ANNUAL
REPORT
2024
CONTRIBUTING RESPONSIBLY
TOWARDS MEETING THE
WORLD’S ENERGY NEEDS
THROUGH THE SAFE AND
EFFICIENT PRODUCTION
OF HYDROCARBONS
Strategic Report
2
Who we are and what we do
3
A balanced and diverse
portfolio with growth potential
4
Chair's statement
6
Our business strategy
8
Key performance indicators
10 Chief Executive’s review
12 Review of operations
16 Environmental, social and
governance
18 Financial review
Corporate Governance
38 Board of Directors
42 Directors’ report
43 Corporate governance
48 Corporate governance
framework
50 Board evaluation/review of the
Board’s effectiveness
52 Committee reports
58 Directors’ remuneration report
73 Directors’ statement under
section 172 (1) of the
Companies Act 2006
75 Directors’ responsibilities
statement
Financial Statements
76 Independent Auditor’s report
85 Group primary financial statements
90 Notes to the Group financial
statements
133 Directors’ responsibilities statement
134 Company primary financial
statements
136 Notes to the Company financial
statements
141 Reconciliation of non-IFRS measures
Other Information
143 Glossary
144 Licence holdings
145 Corporate information
WHAT’S IN THIS YEAR’S REPORT
Serica is proud of its contribution
towards the United Kingdom’s
energy security and economic
prosperity, with the Bruce Hub
delivering around 5% of total
domestic gas production.
The North Sea is of key importance to the
economy, sustaining over 200,000 jobs and
supporting communities across the UK.
Serica alone has spent over £1 billion with
British companies, and paid over £500 million
in corporate taxes since 2021, a contribution
that can continue for many years to come
with an appropriate fiscal and regulatory
environment.
A leading UK North Sea focused company
Serica Energy plc Annual Report & Accounts 2024 l 1
Who we are
and what we do
Even split of oil and gas,
with Bruce Hub gas c.5%
of UK total production
Focused on safety and
operational delivery
Successful drilling
programme at Triton with
production enhancement
and cash to come
Embedded ESG
culture and
transparent reporting
Material 2C resources,
with the clear potential
to convert to reserves
Robust balance sheet
supporting growth
and returns
Production from two major hubs supports material cash generation
and shareholder returns for years to come
2 l Serica Energy plc Annual Report & Accounts 2024
Aberdeen
Buchan
Horst
Triton
Area
Orlando
Bruce Hub
Sullom Voe
Oil Terminal
Cruden Bay
Erskine
Skerryvore
St Fergus
Orkney
Frigg
Forties
Continent
Ninian Pipeline
Forties
CATS to Teesside
Shetland
Terminals
Ninian Central
Everest
SEGAL
Lomond
Columbus
Shearwater
Gas
Key
Oil
Mixed
Serica assets
Host facilities
A balanced and diverse portfolio
with growth potential
producing fields
10
personnel offshore and
onshore in Aberdeen
and London
200+
producing hubs
2
Serica Energy plc Annual Report & Accounts 2024 l 3
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
CHAIR’S STATEMENT
UK political challenges
The adverse impact of multiple increases
and extensions to the Energy Profits Levy
(‘EPL’) in the last few years can be seen
in the decline of production and activity
in the UK North Sea. During 2024 the
new Labour Government was formed,
promising a further increase in the tax
burden for UK oil and gas producers
further eroding investor confidence in
the long-term prospects of the basin.
Although a small increase in the overall
tax rate to 78% did materialise, the
government listened to the industry’s
representations and preserved 100%
first-year tax allowances for capital
investment. This was essential with the
alternative being a rapid curtailment of a
valuable national resource.
Dear Shareholder
I am pleased to introduce my second set of results as the Chair of Serica
Energy. 2024 was a year in which we accomplished a great deal, but it
was not without its challenges both internally and externally. It was a year
in which we delivered a tremendously successful drilling programme, but
we experienced unplanned outages that hit our production, and of course
meant that our revenues did not benefit as they should have done. It was
also a year in which uncertainty about government policies dominated the
political landscape for operators in the UK North Sea, something on which
there have been recent tentative signs of changing for the better. During
the year, we also saw a significant change in the management team, and
I am confident that we have the right team to drive the Company forward
and thrive in the face of current challenges.
“Serica is well positioned in the
current environment, primed
to take advantage of the
opportunities ahead”
The energy debate is sometimes posited
as a choice between domestically
produced oil and gas and renewable
sources. The fact is that the UK needs
all of the above. Homegrown oil and gas
supports quality jobs in our communities,
enhances the UK’s security, enables
an equitable energy transition, and
generates government tax revenues.
Serica alone has paid over £500 million
of tax during the last five years.
Between now and achieving net zero in
2050, the Climate Change Committee's
energy transition pathway estimates that
the UK will need 13-15 billion barrels
equivalent of oil and gas, during which
period the UK is projected to import
more than half its essential oil and gas
requirements. Although production
from the UK North Sea is in decline,
the steepness of that decline is in part
due to government policies over recent
years. Of the barrels that the UK needs,
only an estimated four billion are set to
be produced in the North Sea, worth
an estimated value of £200 billion to
the UK economy. This figure could rise
to seven billion barrels with supportive
4 l Serica Energy plc Annual Report & Accounts 2024
boepd production in 2024
total dividend relating
to 2024
(paid and proposed)
34,600
19p/share
fiscal and regulatory frameworks in
place, generating a further estimated
£150 billion for the UK. Oil and gas in the
UK North Sea remains a very valuable
national resource and it is common sense
to prioritise its exploitation over imports.
At the time of writing, the UK
Government has recently launched two
formal consultations on UK North Sea
licensing and taxation. In addition, we
await the outcome of the consultation
on guidance for Environmental Impact
Assessments for new projects. The
combined impact of these three
processes will be pivotal in determining
the future of the North Sea and we
hope that the government pursues
policies that are consistent with, rather
than effectively negate, the decision to
retain full first-year tax allowances for
investment.
I am proud of the role Serica is playing
in the country’s energy debate. We have
been and will continue to be at the
forefront of the industry in speaking up in
favour of homegrown oil and gas. A Town
Called Bruce, the film we helped create
with the GMB, illustrated the positive
impact that we and our peers have on
jobs and communities throughout the UK.
As someone who has spent over three
decades in the industry, I found the film
both moving and inspiring. My thanks go
to all those who contributed to creating
the film. It can be found on our website
and I thoroughly recommend a watch.
Heading into 2025, I am more positive on
the direction of government policy than I
was a year ago, but we are not out of the
woods yet.
A new phase of Serica Energy, with a
new team
We continue to remain prudent in how
we allocate capital, and indeed are
adjusting our framework in this regard
with these results, focusing our capital
spend where we see investment in our
organic portfolio delivering rapid returns.
Early production from the first two wells
of the five due to be drilled in the Triton
area has delivered excellent technical
results and is a testament to our team’s
capabilities. A key focus is now on
working with the operator of the Triton
FPSO to make sure that we translate
the excellent subsurface performance
into sustaining strong production and
cashflow.
Serica is continuing to evolve as a
company. We started with our AIM listing
some 20 years ago this year, with a very
small team, trying and succeeding in
growing the Company through innovative
transactions. We are now moving into
a new phase where we are cementing
ourselves as a proven operator, focused
on safety, operational delivery and
GHG emissions reduction, and looking
for other opportunities to become the
operator of more assets, diversifying our
portfolio and making it more robust, while
retaining a balanced commodity mix. In
this respect, it is fitting that we are also
looking to move our listing to the main
LSE market later this year.
As we move into this phase, the Board
was delighted to appoint Chris Cox as
CEO. Chris joined in July, bringing the
experience of running a multi-asset
business, understanding the necessary
maintenance of similarly mid-to-late life
fields, and delivering organic growth and
building companies.
As we seek to grow further, we were
also very pleased that Martin Copeland
joined the business as CFO. Martin has
the ability, energy and experience to
identify and execute value-accretive
M&A transactions, with the Parkmead
acquisition an excellent example of a
small but smart transaction, to optimise
and deliver value from our portfolio.
The importance of increasing our scale,
but above all the diversification of our
sources of production and revenue base,
has been made only more apparent given
the operational challenges we witnessed
in Q4 2024 and the early part of 2025.
We are continuing our drive for further
diversification of our asset base, which
we believe will allow us to deliver a
more predictable and reliable financial
performance – but we will only transact
if we are convinced that doing so will
deliver value to Serica’s shareholders.
