Serica2013
SERICA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2013
Serica Energy plc is an oil
and gas exploration and
development company with
activities based in the UK,
Ireland, Namibia and Morocco,
and an economic interest in an
oilfield offshore Norway.
The Company’s shares are listed
on AIM in London and on the
Canadian TSX Exchange under
the symbol SQZ.
02 Highlights
03 Summary
04 Licence interests
05 Chairman’s statement
07 Strategic report
07 Chief Operating Officer’s review
09 Review of licence holdings
12 Finance Director’s review
17 Consolidated financial statements
20 Corporate governance statement
23 Directors’ biographies
24 Directors’ responsibilities statement
25 Auditor’s report
27 Financial statements
63 Group proved plus probable reserves
64 Glossary
65 Corporate information
SERICA ENERGY PLC ANNUAL REPORT AND ACCOUNTS 2013
HIGHLIGHTS
Operations Highlights
• Progress continues on all four of Serica’s UK gas-centric projects
– Centrica to carry Serica for 20% on Doyle well in Block 113/27c - Serica also received award of adjacent block 113/22a into
which prospect likely extends
– ENI joins as operator in block 22/19c where large HPHT prospects evident - Serica (15%) carried by JX Nippon through first well
– 3D Seismic acquired and processed in Greater York area - interpretation underway – Serica 37.5% interest
– Export route for Columbus field under negotiation - commercial discussions continue with BG and others - infrastructure
support from Wood Report and DECC
• Atlantic Margin and Africa exploration moving forward on programme
– Namibia - partnering process underway - huge benefit from BP’s involvement in Luderitz Basin – c. US$50 million of high
quality data at nil cost to Serica
– Morocco - first Foum Draa well drilled, results non-commercial – first well in Sidi Moussa spuds early 2H2014 – Serica largely
carried on both wells
– Ireland - Ministry awards full Frontier Licence in Rockall Basin and extends Serica’s existing licence – partnering process
underway in Slyne Basin blocks
• Competent Person’s Report flags major potential in all of Serica’s licences – highlights in Operations Review
• Operator of Bream has indicated end year development decision - would provide a large uplift in value to Serica
Financial Highlights
• Funded to meet planned expenditure through end 2015
• End year cash balance of US$26.1 million, nil debt
• Successful fundraise of US$19.5 million - well supported by new and existing shareholders
• Reduced loss for the year from continuing operations of US$5.1 million (2012: US$16.4 million)
• Efficiencies improved - costs strictly controlled - all major commitments farmed-out
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Serica Energy plc Annual Report and Accounts 2013
SUMMARY FOR 2013
Company net oil and gas reserves
(working interest basis)
At 31 December
Gas – million cubic feet
Condensate and LPG – barrels
Total – barrels of oil equivalent
Financial position
Market capitalisation – US$
Net current assets – US$
Cash – US$
Number of shares in issue
Number of shares fully diluted
Proven and
probable
2013
21,900
1,500,000
5,200,000
55 million
26 million
26 million
250,179,040
261,187,500
Proven and
probable
2012
23,400
1,600,000
5,500,000
74 million
19 million
22 million
182,770,311
193,728,771
Serica Energy plc Annual Report and Accounts 2013
3
LICENCE INTERESTS
The following table summarises the Company’s licences as at 31 December 2013.
Block(s)
Description
Role
Non-operator
Non-operator
Non-operator
Exploration
Exploration
Exploration
Columbus Field – Development planned Operator
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Non-operator
Non-operator
Non-operator
Non-operator
Operator
Operator (1)
Operator (1)
Operator (1)
UK
15/21g
15/21a (part)
22/19c
23/16f
47/2b (split)
47/3g (split)
47/7 (split)
47/8d (part)
110/8b
113/26b
113/27c
113/22a
Ireland
27/4
27/5 (part)
27/9
5/17
5/18
5/22
5/23
5/27
5/28
11/10
11/15
12/1 (part)
12/6
12/11 (part)
Namibia
2512A
2513A
2513B
2612A (part)
Morocco
Foum Draa
Sidi Moussa
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
Exploration
% at
31/12/13
21%
21%
15%
50%
37.5%
37.5%
37.5%
37.5%
100%
65% (1)
65% (1)
35% (1)
50%
50%
50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
85%
85%
85%
85%
Location
Central North Sea
Central North Sea
Central North Sea
Central North Sea
Southern North Sea
Southern North Sea
Southern North Sea
Southern North Sea
East Irish Sea
East Irish Sea
East Irish Sea
East Irish Sea
Slyne Basin
Slyne Basin
Slyne Basin
Rockall Basin
Rockall Basin
Rockall Basin
Rockall Basin
Rockall Basin
Rockall Basin
Rockall Basin
Rockall Basin
Rockall Basin
Rockall Basin
Rockall Basin
Luderitz Basin
Luderitz Basin
Luderitz Basin
Luderitz Basin
Operator
Operator
Operator
Operator
Operator
Operator
Operator
Operator
Operator
Operator
Operator
Operator
Operator
Operator
Operator
Operator
Operator
Operator
Non-operator
Non-operator
8.3333%
5%
Tarfaya-Ifni Basin
Tarfaya-Ifni Basin
Indonesia
Glagah Kambuna TAC Kambuna Field Production
Non-operator
25% (2)
Offshore North Sumatra
Notes:
(1) Interest subject to a farm-out agreement. Post completion, Serica’s interest will be 20% and Hydrocarbon Resources Limited (a wholly owned subsidiary of
Centrica) will be appointed operator.
(2) Glagah Kambuna TAC terminated on 31 December 2013.
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Serica Energy plc Annual Report and Accounts 2013
CHAIRMAN’S STATEMENT
Dear Shareholder
I am pleased to report that the Company made good progress
during 2013 to advance its exploration programme, both in
the UK and overseas. We now have an enviable portfolio of
rapidly maturing and ready to drill prospects, some of which
are already farmed-out, providing shareholders with exposure
to material upside, both near and longer term, at very little
cost. An independent report undertaken by Netherland Sewell
and Associates has confirmed the range and potential of the
Company’s prospect inventory and more details are provided in
the Chief Operating Officer’s Review. The report also includes
the year-end audit of reserves and confirms the Columbus
reserves at 15.5 mmboe, 5.2 mmboe net to Serica’s interest. Work
has continued in our efforts to find alternative arrangements for
Columbus production.
Towards the year end, we were able to complete a capital
financing in difficult market conditions to place us in a healthy
financial position to take us forward. I am pleased with the
result and am delighted with the support that we received from
shareholders to make this financing so successful.
The Company’s main challenge going forward is to secure an
export route for Columbus and no effort is being spared by the
Board to this end. We have striven hard to achieve this objective
and have been in continual discussions with the Lomond field
operator throughout the past few months but we have yet to
reach a satisfactory conclusion. As I have said previously there
are no technical impediments to connecting Columbus to the
adjacent Lomond platform. We have, nevertheless, extended
discussions to other operators who can also take the gas and
liquids. I give further commentary below but we will report back
to shareholders as soon as we have demonstrable progress.
UK Exploration and Norway
Our UK exploration programme has seen material progress.
During the year we reached agreement with Centrica which
will see a well drilled on our Doyle prospect in the East Irish
Sea at limited cost to Serica. Centrica are meeting the costs
of our retained 20% interest up to a gross well expenditure of
£11 million and they have confirmed that the well will be drilled
as part of their forward programme with spud now likely early
next year. With the prospect lying close to the Morecambe Bay
production facilities, also operated by Centrica, it is expected
that any discovery would see early development.
Progress towards drilling on Block 22/19c, located just to the
west of Columbus, is encouraging. Our partner, JX Nippon,
has confirmed that it has reached agreement under which
ENI will be joining the group. The block contains two large
high-pressure, high-temperature (“HPHT”) prospects. The
prospective resources independently attributed to these two
prospects are considerable. Under an earlier farm-out agreement
with JX Nippon, Serica will be fully carried for its 15% share of
the cost of drilling a well, providing shareholders with exposure
to significant potential at no cost. In addition, the Government
has announced that it will introduce specific tax changes to
encourage development of HPHT fields. Serica is well placed to
benefit from these changes.
In the Southern gas basin, our work programme to shoot a 3D
seismic survey in the blocks adjacent to the producing York field
has been completed and the data has now been fully processed
and is being interpreted. Serica has a 37.5% interest in these
blocks and we are expecting results to show additional gas
accumulations and support a drilling programme.
In short, in addition to Columbus, Serica is involved in three
active gas-focussed exploration projects in the UK, each of
which has clearly defined potential and in two of which it is
carried by third parties. With the current tight gas supply and
security uncertainties we believe that gas prices will continue to
be strong for the foreseeable future and encourage development
of new reserves.
In Norway, we await the announcement of an investment
decision for Bream. This has been stated recently by the
operator to be around the end of 2014/early 2015. At the time
of such an announcement the Company would expect to see a
material increase in the value of its indirect holding in the field
and we look forward to this project finally moving ahead.
Atlantic Margin Exploration
We also continue to make progress in our Atlantic Margin
blocks. In Namibia, we have benefitted from BP’s participation
in the acquisition and interpretation of the large 3D seismic
survey which we undertook in 2012 and completed during 2013.
Although, following the conclusion of a portfolio review, BP
decided not to build on its foothold in Namibia and is pulling
back to other areas in which it has a larger presence, its valuable
contribution has enabled Serica to prove the presence of very
large structures with clear characteristics of potentially prolific
carbonate deposits as well as highlighting shallower clastic
accumulations likely to have been exposed to regionally present
mature oil source rocks. This has all been achieved at no cost
to Serica, and has not only accelerated exploration, but has put
us in a stronger position than at the time of the licence award
just over two years ago. We are now in the partnering process to
take the licence to the next stage and are very positive about the
blocks’ potential.
In Morocco, we drilled our first well towards the end of the year,
operated by Cairn Energy who also paid the bulk of the drilling
costs related to our retained 8.33% working interest. The well,
drilled in the Foum Draa licence, did not encounter commercial
hydrocarbons, but the cost to Serica was minimised as the result
of our farm-out and does not write off the block’s potential. Our
Moroccan activities continue with the drilling of our second well
in which our costs are largely met, in this case by Genel in the
Sidi Moussa block where we have a retained 5% working interest.
The well is expected to be drilled in the third quarter 2014 and
would have a material impact on Serica, at minimal exposure, if
successful.
Serica Energy plc Annual Report and Accounts 2013
5
Forward prospects
Although regulatory processes, increasing costs, overly complex
taxation and maturing infrastructure have conspired to make
it difficult to operate efficiently in the North Sea it is believed
that the Government has recognised the need to alleviate the
problem. The Wood report is a major step in this direction and
comes at a time when the UK needs to encourage development
of its remaining gas reserves and extend the life of its offshore
infrastructure. We therefore expect matters to improve. At the
same time we are seeing the larger oil companies refocussing
their business strategies which provides new opportunities for the
smaller E&P companies to expand and diversify through increased
M&A activity.
It is our firm belief that Serica has the skills and resources to
pursue such opportunities. We believe that 2014 will see progress
across the Company’s areas of operations as well as the pursuit
of new opportunities both in the UK and overseas. The November
financing has put Serica in a good position to achieve these
objectives and, with our portfolio of prospects rich with potential
and a lean but strong and experienced management team, we are
continually looking to opportunities and synergies both to expand
and to unlock the value of our business.
Although we have made good progress on the exploration front,
2013 has been challenging and I would like to thank all of our
employees for their continued hard work during the year and
shareholders for their patience. We shall be providing shareholders
with an update of the Company’s activities at the forthcoming
Annual General Meeting to be held on 26 June 2014 when I would
hope to be able to report on further progress.
Tony Craven Walker
Chairman
9 April 2014
Our activities in Ireland continue to be focussed on partnering
efforts. Our blocks offer well-defined prospects close to existing
oil and gas discoveries, one of which, the Bandon oil discovery,
was drilled by Serica. We are seeing signs of increasing industry
interest, but there has been only limited farm-out activity in the
area to date. We believe that this will change as the strategic
benefits of discoveries which can improve energy security in
Western Europe become more apparent.
Columbus
Returning to Columbus, Serica is not alone in facing problems
gaining access to infrastructure. The fact that it has taken us
and our partners eight years of investment and endeavour to
gain access to infrastructure, and we still have not been able
to reach agreement with the major companies who operate the
platform and pipeline systems, has sent a strong message to the
UK Government that regulatory and oversight processes have
got to be strengthened if the North Sea’s potential is going to be
fully exploited. The Wood Report, which was commissioned by the
Government to investigate the problem and published in February
2014, supports the case for change. It is hard-hitting in its findings
and requires existing infrastructure operators to collaborate fully
to make infrastructure available to smaller companies.
We welcome and fully support the findings of the Wood Report.
The mature, developed areas offshore UK still hold significant
undeveloped reserves and reserves remaining in existing fields
and it will be the smaller companies who will play a pivotal
role in finding and developing these reserves. Preventing these
companies from accessing existing infrastructure damages
investor confidence, prevents new, emerging companies from
flourishing, holds back entrepreneurial and technical expertise
and, ultimately, results in a loss to the nation of the long term
value of its reserves and their strategic value. We are, therefore,
starting to press the findings of the Wood Report as well as
continuing discussions with other operators. We are committed
to seeing the development of Columbus take place. With renewed
Government emphasis to tackle the industry needs we believe
these problems of infrastructure access and appropriate taxation
policies will be resolved.
Finances
In November 2013 the Board took steps to strengthen the
Company’s financial position. The Company completed a
capital financing in difficult market conditions, raising a gross
US$19.5 million. The Board recognises and is grateful for the
support received from both existing and new shareholders who
participated in the financing. The funds raised will underpin the
growth of the business in 2014 and beyond and help to secure the
full potential of the Group’s assets and to ultimately maximise
value for shareholders.
Our finances are also strengthened by our zero debt position. The
Group is debt free and the year-end net cash balance of US$26.1
million, coupled with the benefits of the Group’s farm-out efforts
in recent years, and control of overhead costs, is sufficient to
meet the Group’s contractual commitments and current projected
cash requirements to the end of 2015.
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Serica Energy plc Annual Report and Accounts 2013
STRATEGIC REPORT
The following Strategic Report of the operations and financial
results of Serica Energy plc and its subsidiaries (the “Group”)
should be read in conjunction with Serica’s consolidated
financial statements for the year ended 31 December 2013.
Disclosure and Other Exemptions Relating to Foreign Issuers.
The Company is subject to the foreign regulatory requirements
of the Alternative Investment Market of the London Stock
Exchange in the United Kingdom.
References to the “Company” include Serica and its subsidiaries
where relevant. All figures are reported in US dollars (“US$”)
unless otherwise stated.
The Company is a “designated foreign issuer” as that term
is defined under National Instrument 71-102 - Continuous
Serica is an oil and gas company with exploration and
development activities based in the UK, Ireland, Namibia and
Morocco, and an economic interest in an oilfield offshore
Norway. The Company’s interest in the Kambuna field in
Indonesia was formally terminated on 31 December 2013.
CHIEF OPERATING OFFICER’S REVIEW
UK Operations
Columbus Development
BG’s unexpected decision to cancel the Lomond Bridge Linked
Platform (“BLP”) project in early 2013 was a major setback for the
Columbus project. The focus of the technical work for the rest of
the year was switched to identifying and securing a new offtake
route for Columbus. The preferred technical solution is for a direct
subsea tie-back to the existing Lomond facilities which are less
than 8km away from Columbus. Technical work has shown that
this solution is feasible and that the capital expenditure required
is appropriate for a development of this size. The obstacle has
been to agree commercial terms for the transportation and
processing of Columbus production on the Lomond platform.
Progress has been slow although dialogue is continuing with BG
International Limited (the operator of the Lomond infrastructure),
the Department of Energy and Climate Change (“DECC”) and
other stakeholders in the area.
If access to the Lomond offtake route cannot be secured on
acceptable terms then there are other realistic alternative offtake
routes that are currently under consideration. Technical work has
commenced on these alternatives and approaches have been
made to the relevant operators.
Against this background, continuing cost rises in the North Sea
are also eroding development economics and both we and the
other operators in the area are conscious of the need for close
co-operation, highlighted by the DECC sponsored Wood Report,
to reduce cost and maintain efficiencies. The Government has
recognised the need to assist in these objectives as well as to
ensure that there are no taxation impediments holding back
development.
In December 2013, DECC granted a two year extension to the
licence which includes the 23/16f portion of the Columbus field.
This extension shows the understanding and commitment of
DECC to support our efforts and allows time for the Columbus
partners to secure a commercially viable offtake route for the
field.
Exploration
In the East Irish Sea, a site survey in Block 113/27c was completed
during the year in preparation for drilling the Doyle Triassic
gas prospect. Under an agreement with Centrica’s subsidiary
Hydrocarbon Resources Limited (“HRL”) for the farm-out of
Blocks 113/26b and 27c, HRL are paying Serica’s share of costs
associated with the drilling of an exploration well to test Doyle
up to a gross cap of £11 million in return for a 45% interest in the
licence. The site survey was therefore performed at no cost to
Serica. HRL, as designated operator, has confirmed that the well
will be spudded early in their next drilling campaign and that they
are about to go to tender for a suitable rig.
In November 2013, we were delighted to be awarded a 35%
operated interest in Block 113/22a which is adjacent to Block
113/27c and is believed to contain an extension to the Doyle
prospect. The award was made as part of the delayed UK 27th
Offshore Licensing Round. Work commitments include obtaining
150 kilometres of 2D seismic data and a drill or drop decision on a
well within 3 years.
The farm-out agreement with HRL covers all of Blocks 113/26b,
113/27c and 113/22a. Upon completion of the farm-out HRL will
take over formally as operator with Serica retaining a 20% interest.
In the Central North Sea, Serica has a 15% interest in Block
22/19c, located two blocks to the west of Columbus. As the result
of a farm-out to JX Nippon, who took over as operator, Serica has
a full carry on this licence up to and including the drilling of an
exploration well. The decision to drill this well lies with JX Nippon.
Serica Energy plc Annual Report and Accounts 2013
7
CHIEF OPERATING OFFICER’S REVIEW CONTINUED
However, JX Nippon have recently advised us that they have
reached agreement with ENI to join the block and we expect this
will lead to an accelerated programme. The group has identified
significant deep High Pressure High Temperature (“HPHT”)
potential in the Jurassic and Triassic. A Competent Person’s
Report (“CPR”) conducted by Netherland, Sewell & Associates,
Inc (“NSAI”) and commissioned by Serica, has assessed the
highest ranked prospect to contain between a P90 of 40mmboe
and a P10 of 243mmboe of unrisked prospective gross resources.
A site survey is expected to be acquired in 2014 in preparation for
drilling an exploration well.
In the Southern North Sea a new 3D seismic survey was acquired
over part of the Greater York area blocks operated by Centrica in
which Serica has a 37.5% interest. This survey was acquired on
schedule and under budget and has now been fully processed.
Interpretation of the newly acquired data is ongoing with the aim
of selecting the location for an exploration well.
Namibia
In Namibia the main focus during 2013 was the processing and
interpretation of the 3D seismic survey that was acquired by
Serica over our Luderitz blocks in 2012. The interpretation of the
seismic, which covered approximately 25% of the licence area and
focussed on Prospect B, is now complete and has confirmed that
our primary prospect (Prospect B) exhibits the characteristics of a
very large carbonate platform.
An independent assessment of the unrisked prospective
resources contained in our Namibian licence has been performed
by NSAI and covers prospects which have been mapped from
early 2D seismic as well as the highly detailed 3D. This CPR
recognises the multi-prospect nature of the licence and states
that Prospect B at the primary Barremian level alone contains
P50 unrisked prospective recoverable oil resources of 623 million
barrels (with a P90 to P10 range of 138 million to 2.81 billion
barrels). The report gives a geological risk factor of 16%.
In addition to the large Lower Cretaceous carbonate prospects
evident on the licence the seismic also confirms the presence of
large turbidite channel sand formations. These sands are likely to
have been sourced by regionally present mature oil source rocks
and therefore present valid and attractive targets.
The costs associated with the acquisition and processing of
the 3D seismic survey were fully paid by BP as part of their 2012
farm in agreement. At the end of 2013 BP decided to refocus its
international portfolio and elected to withdraw from the licence.
Serica now holds 85% of the equity in the licence but retains the
3D seismic data which cost almost US$50million to acquire and
process. We have now commenced a process to attract one or
more new partners to enter into a Joint Venture arrangement with
us with the aim of drilling the first exploration well in 2015. The
initial level of industry interest in this opportunity has been strong
and discussions continue.
Morocco
In April, a site survey was carried out by Cairn Energy in
preparation for drilling the FD-1 well on our Foum Draa licence
in Morocco. The well was spudded in October using the fifth
generation semi-submersible drilling rig Cajun Express. This was a
deepwater well drilled in over 1,500m of water and to a total depth
of 5,255m. Drilling operations finished in early January 2014. The
well failed to find commercial hydrocarbons but did encounter
gas shows indicating an active thermogenic petroleum system.
