteat www.serica-energy.com and on SEDAR at www.sedar.com Approved on Behalf of the Board Paul Ellis Christopher HearneChief Executive Officer Finance Director 29 April 2008 Forward Looking Statements This disclosure contains certain forward looking statements that involvesubstantial known and unknown risks and uncertainties, some of which are beyondSerica Energy plc's control, including: the impact of general economicconditions where Serica Energy plc operates, industry conditions, changes inlaws and regulations including the adoption of new environmental laws andregulations and changes in how they are interpreted and enforced, increasedcompetition, the lack of availability of qualified personnel or management,fluctuations in foreign exchange or interest rates, stock market volatility andmarket valuations of companies with respect to announced transactions and thefinal valuations thereof, and obtaining required approvals of regulatoryauthorities. Serica Energy plc's actual results, performance or achievementcould differ materially from those expressed in, or implied by, these forwardlooking statements and, accordingly, no assurances can be given that any of theevents anticipated by the forward looking statements will transpire or occur, orif any of them do so, what benefits, including the amount of proceeds, thatSerica Energy plc will derive there from. The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release. To receive Company news releases via email, please contact sarah@chfir.com and specify "Serica press releases" in the subject line. Serica Energy plcGroup Income Statement Unaudited Three Three months months ended ended 31 Mar 31 Mar 2008 2007 Notes US$000 US$000 Sales revenue - - Cost of sales - - Gross profit - - Administrative expenses (1,973) (1,846)Foreign exchange (loss)/gain (55) 15Pre-licence costs (188) (101)Asset write offs (375) -Share-based payments (375) (499)Depreciation & depletion (58) (26) Operating loss before financerevenue and tax (3,024) (2,457) Finance revenue 576 862Finance costs (878) - Loss before taxation (3,326) (1,595) Taxation credit/(charge) for the period 6 - - Loss for the period (3,326) (1,595) Loss per ordinary share (US$):Basic and diluted loss per share (0.02) (0.01) Serica Energy plcConsolidated Balance Sheet 31 March 31 Dec 31 March 2008 2007 2007 US$000 US$000 US$000 (Unaudited) (Audited) (Unaudited)Non-current assetsExploration & evaluation assets 75,393 71,874 45,738Property, plant and equipment 39,274 19,543 316Goodwill 768 768 1,200Financial assets 4,680 4,680 -Other receivables 2,382 1,224 668 122,497 98,089 47,922Current assetsInventories 6,051 6,991 6,785Trade and other receivables 22,076 21,906 11,369Tax receivable 3,387 3,387 -Cash and cash equivalents 50,931 22,638 72,175 82,445 54,922 90,329 TOTAL ASSETS 204,942 153,011 138,251 Current liabilitiesTrade and other payables (28,979) (23,604) (11,864) Non-current liabilitiesFinancial liabilities (9,829) (9,582) -Deferred income tax liabilities (4,589) (3,910) (955) TOTAL LIABILITIES (43,397) (37,096) (12,819) NET ASSETS 161,545 115,915 125,432 Share capital 4 207,452 158,871 157,817Other reserves 14,104 13,729 12,266Accumulated deficit (60,011) (56,685) (44,651) TOTAL EQUITY 161,545 115,915 125,432 Serica Energy plcStatement of Changes in EquityFor the period ended 31 March 2008 Group Share capital Other Deficit Total reserves US$000 US$000 US$000 US$000 At 1 January 2008 (audited) 158,871 13,729 (56,685) 115,915 New shares issued (net) 48,581 - - 48,581Share-based payments - 375 - 375Loss for the period - - (3,326) (3,326) At 31 March 2008 (unaudited) 207,452 14,104 (60,011) 161,545 Group Share capital Other Deficit Total reserves US$000 US$000 US$000 US$000 At 1 January 2007 (audited) 157,283 11,767 (43,056) 125,994 Conversion of options 534 - - 534Share-based payments - 499 - 499Loss for the period - - (1,595) (1,595) At 31 March 2007 (unaudited) 157,817 12,266 (44,651) 125,432 Conversion of options 1,054 - - 1,054Share-based payments - 464 - 464Loss for the period - - (1,587) (1,587) At 30 June 2007 (unaudited) 158,871 12,730 (46,238) 125,363 Share-based payments - 485 - 485Loss for the period - - 1,237 1,237 At 30 September 2007 (unaudited) 158,871 13,215 (45,001) 127,085 Share-based payments - 514 - 514Loss for the period - - (11,684) (11,684) At 31 December 2007 (audited) 158,871 13,729 (56,685) 115,915 Serica Energy plcConsolidated Cash Flow Statement Unaudited Three Three months months ended ended 31 Mar 31 Mar 2008 2007 US$000 US$000Cash flows from operating activities:Operating loss (3,024) (2,457) Adjustments for:Depreciation and depletion 58 26Asset write offs 375 -Share-based payments 375 499Changes in working capital 4,550 (4,978)Cash generated from operations 2,344 (6,910) Taxes received - - Net cash in/(out)flow from operations 2,334 (6,910) Cash flows from investing activities:Interest received 576 862Proceeds from disposals - 5,000Purchases of property, plant & equipment (19,679) -Purchase of intangible exploration assets (3,519) (4,617) Net cash used in investing (22,622) 1,245 Cash proceeds from financing activities:Issue of shares (net) 48,581 -Proceeds on exercise of warrants/options - 534 Net cash from financing activities 48,581 534 Cash and cash equivalentsNet increase/(decrease) in period 28,293 (5,131)Amount at start of period 22,638 77,306 Amount at end of period 50,931 72,175 Serica Energy plc Notes to the Unaudited Consolidated Financial Statements 1. Corporate information The interim condensed consolidated financial statements of the Group for thethree months ended 31 March 2008 were authorised for issue in accordance with aresolution of the directors on 29 April 2008. Serica Energy plc is a public limited company incorporated and domiciled inEngland & Wales. The Company's ordinary shares are traded on AIM and the TSXVenture Exchange. The principal activity of the Company is to identify, acquireand exploit oil and gas reserves. 2. Basis of preparation and accounting policies Basis of Preparation The interim condensed consolidated financial statements for the three monthsended 31 March 2008 have been prepared in accordance with IAS 34 InterimFinancial Reporting. These unaudited interim consolidated financial statements of the Group have beenprepared in accordance with International Financial Reporting Standardsfollowing the same accounting policies and methods of computation as theconsolidated financial statements for the year ended 31 December 2007. Theseunaudited interim consolidated financial statements do not include all theinformation and footnotes required by generally accepted accounting principlesfor annual financial statements and therefore should be read in conjunction withthe consolidated financial statements and the notes thereto in the Serica Energyplc annual report for the year ended 31 December 2007. Significant accounting policies The accounting policies adopted in the preparation of the interim condensedconsolidated financial statements are consistent with those followed in thepreparation of the Group's annual financial statements for the year ended 31December 2007, except for the adoption of the following new standards andinterpretations, noted below, IFRIC 11 'IFRS2 - Group and Treasury Share Transactions' - Effective for periodsstarting 1 March 2007 IFRIC 12 'Service Concession Arrangements' - Effective date 1 January 2008 IFRIC 14 'IAS 19 - The Limit on a Defined Benefit Asset, Minimum FundingRequirements and their Interaction' - Effective date 1 January 2008 The adoption of these did not affect the Group's results of operations orfinancial position. The Group financial statements are presented in US dollars and all values arerounded to the nearest thousand dollars (US$000) except when otherwiseindicated. Basis of Consolidation The consolidated financial statements include the accounts of the Company andits wholly-owned subsidiaries Serica Energy Corporation, Serica Energy HoldingsB.V., Asia Petroleum Development Limited, Petroleum Development Associates(Asia) Limited, Serica Energia Iberica S.L., Serica Holdings UK Limited, SericaEnergy (UK) Limited, PDA Lematang Limited, APD (Asahan) Limited, APD (Biliton)Limited, APD (Glagah Kambuna) Limited and Serica Energy Pte Limited, SericaKutei B.V., Serica Nam Con Son B.V. and Serica Energy Norge AS. Together, thesecomprise the "Group". All inter-company balances and transactions have been eliminated uponconsolidation. 3. Segmental Information The primary segment reporting format is determined to be geographical segmentsand they are based on the location of the Group's assets. The Group has only onebusiness segment, that of oil & gas exploration and development. The following tables present profit information regarding the Group'sgeographical segments for the three months ended 31 March 2008 and 2007. Norevenue was earned by the Group in either period. Three months ended 31 March 2008 Indonesia & UK & NW Europe Spain Total Vietnam US$000 US$000 US$000 US$000 Loss for the period (623) (2,671) (32) (3,326) Three months ended 31 March 2007 Indonesia & UK & NW Europe Spain Total Vietnam US$000 US$000 US$000 US$000 Loss for the period (287) (1,255) (53) (1,595) 4. Equity Share Capital 31 March 31 March 31 December 31 December 2008 2008 2007 2007 Number US$000 Number US$000Authorised:Ordinary shares of US$0.10 200,000,000 20,000 200,000,000 20,000Ordinary 'A' share of £50,000 1 90 1 90 200,000,001 20,090 200,000,001 20,090 On incorporation, the authorised share capital of the Company was £50,000 andUS$20,000,000 divided into one 'A' share of £50,000 and 200,000,000 ordinaryshares of US$0.10 each, two of which were issued credited as fully paid to thesubscribers to the Company's memorandum of association. The balance classified as total share capital includes the total net proceeds(both nominal value and share premium) on issue of the Group and Company'sequity share capital, comprising US$0.10 ordinary shares and one 'A' share. Allotted, issued and fully paid: Share Share Total capital premium Share capitalGroup Number US$000 US$000 US$000 At 1 January 2007 150,537,956 15,144 142,139 157,283 Options exercised (1) 1,110,001 111 1,477 1,588 As at 31 December 2007 151,647,957 15,255 143,616 158,871 Shares issued (2) 24,770,354 248 48,333 48,581 As at 31 March 2008 176,418,311 15,503 191,949 207,452 (1) From 1 January 2007 until 31 December 2007, 1,110,001 employee share optionswere converted to ordinary shares at prices ranging from Cdn$1.11 to Cdn$2.00. (2) From 1 January 2008 until 31 March 2008, 19,826,954 ordinary shares wereissued at £1.02 and 4,943,400 at Cdn$2.10. The proceeds net of expenses arecredited to share capital and share premium. 