Building a stronger company
There remain challenges ahead, but I
am confident that Serica is in a stronger
position today than at any other point
in its history. We have assets with the
potential to generate significant cash, an
attractive production mix of oil and gas,
and a highly experienced management
team and board, with a strategy of
optimising mid-to-late life assets in a
way that has the potential to deliver
significant shareholder value.
We continue to be very active in pursuing
multiple M&A opportunities in both the
UK North Sea and other geographies,
firmly focused on deals that we believe
will be accretive to shareholder value.
As we seek to diversify and further
strengthen the Company, we intend to
retain a strong balance sheet to keep
us resilient to uncertain future events,
with the expectation of material cash
generation going forward and multiple
organic opportunities in which to
allocate capital. Our confidence in our
future prospects supports the ongoing
payment of a substantial dividend, and
the Board is pleased today to confirm a
final distribution in respect of 2024 of
10 pence per share, bringing the total
dividend for 2024 to 19 pence per share
and overall shareholder distributions
equivalent to 23 pence per share, in line
with returns related to the 2023 financial
year, when we also factor in the inaugural
share buyback executed during the year
The prudent rebalancing of our dividend
reaffirms our commitment to material
direct shareholder returns, takes into
account the deferred revenues due
to operational issues in 2024, and
ensures that we retain liquidity to take
full advantage of the many organic
and inorganic opportunities ahead. As
we do this, work is ongoing regarding
a potential move from the AIM, which
would increase our visibility and bring
our investment story to the widest
possible pool of investors. Serica is well
positioned in the current environment,
and I firmly believe that the best is yet
to come.
David Latin
Chair
31 March 2025
Serica Energy plc Annual Report & Accounts 2024 l 5
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
Creating
Shareholder
Value
Generate
material cash
flows from a
robust and
diverse
production
portfolio
Provide an attractive
mix of growth and
direct shareholder
returns
Invest in organic
growth and value
accretive M&A
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Utilise world-class subsurface
capabilities to maximise the
value of mid-to-late life fields
Our business
strategy
Serica’s strategy supports our goal of delivering
value to shareholders through a mix of share price
growth and direct shareholder returns
A proven strategy for the creation of shareholder value
6 l Serica Energy plc Annual Report & Accounts 2024
Serica specialises in generating shareholder
value from mid-to-late life assets, with
subsurface expertise able to unlock reserves
and optimise production in order to extend
the life of fields.
With a focus on safety, Serica aims to operate
fields efficiently across an increasingly diverse
portfolio, with a mix of oil and gas, delivering
growth and resilient cash generation that
supports long-term shareholder returns.
Production
34,600 boepd
64%
GAS
36%
OIL
2P reserves
117.5 mmboe
53%
GAS
47%
OIL
2C resources
88.7 mmboe
31%
GAS
69%
OIL
Serica Energy plc Annual Report & Accounts 2024 l 7
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
Serica Energy plc Annual Report & Accounts 2024 l 7
Key performance
indicators
Key performance indicators (‘KPIs’) provide measurable benchmarks that allow stakeholders to assess
strategic progress and the health of a company. Our revised KPIs offer a clear view of how well Serica
is achieving its goals, and sum up progress in core areas at a glance.
Production
(boepd)
Cash flow from
operations after tax
($ million)
Reserves
and resources
(mmboe)
Definition
Production is measured in barrels of oil
equivalent produced per day, with gas
production converted accordingly.
Relevance
Production from Serica fields constitutes
the source of all revenue generation, and
illustrates the performance of both the
subsurface and facilities.
Performance in 2024
While the first few months of 2024
saw robust production, issues with the
gas compressor at Triton resulted in
downtime in both May and the second
half of the year. This reduced operational
efficiency outside planned maintenance
at Triton to 58% from 80% in 2023.
Pump failure at the Bruce Hub in Q4 also
impacted the overall production figure,
and resulted in a decline year-on-year
despite positive early results from the
Triton drilling programme.
Definition
Cash generated from operations, less
current tax, excluding adjustments in
respect of prior years.
Relevance
Illustrates Serica’s operational cash flow
and financial performance in a high-
tax environment, representative of the
cash generation of the business prior to
discretionary decisions regarding capital
allocation.
Performance in 2024
Despite operational issues at the
Triton FPSO impacting production and
revenues, cash flow from operations
after tax increased on the prior year to
$403 million in 2024, as a result of a
significantly lower current tax charge in
2024 due to group relief effects resulting
from the Q4 Triton performance.
Definition
Comprises proven and probable reserves
(2P) and the best estimate of contingent
resources (2C).
Relevance
Illustrates long-term sustainability of
Serica’s production, and potential within
the portfolio. Serica aims to extend the
life of mature hydrocarbon fields through
utilising our subsurface expertise to
identify resources and then convert
them to reserves, maximising life of field
production. The Company also aims to
add barrels through acquisition.
Performance in 2024
Serica’s assets contain 117.5 mmboe of oil
and gas 2P reserves net to the Company
as of 31 December 2024, with a broadly
even split between oil and gas. The
reduction in reserves reflects production
of 12.0 mmboe in 2024, as well as
the result of a reassessment of well
performance and opportunities across
the portfolio, notably reserves relating to
the potential SCE/SCW infill wells on BKR
reducing by 9.5 mmboe. With the addition
of 30 mmboe from The Greater Buchan
Area, and other prospects across the
portfolio being high-graded, 2C resources
increased significantly from 21.5 mmboe
to 88.7 mmboe.
2024
2023
2022
2024
2023
2022
2024
2023
2022
34,600
206
403
40,100
162
250
26,200
108
528
8 l Serica Energy plc Annual Report & Accounts 2024
Lost time incident rate
(per million hours)
Carbon intensity
(kgCO2/boe)
Shareholder returns
($ million)
Definition
Any work-related injury at operations
under the direct control of Serica’s
management system which results in a
person being unfit for work on any day
after the day of occurrence, measured
in number of LTIs per million man hours
worked.
Relevance
HSE is of primary importance to Serica,
and the Company aims for continuous
improvement of our HSE performance,
providing a safe working environment for
our staff.
Performance in 2024
We were pleased to report another year
meeting our aim of zero LTIs. This does
not mean that we are complacent, and
Serica has put in place and is already
activating a detailed Process Safety
Improvement Plan for 2025.
Definition
The amount of CO2 emitted per unit
of hydrocarbon produced, reported
as kilograms of CO2 per barrel of oil
equivalent (boe) exported from the Bruce
platform.
Relevance
Serica contributes responsibly towards
meeting the UK’s energy needs through
the energy transition, producing oil and
gas with emissions below the North Sea
average. For 2025, the company has
set a net producing portfolio target of
<20 kgCO2/boe.
Performance in 2024
Scope 1 emissions from the Bruce
installation totalled 200,221 tonnes
of CO2, the lowest level of operating
emissions over the last six years,
except for 2023, when an extended
summer shutdown for planned
maintenance caused a significant drop.
An ambitious carbon intensity target of
15.5 kg CO2/boe for the Bruce installation
in 2024 was narrowly missed due to
plant instability in the latter half of the
year, with the carbon intensity being
17.0 kgCO2/boe, still below the UKCS
average of 21 kg CO2/boe (NSTA).
Definition
Return of capital to shareholders via
dividends attributable to the calendar
year, and share buy-backs.
Relevance
Serica aims to offer shareholders a mix of
growth and returns, and is committed to
returning value to shareholders through
a reliable and sustainable dividend,
supplemented by share buy-backs.
The level of returns illustrates underlying
performance and cash flow prospects.
Performance in 2024
Serica announced a 2024 final dividend
of 10 pence per share, equating to an
estimated $50 million. This reflects
confidence in future cash flows, while
prudently rebalancing our capital
allocation approach to give us increased
flexibility over the medium-term to
allocate capital to the areas where it
will deliver best value for shareholders.
The adjustment will allow us to invest
in the exciting drilling and development
programmes in our portfolio and be
opportunistic in accretive M&A, all
while retaining our highly competitive
shareholder distributions.
2024
2023
2022
2024
2023
2022
2024
0
2023
0
2022
0
114
17.0
112
16.4
92
16.4
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
Serica Energy plc Annual Report & Accounts 2024 l 9
The first is the quality of the subsurface
properties of our asset base. The
number, and quality, of the opportunities
for drilling more wells and accessing
reserves at both BKR and in the Triton
area is exceptional given the maturity of
the assets and the fact that they have
been operated in the past by major
companies.
I have also been delighted with the
team that we have in place to mature
and deliver these opportunities. We
effectively have the best of both from
Serica and the team acquired from
Tailwind, some of whom I was delighted
to know from when I worked with them
at BG. They are great at what they do,
with the right people in the right roles,
deploying key technologies in the right
way, and they can be a real differentiator
going forward. The tremendous results
of the Triton drilling campaign illustrate
what can still be achieved in delivering
growth in our basin.