In line with our ongoing strategy of limiting our cost exposure, the
first US$60million of the gross drilling costs for this well were paid
by Cairn, our farm-in partner, minimising the net cost to Serica’s
retained 8.33% working interest. The group is now evaluating the
valuable data recovered from the well and will soon agree on a
forward plan for the licence.
The next Moroccan well in which we have an involvement will
be in the Sidi Moussa licence which is now operated by Genel
Energy. Once again our cost exposure is limited under a farm-out
agreement and Genel will carry Serica’s retained 5% working
interest for the first US$50million of gross well costs, therefore
considerably limiting our cost exposure. The site survey has been
completed and the rig Noble Paul Romano has been contracted to
drill the well which is expected to spud in Q3 2014. This prospect
is a carbonate draped tilted fault block structure that the operator
Genel estimates to hold prospective resources of 200 million
barrels with a 20% chance of success.
Ireland
Serica holds 100% interests in two large swathes of blocks in the
Atlantic Margin Rockall Basin and has undertaken considerable
work reprocessing 2D and 3D seismic data to delineate fully
the prospectivity of these blocks. This work has identified large
prospects of pre-Cretaceous age close to an existing discovery
drilled off block.
In July 2013 we were pleased to be informed that the Minister of
State at the Department of Communications, Energy and Natural
Resources (“DCENR”) had consented to extend the original
four year duration of Serica’s Rockall Basin Frontier Exploration
Licence 01/09 by two years to enable further work to be done on
the licence, including a possible site survey.
This was followed in December 2013, when we were advised that
we had been successful in our application to convert adjacent
Licence Option 11/1 to a full Frontier Exploration Licence and
that the Minister of State at the DCENR has granted Frontier
Exploration Licence number 04/13 with effect from 1 December
2013.
This places us in a stronger position to attract industry partners
as the attractiveness of the technical potential and the licence
terms become better understood. Given the size of the prospects
and their position in a proven gas-condensate bearing basin,
holding two licences with significant acreage (over 1,900 square
kilometres) greatly expands the options open to Serica to deliver
an active drilling campaign in the area. The NSAI CPR attributes
P50 unrisked prospective resources of 677bcf (with a range from
8
Serica Energy plc Annual Report and Accounts 2013
a P90 of 155bcf to a P10 of 3.4tcf) to the Muckish prospect with a
geological risk factor of 26%.
In addition to the clearly mapped prospects, recent in-house
analysis of the extensive seismic database has also indicated the
presence of an alternative play type, not previously considered
and it is evident that the blocks contain the potential for
deepwater fans. Evaluation of this play has commenced and will
be completed in Q2 2014.
Further south in the Slyne Basin, we have two significant
drill-ready prospects in Licence 01/06, the Boyne and the Liffey
prospects. The blocks are located 40 kilometres south of the
Corrib gas field in water depths of 180 to 280 metres. Boyne and
Liffey are two Lower Jurassic prospects mapped as a result of the
discovery of oil in shallower Jurassic sediments in the Bandon
well drilled by Serica in 2009. NSAI in their CPR attribute P50
gross unrisked prospective resources (for the combined Jurassic
and Triassic objectives in Boyne and Liffey) of 215mmboe (with a
range from a P90 of 56mmboe to a P10 of 824mmboe). Together
with our partner (RWE), we are looking for a further partner to
invest in an exploration well to drill the Boyne Prospect in return
for significant equity in the licence. This is a high value farm-in
opportunity with moderate risk and significant upside.
Indonesia
Finally, during 2013 the Kambuna Field in Indonesia reached
the end of its economic life. The field has been abandoned in
accordance with local regulations and the Technical Assistance
Contract (TAC) with Pertamina was terminated in December
2013. The abandonment and handover operations were completed
smoothly and within budget.
Mitch Flegg
Chief Operating Officer
9 April 2014
REVIEW OF LICENCE HOLDINGS
The following summary gives further detailed information on
Serica’s licence interests in which activities took place during,
and subsequent to the end of 2013.
United Kingdom
Central North Sea: Block 23/16f - Columbus Field
Development
Block 23/16f covers an area of approximately 22 square
kilometres in the UK Central North Sea and contains the
majority of the Columbus gas field. The Columbus field,
containing gas rich in condensate, extends from Block 23/16f
into Block 23/21 to the south, operated by BG International
Limited (“BG”). Block 23/21 includes the Lomond platform
and the producing Lomond field. Serica has a 50% interest as
operator in Block 23/16f and will be the operator for Columbus
field facilities with an interest of 33.2%.
In early March 2013 Serica, as operator of the Columbus field
and on behalf of the Columbus field participants, issued tender
documents to pre-qualifying contractors for the fabrication,
installation and hook-up of sub-sea facilities and the provision
of associated sub-sea equipment and systems. This followed
the issuing by BG in December 2012 of tender documents for
the construction and installation of a Bridge Linked Platform
(“BLP”), through which Columbus field gas and condensate
production would be exported.
In late March 2013, BG informed Serica that it had decided not
to proceed with the construction of the BLP. This cancellation
was a setback to the Columbus project but since then,
progress has been made towards a revised development plan
under which the Columbus field would be tied back directly
to the Lomond platform without need for a BLP. Preliminary
engineering studies showed that this solution is technically
feasible and could be delivered within the time frame
envisaged under the previous BLP-based plan.
The outstanding issue to be addressed before detailed
technical work can proceed is for (non-binding) commercial
terms to be agreed between the Columbus owners and the
Lomond owner. Negotiations are continuing with BG, DECC
and other interested parties with all parties working to secure
a positive outcome following which clearances will be required
from DECC enabling the project to proceed. Serica is aiming
to reach an understanding acceptable to all parties during
the first half of 2014. The original field development plan, as
submitted to DECC, was designed to evaluate the potential
for additional reserves which may exist as an extension to
Columbus and this would remain the intention in any revised
plan designed to take account of a modified export route.
The partners in Block 23/16f recently obtained a two year
extension from DECC for the second phase of the licence
(P1314), which now expires in December 2015. This cooperation
Serica Energy plc Annual Report and Accounts 2013
9
REVIEW OF LICENCE HOLDINGS CONTINUED
from DECC is indicative of their support to help reach a
positive conclusion and extends the timeframe to achieve
agreement for an export route. As part of this process, the
part of the block east of the Columbus accumulation has been
relinquished such that the portion retained, which contains the
Columbus field, has an area of 22 square kilometres.
Lomond is the nearest and easiest platform for Columbus to
link into and remains the prime choice for cost and simplicity
reasons. However, in addition to negotiations with BG
discussions have also been opened up with other infrastructure
operators who can provide alternatives in the event that
negotiations with BG fail to reach a commercial conclusion.
Independent consultant NSAI carried out a reserves report on
the Columbus field for the end of 2013. This report estimated
that the gross Proved plus Probable Reserves of the field are
66.0 bcf of gas and 4.5 mmbbl of liquids, a total of 15.5 mmboe.
Serica holds a 50% interest in those Columbus reserves lying in
Block 23/16f. After providing for reserves lying in the adjacent
Block, NSAI estimates the Company’s share of proved and
probable reserves in the field to be 21.9 bcf of sales gas and 1.5
mmbbl of liquids, a net 5.2 mmboe to Serica.
Central North Sea: Blocks 15/21g and 15/21a (part) –
Spaniards Appraisal
Block 15/21g, in which Serica was initially awarded a 30%
interest, lies immediately west of the Scott oil field and
adjacent to Block 15/21a containing the Jurassic oil discovery
well 15/21-38z (“Spaniards”), which flowed 2,660 bpd of 25° API
oil from a good quality Jurassic-aged Upper Claymore sand.
In January 2012 Block 15/21g was amalgamated with part of
Block 15/21a to form a single area which includes the Spaniards
discovery. Serica has a 21% interest in the amalgamated area.
In Q4 2012 the Spaniards East well was drilled to appraise the
Spaniards discovery but was plugged and abandoned. The
analysis of the Spaniards East well data confirms that there is
little chance of any remaining oil prospectivity in the east of the
field. The focus of the forward work programme is to mature
the Spaniards West prospect so that a decision can be made
whether to drill another well or withdraw from the licence.
Central North Sea: Block 22/19c
Block 22/19c is located approximately 20 kilometres to the west
of Serica’s Columbus field. Following the farm-out of an 85%
interest to JX Nippon in 2012, Serica has a 15% interest in the
block and has a full carry on this licence up to and including
the drilling of an exploration well. The partners have identified
significant deep HPHT potential in the Jurassic and Triassic on
the block and a site survey is expected to be acquired in 2014 in
preparation for drilling an exploration well.
JX Nippon has recently executed an agreement with ENI for
the latter to join the block as operator with a 50% interest. The
transaction between JX Nippon and ENI is subject to normal
regulatory and partner approvals. Serica expects that the
transaction will lead to an accelerated programme.
Southern North Sea: Blocks 47/2b (Split), 47/3g (Split), 47/7
(Split) & 47/8d (Part)
Serica has a 37.5% interest in the blocks which are operated by
Centrica. These blocks are contiguous part blocks immediately
adjacent to the producing York field, also operated by Centrica.
A number of gas prospects, including a possible extension
to the York field, have been identified on the blocks at
Leman (Permian) level with additional leads at Namurian
(Carboniferous) level. The work obligation, comprising a 3D
seismic acquisition survey and reprocessing of existing seismic
data, has been completed.
East Irish Sea: Block 110/8b
Serica has a 100% interest and operatorship of Block 110/8b.
Recent drilling by Centrica in the adjoining block to the north
is likely to have investigated prospectivity for gas in the area of
the Darwen North prospect lying in the north of Block 110/8b
but results of the drilling have not been released.
East Irish Sea: Blocks 113/26b and 113/27c - Doyle Prospect
In June 2013 the Company announced that it had reached
agreement with Centrica, through Centrica’s subsidiary HRL,
for the farm-out of UK East Irish Sea Blocks 113/26b and 27c,
in which Serica presently holds a 65% interest. Under the
agreement, HRL will acquire an operated 45% interest in the
licence, with Serica retaining 20%, in consideration for HRL
bearing Serica’s share of costs associated with the drilling of
an exploration well up to a gross cap of £11 million.
The agreement is subject to UK government approval.
Completion also requires agreement with the operator of a wind
farm planned nearby. However this is now at an advanced stage
with final agreement expected shortly.
A Triassic gas prospect, the Doyle prospect, lies in the north of
Block 113/27c. A fault and dip closed structure, this prospect
has been fully matured and is ready to drill. The site survey has
been completed and the well is expected to be drilled in
early 2015.
East Irish Sea: Block 113/22a
In November 2013 Serica was awarded a Traditional Licence
in the latest stage of the 27th Offshore Licensing Round,
announced by DECC. Block 113/22a in the East Irish Sea has
been awarded to a group in which Serica has a 35% interest
and is operator. The other participants in the new licence award
are HRL (a subsidiary of Centrica) 30%, MPX Limited 25% and
Agora Limited (a subsidiary of Cairn Energy) 10%.
This block is adjacent to Serica Block 113/27c and the farm-out
agreement for Blocks 113/26b and 113/27c with Centrica noted
above, extends to the new licence offered. As a result, Serica
will have a 20% interest both in the new licence offered and in
Blocks 113/26b & 27c on completion of the farm-out. The Doyle
10
Serica Energy plc Annual Report and Accounts 2013
prospect in Block 113/27c is believed to extend into
Block 113/22a.
Northern North Sea: Blocks 210/19a and 210/20a – South Otter
Prospects
Drilling of the South Otter blocks, in which Serica held a
100% interest, remained subject to a farm-out programme. As
sufficiently attractive proposals to enable a well to be drilled
in the blocks were not received, Serica made the decision to
relinquish the blocks in January 2013 to comply with the terms
of the licence.
Ireland
Frontier Exploration Licence 1/09: Blocks 5/17, 5/18, 5/22, 5/23,
5/27, and 5/28 - Muckish Prospects
Serica holds a 100% working interest in six blocks in this licence
covering a total area of 993 square kilometres in the north-
eastern part of the Rockall Basin off the west coast of Ireland.
A large exploration gas condensate prospect, Muckish, has
been fully delineated from 3D seismic data in Blocks 5/22 and
5/23. Muckish is analogous to the nearby Dooish gas condensate
discovery and provides material upside in a proven hydrocarbon
basin. The evaluation of 3D seismic data coverage and the
nearby Dooish gas-condensate discovery, give confidence in the
potential of the prospect which covers an area of approximately
30 square kilometres with over 600 metres of vertical closure in a
water depth of 1,450 metres.
Serica has secured a two-year extension to the first phase of the
licence covering the blocks and is moving forward with plans
to perform a site survey in preparation for securing partners to
participate in drilling the Muckish prospect.
Frontier Exploration Licence 4/13 - Blocks 11/10, 11/15,
12/1(part), 12/6 and 12/11(part) - Midleton Prospects
In December 2013, following the initial two year period of the
licence award, Serica took the option to convert Licence Option
11/01, also located in the Rockall Basin, into a full Frontier
Exploration Licence (“FEL”). Following a mandatory 25%
relinquishment at the time of the option conversion into FEL
4/13, the three blocks and two part blocks now cover an area of
approximately 925 square kilometres.
The area covered by the licence contains two pre-Cretaceous
fault block prospects, Midleton and West Midleton which
are analogous to the proven gas-condensate bearing Dooish
discovery lying immediately to the east. These complement and
provide additional diversity to the Muckish prospect lying in
Serica’s acreage just to the north east and the award will enable
a comprehensive exploration programme covering the Muckish
and Midleton prospects.
Serica is undertaking 2D and 3D seismic reprocessing work
and other geological studies to firm up these two additional
prospects. Recent in-house analysis of the extensive seismic
database has also indicated the presence of deepwater fans, a
play type not previously considered. This will be fully evaluated
during this licence phase.
Frontier Exploration Licence 01/06: Blocks 27/4, 27/5 (west) and
27/9 - Liffey & Boyne Prospects
Licence FEL 1/06 covers an area of approximately 305 square
kilometres in the Slyne Basin off the west coast of Ireland. The
blocks lie some 40 kilometres south of the Corrib discovery,
which has reserves of approximately 800 bcf of gas. The Company
holds a 50% interest in the blocks and operates the licence.
The Company, in partnership with RWE, has launched a farm-out
campaign to follow up on the 2009 Bandon oil discovery made
by Serica. Subject to identifying a suitable partner or partners a
well is targeted to be drilled on the Boyne prospect in 2015.
Namibia
Luderitz Basin: Blocks 2512A, 2513A, 2513B and 2612A (part)
During 2013, Serica, in partnership with BP, undertook the
processing and interpretation of an extensive 4,180 square
kilometre 3D seismic survey undertaken by Serica in 2012.
The survey, covering approximately 25% of the licensed area
and costing approximately US$50 million, was fully funded by
BP under the terms of a farm-out agreement with Serica and
was designed to delineate the size and nature of Prospect B,
one of three large structures identified on the licence at Lower
Cretaceous (Barremian) level, and to examine prospectivity at
shallower levels.
The results of this survey are positive. Processing of the data
confirms Prospect B as having the clear characteristics of a
large carbonate platform extending over 700 square kilometres
with a vertical closure of up to 300 metres. The expectation of
a predominantly carbonate structure has been reinforced by
third party drilling elsewhere in Namibia which has proven the
presence of large structures with associated carbonate build-up
at Lower Cretaceous level.
The survey also confirmed the presence of large submarine
canyon-channel turbidite sand systems at both Lower and Upper
Cretaceous levels. These, together with further leads and other
large prospects on the licence, provide considerable additional
potential. This is recognised in the NSAI report which gives
a combined best estimate of gross unrisked prospective oil
resources associated with 7 prospects and 2 leads identified
on licence of 2,297 million barrels and 437 million barrels
respectively.
In December 2013, BP decided not to exercise an option to
increase its interest in the licence and assigned its 30% interest
to Serica under the terms of Serica’s farm-out agreement
with BP. Serica now holds an interest of 85% in the licence
in partnership with The National Petroleum Corporation of
Namibia (Pty) Limited (“NAMCOR”) and Indigenous Energy (Pty)
Limited. The withdrawal of BP leaves Serica with a valuable and
Serica Energy plc Annual Report and Accounts 2013
11
REVIEW OF LICENCE HOLDINGS CONTINUED
extensive, fully interpreted data set and provides the Company
with an opportunity to attract new partners and to retain a larger
percentage interest.
contract has been signed for the Noble Paul Romano drilling rig
and the well is due to spud in Q3 2014.
Morocco
Sidi Moussa and Foum Draa Petroleum Agreements
Serica holds licence interests in the Foum Draa and adjacent
Sidi Moussa Petroleum Agreements offshore Morocco.
The blocks cover a total area of approximately 8,375 square
kilometres in the sparsely explored Tarfaya-Ifni Basin and
extend from the Moroccan coastline into water depths
reaching a maximum of 2,000 metres. The Tarfaya-Ifni Basin is
geologically analogous to the oil producing salt basins of West
Africa.
Foum Draa
Following a farm-out to Cairn Energy, Serica has an 8.33%
interest in the Foum Draa licence.
In October 2013, drilling operations on the licence commenced
with the FD-1 well. In December, Cairn reported that the
well had reached a Total Depth of 5,255m MDBRT (measured
depth below rotary table). Although commercial hydrocarbons
and clastic reservoir rocks were not found, gas shows were
encountered indicating an active thermogenic petroleum
system. The well was plugged and abandoned. Under the terms
of the 2012 farm out agreement Serica was carried by Cairn
for its share of drilling costs up to a gross well cost of US$60
million.
Sidi Moussa
Serica has a 5% working interest in the Sidi Moussa licence and
is carried by Genel for its share of the cost of drilling the first
well on the licence up to a gross well cost of US$50 million. The
location for the first exploration well has been agreed and the
well will target a prospect with unrisked prospective resources
estimated by Genel, the operator, at 200 mmboe. Site survey
operations were completed in August/September 2013, a rig
Norway
Serica has a significant economic interest in the development
of the Bream field and is due a substantial payment on first
production. In their Annual Results Statement (March 2014),
the Operator, Premier, stated: “A formal concept selection
design will now take place during the first quarter of 2014 and
an investment decision is planned for late 2014, or early 2015.
The Bream development concept is planned to be an FPSO with
subsea production and water injection wells”.
Indonesia
Glagah Kambuna TAC - Kambuna Field, Offshore North
Sumatra, Indonesia
Serica held a 25% interest in the Glagah Kambuna Technical
Assistance Contract (“TAC”) offshore North Sumatra,
Indonesia for the large part of 2013. The TAC covered an area
of approximately 380 square kilometres and contained the
producing Kambuna gas field.
Throughout the first half of 2013 the Company benefited from
cash flows from field production but the field reached the end
of its economic life in July 2013 and was shut-in as planned.
Gross Kambuna field production in 2013 was 1,176 mmscf of
gas and 100,000 barrels of condensate. Average prices realised
during the year for gas and condensate sales respectively were
US$6.5 per mcf and US$105.3 per barrel.
The partnership agreed handover arrangements with the
Indonesian authorities and the decommissioning process,
which involved securing the three wells and wellhead
structure, was completed in November 2013. The TAC was
formally terminated and facilities handed over to Pertamina in
December 2013.
FINANCE DIRECTOR’S REVIEW
Financial summary
The Group entered 2013 aware that Kambuna field revenues would
cease in mid year and that it would be more than two years before
expected first revenues from the Columbus field. It was therefore
recognised that additional funding would need to be secured
ready for the Group’s exploration programme from 1H 2014 and to
support further business growth.
In June 2013 a farm-out on its East Irish Sea licence containing the
Doyle prospect was agreed with Centrica. This transaction gives
a carry on an exploration well up to a gross cap of £11m, and is
another demonstration of the Group’s successful approach to risk
management limiting its financial exposure whilst maintaining
upside potential from exploration drilling.
12
Serica Energy plc Annual Report and Accounts 2013
The most significant exploration expenditure during 2013 was
incurred in the UK Southern North Sea on 3D seismic acquisition
on the Greater York asset, followed by the drilling of the Foum
Draa well in Morocco in Q4 2013. Although the drilling results of
the FD-1 well were disappointing, the Group’s share of costs was
limited due to the capped carry negotiated in the prior year farm-
out to the operator Cairn.
Income statement - discontinued operations
Serica generated a profit from discontinued operations of
US$0.1 million for the year ended 31 December 2013 (2012:
loss of US$8.3 million) from its 25% interest in the Kambuna
field. Field production ceased in July 2013, the facilities were
decommissioned in 2H 2013 and the Glagah Kambuna TAC was
formally terminated in December 2013.
The main financial event of the year was the successful capital
raise from a placing and open offer which completed in November
2013 raising US$19.5 million before expenses. This transaction is
covered in more detail below but enabled the Group to end 2013
with a stronger cash position of US$26.1 million and no debt.
