Serica 2010 AGM write-up

Here are my notes from Friday's AGM. Slide refs are to the AGM presentation given by Paul Ellis, CEO, http://www.serica-energy.com/downloads/pdf/2010-06-25-Serica-AGM-Presentation-2010.pdf . Most of my questions were asked after the meeting rather than in the presentation. The chairman (Tony Craven Walker)'s statement provides a good overview of the company http://www.investegate.co.uk/Article.aspx?id=201006251430062640O  .The only surprise there being that they are switching from the Venture exchange on TSX to the main board. From the statement:

We expect to know the outcome of the Oates well around the end of August when we should also be starting our two well drilling programme in the Kutai PSC, offshore East Kalimantan in Indonesia.  The programme will commence with the drilling of the Dambus well followed by the Marindan well.  Serica holds a 30% interest in these wells, both of which could be material to the Company if successful.

Shareholders are therefore exposed this year to an exploration drilling programme which holds much promise and which is now underway.  The differing natures and geographical locations of the prospects means that the outcome of any one well will not change the prospectivity of the other wells and each should be taken as they come.

The Company has done its best to mitigate against a negative outcome by farming out or reducing its interests in the individual wells so that the programme is easily met from the Company's financial resources.

[my bold]

Slide 9 - general move out of SE Asia because "better returns elsewhere". All their remaining acreage is in Indonesia, where they are applying for further blocks. IMO this makes them now uninteresting for Salamander, so w will not see a return of that bid - although of course major success in Kutai this year could change things.

Slide 11 - Kambuna production. The hiccup in the first few weeks was not their fault. The pipeline taking the gas from the Pangkalan Facility to Poewer  station also receives gas from another small field, previously that gas had had the liquids knocked out of it, but that was switched off, so all of a sudden the Power Station was getting liquids into the turbines, no scrubber at the power station and as it was Ramadan, no-one noticed until a fair amount of damage ad been caused...

There will be negotiations over the Take or Pay clauses in the contract, as there are some get out clauses if it is not the Power Station's fault.

The power station equipment is 25 years old and they have been building up th volume cautiously. Now at 35, expectingto get up to 40, and the new processing facility will be able to take 10% out as LNG, so Kambuna should be able to produce at 45 going forwards.

I asked what would happen if they discovered gas in the surrounding block. The power station actually has 4 40 capacity turbines, although Serica think that one may have been cannibalised over the years as parts for the others. The other two are currently burning imported fuel oil, so if there is another good find, they could be switched over.

slide 12 - Columbus development. I asked about the unitisation argreement with BG. PE said that BG has agreed to sign over everything to the 23/16f block owners, it would get paid through the pipeline tc fees for going through BG's Lomond platform.

slide 14 - the Lomond platform is very congested., hence the new Bridge Linked Platform. This will also take from Dana's Barabara/Phyllis and potentially from BG's Moth field, but this hasn't yet been appraised.

Hoping for projection sanction by end of the year, first production early 2013.

slide 16 - Oates prospect Premier are paying all dry hole costs. See this excited article on Premier's farm-in http://business.timesonline.co.uk/tol/business/markets/article6977108.ece    The Huntington discovery is 25mmb and Serica are assuming that PMO came in because a find at Oates would allow a joint development.

Serica have Oates as 78mm boe and 60%/ likley to me oil rather than gas. Premier have a slightly lower target quoting 60-65. Mostly oil will be easy to develop, dry gas would too but is unlikley. Wet gas will be more of a challenge.

slide 20 Dambus prospect Oil target. small surface area but 12+ stacked sands, targetting 200mmb prospect. Lots of infrastructure nearby.

slide 21 Marindan prospect Gas targetting 90-250bcf

slide 23 Conan failure - caused by 'lithological differences' from the other wells in the area. Will not affect other prospects on the block and they will return.

slide 24 Bandon/Slyne Planning to drill 1 or 2 prosepcts in 2011 (nb not 2010 as the slide says). Are considering what licenses to apply for next May when West ireland licensing round closes.

slide 25 Rockall - difficult to put sizes to prospects as Doolish was a very large trap but underfilled. Serica has 100% and will be looking for farm-out

slide 26 E Seruway - aiming for well in 2011 - will require farm-out. It would make sense if Salamander are interested.

slide 27 offshore Morocco Deep wells, c $60m, Serica will farm down from current 25%. Currently re-processing seismic. Drill 2012.

slide 28 financials - I wish all my small oilies were as healthy

slide 31 & 32 - in the distance is the Lomond platform :)

I am happy to continue to hold a decent size position. I sold a few in the 90s pre-Conan. Will buy them back if it goes much lower.

db