Of course, what we have not seen to
date is our high-quality subsurface
assets delivering appropriate production,
cash flows, and in turn value to
our shareholders. This has been
disappointing and, put simply, our assets
are not producing what they could be.
While the majority of these issues have
been on Triton, where Serica is not the
operator, we are doing everything we can
to work with the operator to ensure, as
far as possible, that the issues that have
caused the poor uptime of the FPSO do
not happen again. The value we have
created through the drill-bit is very much
there, but it is being left in the ground,
and we need to, and will, do more to stop
this from happening.
Delivering value from mid-to-late
life assets
Serica has the ability to continue
delivering value from our portfolio of mid-
to-late life assets, and the team is working
hard to strengthen further a culture of
performance excellence. This starts with
safety, and everyone taking pride of
ownership of their sphere of influence.
The leadership team is totally committed
to the safe running of operations, and
we firmly believe that excellence in this
area will also help deliver the production
performance of which our asset base is
so clearly capable.
This aspect was the other main surprise
to me on coming into the Company – just
how much more can be achieved from
our current asset base if it can be made
to run to its true potential. To date, there
have been too many outages at Triton,
and at BKR there is also very much the
potential to do more and to optimise
production. But this is a good problem to
have – it is clearly far preferable to have
a positive subsurface, with work to be
done on facilities, than it is to have great
facilities and bad rocks. We know the
issues we face, and how to fix them – in
contrast, you can’t fix what nature has
dealt you under the ground.
I have spent most of my career dealing
with and managing the challenges of
mid-to-late life assets, and it is not
always straightforward. Facilities are
designed to handle a particular flow
rate and a particular type of fluid at a
particular pressure, and these change
over time. By the time they get to late
life, fields are often producing a fraction
of the fluid volumes for which they were
designed, a lot of water may be coming
through, and lower pressures mean
facilities don't perform in the same way.
These assets need care and attention,
including detailed, well-planned and
executed maintenance programmes.
The operator needs to get the basics
right, make sure everything runs within
appropriate and optimised parameters,
replace what is needed before it fails,
and it is then entirely possible to ensure
that the facilities are able to run safely
and efficiently often well past their
original design lives. This is hard, focused
work but it is deliverable. We have the
Having joined Serica in July, it would be fair to say that
there have already been some ups and downs, and a
couple of things that have surprised me.
CEO’S REVIEW
“Serica has the ability to continue
delivering value from our portfolio
of mid-to-late life assets”
10 l Serica Energy plc Annual Report & Accounts 2024
hydrocarbons, and we have the potential
to continue supporting UK North Sea
production for many years to come.
As part of our drive to increase reliability
and performance, we are refining our
structure in terms of operational roles and
making sure the right people are laser
focused on the right things. Amongst
other high-quality appointments in key
strategic roles, we are set to take on
a Production Optimisation Manager
imminently, tasked with helping to convert
the subsurface quality into optimised
production and cash flows.
The Triton area drilling campaign is a
great illustration of the quality of our
people. We have completed four wells out
of five on Triton, with four positive results,
and we will work hard to get the facilities
functioning as they should to deliver this
new production reliably. Given the age
of the fields, to have multiple wells come
in that exceed pre-drill expectations and
produce clean oil really is a fantastic
outcome. We are confident that the fifth
one to come, Belinda, will also be a good
well, and we are excited by the value that
could be unlocked now that the same
subsurface team is turning its attention to
the wider portfolio.
Opportunities ahead
We have announced today a material
increase in our 2C resources to 89
mmboe, and the work done on our BKR
hub to identify opportunities is not yet
complete. At BKR our initial focus is on
Bruce. Re-processed 3D seismic data
is helping to unlock Bruce potential,
and the team has built the first full field
subsurface map and 3D simulation
model. We have already identified
multiple drilling opportunities, and
while not all of those will turn out to be
economic, as we do more work on them
and run simulation models, we will high-
grade the opportunity set throughout
this year to create options for 2026 and
beyond. No new wells have been drilled
on Bruce since 2012 and new techniques
and technologies can help access
previously undrained and untargeted
areas, and I look forward to updating
you on our plans for BKR as they come
together later in the year.
Given the ongoing lack of clarity over
the long-term fiscal regime pending the
outcome of the current consultations,
our focus is largely on maturing possible
infill drilling programmes, where these
promise a similarly rapid payback to
our Triton area drilling campaign. The
retention of first year allowances in
the Autumn Budget has allowed us
to accelerate spend on resilience
enhancement measures at both the
Bruce Hub and on the Triton FPSO,
and the Flare Gas Recovery project at
Bruce qualifies for the decarbonisation
allowance, meaning its c.$10 million cost
will be more than fully offsetable against
our tax liability. This will help our ongoing
efforts regarding GHG emissions, with
our carbon intensity from Bruce of
17.0 kgCO2/boe in 2024 remaining below
the UKCS average of 21 kg CO2/boe.
However, should the government
provide clarity on a long-term fiscal and
regulatory environment that supports the
UK North Sea in providing a homegrown
solution to the UK’s hydrocarbon
demand, then we have larger projects in
the portfolio with the potential to deliver
organic growth that would offset natural
decline in our portfolio into the next
decade.
Our next development project could
be Kyle. Kyle is a redevelopment of an
old field that was abandoned because
its host infrastructure was removed.
We were awarded the licence in the
33rd licence round run by the last
government in October 2023, and it is
a classic example of the kind of hidden
potential that we hope the ongoing
licensing consultation will address. Kyle
was a new licence for us, but it has
discovered hydrocarbons able to add
material value to an existing hub, and
we very much hope that the government
will continue to allow new licences in
similar circumstances. Kyle is very close
to Triton and can be easily tied back
via a single well development with the
potential to convert over 11 mmboe of
2C resources into reserves. Wells in the
reservoir have produced oil from it in
the past and were still producing when
the field was abandoned. Beyond Kyle,
we have options in the Buchan Horst
redevelopment, and what we hope
to be multiple further exciting drilling
opportunities around Bruce.
Resilience through diversification
As we seek to deliver organic growth,
further asset diversification would also
be a real positive for us, reducing the
extent of our vulnerability to any future
operational issues at one of our two main
hubs. The chance to achieve further
diversification from our existing portfolio
is therefore attractive, while we continue
to seek meaningful additions through
M&A. Our current focus is on the UK,
where we are well placed to act as a
consolidator in what remains a buyer’s
market. The soon to be completed
Parkmead E&P acquisition was a small
deal but one that adds real value to
Serica. We think there is more to come
in the UK. We are also keen to find
value creating opportunities to provide
geographical diversification that, despite
the improving tone of government policy
signals, will reduce our dependence on a
single political jurisdiction.
As we continue to run the rule over
multiple opportunities, we will also take
care of our base business and make
sure that our assets run better than they
clearly have in 2024 and 2025 year to
date and realised the value of our current
portfolio. To realise our ambitions in M&A,
we are aware that we need to prove to
our shareholders that we are a top-tier
operator who can be trusted to utilise
your capital to deliver value from other
assets. And we will.
Material cash generation
With all assets producing, our portfolio
is capable of delivering well over
50,000 boepd on any given day.
Issues at Triton during the first quarter
which, albeit different, compound on
the challenges of Q4 2024, mean that
we have been a long way from our
production potential in the first quarter,
and our production guidance for 2025
has today been set at a revised range
of 33,000 to 37,000 boepd. Given the
potential flow rates, a period of stable
production will help us to strive for the
top end of this range.
With a robust gas price and stable oil
price, and our sizeable carried forward
loss position at Triton providing a
tax shelter from Corporation Tax and
Supplementary Charge, we are confident
that future production can deliver
material free cash flow. This should
enable us to fund our organic growth
prospects, while also allowing us to
continue delivering healthy returns to our
shareholders.
Chris Cox
Chief Executive Officer
31 March 2025
Serica Energy plc Annual Report & Accounts 2024 l 11
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Financial Statements
“Our work has delivered a
material upgrade in resources,
with the clear potential to
move them from 2C to 2P
as work continues to mature
opportunities”
Reserves and resources
Serica’s assets contained 117.5 mmboe of 2P oil and gas reserves net to the Company as of 31 December 2024 (31 December 2023:
140 mmboe), with a broadly even split between oil (55.1 mmboe) and gas (62.4 mmboe). 2P reserves include, for the first time,
5.6 mmboe of gas that will be produced to fuel production assets.