Results from operations
Following the cessation of production and the decommissioning
of the Kambuna field facilities in the second half of 2013, the
annual financial results of the Kambuna field business segment
are disclosed within ‘discontinued operations’ in the financial
statements and separate from the results of the retained core
business segments. 2012 comparative figures have been restated
accordingly. A high level summary of the income statement
results for continuing and discontinued operations is given below.
Income statement – continuing operations
The Company generated a loss before tax from continuing
operations of US$5.1 million for 2013 compared to a loss before
tax of US$16.4 million for 2012.
The pre-licence expenditure of US$0.3 million for 2013 was in
line with the 2012 charge of US$0.3 million due to a similar level
of activity in the year. Pre-licence costs included direct costs
and allocated general administrative costs incurred on oil and
gas activities prior to the award of licences, concessions or
exploration rights.
Asset write offs of US$0.3 million in 2013 included minor
exploration and evaluation (“E&E”) asset and obsolete inventory
amounts and were significantly lower than the 2012 charge of
US$10.5 million. The prior year charge included US$8.8 million
attributed to the Spaniards block in the UK North Sea, US$1.1
million of charge from relinquished UK licences and US$0.6
million of obsolete inventory.
Administrative expenses of US$4.5 million for 2013 decreased
from US$5.3 million for 2012. The Company has worked to reduce
overhead during 2013 and expects these savings to give further
benefit in 2014.
The accounting gain of US$1.0 million on disposal in 2012 was
recorded following the Company’s farm-out to BP in Namibia
and related to the recognition of recovery for those past costs
incurred that had been expensed as pre-licence costs in previous
periods.
Finance costs reduced from US$0.6 million in 2012 to US$0.04
million in 2013 following the expiry of the loan facility in March
2013. No finance costs are currently being incurred.
The field commenced its anticipated natural decline during
2011 in line with reservoir pressure depletion. In 2013, gross
Kambuna field gas production totalled 1,176 mmscf (2012: 5,538
mmscf) together with condensate production of 100,000 barrels
(2012: 334,000 barrels). The 2013 gas production was sold at
prices averaging US$6.47 per mscf (2012 US$6.53 per mscf) and
generated US$1.7 million (2012 US$8.0 million) of revenue net to
Serica. Condensate liftings in the year earned US$2.4 million (2012
US$7.4 million) of revenue net to Serica at an average price of
US$105.3 per barrel (2012 US$116.1 per barrel).
Cost of sales for 2013 were driven by field production and totalled
US$3.9 million (2012 US$19.3 million). The charge comprised
direct operating costs of US$2.6 million (2012 US$6.2 million),
non cash depletion of US$1.0 million (2012 US$13.1 million) and a
decrease in condensate inventory of US$0.3 million (2012 US$0.02
million increase).
In 2012, a US$4.4 million pre-tax impairment relating to the
Kambuna field was recorded against oil and gas property, plant
and equipment. Taxation charges typically arose from Kambuna
field operations, although there is no current taxation or deferred
taxation charge in 2012 or 2013 given the cost recovery position of
the field at the time.
Balance Sheet
During 2013, total investments in E&E assets increased from
US$66.9 million to US$74.6 million, an increase consisting of
US$7.8 million of additions less US$0.1 million of exploration asset
write-offs. The more significant exploration costs in the year were
incurred on the following assets:
In Africa, US$2.3 million was capitalised on the Foum Draa
licence in Morocco (largely consisting on the costs of the FD-1
well drilled in Q4 2013) and US$1.1 million was incurred in respect
of the Luderitz basin licence interests in Namibia. FD-1 well
operations continued into January 2014 and an estimated cost of
US$1.2 million of expenditure incurred in the current 2014 period
is not recognised in the 2013 financial statements.
In the UK & Ireland, US$2.1 million was incurred on a 3D seismic
survey on the Group’s Greater York interests in the Southern North
Sea, US$0.7 million was incurred on the Columbus development
and US$0.7 million on exploration work on the Rockall licences in
Ireland.
Property, plant and equipment balances chiefly comprised the net
book amount of the expenditure on the Kambuna asset and were
fully depleted to US$ nil in the year.
Serica Energy plc Annual Report and Accounts 2013
13
FINANCE DIRECTOR’S REVIEW CONTINUED
Long-term other receivables of US$1.3 million are represented
by value added tax (“VAT”) on Indonesian capital spend which
continues to be recovered from the Indonesian authorities.
Trade and other receivables at 31 December 2013 totalled
US$3.9 million and included US$1.4 million of trade debtors from
condensate sales from the Kambuna field. The aggregate total in
2013 showed a decrease of US$5.0 million from the 2012 balance
of US$8.9 million. The fall is attributable to the recovery during
the period of Indonesian VAT, back costs from 2012 farm-outs
and a significant drop in JV partner recoverables in Namibia and
Kambuna, reflecting the reduced current activity on those assets.
Cash and cash equivalents increased from US$22.3 million to
US$26.1 million in the year The Company received net proceeds of
US$18.2 million from the issue of shares in the placing and open
offer which completed in November 2013, and also benefitted from
cash inflows from Kambuna field revenues. Cash outflows were
incurred on the Q4 2012 East Spaniards well (US$6.9 million) and
Greater York 3D seismic acquisition (US$2.1 million) in the UK,
Kambuna field operating costs in Indonesia and on the Foum Draa
exploration well drilling in Morocco. Other costs included seismic
work across the portfolio, Columbus Field Development Plan
expense together with new venture costs, ongoing administrative
costs and corporate activity.
Trade and other payables totalled US$4.4 million at 31 December
2013 and were significantly reduced from the prior year balance
of US$11.7 million which included US$6.9 million of liabilities
from the East Spaniards well in the UK drilled in Q4 2012 but
cash settled in Q1 2013. The current year balance chiefly includes
creditors and accruals of US$1.7 million from the Foum Draa well
drilling in Morocco and final creditors of US$1.1 million from the
Kambuna field decommissioning and operations.
Provisions of US$1.6 million at 31 December 2012 were in respect
of obligations to decommission the Kambuna in Indonesia. This
process was completed in Q4 2013 and any unpaid liabilities are
classified in trade and other payables.
Capital raising, cash and future commitments
Capital raising
The main financial event in the year was a capital raising which
completed in November 2013 and raised aggregate gross proceeds
of approximately US$19.5 million.
The capital raising comprised three elements: the placing of
56,870,934 new ordinary shares with institutional and other
investors; the acceptance of 6,093,351 new ordinary shares in an
open offer to qualifying shareholders; and the placing of 4,444,444
new ordinary shares not taken up by qualifying shareholders under
the open offer.
in November 2013. As at 9 April 2014 the Company has 250,179,040
ordinary shares issued and outstanding.
Whilst the Company was able to meet its 2013 commitments
from cash in place as at 31 December 2012, the capital raising
was needed for the exploration programme from 1H 2014 and to
support further business growth. It has also put the Company
onto a stronger footing and improved its ability to fund upcoming
expenditure in order to bring projects to maturity whilst enabling
the Group to optimise, and ultimately realise, value across its
portfolio.
Current cash position, capital expenditure commitments and
other obligations
At 31 December 2013, the Group held cash and cash equivalents
of US$26.1 million and US$0.4 million of short-term restricted
cash. Liabilities of US$2.8 million arising from the Q4 2013 Foum
Draa well in Morocco have been settled since the year end,
and as at 7 April 2014, cash and restricted cash balances held
totaled US$21.5 million. Management believe these are sufficient
resources to meet the current committed programme for 2014 and
2015.
The Group’s main near term exploration commitments in 2014 are
on the Sidi Moussa licence where an exploration well is expected
to be drilled in Q3 2014. The Company is carried for its share of
expenditure up to a gross cap of US$50 million and has currently
budgeted to pay some US$2.3 million, being its paying share of
costs over and above the agreed cap to the farm-in carry.
In the UK East Irish Sea, the exploration well on the Doyle
prospect slated for 2015 is also subject to a cap although no
overrun is currently forecast. The Group has no significant
commitments on its other exploration licences.
The Company will continue to give priority to the careful
management of existing financial resources. Although a key
objective for the Group is to get the Columbus development back
on track when the final decision to proceed with the Columbus
development is made, the Group would use alternative means of
finance to fund its share of development costs.
Other
Asset values and Impairment
At 31 December 2013 Serica’s market capitalisation stood at
US$54.7 million (£33.1 million), based upon a share price of
£0.1325, which was exceeded by the net asset value at that
date of US$102.1 million. By 7 April 2014 the Company’s market
capitalisation had decreased to US$44.6 million. Management
conducted a thorough review of the carrying value of the Group’s
assets and determined that no significant write-downs were
required.
All new ordinary shares were issued at a price of 18 pence per
share and following the relevant required approvals, the aggregate
of 67,408,729 new ordinary shares were listed on AIM and the TSX
Christopher Hearne
Finance Director
9 April 2014
14
Serica Energy plc Annual Report and Accounts 2013
Business Risk and Uncertainties
Serica, like all companies in the oil and gas industry, operates in an environment subject to inherent risks and uncertainties. The Board
regularly considers the principal risks to which the company is exposed and monitors any agreed mitigating actions. The overall strategy
for the protection of shareholder value against these risks is to retain a broad portfolio of assets with varied risk/reward profiles, to
apply prudent industry practice in all operations, to carry insurance where available and cost effective, and to retain adequate working
capital.
The principal risks currently recognised and the mitigating actions taken by the management are as follows:
Investment Returns: Management seeks to raise funds and then to generate shareholder returns though investment in a portfolio of
exploration acreage leading to the drilling of wells and discovery of commercial reserves. Delivery of this business model carries a
number of key risks.
Risk
Market support may be eroded obstructing fundraising and
lowering the share price
Mitigation
• Management regularly communicates its strategy to shareholders
• Focus is placed on building an asset portfolio capable of delivering
General market conditions may fluctuate hindering delivery
of the company’s business plan
Management’s decisions on capital allocation may not
deliver the expected successful outcomes
Each asset carries its own risk profile and no outcome can
be certain
regular news flow and offering continuing prospectivity
• Management aims to retain adequate working capital to ride out
downturns should they arise
• Rigorous analysis is conducted of all investment proposals
• Operations are spread over a range of areas and risk profiles
• Management aims to avoid over-exposure to individual assets and to
identify the associated risks objectively
Operations: Operations may not go according to plan leading to damage, pollution, cost overruns or poor outcomes.
Risk
Individual wells may not deliver recoverable oil and gas
reserves
Mitigation
• Thorough pre-drill evaluations are conducted to identify the risk/reward
balance
Wells may blow out or equipment may fail causing
environmental damage and delays
Operations may take far longer or cost more than expected
Resource estimates may be misleading and exceed actual
reserves recovered
• Exposure is selectively mitigated through farm-out
• The Group retains fully trained and experienced personnel
• The planning process involves risk identification and establishment of
mitigation measures
• Emphasis is placed on engaging experienced contractors
• Appropriate insurances are retained
• Management applies rigorous budget control
• Adequate working capital is retained to cover reasonable eventualities
• The Group deploys qualified personnel
• Regular third-party reports are commissioned
• A prudent range of possible outcomes are considered within the
planning process
Personnel: The company relies upon a pool of experienced and motivated personnel to identify and execute successful investment
strategies
Risk
Key personnel may be lost to other companies
Mitigation
• The Remuneration Committee regularly evaluates incentivisation
Personal safety may be at risk in demanding operating
environments, typically offshore
Staff and representatives may find themselves exposed to
bribery and corrupt practices
schemes to ensure they remain competitive
• A culture of safety is encouraged throughout the organisation
• Responsible personnel are designated at all appropriate levels
• The Group maintains up-to-date emergency response resources and
procedures
• Insurance cover is carried in accordance with industry best practice
• Company policies and procedures are communicated to personnel
regularly
• Management reviews all significant contracts and relationships with
agents and governments
Serica Energy plc Annual Report and Accounts 2013
15
FINANCE DIRECTOR’S REVIEW CONTINUED
Commercial environment: World and regional markets continue to be volatile with fluctuations and infrastructure access issues that
might hinder the company’s business success
Risk
Volatile commodity prices mean that the company cannot
be certain of the future sales value of its products
Mitigation
• Price mitigation strategies may be employed at the point of major
capital commitment
The company may not be able to get access, at reasonable
cost, to infrastructure and product markets when required
Credit to support field development programmes may not
be available at reasonable cost
Fiscal regimes may vary, increasing effective tax rates and
reducing the expected value of reserves
• Gas may be sold under long-term contracts reducing exposure to short
term fluctuations
• Oil and gas price hedging contracts may be utilised where viable
• Budget planning considers a range of commodity pricing
• A range of different off-take options are pursued wherever possible
• Serica seeks to build and maintain strong banking relationships and
initiates funding discussions at as early a stage as practicable
• Operations are currently spread over a range of different fiscal regimes
in Western Europe and Africa
• Before committing to a significant investment the likelihood of fiscal
term changes is considered when evaluating the risk/reward balance
In addition to the principal risks and uncertainties described herein, the Company is subject to a number of other risk factors generally,
a description of which is set out in our latest annual information form available on www.sedar.com.
Key Performance Indicators (“KPIs”)
The Company’s main business is the acquisition of interests in prospective exploration acreage, the discovery of hydrocarbons in
commercial quantities and the crystallisation of value whether through production or disposal of reserves. The Company tracks its
non-financial performance through the accumulation of licence interests in proven and prospective hydrocarbon producing regions, the
level of success in encountering hydrocarbons and the development of production facilities. In parallel, the Company tracks its financial
performance through management of expenditures within resources available, the cost-effective exploitation of reserves and the
crystallisation of value at the optimum point. A review of the Company’s progress against these KPIs is covered in the operations and
financial review within this Strategic Report.
Additional Information
Additional information relating to Serica, can be found on the Company’s website at www.serica-energy.com and on SEDAR at
www.sedar.com
Approved on behalf of the Board
Christopher Hearne
Finance Director
9 April 2014
Forward Looking Statements
This disclosure contains certain forward looking statements that involve substantial known and unknown risks and uncertainties,
some of which are beyond Serica Energy plc’s control, including: the impact of general economic conditions where Serica Energy plc
operates, industry conditions, changes in laws and regulations including the adoption of new environmental laws and regulations and
changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management,
fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced
transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. Serica Energy plc’s actual
results, performance or achievement could differ materially from those expressed in, or implied by, these forward looking statements
and, accordingly, no assurances can be given that any of the events anticipated by the forward looking statements will transpire or
occur, or if any of them do so, what benefits, including the amount of proceeds, that Serica Energy plc will derive therefrom.
16
Serica Energy plc Annual Report and Accounts 2013
CONSOLIDATED FINANCIAL STATEMENTS OF SERICA ENERGY PLC
YEAR ENDED 31 DECEMBER 2013
DIRECTORS’ REPORT
The Directors of the Company present their report and the Group financial statements of Serica Energy plc (“Serica” or the “Company”)
for the year ended 31 December 2013.
Principal Activities
The principal activity of the Company and its subsidiary undertakings (the “Group”) is to identify, acquire, explore and subsequently
exploit oil and gas reserves. Its current activities are located in the United Kingdom, Ireland, Namibia and Morocco.
Business Review and Future Developments
A review of the business and the future developments of the Group is presented in the Strategic Report (including a Review of
Operations and Financial Review) and Chairman’s Statement (all of which, together with the Corporate Governance Statement, are
incorporated by reference into this Directors’ Report).
Results and Dividends
The loss for the year was US$5,008,000 (2012: loss US$24,708,000).
The Directors do not recommend the payment of a dividend (2012: US$nil).
Financial Instruments
The Group’s financial risk management objectives and policies are discussed in note 22.
Events Since Balance Sheet Date
Events since the balance sheet date are included in note 29.
Directors and their Interests
The following Directors have held office in the Company since 1 January 2013:
Antony Craven Walker
Christopher Hearne
Peter Sadler (resigned 27 June 2013)
Neil Pike
Mitchell Flegg
Ian Vann
Steven Theede
Jeffrey Harris
The Directors who held office at the end of the financial year had the following interests in the ordinary shares of the Company
according to the register of Directors’ interests:
Antony Craven Walker (1)
Christopher Hearne
Mitchell Flegg
Neil Pike (2)
Ian Vann
Steven Theede
Jeffrey Harris (3)
Class
of share
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Interest at
end of year
Interest at
start of year
7,829,916
1,051,613
301,463
505,000
267,935
749,485
46,090,576
5,970,236
794,632
102,816
405,000
133,935
749,485
25,501,736
1. 4,207,078 ordinary shares are held by Antony Craven Walker, 2,241,732 ordinary shares are held by Christine Elizabeth Walker and 1,381,106 by Rathbones (pension funds).
2. 190,000 ordinary shares are held by Romayne Pike and 185,000 ordinary shares by Luska Limited.
3. 46,090,576 ordinary shares are held by GRG UK Oil LLC who are represented on the Board by Jeffrey Harris.
Serica Energy plc Annual Report and Accounts 2013
17
CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
None of the Directors who held office at the end of the financial year had any disclosable interest in the shares of other Group
companies.
No rights to subscribe for shares in or debentures of Group companies were granted to any of the Directors or their immediate families,
or exercised by them, during the financial year except as indicated below:
The Directors are interested in share options held by them pursuant to the terms of the Serica Energy Corporation option plan (a
summary of which is set out in note 25) as follows:
1/1/13
Granted
Expired
31/12/13
Exercise
Price Cdn$
C Hearne
600,000
100,000
–
–
–
–
600,000
100,000
1.00
1.80
Date of
grant
17/01/05
15/06/05
Expiry
date
16/01/15
14/06/15
The options above have fully vested.
The following Directors are also interested in share options held by them pursuant to the terms of the Serica Energy plc Share Option
Plan 2005 (“Serica 2005 Option Plan”) (a summary of which is set out in note 25) as follows:
C Hearne
M Flegg
1/1/13
Granted
Expired
31/12/13
103,000
7,000
350,000
675,000
200,000
402,190
400,000
270,000
150,000
210,000
66,000
225,000
200,000
326,750
400,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
103,000
7,000
350,000
675,000
200,000
402,190
400,000
270,000
150,000
210,000
66,000
225,000
200,000
326,750
400,000
Exercise
Price £
0.97
0.97
0.82
0.68
0.314
0.214
0.29
0.96
1.02
0.75
0.32
0.68
0.314
0.214
0.29
Date of
grant
23/11/05
23/11/05
31/03/08
11/01/10
05/04/11
11/01/12
08/10/12
12/06/06
11/01/07
14/03/08
05/01/09
11/01/10
05/04/11
11/01/12
08/10/12
Expiry
date
22/11/15
22/11/15
30/03/18
10/01/20
04/04/21
10/01/22
07/10/22
11/06/16
10/01/17
13/03/18
04/01/14
10/01/20
04/04/21
10/01/22
07/10/22
Options granted prior to December 2009 vest as to one third on each of the first, second and third anniversaries of grant in line with the
practice for companies listed in Toronto which applied at the date of grant. Options awarded since December 2009 have a three year
vesting period.
Under the Serica 2005 Option Plan, when awarding options to directors, the Remuneration Committee is required to set Performance
Conditions, in addition to the vesting provisions, before vesting can take place. In summary the Performance Conditions are as follows:
In respect of the options granted in November 2005, the director may only exercise those options on condition that the Serica share price
on a 30 day moving average basis prior to 23 November 2015 has reached at least 200p.
In respect of the options granted in March 2008, the director may only exercise those options on condition that the Serica share price on
a 30 day moving average basis prior to 30 March 2018 has reached at least 200p.
18
Serica Energy plc Annual Report and Accounts 2013
In respect of the options granted in January 2010, the vesting of the options is subject to Serica share price Performance Conditions
measured against a selected peer group initially consisting of Antrim Energy Inc., Aurelian Oil & Gas plc (Aurelian), Bowleven plc,
Falkland Oil & Gas Limited, Faroe Petroleum plc, Gulfsands Petroleum plc, Ithaca Energy Inc, Northern Petroleum plc, Petroceltic
International plc, Providence Resources plc, Regal Petroleum plc and Valiant Petroleum plc (Valiant). The Performance Conditions
are as follows:
– 40% of options to vest in the event that the Company outperforms the 25th percentile of peer group performance over any 1 year period
– 80% of options to vest in the event that the Company outperforms the 50th percentile of peer group performance over any 1 year period
– 100% of options to vest in the event that the Company outperforms the 75th percentile of peer group performance over any 1 year period
The peer group of comparator companies is subject to change by the Remuneration Committee should the Remuneration Committee
feel that the group no longer comprises a meaningful peer group comparator as the result, for example, of a significant change in the
Company or one or more of the peer group companies ceasing to be quoted on a recognised exchange. Regal Petroleum plc (Regal) was
replaced by Dominion Petroleum plc (Dominion) following Regal’s acquisition by Energees Management Limited and Dominion was
replaced by Chariot Oil and Gas Limited (Chariot) following Dominion’s acquisition by Ophir Energy plc. Aurelian ceased to be quoted
on a recognised exchange in January 2013 and Valiant merged with Ithaca Energy Inc in April 2013. Following these events Aurelian and
Valiant are no longer included in the peer group of comparator companies and have not been replaced.
