Update from Serica Energy plc

Serica Energy plc is pleased to provide the following operations update.

Highlights

• Commencement of offshore operations to prepare the Rhum R3 well for production
• Successful installation of first Columbus subsea equipment
• Significantly improved gas prices
• No COVID-19 interruptions to operations or production

Rhum Field: R3 Intervention Project

Offshore  operations  on  the  R3  Intervention  project  have  commenced. Awilco Drilling’s WilPhoenixsemi-submersible  drilling  rig,  has  arrived  on  location  andis  safely  installed over the R3 well.

The Rhum field is situated some 380 km NE of Aberdeen ina water depth of 109metres. Field  development  was  sanctioned  in  2003  and  production  started  in  December  2005. Rhum has subsea completions which are tied back to the Bruce platform complex which lies 44 km south of Rhum.The original development plan consisted of three wells but the third of these wells (R3) has never been put into production.

The current work  programme  will  involve  recovering equipment left  in  the  well  by  the previous operator and removing an obstruction that is believed to be in place across parts of the downhole completion. The well will then be recompleted. Rig operations are planned to last  approximately  70  days. R3  is  already  connected  to  the  subsea  production infrastructure and it is expected that operations to commence productionfrom R3 will take place in early 2021.

Rhum wells produce predominantly gas with minor levels of condensate. Average Rhum production from the existing two wells in 2019 was 13,775 boe/d net to Serica's 50% field interest.A successful recompletion of R3 will increase the production capacity utilising the existing production facilities located on the Bruce platform and will, therefore,not lead to any significant additional CO2 emissions.  This  is  in  line  with  Serica’s stated objective of reducing  the  carbon  intensity  of  the  operations  associated  with  our  production.  Further details on Serica’s commitment to ESG (Environment, Social & Governance) can be found at www.serica-energy.com/downloads/ESG-report-2019.pdf

A further update on the R3 Intervention project will be provided when rig operations are completed.

Columbus Development

In  late  September  an  important  milestone  was achieved  in  the  Columbus  development project with the successful installation of the seabed tie-in structure.

Columbus will be developedby a single subsea well, which will be connected to the Arranto Shearwater  pipeline  through  which Columbus gas  and  condensate production will  be exported co-mingled with Arran field production.

The  Arran  to  Shearwater  pipeline  has  been installed  and  the  first  Arran  well  has  been spudded.  The  installation  of  the  Shearwater  to  Columbus  umbilical  is  complete  and  the Columbus  tie-in  structure  has  been placedon  the  seabed adjacent  to  the  proposed wellhead location.

The jack-up rig Maersk Resilient has been contracted to drill the Columbus development well which is planned forthe first half of 2021. First production is expected from Columbus in the second half of 2021 with expected production rates net to Serica of 3,500 –4,000 boe/d to be achieved shortly thereafter.

Commodity Prices

Over 80% of Serica’s production is gas and spot gas prices have continued to strengthen following  the historically  lowprices encountered earlier  this  year.In  January  this  year, average Heren  NBP  day-ahead  spot  priceswere  around  28p/therm but  then fell significantly during the early stages of the COVID lock downreaching below 10p/therm on a number of days.

Subsequently, the recovery in gas prices has been strong and in September average spot prices were over 29.5p/therm,a substantial increase over the low point in the first half of the year. The average price in October to date has exceeded 35p/therm. Serica’s gas price hedging  programme yielded  significant  gains  in  the  first  half  of  the  year  and provides further support into 2022.

COVID-19

There have been no confirmed cases of COVID-19 on any of our installations nor, to date, any  interruptions  to  production caused  from  COVID-19 infections  on  our  or third-party facilities.

Serica has not furloughed or laidoff any staff during 2020 nor utilized any of the various government schemes that have been made available to support industry during the current pandemic.Serica  has  assessed  the risk of COVID-19  related  matters  impacting the  availability  of equipment and/or personnel for the R3 and Columbus projects and has determined that any such risk currently is insufficient to prevent the execution of these projects.

Mitch Flegg, Chief Executive of Serica Energy, commented:

“We  are  entering  an  exciting  period  of  value-adding  operations.  The  R3  Intervention project has the potential to add significant production volumes and can provide valuable optionality to the management of Rhum wells and reservoir. The Columbus development will add further production and diversity to our portfolio.

Serica’s net production levels remain strong despite the added complexities associated with  operating  remote  installations  in  a  socially  distanced  manner.Gas  prices  have recovered  significantly and  the  gas  futures  price  outlook  is  good.  Our  balance  sheet remains  robust  with  significant  cash  reserves,  no  debt  and  limited  decommissioning liabilities.This will enable us to execute these projects whilst simultaneously continuing to look to take advantage of current market conditions by pursuing opportunities to further expand our portfolio.”

Read the latest issue of the OGV Energy magazine HERE.