As at 31 December (mmboe)*
2P 2024
2P 2023
2C 2024
2C 2023
Bruce Hub
69.8
84.1
33.3
21.3
Triton Hub
41.8
49.1
16.4
-
Other Production Assets
5.9
7.1
9.0
9
Greater Buchan Area
-
-
30.0
-
Total
117.5
140.3
88.7
30.3
*
boe figures have been determined using field specific calorific values for gas. The methodology has been updated from previous years, which used
an industry standard conversion factor for gas from all fields
The result of the subsurface work
undertaken in 2024 has though delivered
a material upgrade in resources,
with the clear potential to move a
proportion of these from 2C to 2P as
work continues to mature opportunities
towards investment decisions. We
are now reporting 88.7 mmboe of 2C
resources (31 December 2023: 30.3
mmboe), of which the Greater Buchan
Area, into which our farm-in transaction
completed in February 2024, comprises
30.0 mmboe. Notable other opportunities
across the portfolio include the addition
of 11.1 mmboe relating to the Kyle
redevelopment, and work at Bruce has
resulted in the Company booking an
additional 11.8 mmboe of 2C resources –
with work ongoing that has the potential
to see this figure increase further and/or
be converted to reserves.
The Company continues to pursue
a returns-led approach to organic
investment, investing in its assets to
add value through increased production,
decarbonisation through reduced
emissions, and the extension of field
life. The current work programme, with
its focus on the five-well Triton drilling
campaign, has the ability to sustain
production above an annual average of
40,000 boepd well into 2026. Plans for
the resumption of drilling around BKR,
and potentially the redevelopment of Kyle
and Buchan Horst, can boost reserves,
increase production, and further illustrate
our ability to identify value-adding
opportunities in a mature basin, and in
turn create significant shareholder value.
REVIEW OF OPERATIONS
The reduction in reserves reflects
production of 12 mmboe in 2024, as well
as the result of a rigorous reassessment
of well performance and opportunities
across the portfolio. This, combined with
the continued uncertainties of the fiscal
and regulatory backdrop, resulted in the
deferral of planned drilling of the SCE/
SCW wells on BKR, with 2P reserves
reduced by 9.5 mmboe. However, the
same technical reassessment has
high-graded other potential prospects,
albeit not to a level of maturity
necessary to constitute reserves as at
31 December 2024.
12 l Serica Energy plc Annual Report & Accounts 2024
The Rhum field produced consistently
and in line with expectations, with
minimal capital work, in the first half of
2024. Necessary subsea intervention
work to install a hydraulic override
tool and address an issue with the R3
well resulted in Q4 not meeting our
expectations. Average field production
in 2024 totalled 13,800 boepd (2023:
12,500 boepd) of gas net to Serica.
Limited capital expenditure is expected
at Rhum in 2025, with well scale
removal to improve well delivery under
consideration.
Work in H1 2025 is focused on improving
production rates, with an operational
failure on the productive R3 well
impacting production in March from the
field. Work to increase resilience will now
be undertaken ahead of the resumption
of production from the K1 well on the
Keith field, which has not produced since
2022.
The annual maintenance shutdown at the
Bruce Hub will take place in Q3 and is
scheduled to last for 12 days.
Triton Hub
Bittern 64.63%, Evelyn 100%,
Gannet E 100%, Guillemot West &
North West 10%, Belinda 100%
The Triton Hub experienced a mixed
2024 – where positive subsurface results
were achieved from infill well drilling,
but production was disappointing due
to a number of unplanned outages
that resulted in a year-on-year average
production decline from 14,100 boepd to
9,000 boepd.
The first shutdown in May followed a trip
on the single gas export compressor that
was available, a weakness that continued
throughout 2024, causing another
significant outage in Q4 commencing
from 26 October. Production was also
adversely impacted by the summer
shutdown for annual maintenance work
on Triton overrunning by three weeks.
Unfortunately, problems have continued
into the start of 2025, as issues resulting
from Storm Éowyn caused production
to be suspended at the end of January.
Safety critical maintenance was
scheduled following damage to a storage
tank, and then integrity issues were
discovered in pipework which is used
to inject inert gas into the cargo tanks.
Following an investigation into the causes,
Production net to Serica
(boepd)
2024
Pro forma
2023
Bruce Hub
19,800
19,100
Triton Hub
9,000
14,100
Other Assets
5,800
6,900
Total
34,600
40,100
Bruce Hub
Bruce Field – Blocks 9/8a, 9/9b and
9/9c, Serica 98% and operator
Rhum Field – Blocks 3/29a, Serica
50% and operator
Keith Field – Block 9/8a, Serica 100%
Production at the Bruce Hub averaged
19,800 boepd in 2024, a small increase
on 2023. Production was robust in
H1, with the Bruce Hub averaging
23,400 boepd ahead of the summer
maintenance programme. Q4 was
then impacted by a short period of
unscheduled downtime on the Bruce
platform, related primarily to a subsea
intervention and consequent pause
in production necessary to ensure
enhanced longer-term production
reliability on the Rhum field.
On a field level, the Bruce Hub 2024
LWIV campaign undertaken with the
Helix Well Enhancer was successfully
completed in May, and the summer
programme of Bruce field platform work
included a range of activities designed
to enhance production as well as routine
integrity monitoring. Production at Bruce
averaged 6,000 boepd in the year (2023:
6,500 boepd).
A number of minor projects are set to
be undertaken in 2025 which will help
improve resilience and efficiency, all
managed by our soon to be appointed
Production Optimisation Manager, helping
to maximise the performance of BKR.
Looking further ahead, extensive
subsurface work is ongoing to identify
and rank opportunities for infill drilling.
A number of opportunities have been
uncovered, not all of which are included
in the 2C resources of 33.4 mmboe now
booked on Bruce. Work will continue to
high-grade these prospects and deliver a
drilling programme, with the potential for
drilling to resume on the field from late
2026, which would be the first since 2012.
Dana inspected all piping and valves in
the inert gas/gas free venting system to
the cargo oil tanks, resulting in a more
significant work scope being undertaken
to replace whole sections of pipework in
this system on the FPSO.
In order to reduce overall downtime this
year, following discussions with Dana,
the decision was made to bring forward
the scheduled summer maintenance
programme and carry it out concurrently
with the ongoing work. Through
integrating the work programmes it
removes the downtime inherent in
shutting down and restarting the plant
for a separate maintenance period,
which alone adds around two weeks of
production potential. The work scope for
the maintenance programme has been
optimised to fit the current schedule, and
production is expected to resume in June
and then have no planned downtime for
the remainder of the year.
Immediately prior to this late-January
shutdown, production from Triton
achieved rates of 25,000 boepd net to
Serica, with production from wells at
Guillemot North West and Evelyn still to
come. An amendment to the mode of
operation in start up of the gas export
compressors appears to have solved
the repeated issue with the gas seal
system that impacted 2024. The second
compressor will also be brought into
commission once the FPSO is back up
and running and this, together with the
current work being completed, should
help to deliver more consistent and
reliable uptime, and hence production
rates, going forward.
Serica Energy plc Annual Report & Accounts 2024 l 13
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Serica continues to work closely with
the operator, Dana, to ensure that
maintenance work is delivered in a
way that will see enhanced reliability
at Triton. Serica employees have been
reviewing the plans of the operator’s
team, which has itself been enhanced
in recent months. Discussions also
continue with Dana regarding options
for the future of the FPSO, with a view
to securing a lasting improvement in the
operating performance. As confirmed by
a third-party review undertaken by the
engineering firm Kent, the FPSO itself is
structurally sound, with no material issues
found with its key systems, those being
the double hull, turret or swivel, and with
continued and timely maintenance the
Triton FPSO has the potential to produce
to 2035 and potentially beyond.
The outages have meant that Serica’s
production has not yet truly benefitted
from the tremendous results of the
first wells in the five-well Triton drilling
campaign.
The first well completed was the B6
horizontal well (a sidetrack from the B1
well) on the Bittern field, which entered
production in September at a rate of over
5,000 boepd net to Serica. This very
positive result was then followed by the
Gannet GE05 well, which was tied in to
the Triton FPSO on 25 October, under
budget and ahead of time, and was
brought onto stable production at a rate
of over 6,000 bopd after the late 2024
outage period, in January.
The outage of the FPSO in Q1 2025 did
not adversely affect the drilling work. The
W7Z well on the Guillemot North West
field is set to be brought onto production
following the resumption of production
on the FPSO, and the EV02 on the Evelyn
field, drilled on time and under budget, is
set to follow shortly after restart. EV02
has shown similarly promising signs to
the other wells in the campaign, a further
endorsement of our subsurface team’s
ability to enhance production and deliver
value from mid-to-late life fields.