In respect of the options granted in April 2011, the director may only exercise those options on condition that either of the following
Performance Conditions is satisfied:
– Achievement of full year post-tax, audited profit for the Serica Energy group of companies; and/or
– Successful achievement of a merger or acquisition or other similar corporate event approved by the Board of Directors of the Company
which, in the view of the Remuneration Committee, would create greater diversity and scope for the Company.
In respect of the options granted in January 2012 and October 2012, the vesting of the options is subject to Serica share price
Performance Conditions measured against a selected peer group initially consisting of Antrim Energy Inc., Aurelian Oil & Gas plc,
Bowleven plc, Chariot Oil and Gas Limited, Falkland Oil & Gas Limited, Faroe Petroleum plc, Gulfsands Petroleum plc, Ithaca Energy Inc,
Northern Petroleum plc, Petroceltic International plc, Providence Resources plc and Valiant Petroleum plc. The Performance Conditions
are as follows:
– 40% of options to vest in the event that the Company outperforms the 25th percentile of peer group performance over any 1 year period
– 80% of options to vest in the event that the Company outperforms the 50th percentile of peer group performance over any 1 year period
– 100% of options to vest in the event that the Company outperforms the 75th percentile of peer group performance over any 1 year period
The peer group of comparator companies is subject to change by the Remuneration Committee should the Remuneration Committee
feel that the group no longer comprises a meaningful peer group comparator as the result, for example, of a significant change in the
Company or one or more of the peer group companies ceasing to be quoted on a recognised exchange. Aurelian ceased to be quoted
on a recognised exchange in January 2013 and Valiant merged with Ithaca Energy Inc in April 2013. Following these events Aurelian and
Valiant are no longer included in the peer group of comparator companies and have not been replaced.
Auditor
A resolution to reappoint Ernst & Young LLP, as auditor will be put to the members at the annual general meeting.
Disclosure of information to auditors
The directors who were members of the Board at the time of approving the Directors’ Report are listed above. So far as each person
who was a director at the date of approving this report is aware, there is no relevant audit information, being information needed by
the auditor in connection with preparing its report, of which the auditor is unaware. Having made enquiries of fellow directors and
the Group’s auditor, each director has taken all the steps that he is obliged to take as a director in order to made himself aware of any
relevant audit information and to establish that the auditor is aware of that information.
On behalf of the Board
Christopher Hearne
Director
9 April 2014
Serica Energy plc Annual Report and Accounts 2013
19
CORPORATE GOVERNANCE STATEMENT
The Board of Directors fully endorses the importance of sound corporate governance. Serica is incorporated in the United Kingdom. Its
shares are traded on both the AIM market of the London Stock Exchange (“AIM”) and on the Toronto Stock Exchange in Canada (“TSX”).
The code of practice followed for companies incorporated in the United Kingdom and listed on the premium sector of the Main Market of
the London Stock Exchange is set out in the UK Corporate Governance Code (the “UK Code”). It is not compulsory for companies whose
shares are traded on the AIM market but the Board applies those principles of the UK Code to the extent that it considers it reasonable and
practical to do so given the size and nature of the Company.
As the Company is quoted on the TSX market as well as on the AIM market it endeavours to meet the principles of the non-binding
Corporate Governance Guidelines as well as the UK Code where it is deemed practical and appropriate to do so.
The corporate governance guidelines applying to reporting issuers in Canada are set out under Ontario Securities Commission National
Policy 58-201 (the “Corporate Governance Guidelines”). The Company is a ‘designated foreign issuer’ as defined under National Instrument
71-1-2-Continuous Disclosure and Other Exemptions Relating to Foreign Issuers. The Company is subject to the foreign regulatory
requirements of the AIM Market of the London Stock Exchange.
The disclosures below explain the composition of, role and responsibilities of the Board and the Board Committees.
The Board and its Committees
The Board of the Company currently consists of two Executive Directors, four non-Executive Directors and the Chairman of the Board
who has been acting as Interim CEO since the retirement of Paul Ellis in April 2011. At the time of Mr Ellis’s retirement, the Board agreed
that it was necessary for there to be some continuity in the management of the Company and it was agreed that the Chairman should be
appointed as Interim CEO until such time as a suitably qualified successor to fill the CEO position could be identified. The position has
been kept under review by the Corporate Governance and Nomination Committee which reports to the Board. This Committee considers
that it remains in the best interests of the Company for the Chairman to continue to fill this role during this period of strategic refocus.
This view is supported by the Board. Neil Pike continues to hold the position of Senior Independent Director which ensures that the
appropriate level of balance is maintained on the Board. Peter Sadler resigned as an Executive Director in June 2013 but continues to
provide consultancy services to the Group. It is considered that the Board is of sufficient size and that the balance of skills and experience
is appropriate for a company of Serica’s size, stage of development and business although it is recognised that a CEO will need to be
appointed in due course. All the non-Executive Directors and the Chairman are independent in character and judgement and have the range
of experience and calibre to bring independent judgement on issues of strategy, performance, resources and standards of conduct which is
vital to the success of the Group.
The Board retains full and effective control over the Company. The Company holds regular Board meetings at which financial, operational
and other reports are considered and, where appropriate, voted on. The Board is responsible for the Group’s strategy, performance, key
financial and compliance issues, approval of any major capital expenditure and the framework of internal controls. The matters reserved
for the Board include, amongst others, approval of the Group’s long term objectives, policies and budgets, changes relating to the Group’s
management structure, approval of the Group’s annual report and accounts and ensuring maintenance of sound systems of internal control.
There is a clearly defined organisational structure with lines of responsibility and delegation of authority to executive management. The
Board is responsible for monitoring the activities of the executive management. The Chairman has the responsibility of ensuring that
the Board discharges its responsibilities. In the event of an equality of votes at a meeting of the Board, the Chairman has a second or
casting vote.
Other than Jeffrey Harris who represents Global Reserve Group, the Company’s largest shareholder, all of the non-Executive Directors meet
the requirements of independence prescribed in the UK Code. The Board believes that there has been an adequate balance between the
non-Executive and Executive Directors, both in number and in experience and expertise, to ensure that the Board operates independently of
executive management. The need to appoint a Chief Executive Officer is recognised and this is discussed further in the Chairman’s Report.
There is no formal Board performance appraisal system in place but the Corporate Governance and Nomination Committee considers this
as part of its remit.
Individual Directors may engage outside advisors at the expense of the Company upon approval by the Board in appropriate circumstances.
The Board has established a Corporate Governance and Nomination Committee, an Audit Committee, a Reserves Committee, a
Remuneration and Compensation Committee and a Health, Safety and Environmental Committee. The terms of reference of the Corporate
Governance and Nomination, Audit and Remuneration and Compensation Committees can be found on the Company’s website
www.serica-energy.com
20
Serica Energy plc Annual Report and Accounts 2013
Corporate Governance and Nomination Committee
The Corporate Governance and Nomination Committee is responsible for the Company’s observance of the UK Code and the
Corporate Governance Guidelines where they apply to the Company, for compliance with the rules of AIM and the TSX and for other
corporate governance matters, including compliance with the Company’s Share Dealing Code and with AIM and TSX in respect of
dealings by directors or employees in the Company’s shares. The committee is responsible for monitoring the effectiveness of the
Board and its Committees, proposing to the Board new nominees for election as directors to the Board, determining successor plans
and for assessing directors on an ongoing basis.
The committee met three times during 2013 and proposes to meet at least three times during the next financial year.
The Corporate Governance and Nomination Committee is comprised of the Chairman and two non-Executive Directors all of whom
are independent (other than as described in “The Board and its Committees” above). The committee is chaired by Neil Pike and its
other member is Antony Craven Walker.
Audit Committee
The Audit Committee meets regularly and consists of three members, all of whom are non-Executive Directors and two of whom are
independent including the chairman of the committee. The committee’s purpose is to assist the Board’s oversight of the integrity of
the financial statements and other financial reporting, the independence and performance of the auditors, the regulation and risk
profile of the Group and the review and approval of any related party transactions. The Audit Committee may hold private sessions
with management and the external auditor.
The Audit Committee met four times in 2013 and proposes to meet at least three times during the next financial year. The committee
is chaired by Neil Pike and its other members are Steven Theede and Jeffrey Harris.
The responsibilities and operation of the Audit Committee are more particularly set out in the Company’s Audit Committee Charter,
a copy of which is included as Schedule A to the last annual information form filed for the Company, a copy of which is available on
SEDAR at www.sedar.com.
Reserves Committee
The Reserves Committee is a sub-committee of the Audit Committee. The committee’s purpose is to review the reports of the
independent reserves auditors pursuant to Canadian regulations which require that the Board discuss the reserves reports with the
independent reserves auditors or delegate authority to a reserves committee comprised of at least two non-Executive Directors.
The committee is chaired by Steven Theede and its other member is Ian Vann. The committee meets at least once a year prior to
publication of the annual results.
Remuneration and Compensation Committee
The Remuneration and Compensation Committee meets regularly to consider all material elements of remuneration policy, the
remuneration and incentivisation of Executive Directors and senior management and to make recommendations to the Board on the
framework for executive remuneration and its cost. The role of the Remuneration and Compensation Committee is to keep under
review the remuneration policies to ensure that Serica attracts, retains and motivates the most qualified talent who will contribute to
the long-term success of the Company.
The committee met three times in 2013 and proposes to meet at least three times during the next financial year. In addition, written
resolutions of the committee are passed from time to time particularly in relation to routine matters such as the allotment of shares
pursuant to share option exercises as well as to record formally decisions of the committee reached outside the scheduled meetings.
The committee is composed of the Chairman and two non-Executive Directors all of whom are independent (other than as described
in “The Board and its Committees” above). The Remuneration and Compensation Committee is chaired by Steve Theede and its other
members are Neil Pike and Antony Craven Walker.
Health, Safety and Environmental Committee
The Health, Safety and Environmental Committee is responsible for matters affecting occupational health, safety and the
environment, including the formulation of a health, safety and environmental policy.
The committee met three times in 2013 and proposes to meet at least three times during the next financial year. The committee is
chaired by Ian Vann and its other members are Mitch Flegg and Antony Craven Walker.
Serica Energy plc Annual Report and Accounts 2013
21
CORPORATE GOVERNANCE STATEMENT CONTINUED
Directors’ attendance at meetings
The Board generally has one scheduled Board meeting per month over the course of the financial year. Additional meetings are held
depending upon opportunities or issues to be dealt with by the Company from time to time. The non-Executive Directors hold informal
meetings during the course of the year at which members of management are not in attendance.
The following changes were made to the Board Committees during the course of the year:
• Mr Harris appointed as a member of the Audit Committee on 28th February 2013.
• Mr Craven Walker appointed as a member of the HSE Committee on 28th February 2013.
• Mr Vann appointed as a member of the Corporate Governance and Nomination Committee on 25th April 2013.
The directors’ attendance at scheduled Board meetings and Board committees during 2013 is detailed in the table below:
Director
Board
A Craven Walker (Chairman) 12*
CJ Hearne (CFO)
12
P Sadler (Business
Development Director –
resigned 27th June 2013)
M Flegg (COO)
N Pike
S Theede
I Vann
J Harris
Total meetings
5
12
12
11
12
12
12
–
–
–
–
4*
3
–
3
4
Audit Remuneration
Compensation
Corporate
and Governance
and
Nomination
3
–
3
–
–
–
3
3*
–
–
3
–
–
3*
–
1
–
3
HSE
Reserves
2
–
1
3
–
–
3*
–
3
–
–
1
–
–
1*
1
–
1
Notes:
1. The Chairman and non-executive directors attended a number of meetings of committees of which they were not members during the course of the year at the
invitation of the committee chairman.
* Chairman
Janette Davies
Company Secretary
9 April 2014
22
Serica Energy plc Annual Report and Accounts 2013
DIRECTORS’ BIOGRAPHIES
Antony Craven Walker Chairman and interim Chief Executive Tony Craven Walker started his career with BP and has been a
leading figure in the British independent oil industry since the early 1970s. He founded two British independent oil companies,
Charterhouse Petroleum, where he held the post of Chief Executive, and Monument Oil and Gas, where he held the post of Chief
Executive and later became Chairman. He was also a founder member of BRINDEX (Association of British Independent Oil
Exploration Companies). He was appointed Chairman of Serica in 2004 and following the retirement of Paul Ellis in April 2011, is
currently acting as interim Chief Executive.
Christopher Hearne Finance Director Chris Hearne joined Serica from Intrepid Energy, a leading independent exploration
and production company in the North Sea, where he was responsible for corporate finance for eight years. In this capacity, he
contributed to the growth of Intrepid Energy from a start-up company to its sale for over US$1 billion. Prior to joining Serica he
worked as an investment banker with Lehman Brothers and Robert Fleming. He was appointed to the Board as Finance Director of
Serica in 2005.
Mitchell Flegg Chief Operating Officer Mitch Flegg has over 32 years of industry experience starting with Schlumberger and then
with Enterprise Oil, (initially as a Petrophysicist) where he became responsible for drilling related operations for wells drilled in UK,
Australia, Cambodia, Vietnam, Ireland, Romania and Bulgaria. After the takeover by Shell he worked on the implementation of new
technology in well engineering before moving into asset management. Mitch joined Serica in 2006 and has been responsible for all
drilling and development operations. He was promoted to the position of Chief Operating Officer in March 2011 and appointed to the
Board of Serica in September 2012.
Neil Pike Non-Executive Director Neil Pike has been involved in the global petroleum business as a financier since joining
the energy department at Citibank in 1975 until joining the board of Serica. Neil remained an industry specialist with Citibank
throughout his career and was closely involved in the development of specialised oil field finance. Latterly he was responsible for
Citibank’s relationships with the oil and gas industry worldwide. He was appointed to the Board of Serica in 2004.
Ian Vann Non-Executive Director Ian Vann was employed by BP from 1976, and directed and led BP’s global exploration efforts
from 1996 until his retirement in January 2007. He was appointed to the executive leadership team of the Exploration & Production
Division of BP in 2001, initially as Group Vice President, Technology and later as Group Vice President, Exploration and Business
Development. He was appointed to the Board of Serica in 2007.
Steven Theede Non-Executive Director Steven Theede held senior management positions with Conoco, later ConocoPhillips, and
in 2000 was appointed President, Exploration and Production for Europe, Russia and the Caspian region. In 2003 he joined Yukos Oil
Company and became its Chief Executive Officer in July 2004, a position he held until August 2006. He was appointed to the Board of
Serica in 2007.
Jeffrey Harris Non-Executive Director Jeffrey Harris founded Global Reserve Group LLC in 2012 following a twenty-nine year
career with Warburg Pincus, during which period he invested in and advised companies in the industrial, consumer, technology and
energy sectors. Jeffrey has served on the board of directors of over thirty companies, including twelve publicly-traded entities. He
is past chairman of the National Venture Capital Association and an adjunct professor at the Columbia University Graduate School
of Business where he teaches courses on venture capital, and entrepreneurship and innovation. He was appointed to the Board of
Serica in December 2012.
Serica Energy plc Annual Report and Accounts 2013
23
DIRECTORS’ RESPONSIBILITIES STATEMENT IN RELATION TO THE GROUP AND
COMPANY FINANCIAL STATEMENTS
The Directors are responsible for preparing the Strategic Report, the Director’s Report and financial statements in accordance with
applicable United Kingdom law and regulations and those International Financial Reporting Standards as adopted by the European
Union.
Company law requires the directors to prepare financial statements for each financial year. As required by the AIM Rules of the London
Stock Exchange they are required to prepare the Group financial statements in accordance with International Financial Reporting
Standards as adopted by the European Union. Under United Kingdom company law the directors have elected to prepare the Parent
Company financial statements in accordance with International Financial Reporting Standards as adopted by the European Union.
Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view
of the state of affairs of the Group and the Company and the profit or loss of the company for that period.
In preparing those Group and Company financial statements the Directors are required to:
• present fairly the financial position, financial performance and cash flows of the Group;
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state that the Group and Company has complied with IFRSs, subject to any material departures disclosed and explained in the
financial statements;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable
information;
• provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand
the impact of particular transactions, other events and conditions on the Group’s and Company’s financial position and financial
performance; and
• state whether the Group financial statements have been prepared in accordance with IFRSs as adopted by the European Union,
subject to any material departures disclosed and explained in the financial statements.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions
and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the
Group and Company financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of
the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors confirm that they have complied with these requirements and, having a reasonable expectation that the Company and the
Group have adequate resources to continue in operational existence for the foreseeable future, will continue to adopt the going concern
basis in preparing the accounts.
24
Serica Energy plc Annual Report and Accounts 2013
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SERICA ENERGY PLC
We have audited the financial statements of Serica Energy plc for the year ended 31 December 2013 which comprise the Group
Income Statement, the Group Statement of Comprehensive Income, the Group and Parent Company Balance Sheets, the Group and
Parent Company Statements of Changes in Equity, the Group and Parent Company Cash Flow Statements and the related notes
1 to 29. The financial reporting framework that has been applied in their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied
in accordance with the provisions of the Companies Act 2006.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to
them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the
financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to the group’s and the parent company’s circumstances and have
been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors;
and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the
Annual Report and financial statements to identify material inconsistencies with the audited financial statements and to identify
any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in
the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the
implications for our report.
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December
2013 and of the group’s loss for the year then ended;
• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; and
• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European
Union and as applied in accordance with the provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Separate opinion in relation to IFRSs as issued by the IASB
As explained in Note 1 to the financial statements, the group in addition to complying with its legal obligation to apply IFRSs as
adopted by the European Union, has also applied IFRSs as issued by the International Accounting Standards Board (IASB).
In our opinion the financial statements comply with IFRSs as issued by the IASB.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements.
Serica Energy plc Annual Report and Accounts 2013
25
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our
opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Justine Belton, (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
9 April 2014
26
Serica Energy plc Annual Report and Accounts 2013
Notes
25
6
13
9
10
GROUP INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER
Continuing operations
SALES REVENUE
Cost of sales
GROSS PROFIT
Pre-licence costs
E&E and other asset write-offs
Administrative expenses
Foreign exchange gain
Share-based payments
Depreciation
2013
US$000
* restated
2012
US$000
–
–
–
(330)
(299)
(4,458)
341
(252)
(109)
–
–
–
(331)
(10,462)
(5,274)
180
(570)
(341)
OPERATING LOSS BEFORE NET FINANCE REVENUE AND TAx
(5,107)
(16,798)
Gain on disposal
Finance revenue
Finance costs
LOSS BEFORE TAxATION
11 a)
Taxation charge for the year
Loss for the year from continuing operations
Discontinued operations
Profit/(loss) for the year from discontinued operations
4
LOSS FOR THE yEAR
Loss per ordinary share – EPS
Basic and diluted EPS on continuing operations (US$)
Basic and diluted EPS on loss for the year (US$)
12
12
* restated for discontinued operations – see note 4
Group Statement of Comprehensive Income
There are no other comprehensive income items other than those passing through the income statement.
