LONDON: Serica Energy plc (AIM: SQZ) is pleased to announce it has signed a sale and purchase agreement to acquire 100% of the issued share capital of Prax Upstream Limited from Prax Exploration & Production Plc.
The acquisition is a corporate acquisition of Prax Upstream for a consideration of £14.5 million ($18.9 million). Completion is subject only to customary regulatory approvals and is expected to occur by year end.
Prax Upstream holds a 100% interest in, and is the operator of, the Lancaster field. In addition, Prax Upstream is party to separate executed sale and purchase agreements with TotalEnergies and ONE-Dyas for the purchase of certain assets (‘Existing SPAs’).
Consequently, the acquisition, including completion of the Existing SPAs, comprises a 40% operated interest in the Greater Laggan Area (‘GLA’), a 10% interest in the Catcher Field, a 5.21% interest in the Golden Eagle Area Development (‘GEAD’) and a 100% interest in the Lancaster field. The total aggregate upfront consideration is $25.6 million.
Chris Cox, Serica’s CEO, stated: “This transaction represents a further step in the delivery of our growth strategy – it diversifies our portfolio, increases our reserves and resources, and enhances near-term cashflows at an attractive valuation. The addition of GLA brings Serica a new production hub, with operatorship of the Shetland Gas Plant. There is an immediate boost to production and reserves, plus the scope to create significant value for shareholders through multiple subsurface, commercial, and further M&A opportunities.
This transaction illustrates Serica’s ability to move quickly, utilising our strong balance sheet and skill sets to make an acquisition with strategic potential on attractive terms.”
BENEFITS OF THE ACQUISITION
Completion of the acquisition is expected in Q4 2025 and of the Existing SPAs in Q1 2026. Taken together, these transactions will enhance the Serica portfolio as follows:
· Addition of 11.0 mmboe of 2P reserves (as at 30 June 2025), at an acquisition cost of $2.3/boe
· A more diverse and robust production portfolio, with H1 2025 production of 7,900 boepd associated with the Existing SPAs and 5,900 boepd from the Lancaster field (expected to cease production in H2 2026)
· A new operated hub for Serica in the West of Shetland basin with multiple sources of organic growth potential, including an infill well on the Tormore field, the Glendronach development, four exploration licences, and third-party throughput opportunities in the Shetland Gas Plant (‘SGP’)
FINANCIAL HIGHLIGHTS
· Upon completion, Serica will pay an aggregate upfront consideration of $25.6 million and will receive payments totalling an estimated c.$100 million reflecting interim post-tax cashflows between the economic dates of each transaction and estimated completion dates
· In addition to the completion payments, Serica expects an incremental c.$50 million of Free Cash Flow[3] from the acquired assets in 2026
· Following completion of the transactions, Serica estimates that its portfolio decommissioning liability per 2P barrel will remain amongst the lowest in the UK North Sea. Near-term decommissioning costs relate largely to the plugging and abandonment of two wells at Lancaster, forecast to cost c.$60 million
– Catcher and GEAD decommisioning is set to occur towards the end of the decade, at an estimated net cost of c.$90 million
– Decommissioning at GLA is not currently planned until well into the 2030s, with net post-tax costs potentially in the range of $200 to $250 million. As operator, Serica expects to work with partners to pursue opportunities to extend the productive life of the facilities through increasing production and securing third party throughput
· With the addition of tax losses acquired, on completion of the Prax Upstream acquisition Serica aggregate ring-fence losses as of 30 June 2025 will total $2.14 billion Ring Fence Corporation Tax, $1.83 billion Supplementary Charge, and $518 million Energy Profits Levy