The COSL Innovator rig has now moved
to drill the final well in the campaign,
the BE01 well on the Belinda field (SQZ:
100%). Drilling began on 20 March and
the well is forecast to enter production
in early Q1 2026, following the drilling
and installation of subsea infrastructure
required for Belinda as a new field
development.
Other Production Assets
Erskine Field – Blocks 23/26a (Area
B) and 23/26b (Area B), Serica 18%
Erskine averaged 1,200 boepd net to
Serica in 2024 (2023: 1,325 boepd),
in what was very much a year of two
halves. Production issues during H1
2024 led to production averaging
500 boepd net to the Company,
following a compressor problem on the
host Lomond platform. Production was
re-established in early May, but taken
offline shortly thereafter for the planned
Lomond turnaround. Since the restart
of production on 26 August, the field
produced consistently at a rate of well
over 2,000 boepd net to Serica. A late
life compression project to extend the life
of the field is planned to be carried out
this year.
Columbus Field – Blocks 23/16f and
23/21a (part), Serica 75% (operator)
During the first half of 2024, Columbus
production was steady, averaging
1,800 boepd net to Serica in H1. Following
maintenance in Q3, which resulted in no
production in that quarter, production
resumed in October, averaging
2,000 boepd in Q4 and 1,400 boepd for
2024 as a whole (2023: 2,180 boepd).
Orlando Field – Block 3/3b,
Serica 100%
Orlando produced steadily in 2024,
averaging 3,300 boepd net to Serica
(2023: 3,500 boepd). Production has
also begun steadily in Q1, ahead of a
scheduled shut-in of 28 days, originally
planned for late October for annual
maintenance on its host platform Ninian,
which began in March 2025.
14 l Serica Energy plc Annual Report & Accounts 2024
Development
Kyle Redevelopment (P2616), Serica
(Operator) 100%
The Kyle Redevelopment, located in
Block 29/2c, is a previously producing
oilfield, 20 km southeast of Triton, which
was shut-in in 2020 solely due to the
decommissioning of the Banff FPSO
host facility. Kyle presents a potential
redevelopment opportunity with a single
horizontal well tied-back to Triton via
Bittern, similar to other Triton tie-backs.
Ongoing technical work since Serica
was awarded the licence in the 33rd
Licence Round in October 2023 has
led to an enhanced understanding of
the subsurface, and our work to date
has upgraded the Company’s view of
the potential of the asset. Subsurface
and front-end design work tenders are
now set to be issued later this year.
With the appropriate fiscal and licensing
environment, there is the potential for
first oil in 2028 on a project that could be
approximately twice the size of Belinda,
carrying over 11 mmboe of 2C resources.
Greater Buchan Area – Blocks
20/5a, 205d, 21/1d & 21/1a, Serica
30%
In February 2024 Serica completed the
acquisition of a 30% working interest in
the Greater Buchan Area (‘GBA’) licences
P.2498 and P.2170 with co-venture
partners Jersey Oil & Gas (20%) and NEO
Energy (50% and operator). The GBA
encompasses several proven oil and gas
accumulations – including Buchan Horst –
and exploration prospects, some 150 km
north-east of Aberdeen in the Outer
Moray Firth.
Buchan Horst is one of the largest
remaining undeveloped fields on the
UKCS, with an estimated 22.7 mmboe
of 2C resources net to Serica, and the
potential for 10,000 boepd peak net
production. The development project
would support an estimated 1,000 jobs
in the UK and includes the possibility
of powering the facilities from offshore
wind to achieve UKCS leading low carbon
emissions.
The viability of the project depends in
large part on the future UKCS fiscal and
regulatory regimes which are currently
subject to government consultations.
Exploration assets
Skerryvore – Blocks 30/12c (part),
30/13c (split), 30/17h, 30/18c and
30/19c (part), Serica 70% working
interest and operator
The P2400 Licence is located in the
Central North Sea, 60 km south of the
Erskine field. Serica will take on the
operatorship of the asset on completion
of our acquisition of Parkmead’s 50%
holding in the licence, with CalEnergy
holding the remaining 30%. The
commitment work programme includes
drilling an exploration well on the
Skerryvore prospect by the end of
September 2025. However, given the
lack of clarity regarding the future fiscal
and licensing regime, the joint venture
has applied for an extension to the
licence period.
Serica Energy plc Annual Report & Accounts 2024 l 15
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ENVIRONMENTAL, SOCIAL AND GOVERNANCE ('ESG')
Serica worked collaboratively with a variety of stakeholders
to support positive change and progress in key areas.
These included our partners, peers, industry bodies,
suppliers, government, and regulators.
Introduction from the CEO
At Serica, we want future generations to
benefit from the global energy transition.
It is our firm belief that the UK’s domestic
oil and gas industry can be a crucial
bridge to that future – boosting energy
security, generating home-grown jobs
and supporting an offshore supply chain
that services all sources of energy.
We are playing our part in the energy
transition through a commitment to the
North Sea Transition Deal, reducing GHG
emissions from our assets, transparent
reporting of ESG performance,
supporting the development of new
energy technologies and positively
influencing the wider industry.
I am proud to be leading a company
with clear values, with the importance
of acting in the right way prevalent
throughout the organisation. I am
pleased to reaffirm our commitment
to these values, retaining positive ESG
performance as a key indicator of our
success as a business, as we continue
to help meet the world's energy needs
through the safe and efficient production
of hydrocarbons, supporting the
communities in which we operate.
2024
2023
2022
2021
2020
2019
CO₂ emission (tns)
200,221
179,447
218,567
208,868
204,648
241,503
Carbon Intensity (kgCO₂/boe)
17.0
16.4
16.4
17.8
17.5
16.7
Our 2024 ESG Report is part of our
commitment to transparent reporting
which I encourage you to read.
A year of progress
2024 was another important year in our
ESG journey.
We are aligned to the North Sea
Transition Deal, a deal backed by the
UK Government, regulator and industry
to reach a net-zero UKCS basin by
2050, with interim targets to reduce CO2
emissions by 10% by 2025, 25% by 2027,
50% by 2030 and 100% by 2050 from the
2018 baseline. Our contribution to this
basin-wide emissions reduction target
from our operated Bruce Hub at the end
of 2024 is a reduction of 21% relative to
2018 on a CO2 basis. To continue this
momentum, during 2024 we progressed
key projects in our emissions reduction
plan, namely a major gas compression
upgrade and the first project phase of
flare gas recovery. These projects are
expected to be delivered in 2025 and
2026 respectively.
In 2024, our scope 1 emissions from the
Bruce installation totalled 200,221 tonnes
of CO2, the lowest level of operating
emissions over the last six years, except
for 2023. During 2023 the installation
was subject to an extended summer
shutdown for planned maintenance. We
also set an ambitious carbon intensity
target of 15.5 kg CO2/boe for the Bruce
installation in 2024. Unfortunately, as
a result of plant instability in the latter
half of the year, this target was narrowly
missed, with the carbon intensity being
17 kgCO2/boe. This was still below the
UKCS average of 21 kg CO2/boe ('NSTA').
2025 will be another important year
for Serica as we plan to deliver several
emissions reduction projects on
the Bruce installation. In particular,
successful implementation of the gas
compression upgrade project has the
potential to reduce carbon emissions by
10,000-15,000 tonnes per year on a like-
for-like production basis.
To ensure continued focus on operational
environmental performance, the Serica
Board has set the following 2025 Key
Performance Indicators:
1. BKR Scope 1 emissions
<210,000 tonnes of CO2
2. Company carbon intensity (net)
<20 kgCO2/boe
“The UK’s domestic oil and gas
industry can be a crucial bridge
to the future – boosting energy
security, generating home-grown
jobs and supporting an offshore
supply chain that services all
sources of energy”
16 l Serica Energy plc Annual Report & Accounts 2024
Greenhouse Gas (‘GHG’ ) Emissions
Disclosure
Our Scope 1 emissions are those
generated by the Serica operated
Bruce installation to provide power and
compression to produce and export
gas and oil from the Bruce, Keith and
Rhum fields. This includes fuel gas
consumption, diesel usage, flared and
vented gas.
The Bruce installation qualifies for the UK
Emissions Trading Scheme ('ETS') and so
our emissions are reported, audited and
verified in line with scheme requirements.
In 2024 our qualifying UK ETS emissions
were 200,221 tonnes of CO2. Energy
consumption on Bruce in 2024 was
930 GWh compared to 18,600 GWh in
exported energy supply to the UK.