–
16
(38)
1,023
12
(615)
(5,129)
(16,378)
–
–
(5,129)
(16,378)
121
(8,330)
(5,008)
(24,708)
(0.03)
(0.03)
(0.09)
(0.14)
Serica Energy plc Annual Report and Accounts 2013
27
Group
2013
US$000
74,609
–
–
1,293
75,902
258
3,851
420
26,062
30,591
2012
US$000
66,880
1,145
–
1,706
69,731
481
8,941
412
22,345
32,179
Company
2013
US$000
–
–
–
–
–
–
98,148
420
25,459
124,027
2012
US$000
–
–
13,830
–
13,830
–
111,768
412
21,424
133,604
106,493
101,910
124,027
147,434
(4,417)
–
(11,677)
(1,601)
(4,417)
(13,278)
(959)
–
(959)
(1,080)
–
(1,080)
102,076
88,632
123,068
146,354
227,958
–
20,297
(146,179)
209,758
–
20,045
(141,171)
192,686
–
20,297
(89,915)
174,486
4,322
20,045
(52,499)
102,076
88,632
123,068
146,354
BALANCE SHEET AS AT 31 DECEMBER
Notes
13
14
15
16
17
18
18
19
20
21
23
15
Non-current assets
Exploration & evaluation assets
Property, plant and equipment
Investments in subsidiaries
Other receivables
Current assets
Inventories
Trade and other receivables
Financial assets
Cash and cash equivalents
TOTAL ASSETS
Current liabilities
Trade and other payables
Provisions
TOTAL LIABILITIES
NET ASSETS
Share capital
Merger reserve
Other reserve
Accumulated deficit
TOTAL EQUITy
Approved by the Board on 9 April 2014
Antony Craven Walker
Chief Executive Officer
Christopher Hearne
Finance Director
28
Serica Energy plc Annual Report and Accounts 2013
STATEMENT OF CHANGES IN EqUITY FOR THE YEAR ENDED 31 DECEMBER
Group
Share
capital
US$000
Other
reserve
US$000
Accum’d
deficit
US$000
Total
US$000
At 1 January 2012
207,702
19,475
(116,463)
110,714
Loss for the year
Total comprehensive income
Share-based payments
Proceeds on exercise of options
Issue of ordinary shares
AT 31 DECEMBER 2012
Loss for the year
Total comprehensive income
Share-based payments
Issue of ordinary shares
Fees from issue of shares
AT 31 DECEMBER 2013
Company
–
–
–
56
2,000
–
–
570
–
–
(24,708)
(24,708)
–
–
–
(24,708)
(24,708)
570
56
2,000
209,758
20,045
(141,171)
88,632
–
–
–
19,525
(1,325)
–
–
252
–
–
(5,008)
(5,008)
–
–
–
(5,008)
(5,008)
252
19,525
(1,325)
227,958
20,297
(146,179)
102,076
Share
capital
US$000
Merger
reserve
US$000
Other
reserve
US$000
Accum’d
deficit
US$000
Total
US$000
At 1 January 2012
172,430
4,322
19,475
(49,535)
146,692
Loss for the year
Total comprehensive income
Proceeds on exercise of options
Share-based payments
Issue of ordinary shares
–
–
56
–
2,000
–
–
–
–
–
–
–
–
570
–
(2,964)
(2,964)
–
–
–
(2,964)
(2,964)
56
570
2,000
AT 31 DECEMBER 2012
174,486
4,322
20,045
(52,499)
146,354
Loss for the year
Total comprehensive income
Share-based payments
Issue of ordinary shares
Fees from issue of shares
Transfers
–
–
–
19,525
(1,325)
–
–
–
–
–
–
(4,322)
–
–
252
–
–
–
(41,738)
(41,738)
–
–
–
4,322
(41,738)
(41,738)
252
19,525
(1,325)
–
AT 31 DECEMBER 2013
192,686
–
20,297
(89,915)
123,068
Serica Energy plc Annual Report and Accounts 2013
29
CASH FLOW STATEMENT FOR THE YEAR ENDED 31 DECEMBER
Operating activities:
Loss for the year
Adjustments to reconcile loss for the year
to net cash flow from operating activities:
Net finance costs
Profit on disposal
Depreciation
Depletion and amortisation
Asset write-offs
Impairment
Share-based payments
Other non-cash movements
Decrease in trade and other receivables
Decrease in inventories
(Decrease)/increase in trade and other payables
Use of provisions
Cash generated from operations
Taxation paid
NET CASH (OUT)/INFLOW FROM OPERATIONS
Investing activities:
Interest received
Purchase of property, plant and equipment
Purchase of E&E assets
Cash inflow from disposals
Funding provided to Group subsidiaries
Funds from Group subsidiaries
NET CASH FLOW FROM INVESTING ACTIVITIES
Financing activities:
Gross proceeds from issue of shares
Fees from issue of shares
Finance costs paid
Proceeds on exercise of options
NET CASH FLOW FROM FINANCING ACTIVITIES
NET INCREASE IN CASH AND CASH EQUIVALENTS
Effect of exchange rates on cash and cash equivalents
Cash and cash equivalents at 1 January
Group
2013
US$000
2012
US$000
Company
2013
US$000
2012
US$000
(5,008)
(24,708)
(41,738)
(2,964)
28
–
109
1,036
299
–
252
(310)
4,570
24
(2,108)
(1,607)
(2,715)
–
(2,715)
16
–
(13,094)
933
–
–
(12,145)
19,525
(1,325)
(38)
–
18,162
3,302
415
22,345
621
(1,023)
341
13,116
10,462
4,361
570
98
4,051
17
(3,600)
–
4,306
(302)
4,004
12
(690)
(5,816)
5,250
–
–
(1,244)
–
–
(615)
56
(559)
2,201
198
19,946
22
–
–
–
–
40,000
252
(345)
204
–
(212)
–
605
–
–
–
–
–
570
(141)
263
–
278
–
(1,817)
(1,389)
–
–
(1,817)
(1,389)
16
–
–
–
(12,762)
–
(12,746)
19,525
(1,325)
(38)
–
18,162
3,599
436
21,424
8
–
–
–
–
4,036
4,044
–
–
(613)
56
(557)
2,098
184
19,142
21,424
CASH AND CASH EQUIVALENTS AT 31 DECEMBER
26,062
22,345
25,459
30
Serica Energy plc Annual Report and Accounts 2013
NOTES TO THE FINANCIAL STATEMENTS
1. Authorisation of the Financial Statements and Statement of Compliance with IFRS
The Group’s and Company’s financial statements for the year ended 31 December 2013 were authorised for issue by the Board of
Directors on 9 April 2014 and the balance sheets were signed on the Board’s behalf by Antony Craven Walker and Chris Hearne. Serica
Energy plc is a public limited company incorporated and domiciled in England & Wales. The principal activity of the Company and the
Group is to identify, acquire and subsequently exploit oil and gas reserves. Its current activities are located in the United Kingdom,
Ireland, Namibia and Morocco. The Company’s ordinary shares are traded on AIM and the TSX.
The Group’s financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as
adopted by the EU as they apply to the financial statements of the Group for the year ended 31 December 2013. The Company’s financial
statements have been prepared in accordance with IFRS as adopted by the EU as they apply to the financial statements of the Company
for the year ended 31 December 2013 and as applied in accordance with the provisions of the Companies Act 2006. The Group’s financial
statements are also prepared in accordance with IFRS as issued by the IASB. The principal accounting policies adopted by the Group
and by the Company are set out in note 2.
The Company has taken advantage of the exemption provided under section 408 of the Companies Act 2006 not to publish its individual
income statement and related notes. The deficit dealt with in the financial statements of the parent Company was US$41,738,000 (2012:
US$2,964,000).
On 1 September 2005, the Company completed a reorganisation (the “Reorganisation”). whereby the common shares of Serica Energy
Corporation were automatically exchanged on a one-for-one basis for ordinary shares of Serica Energy plc, a newly formed company
incorporated under the laws of the United Kingdom. In addition, each shareholder of the Corporation received beneficial ownership of
part of the ‘A’ share of Serica Energy plc issued to meet the requirements of public companies under the United Kingdom jurisdiction.
Under IFRS this reorganisation was considered to be a reverse takeover by Serica Energy Corporation and as such the financial
statements of the Group represent a continuation of Serica Energy Corporation.
2. Accounting Policies
Basis of Preparation
The accounting policies which follow set out those policies which apply in preparing the financial statements for the year ended 31
December 2013.
The Group and Company financial statements have been prepared on a historical cost basis and are presented in US dollars. All values
are rounded to the nearest thousand dollars (US$000) except when otherwise indicated.
Going Concern
The financial position of the Group, its cash flows and capital commitments are described in the Financial Review above. Although the
Group no longer benefits from sales revenue generated from its interest in the Kambuna field, following the capital raising of US$18.2
million (net of expenses) which completed in November 2013, the Group held cash and cash equivalents of US$26.1 million as at 31
December 2013.
The Directors are required to consider the availability of resources to meet the Group and Company’s liabilities for the foreseeable
future. Since the year end the Group has paid outstanding commitments of US$2.8 million from the recent Foum Draa exploration well
in Morocco. It will also use these funds to pay its share of drilling costs over the contractual US$50 million cap on the Sidi Moussa well
in Morocco, which is expected to spud in Q3 2014. The Group’s planned exploration well on the Doyle prospect in 2015 is also subject to
a capped carry, which is not currently forecast to be exceeded. Any share of costs over the carry would not be significant and could be
satisfied from current cash balances.
The cash in place will cover other geological and geophysical, exploration, technical and administrative costs associated with its
ongoing business in the short to medium term. In particular, it also provides balance sheet support to help achieve infrastructure
access and project sanction for the Columbus field, and covers pre-drilling work in Namibia. When the final decision to proceed with the
Columbus development is made, the Group would use alternative means of finance to fund its share of development costs.
The Group has a record of prudent financial management with particular success in the raising of capital through farm down and will
seek to continue this strategy.
Serica Energy plc Annual Report and Accounts 2013
31
After making enquiries and having taken into consideration the above factors, the Directors have reasonable expectation that the Group
has adequate resources to continue in operational existence for the foreseeable future. Accordingly they continue to adopt the going
concern basis in preparing the annual financial statements.
Use of judgement and estimates and key sources of estimation uncertainty
The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the balance sheet date and
the reported amounts of revenues and expenses during the reporting period. Estimates and judgments are continuously evaluated and
are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable
under the circumstances. Actual outcomes could differ from these estimates.
The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the amounts recognised in the
financial statements are: the assessment of commercial reserves, the impairment of the Group and Company’s assets (including oil &
gas development assets and Exploration and Evaluation “E&E” assets) and share-based payment costs.
Assessment of commercial reserves
Management is required to assess the level of the Group’s commercial reserves together with the future expenditures to access those
reserves, which are utilised in determining the amortisation and depletion charge for the period and assessing whether any impairment
charge is required. The Group employs independent reserves specialists who periodically assess the Group’s level of commercial
reserves by reference to data sets including geological, geophysical and engineering data together with reports, presentation and
financial information pertaining to the contractual and fiscal terms applicable to the Group’s assets. In addition the Group undertakes
its own assessment of commercial reserves and related future capital expenditure by reference to the same datasets using its own
internal expertise.
Impairment
The Group monitors internal and external indicators of impairment relating to its intangible and tangible assets, which may indicate
that the carrying value of the assets may not be recoverable. The assessment of the existence of indicators of impairment in E&E assets
involves judgement, which includes whether management expects to fund significant further expenditure in respect of a licence and
whether the recoverable amount may not cover the carrying value of the assets. For development and production assets judgement is
involved when determining whether there have been any significant changes in the Group’s oil and gas reserves.
The Group determines whether E&E assets are impaired at an asset level and in regional cash generating units (‘CGUs’) when facts and
circumstances suggest that the carrying amount of a regional CGU may exceed its recoverable amount. As recoverable amounts are
determined based upon risked potential, or where relevant, discovered oil and gas reserves, this involves estimations and the selection
of a suitable pre-tax discount rate relevant to the asset in question. The calculation of the recoverable amount of oil and gas development
properties involves estimating the net present value of cash flows expected to be generated from the asset in question. Future cash
flows are based on assumptions on matters such as estimated oil and gas reserve quantities and commodity prices. The discount rate
applied is a pre-tax rate which reflects the specific risks of the country in which the asset is located.
Management is required to assess the carrying value of investments in subsidiaries in the parent company balance sheet for impairment
by reference to the recoverable amount. This requires an estimate of amounts recoverable from oil and gas assets within the underlying
subsidiaries (see note 15).
Share-based payment costs
The estimation of share-based payment costs requires the selection of an appropriate valuation model, consideration as to the inputs
necessary for the valuation model chosen and the estimation of the number of awards that will ultimately vest, inputs for which arise
from judgments relating to the continuing participation of employees (see note 25).
Basis of Consolidation
The consolidated financial statements include the accounts of Serica Energy plc (the “Company”) and its wholly owned subsidiaries
Serica Holdings UK Limited, Serica Energy Holdings B.V., Serica Energy (UK) Limited, Serica Glagah Kambuna B.V., Serica Sidi Moussa
B.V., Serica Foum Draa B.V., Serica Energy Slyne B.V., Serica Energy Rockall B.V., Serica Namibia B.V., Serica Energy Corporation, Asia
Petroleum Development Limited, Petroleum Development Associates (Asia) Limited, Petroleum Development Associates Lematang
Limited, Serica Energia Iberica S.L., Asia Petroleum Development (Asahan) Limited and Asia Petroleum Development (Biliton) Limited.
Together these comprise the “Group”.
32
Serica Energy plc Annual Report and Accounts 2013
All inter-company balances and transactions have been eliminated upon consolidation.
Foreign Currency Translation
The functional and presentational currency of Serica Energy plc and all its subsidiaries is US dollars.
Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies are retranslated at the foreign currency rate of exchange ruling at the balance
sheet date and differences are taken to the income statement. Non-monetary items that are measured in terms of historical cost in a
foreign currency are translated using the exchange rate as at the date of initial transaction. Non-monetary items measured at fair value
in a foreign currency are translated using the exchange rate at the date when the fair value was determined. Exchange gains and losses
arising from translation are charged to the income statement as an operating item.
Business Combinations and Goodwill
Business combinations from 1 January 2010
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of
consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree.
Acquisition costs incurred are expensed and included in administrative expenses.
Goodwill on acquisition is initially measured at cost being the excess of purchase price over the fair market value of identifiable assets,
liabilities and contingent liabilities acquired. Following initial acquisition it is measured at cost less any accumulated impairment
losses. Goodwill is not amortised but is subject to an impairment test at least annually and more frequently if events or changes in
circumstances indicate that the carrying value may be impaired.
At the acquisition date, any goodwill acquired is allocated to each of the cash-generating units, or groups of cash generating units
expected to benefit from the combination’s synergies. Impairment is determined by assessing the recoverable amount of the cash-
generating unit, or groups of cash generating units to which the goodwill relates. Where the recoverable amount of the cash-generating
unit is less than the carrying amount, an impairment loss is recognised.
Joint Arrangements
A joint operation is a type of joint arrangement whereby the parties that have joint control of the arrangement have the rights to the
assets and obligations for the liabilities, relating to the arrangement.
The Group conducts petroleum and natural gas exploration and production activities jointly with other venturers who each have direct
ownership in and jointly control the operations of the ventures. These are classified as jointly controlled operations and the financial
statements reflect the Group’s share of assets and liabilities in such activities. Income from the sale or use of the Group’s share of the
output of jointly controlled operations, and its share of joint venture expenses, are recognised when it is probable that the economic
benefits associated with the transaction will flow to/from the Group and their amount can be measured reliably.
Full details of Serica’s working interests in those petroleum and natural gas exploration and production activities classified as jointly
controlled operations are included in the Review of Operations.
Exploration and Evaluation Assets
As allowed under IFRS 6 and in accordance with clarification issued by the International Financial Reporting Interpretations
Committee, the Group has continued to apply its existing accounting policy to exploration and evaluation activity, subject to the specific
requirements of IFRS 6. The Group will continue to monitor the application of these policies in light of expected future guidance on
accounting for oil and gas activities.
Pre-licence Award Costs
Costs incurred prior to the award of oil and gas licences, concessions and other exploration rights are expensed in the income
statement.
Serica Energy plc Annual Report and Accounts 2013
33
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Exploration and Evaluation (E&E)
The costs of exploring for and evaluating oil and gas properties, including the costs of acquiring rights to explore, geological and
geophysical studies, exploratory drilling and directly related overheads, are capitalised and classified as intangible E&E assets. These
costs are directly attributed to regional CGUs for the purposes of impairment testing; UK & Ireland and Africa.
E&E assets are not amortised prior to the conclusion of appraisal activities but are assessed for impairment at an asset level and in
regional CGUs when facts and circumstances suggest that the carrying amount of a regional cost centre may exceed its recoverable
amount. Recoverable amounts are determined based upon risked potential, and where relevant, discovered oil and gas reserves. When
an impairment test indicates an excess of carrying value compared to the recoverable amount, the carrying value of the regional CGU is
written down to the recoverable amount in accordance with IAS 36. Such excess is expensed in the income statement.
Costs of licences and associated E&E expenditure are expensed in the income statement if licences are relinquished, or if management
do not expect to fund significant future expenditure in relation to the licence.
The E&E phase is completed when either the technical feasibility and commercial viability of extracting a mineral resource are
demonstrable or no further prospectivity is recognised. At that point, if commercial reserves have been discovered, the carrying value of
the relevant assets, net of any impairment write-down, is classified as an oil and gas property within property, plant and equipment, and
tested for impairment. If commercial reserves have not been discovered then the costs of such assets will be written off.
Asset Purchases and Disposals
When a commercial transaction involves the exchange of E&E assets of similar size and characteristics, no fair value calculation is
performed. The capitalised costs of the asset being sold are transferred to the asset being acquired. Proceeds from a part disposal of
an E&E asset, including back-cost contributions are credited against the capitalised cost of the asset, with any excess being taken to the
income statement as a gain on disposal.
Farm-ins
In accordance with industry practice, the Group does not record its share of costs that are ‘carried’ by third parties in relation to its
farm-in agreements in the E&E phase. Similarly, while the Group has agreed to carry the costs of another party to a Joint Operating
Agreement (“JOA”) in order to earn additional equity, it records its paying interest that incorporates the additional contribution over its
equity share.
Property, Plant and Equipment – Oil and gas properties
Capitalisation
Oil and gas properties are stated at cost, less any accumulated depreciation and accumulated impairment losses. Oil and gas properties
are accumulated into single field cost centres and represent the cost of developing the commercial reserves and bringing them into
production together with the E&E expenditures incurred in finding commercial reserves previously transferred from E&E assets as
outlined in the policy above. The cost will include, for qualifying assets, borrowing costs.
Depletion
Oil and gas properties are not depleted until production commences. Costs relating to each single field cost centre are depleted on a
unit of production method based on the commercial proved and probable reserves for that cost centre. The depletion calculation takes
account of the estimated future costs of development of recognised proved and probable reserves. Changes in reserve quantities and
cost estimates are recognised prospectively from the last reporting date.
The Kambuna field was depleted using proved and probable entitlement reserves until 30 June 2011. However, given the relatively short
remaining field life, the Company then concluded that it was appropriate to use proved reserves as a basis for the specific depletion
calculation for the Kambuna field asset with effect from 1 July 2011. Following the advancement of field shut-in plans and handover
arrangements with Pertamina in 2H 2013, the Company concluded that, with effect from 1 October 2012, it was appropriate to use its
best estimates of remaining production quantities as a basis to calculate the reserves for specific depletion and impairment calculations
for the Kambuna field. The Kambuna property was fully depleted in July 2013.
Impairment
A review is performed for any indication that the value of the Group’s development and production assets may be impaired.
For oil and gas properties when there are such indications, an impairment test is carried out on the cash generating unit. Each cash
generating unit is identified in accordance with IAS 36. Serica’s cash generating units are those assets which generate largely
independent cash flows and are normally, but not always, single development or production areas. If necessary, impairment is charged
34
Serica Energy plc Annual Report and Accounts 2013
through the income statement if the capitalised costs of the cash generating unit exceed the recoverable amount of the related
commercial oil and gas reserves.
Asset Disposals
Proceeds from the entire disposal of a development and production asset, or any part thereof, are taken to the income statement
together with the requisite proportional net book value of the asset, or part thereof, being sold.
Decommissioning
Liabilities for decommissioning costs are recognised when the Group has an obligation to dismantle and remove a production,
transportation or processing facility and to restore the site on which it is located. Liabilities may arise upon construction of such
facilities, upon acquisition or through a subsequent change in legislation or regulations. The amount recognised is the estimated
present value of future expenditure determined in accordance with local conditions and requirements. A corresponding tangible item of
property, plant and equipment equivalent to the provision is also created.
Any changes in the present value of the estimated expenditure is added to or deducted from the cost of the assets to which it relates.
The adjusted depreciable amount of the asset is then depreciated prospectively over its remaining useful life. The unwinding of the
discount on the decommissioning provision is included as a finance cost.
Property, Plant and Equipment – Other
Computer equipment and fixtures, fittings and equipment are recorded at cost as tangible assets. The straight-line method of
depreciation is used to depreciate the cost of these assets over their estimated useful lives. Computer equipment is depreciated over
three years and fixtures, fittings and equipment over four years.
Inventories
Inventories are valued at the lower of cost and net realisable value. Cost is determined by the first-in first-out method and comprises
direct purchase costs and transportation expenses.
Investments
In its separate financial statements the Company recognises its investments in subsidiaries at cost less any provision for impairment.
Financial Instruments
Financial instruments comprise financial assets, cash and cash equivalents, financial liabilities and equity instruments.
Financial assets
Financial assets within the scope of IAS 39 are classified as either financial assets at fair value through profit or loss, or loans and
receivables, as appropriate. When financial assets are recognised initially, they are measured at fair value. Transaction costs that are
directly attributable to the acquisition or issue of the financial asset are capitalised unless they relate to a financial asset classified at
fair value through profit and loss in which case transaction costs are expensed in the income statement.
The Group determines the classification of its financial assets at initial recognition and, where allowed and appropriate, re-evaluates
this designation at each financial year end.
Financial assets at fair value through profit or loss include financial assets held for trading and derivatives. Financial assets are
classified as held for trading if they are acquired for the purpose of selling in the near term.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
After initial measurement loans and receivables are subsequently carried at amortised cost, using the effective interest rate method,
less any allowance for impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition over
the period to maturity. Gains and losses are recognised in the income statement when the loans and receivables are de-recognised or
impaired, as well as through the amortisation process.
Cash and cash equivalents
Cash and cash equivalents include balances with banks and short-term investments with original maturities of three months or less at
the date acquired.
