Here are my notes from this morning's AGM for Serica Energy (LON:SQZ) . First, the Chairman's statement was memorable not just for its length (it took 30 minutes to read out) but for its depth. I urge anyone who is interested in the trials of running a small E&P, especially one with assets in the North Sea, to take the time to read it in full, even if you have no interest in Serica itself.
Craven Walker listed the following assets as core: Kambuna, Columbus and Bream (the latter was sold in 2008, it isn't yet being developed but it should be commercial at current oil price and Serica will get a contingent payment if it goes into production.)
market analysts ... consistently value Serica’s core assets at approximately twice the Company’s current share price before taking into consideration any value for upside.
He was asked why the price for Kambuna was so low compared to the previous sale. He said that it reflected the $12m impairment set out in the Annual Report following the downward revision of reserves; that the production since the previous sale had to be taken into account; and that the PSC terms are complicated, but Serica has already received most of the cost recovery element, so future cash receipts would be lower.
Serica have c $120m of North Sea tax losses. These can be set against Columbus revenue i.e. from 2014 onwards, but it may well be more efficient for Serica to buy production before then. He commented that there are over 100 'Mom & Pop' companies in the North Sea and the recent tax changes have dented confidence in the sector.
I asked about Columbus predicted capex, Serica's share and how they would finance it. Serica's Q1 report said
As operator of Block 23/16f, Serica has been actively co-operating with BG, the operator of the Lomond field and a partner in the Columbus field, in the front end engineering design studies for a Bridge Linked Platform. These studies are largely complete. The Bridge Linked Platform would be installed adjacent to the Lomond field platform and receive production from Columbus and other nearby fields for processing on the Lomond platform and onward transportation to the CATS and Forties pipeline systems.
Negotiations with BG continued…