Scope 2 emissions make up less than
0.01% of our total emissions and refer to
the indirect GHG emissions generated
from purchased or acquired electricity,
steam, heat, and cooling (GHG Protocol).
We calculate this by taking the electricity
invoices for our London and Aberdeen
offices and converting the energy usage
(KWh) into CO2e using conversion factors
set out in the “Greenhouse gas reporting:
conversion factors 2024” (Department
for Energy Security and Net Zero, 2024).
Using the location-based method,
our total Scope 2 emissions totalled
30 tonnes of CO2e in 2024. Using the
market-based method, our Scope 2
emissions came to 22 tonnes of CO2e.
Serica’s 2024 ESG Report provides more
detailed information on our Scope 1, 2
and 3 emissions for 2024 and previous
years. More details on the emissions
reduction projects and plans for 2025
and beyond are also presented.
Collaborating to accelerate progress
During 2024 we engaged with our
partners in support of emissions
reduction associated with the Triton
FPSO asset, in which Serica holds a
non-operated interest, to develop and
agree the project plan and resources
targeting emissions reduction from
power generation and achieve zero
routine flaring.
We continue to be actively involved in
a variety of industry-wide programs to
reduce GHG emissions from the UKCS,
including:
• Emissions reduction action plan group
(Asset Stewardship Taskforce)
• Atmospherics technical group and
Decarbonisation Forum (OEUK)
• Accelerate Deployment (Technology
Leadership Board)
During 2024 we contributed to the
development of an industry-wide
standard set of sustainability pre-
qualification questions, which will be
used by North Sea operators, raising the
profile of ESG performance in the supply
chain. This is due to launch in 2025.
We regularly interact with vendors to
Serica on ESG issues. As a result, in 2024
we have seen a number of the smaller
supply chain companies that we use
take steps to reduce their environmental
footprint with regards to waste
management and emissions.
A continued focus on Health and Safety
Protecting the health, safety and
wellbeing of everyone who works for
us is our primary focus. To support that
overarching responsibility, we delivered
a number of notable successes through
2024 on process safety improvement,
control of work, and the delivery of
training programs designed to build and
sustain our organisational competence
and capability. Against the backdrop of
these successes, however, we also faced
a number of challenges relating to our
safety performance. These challenges,
and the learnings from them, have
been used to frame and inform our way
forward in 2025.
While our performance in relation to
recordable injuries and LTIs on Bruce
continues to be admirable, our process
safety performance has not been what
we had hoped. Turning this performance
level around is a key focus area for the
whole organisation through 2025. Further
detail on our efforts can be found in our
ESG Report.
Empowering employees
Serica continues to take pride in a culture
that empowers employees to help deliver
projects that support our commitment
to the United Nations Sustainable
Development Goals. In relation to
biodiversity, we increased our support
for local schemes by becoming a River
Dee Guardian and co-sponsoring the
Northeast Bird Box project. The latter will
see 2,000 bird boxes delivered to schools
across Northeast Scotland by 2025.
Our staff-led committees continue to
positively impact local communities,
donating £169,117 to causes across the
UK and collectively raising thousands
more through fundraising activities such
as the Cateran Yomp and Ride the North.
In terms of education, we sponsored
science and technology initiatives such
as TechFest’s Mathematics Masterclass
Series and repeated Serica’s Summer
Placement Programme.
Regarding Diversity and Inclusion, we
were proud to become a Disability
Confident Committed employer. We
continued to support our D&I partner
organisations such as the Association
for Black and Ethnic Minority Engineers
and Autism and Neurodiversity North
Scotland. Serica achieved the Gold
Armed Forces Covenant Award,
recognising the work done both internally
and across industry to support veterans.
Governance
Serica’s Sustainability Committee is
appointed by the Board to assist in
fulfilling its responsibility to review and
provide oversight of the Company’s
strategies, goals, policies, performance
and disclosures related to sustainability
and ESG matters.
During 2024, the Board held a dedicated
ESG session focusing on emerging
regulations, reporting requirements and
climate risks and opportunities.
Following best practice, the Company
conducted a Double Materiality
Assessment to identify and prioritise
material topics.
Serica Energy plc Annual Report & Accounts 2024 l 17
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Financial Statements
“We retain a strong balance
sheet and an outlook that
promises material free cash
flow, enabling us to drive
growth and deliver returns
for shareholders”
FINANCIAL REVIEW
Our financial performance in 2024 was
impacted by the production issues
experienced at Triton, which resulted
in a material loss of production and
revenue, albeit that our after tax results
benefited from a substantial reduction
in the tax charge in 2024 as compared
to 2023.
Combining this with a year of material
capital expenditure on our new wells
in the Triton area 2024 was essentially
neutral on a free cash flow basis.
However, even though Q1 2025 has
also witnessed unrelated production
downtime at Triton, we view these as
temporary issues that should not impact
Serica’s ability to continue delivering
on our strategy. We retain a strong
balance sheet with very low net debt
and decommissioning liabilities, and an
outlook that generates material free
cash flow in coming years, enabling us
to have capital allocation optionality
to sustain our production and deliver
returns for shareholders while retaining
resilience for unforeseen events.
Capital allocation priorities
The United Kingdom continues to have
an oil and gas tax rate that is unsuitable
for a mature oil and gas basin, and
the industry urgently needs clarity
regarding the future regime to enable
long-term investments to be made
with confidence. The implementation
of the new regime cannot wait, as the
government currently intends, until
2030. Serica will be playing its part in
responding to the recently launched
consultations on the future tax regime
and licensing and we expect to learn the
outcome of these as well as the already
concluded environmental consents
consultation later in the year. Until this
uncertainty is removed, we will remain
prudent in our capital allocation, focused
on completing the tax-efficient, short-
cycle investments in our portfolio which
are delivering rapid returns.
Our investment in 2024 and continuing
into 2025 has focused on the Triton
drilling campaign, where individual wells
can pay back comfortably within a year.
In 2024, $260 million pre-tax capex was
allocated towards drilling at Triton as
well as some well intervention activity
at BKR and certain pre-FID costs on
our E&E assets. We are very pleased
with the drilling results funded by this
investment, and once steady production
from the Triton FPSO is restored
the wells drilled in 2024 will boost
production and revenues.
Although the new government
increased the headline tax rate to
78% and removed the EPL Investment
Allowances, the Autumn Budget did
importantly retain first year capital
allowances at 100%. The retention of
full expensing (in common with all other
sectors of the UK economy) means
that short-cycle investments will likely
continue to deliver positive returns,
and we expect them to remain a key
component of our capital allocation
priorities going forward. We expect pre-
tax capex to be in the range of $220-
250 million in 2025, with the majority of
spend focused on the continuation of
the Triton drilling programme, including
the more extensive subsea work
required for our Belinda development,
where drilling has just commenced. Our
subsurface team continue to mature
other opportunities across the portfolio,
especially in the Bruce area, and we are
hopeful of being able to mature further
infill opportunities enabling us at least to
offset natural decline in the near-term.
The combined effect of our investment
programme and the associated capital
allowances, together with continuing to
retain over $1 billion pool of ring-fence
losses, materially benefitted our tax
position in 2024. Although the blended
headline tax rate in 2024 increased to
75.5% from 75% in 2023, as a result of
the 3% increase in the EPL rate from
1 November, our book tax rate reduced
from 66% in 2023 to 42% in 2024.
Although we paid cash tax in 2024 of
$153 million (2023: $348 million) our
current tax charge for the year, before
adjustment in respect of prior years,
was reduced to only $14 million (2023:
$226 million). This sharply reduced
current tax charge reflected the impact
18 l Serica Energy plc Annual Report & Accounts 2024
of investment and capital allowances
but, most materially, for the first time,
also incorporated group relief for in year
losses of the subsidiaries which hold our
Triton area field interests being applied
against the tax charge at our BKR entity.
The combination of these effects
has also meant that our tax loss pool
remained essentially unchanged at just
over $1 billion dollars at 31 December
2024 (2023: $1 billion). In addition,
following completion of the Parkmead
acquisition we would expect to extend
this tax shield by approximately a
further $250 million of carried forward
tax losses.
We now expect our loss pool to provide
shelter for our Triton production
through to the end of the decade and
will continue to explore options to
accelerate this use where possible.
Robust balance sheet
Our balance sheet remains robust, with
material cash generation expected
once we have Triton back onstream,
enabling us to combine investment in
sustaining and growing production with
maintaining our strong track record of
returning capital to shareholders. The
resilience of this strategy for the delivery
of shareholder value was illustrated
in 2024, as we returned $132 million
to investors, inclusive of dividends
and share buyback, while investing
approximately twice that amount in the
portfolio, notwithstanding the production
challenges we experienced especially in
the latter part of the year.