Serica Energy plc Annual Report and Accounts 2013
35
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Financial liabilities
Financial liabilities include interest bearing loans and borrowings, and trade and other payables.
Obligations for loans and borrowings are recognised when the Group becomes party to the related contracts and are measured initially
at the fair value of consideration received less directly attributable transaction costs.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective
interest method.
Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the amortisation
process.
Equity
Equity instruments issued by the Company are recorded in equity at the proceeds received, net of direct issue costs.
Leases
Operating lease payments are recognised as an operating expense in the income statement on a straight line basis over the lease term.
Revenue Recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably
measured. Revenue from oil and natural gas production is recognised on an entitlement basis for the Group’s net working interest.
Finance Revenue
Finance revenue chiefly comprises interest income from cash deposits on the basis of the effective interest rate method and is disclosed
separately on the face of the income statement.
Finance Costs
Finance costs of debt are allocated to periods over the term of the related debt using the effective interest method. Arrangement fees
and issue costs are amortised and charged to the income statement as finance costs over the term of the debt.
Borrowing costs
Borrowing costs directly relating to the acquisition, construction or production of a qualifying capital project under construction are
capitalised and added to the project cost during construction until such time the assets are substantially ready for their intended use i.e
when they are capable of commercial production. Where funds are borrowed specifically to finance a project, the amounts capitalised
represent the actual borrowing costs incurred. All other borrowing costs are recognised in the income statement in the period in which
they are incurred.
Share-Based Payment Transactions
Employees (including directors) of the Group receive remuneration in the form of share-based payment transactions, whereby
employees render services in exchange for shares or rights over shares (‘equity-settled transactions’).
Equity-settled transactions
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which they are granted.
In valuing equity-settled transactions, no account is taken of any service or performance conditions, other than conditions linked to the
price of the shares of Serica Energy plc (‘market conditions’), if applicable.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the
relevant employees become fully entitled to the award (the ‘vesting period’). The cumulative expense recognised for equity-settled
transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s
best estimate of the number of equity instruments that will ultimately vest. The income statement charge or credit for a period
represents the movement in cumulative expense recognised as at the beginning and end of that period.
36
Serica Energy plc Annual Report and Accounts 2013
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market or
non-vesting condition, which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied,
provided that all other performance conditions are satisfied. Equity awards cancelled are treated as vesting immediately on the date of
cancellation, and any expense not recognised for the award at that date is recognised in the income statement. Estimated associated
national insurance charges are expensed in the income statement on an accruals basis.
Where the terms of an equity-settled award are modified or a new award is designated as replacing a cancelled or settled award, the
cost based on the original award terms continues to be recognised over the original vesting period. In addition, an expense is recognised
over the remainder of the new vesting period for the incremental fair value of any modification, based on the difference between the fair
value of the original award and the fair value of the modified award, both as measured on the date of the modification. No reduction is
recognised if this difference is negative.
Income Taxes
Current tax, including UK corporation tax and overseas corporation tax, is provided at amounts expected to be paid using the tax rates
and laws that have been enacted or substantively enacted by the balance sheet date.
Deferred tax is provided using the liability method and tax rates and laws that have been enacted or substantively enacted at the
balance sheet date. Provision is made for temporary differences at the balance sheet date between the tax bases of the assets and
liabilities and their carrying amounts for financial reporting purposes. Deferred tax is provided on all temporary differences except for:
• temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary differences can
be controlled by the Group and it is probable that the temporary differences will not reverse in the foreseeable future; and
• temporary differences arising from the initial recognition of an asset or liability in a transaction that is not a business combination
and, at the time of the transaction, affects neither the income statement nor taxable profit or loss.
Deferred tax assets are recognised for all deductible temporary differences, to the extent that it is probable that taxable profits will be
available against which the deductible temporary differences can be utilised. Deferred tax assets and liabilities are presented net only if
there is a legally enforceable right to set off current tax assets against current tax liabilities and if the deferred tax assets and liabilities
relate to income taxes levied by the same taxation authority.
Earnings Per Share
Earnings per share is calculated using the weighted average number of ordinary shares outstanding during the period. Diluted earnings
per share is calculated based on the weighted average number of ordinary shares outstanding during the period plus the weighted
average number of shares that would be issued on the conversion of all relevant potentially dilutive shares to ordinary shares. It is
assumed that any proceeds obtained on the exercise of any options and warrants would be used to purchase ordinary shares at the
average price during the period. Where the impact of converted shares would be anti-dilutive, these are excluded from the calculation of
diluted earnings.
New and amended standards and interpretations
The accounting policies adopted are consistent with those of the previous financial year, except for the following new and amended
IFRS and IFRIC interpretations effective as of 1 January 2013 unless otherwise stated. The adoption of the standards or interpretations is
described below:
i) IAS 1 Financial Statement presentation – Presentation of items of Other Comprehensive Income
The amendments to IAS 1 change the grouping of items presented in Other Comprehensive Income. Items that could be classified
to profit or loss at a future point in time would be presented separately from items that will never be reclassified. The amendment
affects presentation only and has no impact on the Group’s financial position or performance. The amendment became effective for
annual periods beginning on or after 1 July 2012.
ii) IFRS 10 Consolidated Financial Statements
IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for
consolidated financial statements. The application of IFRS 10 and IAS 27 did not impact the Group’s accounting for its interests in
subsidiaries.
Serica Energy plc Annual Report and Accounts 2013
37
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
iii) IFRS 11 Joint Arrangements
IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities – Non-monetary Contributions by Venturers.
IFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead JCEs that
meet the definition of a joint venture must be accounted for using the equity method. The application of IFRS 11 did not impact on the
financial position or performance of the Group.
iv) IFRS 12 Disclosure of Involvement with Other Entities
IFRS 12 includes all of the disclosures that were previously in IAS 27 related to consolidated financial statements, as well as all of the
disclosures that were previously included in IAS 31 and IAS 28. These disclosures relate to an entity’s interests in subsidiaries, joint
arrangements, associates and structured entities. A number of new disclosures are also required but the application of IFRS 12 did
not impact on the financial position or performance of the Group.
v) IFRS 13 Fair Value Measurement
IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity
is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or
permitted, and also requires additional disclosures. Application of IFRS 13 has not materially impacted the fair value measurements
of the Group.
Standards issued but not yet effective
Certain standards or interpretations issued but not yet effective up to the date of issuance of the Group’s financial statements are listed
below. This listing of standards and interpretations issued are those that the Group reasonably expects to have an impact on disclosures,
financial position or performance when applied at a future date. The Group intends to adopt these standards when they become
effective.
IFRS 9 Financial Instruments: Classification and Measurement
IFRS 9 as issued reflects the first phase of the IASBs work on the replacement of IAS 39 and applies to the classification and
measurement of financial assets and financial liabilities as defined in IAS 39. The standard is expected to be effective for annual periods
beginning on or after 1 January 2018.
Amendments to IAS 36: Recoverable Amount Disclosures for Non-Financial Assets
The amendment addressed certain unintended consequences arising from consequential amendments made to IAS 36 when IFRS 13
was issued. The amendment is effective for annual periods beginning on or after 1 January 2014.
The Directors anticipate the adoption of the standards and interpretations listed above, or any others in issue but not yet adopted, will
not have a material impact on the Financial Statements of the Group.
38
Serica Energy plc Annual Report and Accounts 2013
3. Segment Information
The Group’s business is that of oil & gas exploration, development and production. The Group’s reportable segments are based on the
location of the Group’s assets.
The following tables present revenue, profit and certain asset and liability information regarding the Group’s geographical reportable
segments for the years ended 31 December 2013 and 2012. Costs associated with the UK corporate centre are included in the UK &
Ireland reportable segment. Reportable information in respect of the Group’s interest in the producing Kambuna field in Indonesia
is disclosed as a separate segment, with income statement information for the Kambuna field in Indonesia additionally classified as
‘discontinued’.
year ended 31 December 2013
REVENUE
Other expenses
Pre-licence costs
Asset write-offs
Depletion
Depreciation
Operating and segment (loss)/profit
Finance revenue
Finance costs
Loss before taxation
Taxation charge for the year
LOSS AFTER TAxATION
Other segment information:
Exploration and evaluation assets
Other assets
Unallocated assets
TOTAL ASSETS
Segment liabilities
TOTAL LIABILITIES
Capital expenditure 2013:
Exploration and evaluation assets
UK &
Ireland
US$000
–
(4,369)
(57)
(299)
–
(109)
(4,834)
UK &
Ireland
US$000
70,372
12,403
82,775
(1,529)
(1,529)
Africa
US$000
–
–
(273)
–
–
–
(273)
Continuing Discontinued
Total
US$000
US$000
–
4,032
(4,369)
(330)
(299)
–
(109)
(5,107)
16
(38)
(5,129)
–
(5,129)
(2,869)
–
–
(1,036)
–
127
–
(6)
121
–
121
Africa
US$000
Kambuna
US$000
Total
US$000
4,237
89
4,326
(1,864)
(1,864)
–
3,508
3,508
(1,024)
(1,024)
74,609
16,000
15,884
106,493
(4,417)
(4,417)
4,429
3,431
–
7,860
Serica Energy plc Annual Report and Accounts 2013
39
Continuing
Total
US$000
*restated
Discontinued
US$000
–
15,404
(5,664)
(331)
(10,462)
–
–
(341)
(16,798)
1,023
12
(615)
(16,378)
–
(16,378)
(6,239)
–
–
(4,361)
(13,116)
–
(8,312)
–
–
(18)
(8,330)
–
(8,330)
–
–
–
–
–
–
–
–
–
Africa
US$000
Kambuna
US$000
Total
US$000
805
–
1,831
2,636
(979)
(979)
1,326
–
–
1,036
7,344
8,380
(3,660)
(3,660)
66,880
1,145
26,135
7,750
101,910
(13,278)
(13,278)
–
690
12,764
690
Africa
US$000
–
–
(213)
–
–
–
–
(213)
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Year ended 31 December 2012
REVENUE
Continuing operations
Other expenses
Pre-licence costs
Asset write-offs
Impairment
Depletion
Depreciation
Operating loss and segment loss
Profit on disposal
Finance revenue
Finance costs
Loss before taxation
Taxation charge for the year
LOSS AFTER TAxATION
Other segment information:
Exploration and evaluation assets
Plant, property and equipment
Other assets
Unallocated assets
TOTAL ASSETS
Segment liabilities
TOTAL LIABILITIES
Capital expenditure 2012:
Exploration and evaluation assets
Property, plant and equipment
UK &
Ireland
US$000
–
(5,664)
(118)
(10,462)
–
–
(341)
(16,585)
UK &
Ireland
US$000
66,075
109
16,960
83,144
(8,639)
(8,639)
11,438
–
* restated for discontinued operations – see note 4
Unallocated assets and liabilities comprise financing items (including cash on deposit).
Information on major customers is provided in note 4.
40
Serica Energy plc Annual Report and Accounts 2013
4. Discontinued Operation
During 2012 and 2013, Serica’s sole remaining interest in Indonesia was its 25% interest in the Glagah Kambuna Technical Assistance
Contract (“TAC”). The TAC covers an area of approximately 380 square kilometres offshore North Sumatra and contains the Kambuna
gas field. Throughout the first half of 2013 the Company continued to benefit from cash flows from field production but, in July 2013,
the field reached the end of its economic life and was shut-in. The partnership agreed handover arrangements with the Indonesian
authorities which involved securing the three wells and wellhead structure. Following the completion of the agreed decommissioning
procedures in Q4 2013, the TAC was formally terminated on 31 December 2013 and the facilities handed over to Pertamina.
Following the developments of the Kambuna business segment in the second half of 2013, the financial results of the Kambuna field are
now disclosed as ‘discontinued’ operations and separate from the results of the continuing business segments. The 2012 results from
the Kambuna business segment have therefore been restated accordingly.
Results of discontinued operations
The results of the discontinued operations are presented below:
SALES REVENUE
Cost of sales
GROSS PROFIT/(LOSS)
Impairment of fixed assets
Administrative expenses
OPERATING PROFIT/(LOSS)
Finance costs
PROFIT/(LOSS) BEFORE TAxATION
Taxation charge for the year
PROFIT/(LOSS) FOR THE yEAR
Earnings per ordinary share (EPS)
Basic and diluted EPS on result in year
Notes
14
year ended
31 December
2013
US$000
Year ended
31 December
2012
US$000
4,032
15,404
(3,905)
127
(19,330)
(3,926)
–
–
127
(6)
121
–
121
US$
(0.00)
(4,361)
(25)
(8,312)
(18)
(8,330)
–
(8,330)
US$
(0.05)
The earnings per ordinary share for the discontinued operations is derived from the net profit attributable to equity holders of the parent
from discontinued operations of US$121,000 (2012: loss of US$8,330,000), divided by the weighted average number of ordinary shares for
both basic and diluted amounts as disclosed in note 12.
Sales Revenue
Gas sales
Condensate sales
2013
US$000
1,653
2,379
4,032
2012
US$000
7,966
7,438
15,404
Gas sales revenue in 2012 and 2013 arose from three customers, the most significant being PLN (2013: US$1,071,000, 2012: US$4,592,000)
and Pertiwi (2013: US$582,000, 2012: US$2,538,000). All condensate sales revenue in 2012 and 2013 was from one customer, PLN.
Serica Energy plc Annual Report and Accounts 2013
41
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Cost of Sales
Operating costs
Depletion (see note 14)
Movement in inventories of oil
Finance Costs
2013
US$000
2,587
1,036
282
3,905
2012
US$000
6,232
13,116
(18)
19,330
Finance costs consist entirely of the unwinding of a discount on the Kambuna decommissioning provision (see note 21).
Other
There are no taxation components within discontinued operations.
The net cash flows attributable to the disposal group in discontinued operations are as follows:
Year ended 31 December:
Operating cash inflows
Investing cash outflows
Financing cash outflows (1)
NET CASH INFLOW
2013
US$000
2,351
–
–
2,351
2012
US$000
10,808
(690)
–
10,118
(1) Repayments of loans and borrowings are classified as corporate cash outflows and excluded from discontinued operations.
42
Serica Energy plc Annual Report and Accounts 2013
5. Analysis of Expenses by Function
Administrative
Asset write-offs
Other
* restated for discontinued operations – see note 4
6. Group Operating Loss
This is stated after charging:
Depreciation of other property, plant and equipment
Total depreciation, depletion and amortisation expense
Depletion of oil and gas properties is classified with cost of sales under discontinued
operations.
Operating lease rentals (minimum lease payments):
- Land and buildings
- Other
Total lease payments recognised as an expense
* restated for discontinued operations – see note 4
7. Auditor’s Remuneration
Audit of the Group accounts
Audit of the Company’s accounts
Audit of accounts of Company’s subsidiaries
TOTAL AUDIT FEES
Other fees to auditor:
Taxation advisory services
2013
US$000
4,458
299
350
5,107
2013
US$000
109
109
524
21
545
*restated
2012
US$000
5,274
10,462
1,062
16,798
*restated
2012
US$000
341
341
531
21
552
2013
US$000
2012
US$000
102
34
20
156
101
34
19
154
US$000
US$000
–
–
7
7
Fees paid to Ernst & Young LLP and its associates for non-audit services are not disclosed in the individual accounts of the Company as
Group financial statements are prepared which are required to disclose such fees on a consolidated basis.
Serica Energy plc Annual Report and Accounts 2013
43
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
8. Staff Costs and Directors’ Emoluments
a) Staff Costs
The average monthly number of persons employed by the Group during the year was:
Management
Technical
Finance and administration
Staff costs for the above persons:
Wages and salaries
Social security costs
Other pension costs
Share-based long-term incentives (including related NI cost)
Staff costs for key management personnel:
Short-term employee benefits
Post-employment benefits
Share-based payments
b) Directors’ Emoluments
2013
No.
3
3
4
10
2012
No.
4
3
4
11
US$000
US$000
2,630
347
170
234
3,381
2,092
88
128
2,308
2,939
384
209
588
4,120
2,134
91
264
2,489
The emoluments of the individual Directors were as follows. Other than fees paid to Jeffrey Harris in US$, all sums are paid in £ sterling
but are converted at an exchange rate of £1=US$1.564 (2012: £1=US$1.585) to US$ being the reporting currency for the purposes ofthe
Company’s accounts.
A Craven Walker (1)
C Hearne
P Sadler (2)
M Flegg (3)
N Pike
I Vann
S Theede
J Harris (4)
J Cartwright (5)
Salary and fees
2013
US$000
Bonus
2013
US$000
Pension Benefits in kind
2013
US$000
2013
US$000
Total
2013
US$000
Total
2012
US$000
519
404
111
404
86
70
70
64
–
1,728
–
70
–
70
–
–
–
–
–
140
–
40
8
40
–
–
–
–
–
88
–
8
–
10
–
–
–
–
–
18
519
522
119
524
86
70
70
64
–
1,974
602
453
509
176
81
65
65
–
30
1,981
(1) Mr Craven Walker has acted as Interim CEO since 10 April 2011. At the request of Mr Craven Walker, the fees proposed for 2011, amounting to £150,000 (US$238,000),
were agreed to be payable contingent upon certain strategic milestones being achieved by the Company. These milestones, which related to the securing of certain
asset sales, acreage awards, farm-outs and progress with field developments, were achieved by early 2012. The fees for the period from 10 April 2011 to that date
were therefore paid in 2012 and are included in the 2012 comparative totals in the table above. Since 1 May 2012, Mr Craven Walker has received a combined fee
in respect of services as Chairman and Interim CEO pending the appointment of a successor to the CEO position. Since 1 January 2013 this fee has included a
provision for travel allowance. He is not entitled to any other award such as share options, share scheme, bonus, pension or medical insurance.
(2) Peter Sadler resigned on 27 June 2013
(3) Mitch Flegg was appointed on 5 September 2012
(4) Jeffrey Harris was appointed on 20 December 2012
(5) Jonathan Cartwright resigned on 28 June 2012
44
Serica Energy plc Annual Report and Accounts 2013
Number of Directors securing benefits under defined contribution schemes during the year
Number of Directors who exercised share options
Aggregate gains made by Directors on the exercise of options
2013
3
–
2012
3
–
US$000
–
US$000
–
The Group defines key management personnel as the Directors of the Company. There are no transactions with Directors other than their
remuneration as disclosed above.
9. Finance Revenue
Bank interest receivable
Other interest receivable
TOTAL FINANCE REVENUE
10. Finance Costs
Bank loans
Other interest payable
TOTAL FINANCE COSTS
2013
US$000
16
–
16
2013
US$000
37
1
38
2012
US$000
8
4
12
*restated
2012
US$000
615
–
615
* restated for discontinued operations – see note 4
Bank loan finance costs include interest payable, unutilised facility fees and an amortisation charge of associated issue costs. The
unwinding of a discount on decommissioning provisions is classified within finance costs under ‘discontinued’ operations.
11. Taxation
a) Tax charged/(credited) in the income statement
Charge for the year
Adjustment in respect of prior years
Total current income tax charge
Deferred tax
Origination and reversal of temporary differences in the
current year
Adjustment in respect of prior years
Adjustment to reflect tax rate changes in recognition of deferred tax
Total deferred tax (credit)
TAx CHARGE IN THE INCOME STATEMENT
2013
US$000
2012
US$000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Serica Energy plc Annual Report and Accounts 2013
45
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
b) Reconciliation of the total tax charge/(credit)
The tax in the income statement for the year differs from the amount that would be corporation tax in the UK of expected by applying
the standard UK corporation tax rate for the following reasons:
Accounting loss before taxation – continuing operations
Accounting profit/(loss) before taxation – discontinued operations
Accounting loss before taxation
Expected tax credit at standard UK corporation tax rate of 23.25% (2012 – 24.5%)
Expenses not deductible for tax purposes
Unrecognised deferred tax assets
Gain on disposal not chargeable to tax
Different foreign tax rates
TAx CHARGE REPORTED IN THE INCOME STATEMENT
* restated for discontinued operations – see note 4
c) Unrecognised tax losses
2013
US$000
*restated
2012
US$000
(5,129)
(16,378)
121
(5,008)
(1,164)
426
733
–
5
–
(8,330)
(24,708)
(6,053)
432
6,920
(261)
(1,038)
–
The benefit of approximately US$114.7 million (2012: US$110.2 million) of tax losses has not been recognised in these consolidated
statements which reflects the extent of the total available UK tax losses that have not been set against a deferred tax liability arising.