5. Share-Based Payments Share Option Plans Following a reorganisation (the "Reorganisation") in 2005, the Companyestablished an option plan (the "Serica 2005 Option Plan") to replace the SericaEnergy Corporation Share Option Plan (the "Serica BVI Option Plan"). Serica Energy Corporation ("Serica BVI") was previously the holding company ofthe Group but, following the Reorganisation, is now a wholly owned subsidiary ofthe Company. Prior to the Reorganisation, Serica BVI issued options under theSerica BVI Option Plan and, following the Reorganisation, the Company has agreedto issue ordinary shares to holders of Serica BVI Options already awarded uponexercise of such options in place of the shares in Serica BVI to which theywould be entitled. There are currently options outstanding under the Serica BVIOption Plan entitling holders to acquire up to an aggregate of 2,722,499ordinary shares of the Company. No further options will be granted under theSerica BVI Option Plan. The Company has granted 7,984,000 options under the Serica 2005 Option Plan,7,729,000 of which are currently outstanding. The Serica 2005 Option Plan willgovern all future grants of options by the Company to Directors, officers, keyemployees and certain consultants of the Group. The Serica 2005 Option Plan is comprised of two parts, the basic share optionplan and a part which constitutes an Enterprise Management Incentive Plan ("EMIPlan") under rules set out by the H.M. Revenue & Customs in the United Kingdom.Options granted under the Serica 2005 Option Plan can be granted, at thediscretion of the Board, under one or other of the two parts but, apart fromcertain tax benefits which can accrue to the Company and its UK employees ifoptions are granted under the part relating to the EMI Plan meeting theconditions of that part of the Serica 2005 Option Plan, all other terms underwhich options can be awarded under either part are substantially identical. The Directors intend that the maximum number of ordinary shares which may beutilised pursuant to the Serica 2005 Option Plan will not exceed 10 per cent. ofthe issued ordinary shares of the Company from time to time, in line with therecommendations of the Association of British Insurers. In December 2005, 330,000 options were awarded to executive directorsexercisable only if certain performance targets are met. 110,000 of these werecancelled during Q2 2007. In August 2007, 1,200,000 options were awarded tonon-executive directors exercisable only if certain performance targets are met.In March 2008, 850,000 options were awarded to executive directors exercisableonly if certain performance targets are met. The Company calculates the value ofshare-based compensation using a Black-Scholes option pricing model (or otherappropriate model for those Directors' options subject to certain performancetargets) to estimate the fair value of share options at the date of grant. Theestimated fair value of options is amortised to expense over the options'vesting period. US$375,000 has been charged to the income statement in theperiod ended 31 March 2008 and a similar amount credited to other reserves. The assumptions made for the options granted during 2005, 2006, 2007 and 2008include a weighted average risk-free interest rate of 6%, no dividend yield anda weighted average expected life of options of three years. The volatilityfactor of expected market price of 50% used for options granted during 2005 and2006 was reduced to 40% for options granted in 2007 and 2008. The following table illustrates the number and weighted average exercise prices(WAEP) of, and movements in, share options during the period: Number WAEP Cdn$Serica BVI Option Plan Outstanding at 31 December 2006 3,975,833 1.57 Exercised during the period (1,110,001) 1.63Cancelled during the period (143,333) 1.58 Outstanding at 31 December 2007 and 31 March 2008 2,722,499 1.57 Serica 2005 Option Plan £ Outstanding at 31 December 2006 2,516,000 1.01 Granted during the period 2,661,000 1.01Cancelled during the period (110,000) (0.97) Outstanding at 31 December 2007 5,067,000 1.00 Granted during the period 2,662,000 0.77 Outstanding at 31 March 2008 7,729,000 0.92 6. Taxation The major components of income tax in the consolidated income statement are: Three months ended 31 March: 2008 2007 US$000 US$000 Current income tax credit 679 -Deferred income tax (charge)/credit (679) - Total tax (charge)/credit - - In 2008, expected tax recoveries from Norwegian expenditure to date have beenrecorded as a current income tax credit. These are offset by a deferred incometax charge from the timing differences arising from capitalised explorationexpenditure. This information is provided by RNS The company news service from the London Stock Exchange