Our liquidity position remains
comfortable following the December
redetermination of our RBL as well as
available cash, and gives us material
optionality over our expenditure, as we
continue to invest in organic growth and
seek M&A that will deliver further value
to shareholders.
Change in presentational currency
Following the acquisition of Tailwind,
which completed in March 2023, and
the refinancing of the Group’s RBL in
January 2024, as communicated at the
time of our 2024 half-year results, the
Directors elected to change the Group’s
presentational currency from Pounds
Sterling to US Dollars with effect from
1 January 2024. The Group believes that
the presentational currency change will
give investors and other stakeholders
a clearer understanding of Serica’s
performance over time and align with
the presentational currency of its peers.
As a result of this change, the results for
the year ended 31 December 2023 and
the balance sheet as at 31 December
2023 have been restated in US
Dollars ($).
Further analysis of the summary metrics
provided in the Summary Financial
Information table below is detailed in the
following pages of this Financial Review.
Summary Financial Information
Units
2024
2023
PF 2023
Production and sales realised prices
Production
boepd
34,600
35,200
40,100
Sales volumes
mmboe
12.2
12.3
14.4
Natural Gas (net of NTS system charges)
p/th
76
93
94
Crude Oil
$/bbl
75
71
67
NGLs
$/MT
491
455
453
Income Statement
Restated
Restated
Revenue
$ million
727
789
917
EBITDAX¹
$ million
379
475
n/a
Profit before taxation
$ million
160
380
n/a
Profit after taxation
$ million
92
128
n/a
Basic earnings per share
cents
24
35
n/a
Other key financial figures
Capital expenditure2
$ million
278
99
n/a
Operating cashflow
$ million
452
470
n/a
CFFO less current tax¹
$ million
403
242
n/a
Dividends paid in year
$ million
113
110
n/a
Share buyback
$ million
19
–
–
1
See Reconciliation of non-IFRS measures for further detail.
2 Capital expenditure includes decommissioning costs
Serica Energy plc Annual Report & Accounts 2024 l 19
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
FINANCIAL REVIEW continued
Production for 2024 was 34,600 boepd, compared to 35,200 boepd for 2023 and 40,100 boepd for 2023 on a pro forma basis.
The 2 million boe lower annual production as compared to the 2023 Pro Forma level, largely reflected the operational challenges
we experienced with the Triton FPSO. Realised sales prices for gas for the period were lower than for 2023, averaging 76 pence
per therm (2023 pro forma: 94 pence per therm), although realised oil prices were slightly higher in 2024 averaging $75/bbl (2023
pro forma: $67/bbl).
Serica generated EBITDAX of $379 million in 2024 compared to $475 million for 2023 and a profit before taxation down nearly 60%
to $160.5 million for 2024 compared to $380.4 million for 2023. However, after a materially lower tax charge of $68.1 million (2023:
$252.6 million), profit after tax for the year was down by just under 30% to $92.4 million compared to $127.8 million for 2023.
Sales revenues
Revenue
Units
2024
Restated
2023
Restated
PF 2023
Total revenue
$ million
727
789
917
Gas Sales
$ million
375
431
445
Crude Oil
$ million
317
332
446
NGLs
$ million
35
26
26
The total 2024 sales revenue was $727.2 million, compared to pro forma 2023 sales revenue of $917.2 million. The reduction in like
for like sales is largely driven by the impact of 2024 Triton unplanned outages, which resulted in over 2 million bbls lower volumes of
oil sales as well as a lesser impact from marginally lower realised commodity prices, primarily driven by the reduction in NBP market
prices and realised gas prices.
Sales comprised gas revenue of $374.7 million (PF 2023: $445.0 million), oil revenue of $317.5 million (PF 2023: $446.6 million)
and NGL revenue of $35.0 million (PF 2023: $25.6 million). The fall in gas revenue was driven by lower realised pricing (76 pence
per therm as compared to 94 pence per therm PF 2023) while the like-for-like oil revenue was down by almost 30% reflecting oil
production down nearly 40% partially offset by higher realised oil prices ($75.4 per barrel as compared to $66.8 per barrel PF 2023).
Like-for-like NGL revenues were up by 36%, with 25% higher sales volumes as well as higher realised prices for NGLs ($491 per
metric tonne as compared to PF 2023: $453 per metric tonne).
Total product sales volumes for the period comprised approximately 386.7 million therms of gas (PF 2023: 379.6 million therms),
4.2 million lifted barrels of oil (PF 2023: 6.7 million barrels), and 70,872 metric tonnes of NGLs (PF 2023: 56,630 metric tonnes).
This amounted to overall sales volumes some 2 million boe lower in the period of 12.2 million boe (PF 2023: 14.4 million).
Gross profit
The gross profit for 2024 was $223.2 million compared to $382.1 million for 2023. Overall cost of sales of $504.0 million compared
to $406.8 million for 2023. This comprised $337.3 million of field operating and lifting costs (2023: $281.6 million), movements in oil
over/underlift increased to a credit of $20.6 million (2023: credit of $11.5 million), and $187.3 million of non-cash depletion charges
(2023: $136.3 million).
Cost of sales
Units
2024
Restated
2023
Total operating costs
$ million
504
407
Field operating costs
$ million
330
273
Lifting costs/other
$ million
8
9
Movement in over/underlift
$ million
(21)
(11)
DD&A
$ million
187
136
The increase in total operating costs largely reflected a full year contribution from the enlarged business including Tailwind
as compared to 2023, with a significant proportion of fixed element costs. Absolute field operating costs as reported were
approximately 20% higher than 2023, largely reflecting a full year of the combined business. This translated into $/boe of $26
as compared to approximately $21 for 2023, with the increased unit rate mainly resulting from reduced production due to the
unplanned Triton Area shut-ins during 2024.
20 l Serica Energy plc Annual Report & Accounts 2024
EBITDAX, operating profit before net finance costs and tax
EBITDAX for 2024 was $379 million compared to $475 million for 2023.
Operating profit to EBITDAX1
Units
2024
Restated
2023
Operating profit
$ million
186
400
Add back DD&A and depreciation
$ million
188
136
Add back E&E costs
$ million
2
13
Add back/(Deduct) unrealised hedging
$ million
32
(25)
Deduct contract revenue – other
$ million
(31)
(30)
(Deduct)/add back transaction costs and other
$ million
(2)
19
Add back share-based payments
$ million
4
4
Deduct gain on acquisition
$ million
–
(42)
EBITDAX¹
$ million
379
475
1 See Reconciliation of non-IFRS measures for further detail.
The operating profit for 2024 was $186.5 million compared to $399.9 million (inclusive of a gain on acquisition of $41.9 million on the
Tailwind transaction) for 2023.
Net hedging expense of $43.5 million (2023: $5.8 million income) comprised unrealised hedging losses of $31.8 million (2023: gains
of $25.3 million) and realised hedging losses of $11.7 million (2023: $19.5 million losses). Unrealised hedging losses arose from the
non-cash movement in valuation of Serica’s 2024 period-end commodity hedge positions, with the main contributor being mark to
market of gas price derivatives which were entered into during 2024 to manage commodity price risks and to comply with minimum
hedging requirements under the Group’s RBL facility. Realised hedging expense during 2024 primarily related to out of the money
UKA Emission Trading Scheme (‘UKA ETS’) carbon price swaps which have now rolled off.
Contract revenue of $31.3 million (2023: $30.0 million) arose from the partial unwind of an underlying revenue offtake contract that
was fair valued in connection with the Tailwind acquisition in 2023. An original liability of $66.7 million was recognised which is
released to the Income Statement across 2023, 2024 and 2025 as the underlying contract unwinds, with the final unwind impact of
$5.4 million to be reflected in 2025.
Administrative expenses for 2024 of $21.6 million reflected a full year period of the enlarged group activities compared to
$24.5 million for 2023. The 2023 comparable period also had additional separately disclosed transactions costs of $12.5 million
relating to fees and other transaction costs associated with the Tailwind acquisition.
Profit before taxation and profit after taxation for the period
Profit before taxation for 2024 of $160.5 million (2023: $380.4 million) included a $2.5 million charge arising from an increase in the
fair value of financial liabilities (2023: $9.4 million charge), $13.9 million of finance revenue (2023: $16.8 million) and $37.4 million of
finance costs (2023: $26.9 million).
