Serica enters year in 'stronger, more resilient' position

21st Jan 2026 12:41

(Sharecast News) - Serica Energy said in an update on Wednesday that it entered 2026 as a "stronger, more resilient company" with production and revenues set to rise materially, as recently announced acquisitions expand its portfolio and underpin higher cash generation.

Chief executive Chris Cox said the group's enlarged asset base would "more than double the number of producing fields in our portfolio and materially add to cash generation, supporting our strategy of delivering value to investors through both growth and shareholder returns."

He added that the broader portfolio is creating a wider range of organic growth options, allowing Serica to prioritise projects offering the strongest returns and to "grow and sustain material cash-generative production for Serica into the next decade."

For 2025, Serica reported average production of 27,600 barrels of oil equivalent per day, down from 34,600 daily equivalent barrels in 2024 but in line with guidance, reflecting lower output from the Bruce Hub and the timing of activity at Triton.

Revenue for the year was $601m, compared with $727m a year earlier, with an average realised Brent oil price of $67 per barrel and an average realised NBP gas price of 84p per therm.

Capital expenditure totalled $250m, broadly in line with guidance and largely directed towards the Triton drilling programme, while operating costs were $365m.

The group generated negative free cash flow of $22m and paid dividends of $84m, equivalent to 16p per share.

At year end, cash stood at $31m, compared with $148m a year earlier, reflecting dividend payments weighted to the second half and the benefit in the first half of a $71m cash tax refund.

Total liquidity was $290m, comprising cash and undrawn committed reserves-based lending facilities of $259m.

Borrowings were unchanged at $231m, leaving net debt of $200m.

Serica said it continued to manage its hedge book in line with policy, with approximately 12,300 barrels of oil equivalent per day hedged in 2026 and 7,100 daily equivalent barrels in 2027, providing downside protection at effective floors of $60 per barrel for oil and 67p per therm for gas.

The hedge portfolio had a mark-to-market value of $30m in-the-money at the latest valuation.

Operationally, year-to-date production in 2026 has averaged 43,000 daily equivalent barrels, with current rates around 50,000 barrels of oil equivalent per day.

At the Bruce Hub, production has returned to around 20,000 barrels equivalent per day net to Serica following the completion of integrity repairs that had constrained output through late 2025 and early 2026.

The focus for the year would be on enhancing reliability, extending asset life and improving well stock performance, with a planned shutdown in the third quarter expected to last around 24 days.

At the Triton Hub, completion of work on the Bittern pipeline and commissioning of a second compressor are expected to improve operational efficiency.

Current production was around 21,000 daily equivalent barrels net to Serica on one compressor, with potential upside from twin-compressor operations once stability is established.

The operator forecast a third-quarter shutdown of around 65 days.

West of Shetland, the Lancaster field was producing at around 6,000 equivalent daily barrels and was expected to continue at that level until production ceased in the second quarter of 2026, when the FPSO was scheduled to leave the field.

Looking ahead, Serica guided for a material increase in average annual production in 2026 to significantly over 40,000 barrels of oil equivalent per day, driven by improved reliability and the completion of acquisitions announced in the second half of 2025.

Subject to completion timing, production from the enlarged portfolio has the potential to exceed 65,000 boepd, with the number of producing fields set to more than double, improving diversification and predictability of revenues.

Operating costs in 2026 were expected to be $380m to $400m, excluding around $65m related to the Lancaster FPSO charter, while base capital expenditure was forecast at $125m to $145m, more than half of which related to highly tax-efficient spend at Bruce.

Serica said it expected to generate material free cash flow in 2026 at prevailing commodity prices, strengthening the balance sheet and supporting its strategy of organic investment alongside attractive shareholder returns.

The company reiterated its intention to move from AIM to the main market of the London Stock Exchange at the earliest possible opportunity in 2026 and said it remained active in screening cash-generative, value-accretive merger and acquisition opportunities in the UK North Sea.

At 1222 GMT, shares in Serica Energy were up 2.36% at 203.5p.

Reporting by Josh White for Sharecast.com.