The Group has UK tax losses of approximately US$175.0 million (2012: US$167.2 million) that are available indefinitely for offset
against future trading profits of the companies in which the losses arose. Of this amount US$60.3 million (2012: US$57.0 million) has
been set off against taxable temporary differences.
d) Deferred tax
The deferred tax included in the balance sheet is as follows:
Deferred tax liability:
Temporary differences on capital expenditure
Temporary difference on decommissioning asset
Deferred tax liability
Deferred tax asset:
Temporary difference on future recoverable costs
Tax losses carried forward
Temporary difference on decommissioning provision
Deferred tax asset
NET DEFERRED TAx LIABILITy
The deferred tax in the Group income statement is as follows:
Deferred tax in the income statement:
Temporary differences on capital expenditure
Temporary difference on future recoverable costs
Tax losses carried forward
Temporary difference on decommissioning asset
Temporary difference on decommissioning provision
DEFERRED INCOME TAx (CREDIT)
46
Serica Energy plc Annual Report and Accounts 2013
2013
US$000
(37,372)
–
(37,372)
–
37,372
–
37,372
–
2012
US$000
(35,336)
–
(35,336)
–
35,336
–
35,336
–
2013
US$000
2012
US$000
2,036
–
(2,036)
–
–
–
(21)
–
21
(396)
396
–
e) Changes to UK corporation tax legislation
Legislation to reduce the main rate of UK corporation tax to 21% for the year commencing 1 April 2014 and 20% for the year from 1 April
2015 and beyond was enacted in July 2013. The UK corporation tax rate for ring-fenced trading profits remains 62%.
The UK Government proposals to increase the extent to which the Small Field Allowance (“SFA”) is available in respect of small
developments were enacted in July 2013. The allowance is now extended to fields with reserves of 6.25 million tonnes from the previous
threshold of 3.5 million tonnes and the allowance available in respect of a qualifying field is increased from £75m (US$120m) to £150m
(US$240m).
f) Unrecognised deferred tax liability
In 2012 and 2013 there are no material temporary differences associated with subsidiaries for which deferred tax liabilities have not
been recognised.
g) Company
The Company has US$23.5 million (2012: US$ 22.3 million) of UK corporation tax losses which are not recognised as deferred
tax assets.
12. Earnings Per Share
Basic earnings or loss per ordinary share amounts are calculated by dividing net profit or loss for the year attributable to ordinary equity
holders of the parent by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the Company by
the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that
would be issued on the conversion of dilutive potential ordinary shares into ordinary shares. As a result of the net loss for the years
ended 31 December 2012 and 2013, there is no dilutive effect of the share options in these years.
The following reflects the income and share data used in the basic and diluted earnings per share computations:
Net loss from continuing operations
Net loss attributable to equity holders of the parent
Basic weighted average number of shares
Diluted weighted average number of shares
Basic and diluted EPS on loss on continuing operations (US$)
Basic and diluted EPS on loss for the year (US$)
* restated for discontinued operations – see note 4
2013
US$000
*restated
2012
US$000
(5,129)
(16,378)
(5,008)
(24,708)
2013
’000
2012
’000
191,266
177,743
191,266
177,743
2013
US$
(0.03)
(0.03)
2012
US$
(0.09)
(0.14)
Serica Energy plc Annual Report and Accounts 2013
47
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
13. Exploration and Evaluation Assets
Group
Cost:
1 January 2012
Additions
Relinquished licences
Write offs
Disposals
31 December 2012
Additions
Write offs
31 December 2013
Provision for impairment:
1 January 2012 and 1 January 2013
Impairment charge for the year
31 December 2013
Net book value:
31 DECEMBER 2013
31 DECEMBER 2012
1 JANUARy 2012
Total
US$000
69,083
12,764
(143)
(9,664)
(5,160)
66,880
7,860
(131)
74,609
–
–
–
74,609
66,880
69,083
Total asset write-offs expensed in the income statement from continuing operations in 2013 were US$0.3 million (2012: US$10.5
million). This charge comprised minor E&E asset write-offs of US$0.1 million (2012: US$9.7 million, of which US$8.8 million related
to the costs incurred on the Spaniards East well in the UK North Sea) and a US$0.2 million charge against obsolete inventory (2012:
US$0.6 million). Other 2012 minor write-offs were in respect of relinquished licences.
Disposals of E&E assets in 2012 arose in the first quarter from the farm-out of an interest in the Company’s Namibian licence to BP,
and in the third quarter from farm-outs of interests in Morocco and the UK. The re-imbursement due for the past costs capitalised
as E&E assets is treated as a reduction from the book cost of the asset. The accounting gain of US$1.0 million on disposal recorded
in the 2012 income statement relates to the recognition of recovery for those past Namibia costs incurred that had been expensed as
pre-licence costs in previous periods.
Company
The Company has no E&E assets.
48
Serica Energy plc Annual Report and Accounts 2013
14. Property, Plant and Equipment
Group
Cost
1 January 2012
Additions
Decommissioning asset
31 December 2012
Additions
Disposals *
31 December 2013
Depreciation and depletion
1 January 2012
Charge for the year
Impairment
31 December 2012
Charge for the year
Disposals *
31 December 2013
Net book value
31 DECEMBER 2013
31 DECEMBER 2012
1 JANUARy 2012
Oil and gas Computer/IT
Equipment
properties
US$000
US$000
Fixtures
Fittings &
Equipment
US$000
62,598
690
(446)
62,842
–
(62,842)
–
44,329
13,116
4,361
61,806
1,036
(62,842)
–
–
1,036
18,269
189
–
–
189
–
–
189
149
32
–
181
8
–
189
–
8
40
901
–
–
901
–
–
901
491
309
–
800
101
–
901
–
101
410
Total
US$000
63,688
690
(446)
63,932
–
(62,842)
1,090
44,969
13,457
4,361
62,787
1,145
(62,842)
1,090
–
1,145
18,719
*The Kambuna field oil and gas properties were handed over to the Indonesian authorities on 31 December 2013.
Impairment of oil and gas properties
The net book amount of the Group’s only producing asset was fully depleted in July 2013 following the cessation of production from the
Kambuna field. No annual impairment test on the Group’s property, plant and equipment was therefore required as at 31 December 2013.
The Group did perform an annual impairment test as at 31 December 2012. In assessing whether a write-down is required in the carrying
value of a potentially impaired item of property, plant and equipment or goodwill, the asset’s carrying value is compared with its
recoverable amount. The recoverable amount is the higher of the asset’s fair value less costs to sell and value in use.
Oil and gas properties included an impairment calculated in accordance with IAS 36 - Impairment of assets, of US$4,361,000 attributed
to oil and gas properties determined by estimating the value in use of the assets. This impairment charge is against the Group’s only
gas condensate producing asset, Glagah Kambuna in Indonesia. The impairment primarily arose following the trigger of a downwards
revision to field reserves estimates.
The recoverable amount of Kambuna was determined on a value in use calculation using a discounted cash flow model. The projected
cash flows were adjusted for risks specific to the asset and discounted using a pre-tax discount rate. This discount rate is derived from
the Group’s post-tax weighted average cost of capital and is adjusted where applicable to take into account any specific risks relating
to the region where the cash generating unit is located. In 2012, given the short-term nature of cash flows, no discount or extrapolation
rates were used.
The calculation of value in use is most sensitive to the following assumptions; reserves estimates, discount rates and oil prices.
Serica Energy plc Annual Report and Accounts 2013
49
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Other
Depletion charges on oil and gas properties are classified within ‘cost of sales’.
Borrowing interest payable costs relating to drilling of development wells, that have been capitalised within oil and gas properties
during 2009, prior to the commencement of production, amounted to US$1,200,000, at a weighted average interest of 4.6%.
Company
The Company has no property, plant and equipment.
15. Investments
Company – Investment in subsidiaries
Cost:
1 January 2012
Increase in investment
31 December 2012
Increase in investment
31 December 2013
Provision for impairment:
1 January 2012 and 1 January 2013
Impairment charge for the year
31 December 2013
Net book amount:
31 December 2013
31 December 2012
1 January 2012
Total
US$000
130,684
2,000
132,684
–
132,684
(118,854)
(13,830)
(132,684)
–
13,830
11,830
In the Company financial statements, the cost of the investment acquired on the Reorganisation (see note 1) was calculated with
reference to the market value of Serica Energy Corporation as at the date of the Reorganisation. As a UK company, under Section 612
of the Companies Act 2006, the Company is entitled to merger relief on its share reorganisation with Serica Energy Corporation, and
the excess of US$112,174,000 over the nominal value of shares issued (US$7,475,000) has been credited to a merger reserve. Following
the impairment charges recorded in 2010 and 2013 against the Company’s investment in subsidiary undertakings, all amounts initially
credited to the merger reserve have been eliminated.
The increase in investment of US$2,000,000 during 2012 represents the value of shares issued by Serica Energy plc as part of the
consideration paid to NAMCOR (see note 23) for the Company’s interests in Namibia which are held by Serica Energy Namibia B.V.
Management has assessed the carrying value of investments in subsidiaries in the parent company balance sheet for impairment by
reference to the recoverable amount.
The incremental provisions for impairment arising in 2013 of US$13,830,000 against the investment in subsidiaries, and US$26,170,000
against amounts owed by Group undertakings (see note 18) have been made following a fall in value in certain of the oil and gas
assets held by the Company’s subsidiary undertakings.
50
Serica Energy plc Annual Report and Accounts 2013
Details of the investments in which the Group and the Company (unless indicated) hold 20% or more of the nominal value of any class of
share capital are as follows:
Name of company:
Serica Holdings UK Ltd
Serica Energy Holdings B.V. (i & iii)
Serica Energy (UK) Ltd (i)
Serica Sidi Moussa BV (i & iii)
Serica Foum Draa BV (i & iii)
Serica Energy Slyne BV (i & iii)
Serica Energy Rockall BV (i & iii)
Serica Energy Namibia BV (i & iii)
Serica Glagah Kambuna BV (i & iii)
Serica Energia Iberica SL (i & iv)
Serica Energy Corporation (i & ii)
APD Ltd (i & ii)
APD (Asahan) Ltd (i & ii)
APD (Biliton) Ltd (i & ii)
PDA Asia Ltd (i & ii)
PDA (Lematang) Ltd (i)
(i) Held by a subsidiary undertaking
(ii) Incorporated in the British Virgin Islands
(iii) Incorporated in the Netherlands
(iv) Incorporated in Spain
16. Other Non-current Assets
Holding
Nature of
business
% voting
rights and
shares held
2013
% voting
rights and
shares held
2012
Holding
Ordinary
Holding
Ordinary
Exploration
Ordinary
Exploration
Ordinary
Exploration
Ordinary
Exploration
Ordinary
Exploration
Ordinary
Ordinary
Exploration
Ordinary Development
Dormant
Ordinary
Dormant
Ordinary
Dormant
Ordinary
Dormant
Ordinary
Dormant
Ordinary
Dormant
Ordinary
Dormant
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Group
2013
US$000
2012
US$000
Company
2013
US$000
2012
US$000
OTHER RECEIVABLES
1,293
1,706
–
–
Other receivables are represented by value added tax (“VAT”) on Indonesian capital spend, which would be recovered from the
Indonesian authorities. Amounts at 31 December 2013 are disclosed net of an impairment of US$427,000 (2012: US$427,000).
17. Inventories
Condensate stocks
Materials and spare parts
Group
2013
US$000
–
258
258
2012
US$000
282
199
481
Company
2013
US$000
–
–
–
2012
US$000
–
–
–
Inventories are valued at the lower of cost and net realisable value. Cost is determined by the first-in first-out method and comprises
direct purchase costs and transportation expenses. US$168,000 was expensed in the income statement as an asset write-off against
materials and spare parts in 2013 (2012: US$609,000).
Serica Energy plc Annual Report and Accounts 2013
51
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
18. Other Current Receivables
Due within one year:
Amounts owed by Group undertakings
Trade receivables
Amounts recoverable from JV partners
Back costs recoverable
Other receivables
Prepayments and accrued income
TRADE AND OTHER RECEIVABLES
FINANCIAL ASSETS
Group
2013
US$000
2012
US$000
Company
2013
US$000
–
1,428
1,334
–
597
492
3,851
420
–
2,099
3,451
933
2,009
449
8,941
412
2012
US$000
110,824
–
–
–
611
333
97,416
–
–
–
395
337
98,148
111,768
420
412
Trade receivables at 31 December 2013 arise from one customer, PLN.
None of the Group’s receivables are considered impaired but US$749,000 of trade receivables and US$124,000 of other receivables are
past due at the date of signing this report. The Directors consider the carrying amount of trade and other receivables approximates to
their fair value.
Financial assets entirely relate to restricted cash on deposit with financial institutions securing various guarantees and performance
bonds associated with the Group’s trading activities. Management considers that there are no unreasonable concentrations of credit
risk within the Group or Company. The financial assets disclosed above are not considered past due nor impaired.
At the reporting date the amounts owed by Group undertakings to the Company are disclosed net of an impairment of US$33,509,000
(2012: US$7,339,000) – see note 15.
19. Cash and Short-Term Deposits
Cash at bank and in hand
Short-term deposits
Group
2013
US$000
10,178
15,884
26,062
2012
US$000
14,595
7,750
22,345
Company
2013
US$000
9,575
15,884
25,459
2012
US$000
13,674
7,750
21,424
Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of
between one day and six months depending on the immediate cash requirements of the Group, and earn interest at the respective
short to medium term deposit rates. The Group’s exposure to credit risk arises from potential default of a counterparty, with a
maximum exposure equal to the carrying amount. The Group seeks to minimise counterparty credit risks by only depositing cash
surpluses with major banks of high quality credit standing, and spreading the placement of funds over a range of institutions.
Financial institutions, and their credit ratings, which held greater than 10% of the Group’s cash and short-term deposits at the balance
sheet date were as follows:
HSBC Bank plc
J.P. Morgan Chase
Barclays Bank plc
S&P credit
rating
A-1+
A-1
A-1
Group
2013
US$000
8,358
8,827
8,760
2012
US$000
7,929
7,824
6,567
Company
2013
US$000
8,358
8,827
8,273
2012
US$000
7,898
7,824
5,700
For the purposes of the consolidated and Company cash flow statement, cash and cash equivalents comprise the above amounts at
31 December.
52
Serica Energy plc Annual Report and Accounts 2013
20. Trade and Other Payables
Current:
Trade payables
Other payables
21. Provisions
Group
2013
US$000
958
3,459
4,417
2012
US$000
7,264
4,413
11,677
Company
2013
US$000
575
384
959
2012
US$000
505
575
1,080
Provisions for decommissioning and restoration of oil and gas assets are:
At 1 January
Decommissioning estimate revisions (see note 14)
Unwinding of discount (see note 4)
Payments and utilisation of provision
At 31 December
2013
US$000
2012
US$000
1,601
–
6
(1,607)
–
2,029
(446)
18
–
1,601
The Kambuna field ceased production in July 2013 and the field decommissioning work programme was completed in November 2013.
Although no decommissioning provision is recorded as at 31 December 2013 as the work had been completed, certain liabilities arising
from the work programme had not been paid at that date and are recorded within trade and other payables.
Any payments made in prior periods into a restricted fund were recognised at the relevant Balance Sheet date as a separate asset
within other receivables and not deducted from the gross liability.
22. Financial Instruments
The Group’s financial instruments comprise cash and cash equivalents, bank loans and borrowings, accounts payable and accounts
receivable. It is management’s opinion that the Group is not exposed to significant interest, credit or currency risks arising from its
financial instruments other than as discussed below:
Serica has exposure to interest rate fluctuations on its cash deposits and bank loans; given the level of expenditure plans over 2014/15
this is managed in the short-term through selecting treasury deposit periods of one to six months. Cash and treasury credit risks are
mitigated through spreading the placement of funds over a range of institutions each carrying acceptable published credit ratings to
minimise concentration and counterparty risk.
Where Serica operates joint ventures on behalf of partners it seeks to recover the appropriate share of costs from these third parties.
The majority of partners in these ventures are well established oil and gas companies. In the event of non payment, operating
agreements typically provide recourse through increased venture shares.
Serica retains certain non US$ cash holdings and other financial instruments relating to its operations. The US$ reporting currency
value of these may fluctuate from time to time causing reported foreign exchange gains and losses. Serica maintains a broad strategy
of matching the currency of funds held on deposit with the expected expenditures in those currencies. Management believes that this
mitigates most of any actual potential currency risk from financial instruments.
It is management’s opinion that the fair value of its financial instruments approximate to their carrying values, unless otherwise noted.
Bank loans
In recent years, the Company had access to a three-year US$50 million debt facility, which was arranged in November 2009 with
J.P.Morgan plc, Bank of Scotland plc and Natixis as Mandated Lead Arrangers. This facility was principally to refinance the Company’s
Serica Energy plc Annual Report and Accounts 2013
53
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
outstanding borrowings on the Kambuna field. It was also originally put in place partly to finance the appraisal and development of
the Columbus field and for general corporate purposes.
Although all outstanding amounts under the Company’s debt facility were fully repaid in February 2011, the facility was rolled
forward until February 2013 whilst the directors reviewed the funding requirements and options available for the Columbus
field development. In March 2013, in light of the expected timing requirements for the Company’s share of Columbus project
development costs, the Company decided to allow the facility to expire. This decision was made in light of other financing options
under review and to save ongoing unutilised fee costs.
The facility was secured by first charges over the Group’s interests in the Kambuna field in Indonesia and the Columbus field in
the UK North Sea and the shares of certain subsidiary companies. This security was released following the expiry of the facility in
March 2013.
Interest Rate Risk Profile of Financial Assets and Liabilities
The interest rate profile of the financial assets and liabilities of the Group as at 31 December is as follows:
Group
year ended 31 December 2013
Fixed rate
Short-term deposits
Short-term financial assets
Floating rate
Cash
Year ended 31 December 2012
Fixed rate
Short-term deposits
Short-term financial assets
Floating rate
Cash
Within 1 year
US$000
15,884
420
1-2 years
US$000
–
–
2-5 years
US$000
–
–
Within 1 year
US$000
10,178
1-2 years
US$000
–
2-5 years
US$000
–
Total
US$000
15,884
420
16,304
Total
US$000
10,178
10,178
Within 1 year
1-2 years
2-5 years
Total
US$000
7,750
412
US$000
–
–
US$000
–
–
Within 1 year
US$000
14,595
1-2 years
US$000
–
2-5 years
US$000
–
US$000
7,750
412
8,162
Total
US$000
14,595
14,595
The following table demonstrates the sensitivity of finance revenue and finance costs to a reasonably possible change in interest
rates, with all other variables held constant, of the Group’s loss before tax (through the impact on fixed rate short-term deposits
and applicable bank loans).
Increase/decrease in interest rate
+0.75%
-0.75%
Effect on (loss) Effect on (loss)
before tax
2012
US$000
before tax
2013
US$000
143
(143)
169
(169)
The other financial instruments of the Group that are not included in the above tables are non-interest bearing and are therefore not
subject to interest rate risk.
54
Serica Energy plc Annual Report and Accounts 2013
The interest rate profile of the financial assets and liabilities of the Company as at 31 December is as follows:
Company
year ended 31 December 2013
Fixed rate
Short-term deposits
Short-term financial assets
Floating rate
Cash
Year ended 31 December 2012
Fixed rate
Short-term deposits
Short-term financial assets
Floating rate
Cash
Credit risk
Within 1 year
US$000
1-2 years
US$000
2-5 years
US$000
15,884
420
–
–
–
–
Within 1 year
US$000
1-2 years
US$000
2-5 years
US$000
9,575
–
–
Total
US$000
15,884
420
16,304
Total
US$000
9,575
9,575
Within 1 year
US$000
1-2 years
US$000
2-5 years
US$000
Total
US$000
7,750
412
–
–
–
–
Within 1 year
US$000
1-2 years
US$000
2-5 years
US$000
13,674
–
–
7,750
412
8,162
Total
US$000
13,674
13,674
The Group’s and Company’s exposure to credit risk relating to financial assets arises from the default of a counterparty with a maximum
exposure equal to the carrying value as at the balance sheet date. Where Serica operates joint ventures on behalf of partners it seeks to
recover the appropriate share of costs from these third parties. The majority of partners in these ventures are well established oil and
gas companies. In the event of non payment, operating agreements typically provide recourse through increased venture shares. Cash
and treasury credit risks are mitigated through spreading the placement of funds over a range of institutions each carrying acceptable
published credit ratings to minimise counterparty risk.
Foreign currency risk
The Group enters into transactions denominated in currencies other than its US dollar reporting currency. Non US$ denominated
balances, subject to exchange rate fluctuations, at year-end were as follows:
Cash and cash equivalents:
Pounds sterling
Canadian dollars
Norwegian kroner
Indonesian rupiah
Euros
Accounts receivable:
Pounds sterling
Group
2013
US$000
8,386
1
12
–
296
2012
US$000
5,524
5
13
25
404
Company
2013
US$000
8,100
1
–
–
–
2012
US$000
5,059
5
–
–
–
931
1,264
354
712
Serica Energy plc Annual Report and Accounts 2013
55
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
Trade payables:
Pounds sterling
Canadian dollars
Euros
1,260
41
103
8,203
–
108
1,185
41
20
529
–
43
The following table demonstrates the Group’s sensitivity to a 10% increase or decrease in the US Dollar against the Pounds sterling. The
sensitivity analysis includes only foreign currency denominated monetary items and adjusts their translation at the year end for a 10%
change in the foreign currency rate.
