Serica Energy Plc (AIM: SQZ): Major potential acquisition
• Serica has agreed to acquire BP’s 32% interest in the P111 and P2544 licences in the Central North Sea. P111 includes the Culzean gas condensate field—the UK North Sea’s largest producing gas asset.• Culzean commenced production in 2019, with remaining net 2P reserves of ~33 mmboe attributable to BP as of 1 January 2025. Net production to BP in 1H25 was 25.5 mboe/d. The remaining interests are held by TotalEnergies (49.99%) and NEO NEXT (18.01%).
• The transaction consideration includes an upfront cash payment of US$232 mm. The final amount payable at closing (~YE25) will be adjusted for potentially significant free cash flow generated from the effective date (1 September 2025). Two additional contingent payments may be triggered by: (1) successful exploration and production from a material opportunity on the P2544 licence, and (2) changes to the UK ring-fence fiscal regime.
• Should this complete, it would represent a transformational acquisition for Serica. Culzean’s 1H25 net production to BP exceeds Serica’s entire 1H25 output, offering immediate scale, diversification via a new hub, and a >25% uplift to 2P reserves (including Prax). There is also potential upside from infill drilling and exploration.
• Culzean opex is currently only US$10.7/boe. Assuming an NBP price of £0.80/therm, this implies netbacks of ~US$54/boe and 2025 annual pre-tax operating cash flow of ~US$490 mm at a full-year rate of 25 mboe/d. Following completion, applying Serica’s CT and SCT tax losses going forward could reduce tax exposure. Additional EPL tax losses (~US$0.18 bn for Serica ex-Prax and ~US$0.34 bn for Prax) would further enhance future cash flows.
• The acquisition is subject to a 30-day pre-emption period.
Valuation and financials
Our Core NAV and ReNAV are currently unchanged at £2.80 per share and £3.05 per share, respectively. Should TotalEnergies or NEO NEXT not exercise their right to pre-emption, these figures will rise. The acquisition is expected to be funded from Serica’s current cash and undrawn amounts under the existing US$525 mm RBL.
Serica Energy is an independent oil and gas company with production, development and exploration licence interests in the U.K. Continental Shelf and exploration interests in Ireland, Morocco and Namibia. As of Dec 31 2016, Co. had proved plus probable reserves of 3.8 million barrels of oil equivalent, which consisted of 2.1 million barrels of oil and 10.40 billion cubic feet of gas.
Auctus Advisors is a specialist Equity Capital Markets and Advisory business with a focus in the Energy Sector.
The partners have complementary skill sets, with decades of experience across Equity Capital Markets, Investment Banking and the Energy industry. We have worked at Société Générale, Canaccord Capital, BMO Capital Markets and Schlumberger. Most recently we have worked together for many years at GMP FirstEnergy.
Auctus has been set up at the beginning of a new decade in which we see significant opportunities in the Energy space. Globally, demand for energy is at record levels and continues to grow. Conversely, investment in traditional energy sources has been severely constrained. We believe this imbalance creates opportunities for both companies and investors.
Auctus provides Corporate Broking, Equity Research and Investment Banking services.
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