Increase/decrease in foreign exchange rate
10% strengthening of US$ against £GBP
10% weakening of US$ against £GBP
Liquidity risk
Effect on (loss) Effect on (loss)
before tax
2012
US$000
before tax
2013
US$000
806
(806)
(141)
141
The table below summarises the maturity profile of the Group and Company’s financial liabilities at 31 December 2013 based on contractual undiscounted
payments. The Group monitors its risk to a potential shortage of funds by monitoring the maturity dates of existing debt.
Group
year ended 31 December 2013
Trade and other payables
Year ended 31 December 2012
Within 1 year
US$000
1 to 2 years
US$000
2 to 5 years
US$000
Total
US$000
4,417
–
–
4,417
Within 1 Year
US$000
1 to 2 years
US$000
2 to 5 years
US$000
Total
US$000
Trade and other payables
11,677
–
–
11,677
Company
year ended 31 December 2013
Trade and other payables
Year ended 31 December 2012
Trade and other payables
Commodity price risk
Within 1 year
US$000
1 to 2 years
US$000
2 to 5 years
US$000
Total
US$000
959
–
–
959
Within 1 Year
US$000
1 to 2 years
US$000
2 to 5 years
US$000
Total
US$000
1,080
–
–
1,080
During 2012 and 2013, all of the Group’s gas production was sold at fixed contracted prices.
All condensate production was sold at prices linked to the spot market. During much of the Kambuna field production period,
fluctuations in condensate price were largely offset by variations in cost recovery.
Fair values of financial assets and liabilities
Management assessed that the fair values of cash and short-term deposits, trade receivables, trade payables and other current
liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments. As such the fair value
hierarchy is not provided.
56
Serica Energy plc Annual Report and Accounts 2013
Capital management
The primary objective of the Group’s capital management is to maintain appropriate levels of funding to meet the commitments of its
forward programme of exploration and development expenditure, and to safeguard the entity’s ability to continue as a going concern and
create shareholder value. At 31 December 2013, capital employed of the Group amounted to US$102.1 million (comprised of US$102.1
million of equity shareholders’ funds and US$nil million of borrowings), compared to US$88.6 million at 31 December 2012 (comprised of
US$88.6 million of equity shareholders’ funds and US$nil of borrowings).
At 31 December 2013, capital employed of the Company amounted to US$123.1 million (comprised of US$123.1 million of equity
shareholders’ funds and US$nil million of borrowings), compared to US$146.4 million at 31 December 2012 (comprised of US$146.4 million
of equity shareholders’ funds and US$nil million of borrowings).
23. Equity Share Capital
The concept of authorised share capital was abolished under the Companies Act 2006 and shareholders approved the adoption of new
Articles of Association at the 2010 Annual General Meeting which do not contain any reference to authorised share capital.
The share capital of the Company comprises one “A” share of £50,000 and 250,179,039 ordinary shares of US$0.10 each. The “A” share has
no special rights.
The balance classified as total share capital includes the total net proceeds (both nominal value and share premium) on issue of the Group
and Company’s equity share capital, comprising US$0.10 ordinary shares and one ‘A’ share.
Allotted, issued and fully paid:
Group
As at 1 January 2012
Options exercised (i)
Shares issued (ii)
31 December 2012
Shares issued (iii)
Share
capital
US$000
Number
Share
Total
premium Share capital
US$000
US$000
176,660,311
17,756
189,946
207,702
110,000
6,000,000
182,770,311
67,408,729
11
600
18,367
6,741
45
1,400
191,391
11,459
56
2,000
209,758
18,200
AS AT 31 DECEMBER 2013
250,179,040
25,108
202,850
227,958
Allotted, issued and fully paid:
Company
As at 1 January 2012
Options exercised (i)
Shares issued (ii)
As at 31 December 2012
Shares issued (iii)
Share
capital
US$000
Number
Share
Total
premium Share capital
US$000
US$000
176,660,311
17,756
154,674
172,430
110,000
6,000,000
11
600
45
1,400
56
2,000
182,770,311
18,367
156,119
174,486
67,408,729
6,741
11,459
18,200
AS AT 31 DECEMBER 2013
250,179,040
25,108
167,578
192,686
In April 2012, 110,000 share options were converted to ordinary shares at a price of £0.32.
i)
ii) In November 2012, 6,000,000 ordinary shares were issued to NAMCOR as part of the consideration for the interest in the Luderitz basin acquired in December
2011. NAMCOR had the option to take the shares or US$2 million in cash. The valuation of the shares issued is based on the cash alternative as value of the equity
alternative when the deal was agreed was less than the cash alternative. At 31 December 2011 the US$2 million was accrued within Trade and other payables.
iii) In November 2013, the Company raised US$18.2 million (net of expenses) through the issue of 67,408,729 ordinary shares at 18 pence each. The issue price represented
a discount of 1.4% to the mid-market price of 18.25 pence per ordinary share on 21 October 2013, the announcement date of the share placing and open offer being 22
October 2013.
Serica Energy plc Annual Report and Accounts 2013
57
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
24. Additional Cash Flow Information
Analysis of Group net cash
year ended 31 December 2013
Cash
Short-term deposits
Year ended 31 December 2012
Cash
Short-term deposits
Analysis of Company net cash
year ended 31 December 2013
Short-term deposits
Year ended 31 December 2012
Cash
Short-term deposits
1 January
2013
US$000
14,595
7,750
22,345
1 January
2012
US$000
8,546
11,400
19,946
1 January
2013
US$000
13,674
7,750
21,424
1 January
2012
US$000
7,742
11,400
19,142
Cash
flow
US$000
Non-cash
movements
US$000
31 December
2013
US$000
(4,570)
7,872
3,302
Cash
flow
US$000
5,851
(3,650)
2,201
153
262
415
10,178
15,884
26,062
Non-cash
movements
US$000
31 December
2012
US$000
198
–
198
14,595
7,750
22,345
Cash
flow
US$000
Non-cash
movements
US$000
31 December
2013
US$000
(4,247)
7,846
3,599
Cash
flow
US$000
5,748
(3,650)
2,098
148
288
436
9,575
15,884
25,459
Non-cash
movements
US$000
31 December
2012
US$000
184
–
184
13,674
7,750
21,424
58
Serica Energy plc Annual Report and Accounts 2013
25. Share-Based Payments
Share Option Plans
Following a Reorganisation in 2005 (see note 1), the Company established an option plan (the “Serica 2005 Option Plan”) to replace the
Serica Energy Corporation Share Option Plan (the “Serica BVI Option Plan”). The objective of these plans is to develop the interest
of Directors, officers, key employees and certain consultants of the Group in the growth and development of the Group by providing
them with the opportunity to acquire an interest in the Company and to assist the Company in retaining and attracting executives with
experience and ability.
Serica Energy Corporation (“Serica BVI”) was previously the holding company of the Group but, following the Reorganisation, is now a
wholly owned subsidiary of the Company. Prior to the Reorganisation, Serica BVI issued options under the Serica BVI Option Plan and
following the Reorganisation the Company has agreed to issue ordinary shares to holders of Serica BVI Options already awarded upon
exercise of such options in place of the shares in Serica BVI to which they would be entitled. There are currently options outstanding under
the Serica BVI Option Plan entitling holders to acquire up to an aggregate of 1,900,000 ordinary shares of the Company. No further options
will be granted under the Serica BVI option plan.
As at 31 December 2013, the Company has granted 18,532,460 options under the Serica 2005 Option Plan, 9,108,460 of which are currently
outstanding. The Serica 2005 Option Plan will govern all future grants of options by the Company to Directors, officers, key employees and
certain consultants of the Group.
The Serica 2005 Option Plan is comprised of two parts, the basic share option plan and a part which constitutes an Enterprise
Management Incentive Plan (“EMI Plan”) under rules set out by the H.M. Revenue & Customs in the United Kingdom. Options granted
under the Serica 2005 Option Plan can be granted, at the discretion of the Board, under one or other of the two parts but, apart from
certain tax benefits which can accrue to the Company and its UK employees if options are granted under the part relating to the EMI Plan
meeting the conditions of that part of the Serica 2005 Option Plan, all other terms under which options can be awarded under either part
are substantially identical.
The Directors intend that the maximum number of ordinary shares which may be utilised pursuant to the Serica 2005 Option Plan will not
exceed 10% of the issued ordinary shares of the Company from time to time in line with the recommendations of the Association of British
Insurers.
4,744,690 of the 9,108,460 options outstanding under the Serica 2005 Option Plan are exercisable only if certain performance targets being
met. These include the following options subject to market conditions; 110,000 options awarded to an executive director in December 2005,
350,000 options awarded to an executive director in March 2008 and 1,425,000 options awarded to executive directors in January 2010.
In April 2011, 200,000 options were awarded to an executive director and 200,000 options were awarded to an employee exercisable only
if certain operational performance targets are met. In October 2012 a further 800,000 share options under the Serica 2005 Option Plan
were granted to two current executive directors, all of these options are subject to performance conditions. Details of the performance
conditions attached are provided in the Directors’ Report. In November 2012, 400,000 options were granted to a consultant subject to
performance conditions.
The Company calculates the value of share-based compensation using a Black-Scholes option pricing model (or other appropriate model
for those Directors’ options subject to certain market conditions) to estimate the fair value of share options at the date of grant. There are
no cash settlement alternatives. The estimated fair value of options is amortised to expense over the options’ vesting period. US$252,000
has been charged to the income statement in continuing operations for the year ended 31 December 2013 (2012 – US$570,000) and a similar
amount credited to the share-based payments reserve, classified as ‘Other reserve’ in the Balance Sheet. US$nil has been charged to the
income statement in discontinued operations for the year ended 31 December 2013 (2012 – US$nil). US$128,000 (2012 – US$264,000) of the
total continuing operations charge was in respect of key management personnel (defined in note 8).
The options granted in 2013 and 2012 were consistently valued in line with the Company’s valuation policy. Assumptions made included a
weighted average risk-free interest rate of 3%, no dividend yield, a weighted average expected life of three years, and a volatility factor of
expected market price of in a range from 50-70%. The weighted fair value of options granted during the year was £0.15 (2012:£0.11).
Serica Energy plc Annual Report and Accounts 2013
59
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options
during the year:
Serica BVI option plan
Outstanding as at 1 January
Expired during the year
Outstanding as at 31 December
Exercisable as at 31 December
Serica 2005 option plan
Outstanding as at 1 January
Granted during the year
Exercised during the year
Cancelled during the year
Expired during the year
Outstanding as at 31 December
Exercisable as at 31 December
2013
Number
1,900,000
–
1,900,000
1,900,000
9,058,460
800,000
–
–
(750,000)
9,108,460
4,513,500
2013
WAEP
Cdn$
1.46
–
1.46
1.46
£
0.52
0.23
–
–
0.40
0.50
0.76
2012
Number
1,900,000
–
1,900,000
1,900,000
10,183,000
3,344,960
(110,000)
(3,159,500)
(1,200,000)
9,058,460
3,060,000
2012
WAEP
Cdn$
1.46
–
1.46
1.46
£
0.75
0.24
0.32
0.81
0.99
0.52
0.73
The weighted average share price at the date of exercise for the options exercised in 2012 was £0.35.
The weighted average remaining contractual life of options outstanding as at 31 December 2013 is 5.5 years (2012: 5.8 years).
For the Serica BVI option plan, the exercise price for outstanding options at the 2013 year end ranges from Cdn$1.00 to Cdn$1.80 (2012:
Cdn$1.00 to Cdn$1.80). For the Serica 2005 option plan, the exercise price for outstanding options at the 2013 year end ranges from £0.18
to £1.04 (2012: £0.21375 to £1.04).
As at 31 December 2013, the following director and employee share options were outstanding:
Expiry Date
March 2014
December 2014
January 2015
June 2015
January 2014
November 2015
January 2016
June 2016
January 2017
May 2017
March 2018
March 2018
January 2020
April 2021
January 2022
October 2022
January 2023
November 2023
On 4 January 2014, 228,000 share options under the Serica 2005 Option Plan expired.
60
Serica Energy plc Annual Report and Accounts 2013
Amount
1,000,000
200,000
600,000
100,000
Exercise cost
Cdn$
1,800,000
200,000
600,000
180,000
Exercise cost
£
72,960
271,600
139,725
259,200
247,860
218,400
445,500
287,000
1,498,380
141,188
458,485
348,000
109,000
72,000
228,000
280,000
135,000
270,000
243,000
210,000
594,000
350,000
2,203,500
450,000
2,144,960
1,200,000
400,000
400,000
On 30 January 2014, 1,200,000 share options were granted to directors, and 600,000 share options granted to employees other than
directors, all with an exercise cost of £0.13 and an expiry date of 29 January 2024.
On 31 March 2014, 1,000,000 share options under the Serica BVI Option Plan expired.
26. Commitments under Operating Leases
Operating lease agreements where the Group is lessee
At 31 December 2013 the Group has entered into commercial leases in respect of rental of office premises and office equipment.
Future minimum rentals payable under non-cancellable operating leases are as follows:
Not later than one year
Later than one year and not later than five years
Group
2013
US$000
137
–
137
2012
US$000
146
–
146
Company
2013
US$000
–
–
–
2012
US$000
–
–
–
In February 2013, the Group entered into a new five year office operating lease with a minimum commitment period of one year, expiring
in March 2014.
Operating sublease agreements where the Group is lessor
In January 2013 the Group entered into an operating sublease for part of its UK office, expiring in March 2014. At 31 December 2013,
future minimum rentals receivable under this sublease for a period not later than one year were US$32,000.
27. Capital Commitments and Contingencies
At 31 December 2013, other amounts contracted for but not provided in the financial statements for the acquisition of exploration and
evaluation assets amounted to US$1.2 million for the Group and US$nil for the Company (2012: US$nil and US$nil respectively). These
amounts relate to costs incurred on Foum Draa drilling in Morocco in January 2014.
The Company also has obligations to carry out defined work programmes on its oil and gas properties, under the terms of the award of
rights to these properties. The Company is not obliged to meet other joint venture partner shares of these programmes.
In Morocco, the partners on the Sidi Moussa licence expect to drill an exploration commitment well in Q3 2014. The Company is carried
for its share of expenditure up to a gross cap of US$50 million. Serica has currently budgeted to pay some US$2.3 million, being its
paying share of costs over and above the agreed cap to the farm-in carry.
Under the terms of the Company’s Namibian licence, the value of work performed to date by the JV partners on the 3D Seismic
acquisition programme has exceeded the minimum obligation expenditure on exploration work of US$15.0 million covering the entire
initial four year period of the licence, ending in December 2015.
Other less material minimum obligations include G&G, seismic work and ongoing licence fees in the UK and Ireland.
The Group has to provide security for a proportion of its future obligations to defined work programmes or other commitments and fulfils
this obligation through the Company providing US$0.4 million of cash collateral included as a financial asset (restricted cash) as at 31
December 2013 (2012: US$0.4 million).
Where the Company enters into financial guarantee contracts and guarantees the indebtedness of other companies within the Group,
the Company considers these to be insurance arrangements, and accounts for them as such. In this respect, the Company treats the
guarantee contract as a contingent liability until such time that it becomes probable that the Company will be required to make a
payment under the guarantee.
Serica Energy plc Annual Report and Accounts 2013
61
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
28. Related Party Transactions and Transactions with Directors
There are no related party transactions, or transactions with Directors that require disclosure except for the remuneration items
disclosed in the Directors Report and note 8 above. These disclosures include the compensation of key management personnel.
The Company’s related parties consist of its subsidiaries and the transactions and amounts due to/due from them are disclosed in the
accompanying notes to the Company financial statements.
29. Post Balance Sheet Events
No events have occurred since the balance sheet date which would require disclosure or adjustment in the Group and Company
accounts now presented.
62
Serica Energy plc Annual Report and Accounts 2013
Group Proved plus Probable Reserves – Unaudited
Western Europe
Indonesia
At 1 January 2013
Revisions
Production
Oil
mmbbl
1.6
(0.1)
–
At 31 December 2013
1.5
Proved developed
Proved undeveloped
Probable developed
Probable undeveloped
At 31 December 2013
–
0.8
–
0.7
1.5
Gas
bcf
23.1
(1.2)
–
21.9
–
12.1
–
9.8
21.9
Oil
mmbbl
0.0
–
–
–
–
–
–
–
–
Gas
bcf
0.3
–
(0.3)
–
–
–
–
–
–
Total
Oil
mmbbl
1.6
(0.1)
–
1.5
–
0.8
–
0.7
1.5
Total
Gas
bcf
23.4
(1.2)
(0.3)
21.9
–
12.1
–
9.8
21.9
Total
Oil & gas
mmboe
5.5
(0.2)
(0.1)
5.2
–
2.9
–
2.3
5.2
Proved and probable reserves are based on independent reports prepared by consultants Netherland, Sewell & Associates (for the
Columbus Field in the UK North Sea) in accordance with the reserve definitions of the Canadian Oil and Gas Evaluation Handbook. Gas
reserves at 31 December 2013 have been converted to barrels of oil equivalent using a factor of 6.0 bcf per mmboe for Western Europe
(Columbus field reserves) on the basis of a nominal gas calorific value of 1,000 BTU per cubic foot.
In view of the field shut-in in July 2013 and subsequent handover to Pertamina, remaining economic hydrocarbon reserves as at 31
December 2012 were of an immaterial level, equating to the estimated levels of declining production in the remaining months of 2013
prior to handover. Accordingly no independent reserves audit was performed in 2012.
Serica Energy plc Annual Report and Accounts 2013
63
GLOSSARY
bbl
bcf
boe
FPSO
mscf
mmbbl
mmboe
mmscf
mmscfd
P10
P50
P90
Proved Reserves
Probable Reserves
Possible Reserves
Reserves
Contingent Resources
Prospective Resources
TAC
tcf
barrel of 42 US gallons
billion standard cubic feet
barrels of oil equivalent (barrels of oil, condensate and LPG plus the heating equivalent of gas converted into
barrels at a rate of 4,800 standard cubic feet per barrel for Kambuna, which has a relatively high calorific
value, and 6,000 standard cubic feet per barrel for Columbus)
Floating, production, storage and offloading unit
thousand standard cubic feet
million barrels
million barrels of oil equivalent
million standard cubic feet
million standard cubic feet per day
A high estimate that there should be at least a 10% probability that the quantities recovered will actually
equal or exceed the estimate
A best estimate that there should be at least a 50% probability that the quantities recovered will actually
equal or exceed the estimate
A low estimate that there should be at least a 90% probability that the quantities recovered will actually
equal or exceed the estimate
Proved reserves are those Reserves that can be estimated with a high degree of certainty to be recoverable.
It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.
Probable reserves are those additional Reserves that are less certain to be recovered than proved reserves.
It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the
estimated proved + probable reserves.
Possible reserves are those additional Reserves that are less certain to be recovered than probable reserves.
It is unlikely that the actual remaining quantities recovered will exceed the sum of the estimated proved +
probable + possible reserves
Estimates of discovered recoverable commercial hydrocarbon reserves calculated in accordance with the
Canadian National Instrument 51 101
Estimates of discovered recoverable hydrocarbon resources for which commercial production is not yet
assured, calculated in accordance with the Canadian National Instrument 51 101
Estimates of the potential recoverable hydrocarbon resources attributable to undrilled prospects, calculated
in accordance with the Canadian National Instrument 51 101
Technical Assistance Contract
trillion standard cubic feet
64
Serica Energy plc Annual Report and Accounts 2013
CORPORATE INFORMATION
Registered and Main Office
52 George Street
London W1U 7EA
Nominated Advisor & UK Broker
Peel Hunt LLP
Moor House
120 London Wall
London EC2Y 5ET
Canadian & Joint UK Broker
RBC Europe Limited
Riverbank House
2 Swan Lane
London EC4R 3BF
Auditor
Ernst & Young LLP
1 More London Place
London SE1 2AF
Bankers
Barclays, HSBC, JPMorgan Chase
UK Legal Advisor
Herbert Smith Freehills
Exchange House
Primrose Street
London EC2A 2HS
Canadian Legal Advisor
Stikeman Elliott LLP
Dauntsey House
4b Fredericks’s Place
London EC2R 8AB
Company Secretary
Janette Davies
UK Registrar
Capita Asset Services
34 Beckenham Road
Kent BR3 4TU
Canadian Registrar
TMX Equity Transfer Services
200 University Avenue
Suite 300
Toronto
Ontario M5H 4H1
Public Relations
Instinctif Partners
65 Gresham Street
London EC2V 7NQ
Listings
AIM, London
TSX, Toronto
Symbol: SQZ
Website
www.serica-energy.com
Annual General Meeting
26 June 2014
Instinctif Partners
65 Gresham Street
London EC2V 7NQ
Company Number
5450950
Serica Energy plc Annual Report and Accounts 2013
65
SERICA ENERGY PLC HEAD OFFICE 52 GEORGE STREET LONDON W1U 7EA UNITED KINGDOM
T +44 (0)20 7487 7300
F +44 (0)20 7487 7330
info@serica-energy.com
www.serica-energy.com