Finance revenue of $13.9 million (2023: $16.8 million) primarily represented interest income earned on cash deposits and decreased
as a result of lower average cash balances held in the period compared to 2023. Finance costs of $37.4 million (2023: $26.9 million)
included interest payable and other financing fees on the RBL facility, as well as the non-cash discount unwind on decommissioning
provisions and other minor finance costs. The increase reflects the full period of interest charges and fees on the RBL in 2024
compared to the shorter post-acquisition period in 2023.
The 2024 taxation charge of $68.1 million (2023: charge of $252.6 million) comprised current tax charges, before adjustment in
respect of prior years, of $14.1 million (2023: $225.8 million), and a deferred tax charge of $54.2 million (2023: $24.4 million). The
sharply reduced current tax charge reflected the materially lower profit before tax but also the group benefiting, for the first time,
from the application of in year group relief effects.
Serica Energy plc Annual Report & Accounts 2024 l 21
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
Reported and Effective tax rate
Units
2024
Restated
2023
Profit before tax
$ million
160
380
Current tax
$ million
14
228
Deferred tax charge
$ million
54
24
Tax charge for the period
$ million
68
252
Book tax rate
%
42%
66%
Applicable ring-fence aggregate tax rate
%
75.5%
75%
Overall, profit after taxation for 2024 was $92.4 million compared to a profit after taxation of $127.8 million for 2023. This resulted
in an earnings per share of 24 cents (2023: 35 cents) after taking into account the weighted average number of ordinary shares
in issue.
Group balance sheet
Serica retains a robust balance sheet with a conservative adjusted net debt to EBITDAX ratio of 0.22x as at 31 December 2024. This
position of balance sheet strength and ample liquidity gives the group flexibility in capital allocation including the ability to fund its
ongoing capital investment programmes while continuing to support distributions to shareholders.
Assets
31
December
2024
$ million
Restated
31
December
2023
$ million
E&E
20
2
PP&E
992
906
Deferred tax asset
55
107
Inventory
15
14
Trade and other receivables, financial assets
164
177
Corporate tax receivable
71
–
DSA Security
–
35
Cash & cash equivalents
148
335
Total Assets
1,465
1,576
Equity and liabilities
31
December
2024
$ million
Restated
31
December
2023
$ million
Equity
797
834
RBL borrowings, drawn amounts
231
271
RBL unamortised fees
(12)
–
Provisions
146
149
Financial liabilities
124
93
Corporate tax payable
–
68
Contract liabilities
5
37
Trade and other payables, lease liabilities
174
124
Total Equity and Liabilities
1,465
1,576
FINANCIAL REVIEW continued
22 l Serica Energy plc Annual Report & Accounts 2024
Total property, plant and equipment increased from $905.8 million at year end 2023 to $991.6 million at 31 December 2024.
PP&E additions comprised book capital expenditure including accruals during 2024 of $264.0 million across the Triton Area
($200.0 million) and BKR ($54.3 million) asset hubs and Erskine field ($9.7 million). These were partly offset by depletion charges for
2024 of $188.3 million.
The net deferred tax asset of $55.1 million at 31 December 2024 compares to $107.1 million at year end 2023. This comprised the
recognition of deferred tax assets in relation to tax losses and future relief available on decommissioning of $577 million, partially
offset by deferred tax liabilities of $522 million arising on PP&E balances. Deferred tax liabilities arising upon the Group’s PP&E
balances will be released in future periods as those balances are depleted. The overall reduction in Net Deferred Tax Assets of
$52.0 million as compared to 2023 largely arose from increased deferred tax liabilities recognised on higher PP&E balances and
reflecting the increase in the EPL rate from 35% to 38%, and a reduction in the deferred tax asset recognised on the Group’s oil
revenue contract liability which substantially unwound during the year.
Decommissioning security advances of $35.1 million at 31 December 2023 were recovered and added to cash balances during H1
2024 when replaced shortly after completion of the new RBL facility by security in the form of letters of credit issued under the new
financing facility.
The decrease in cash balances from $335.4 million at 31 December 2023 to $148.5 million at 31 December 2024 reflected cash
flow from operations of $452 million offset by $153 million of cash tax payments, capital and abandonment expenditures paid of
$278 million, $113 million of dividend payments, $19.0 million in respect of our inaugural share buyback programme conducted
between April and June and $52.5 million on debt repayments in the period.
Current trade and other payables increased to $168.3 million at 31 December 2024 from $121.7 million at the end of 2023 reflecting
the higher payable balances in relation to the Group’s capital and decommissioning expenditure and higher deferred revenue in
respect of certain revenue contracts. The UK corporation tax payable reversed from the prior year to a receivable of $71.0 million
at 31 December 2024 (31 December 2023: $68.3 million payable) and reflects a recovery of overpayments of corporation tax,
supplementary charge, and the EPL in respect of 2024 resulting primarily from the application of group tax relief.
Derivative financial liabilities of $42.4 million at 31 December 2024 represent the mark to market valuation of gas and oil hedging
swap and collar products in place at the year end. New gas and oil hedging arrangements were entered into during 2024 to manage
commodity price risks where management considered this prudent and/or available on attractive market terms and to comply with
minimum hedging requirements under the Group’s RBL.
Contract liabilities of $5.4 million at 31 December 2024 (31 December 2023: $36.7 million) reflect the outstanding portion of an
underlying revenue offtake contract that was fair valued in connection with the Tailwind acquisition in March 2023. An original
liability of $66.7 million was recognised in 2023 which is released to the Income Statement across 2023, 2024 and 2025 as the
underlying contract unwinds.
Non-current financial liabilities of $81.9 million (31 December 2023: $82.8 million) comprise remaining deferred consideration
projected to be paid under the BKR acquisition agreements of $49.7 million (31 December 2023: $44.9 million) and royalty liabilities
of $32.2 million (31 December 2023: $37.9 million) for amounts payable to third parties under the terms of Triton asset acquisitions
previously made by Tailwind. Current financial liabilities at 31 December 2023 reflected the final contingent consideration payment
of shares issued in March 2024 in respect of the Tailwind acquisition.
Provisions of $146.0 million (31 December 2023: $148.8 million) predominantly relate to future decommissioning obligations and
are split between current balances of $nil million (31 December 2023: $16.5 million) as decommissioning activities were undertaken
during the year, and non-current balances of $146.0 million (31 December 2023: $132.3 million). The small decrease from the prior
year was mainly due to expenditure in the period on the completed Arthur field programme partially offset by a charge from the
unwinding of the discount applied. Increases were partially offset by currency translation adjustments.
Interest bearing loans of $219.1 million at 31 December 2024 represent drawn amounts of $231.0 million net of unamortised facility
fees of $11.9 million under the $525 million RBL facility entered into in January 2024 which replaced the previous RBL facility
assumed with the Tailwind acquisition (31 December 2023: $271.2 million).
The initial drawdown under the new RBL facility was $283.5 million (covering a repayment of $271.2 million for the previous RBL and
$12.3 million of interest and new facility fees) in January 2024 and a repayment of $52.5 million was made in February 2024. The
redetermined total amount available for drawdown under the facility at 31 December 2024 was at a level capped by the facility size
of $525 million.
Overall, net assets have decreased from $834.2 million at year end 2023 to $796.5 million at 31 December 2024.
The increase in share capital from $245.3 million to $245.5 million arose from shares issued following the exercise of share
options and the nominal value of shares issued for the Tailwind acquisition, while the decrease in other reserves from $37.7 million
to $37.5 million arose from share-based payments related to share option awards. The merger reserve of $286.6 million in the
consolidated Group accounts arose in connection with the shares issued for the 2023 Tailwind acquisition.
Serica Energy plc Annual Report & Accounts 2024 l 23
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
FINANCIAL REVIEW continued
Cash balances and future commitments
Current cash position and price hedging
At 31 December 2024 the Group held adjusted net debt of $82.5million as compared to adjusted net cash of $99 million at
31 December 2023.
Adjusted Net Cash/(Debt)
31
December
2024
$ million
Restated
31
December
2023
$ million
Interest bearing loan
(219)
(271)
Add back unamortised fees
(12)
–
Cash & cash equivalents
148
335
DSA Security
–
35
Adjusted Net (debt)/cash
(83)
99
As at 27 March 2025, the Company held cash and cash equivalents of $141 million and debt drawings of $231 million.
Hedging
Serica carries out hedging activity to manage commodity price risk, to meet its contracted arrangements under its RBL facility and
to ensure there is sufficient funding for future investments. Serica held the following instruments as at 31 December 2024:
Oil hedges
2025
2026
Weighted Average
Units
Q1–25
Q2–25
Q3–25
Q4–25
Q1–26
Q2–26
Q3–26
Put Net
$/bbl
–
–
–
–
–
–
–
Swap price
$/bbl
68
75
75
75
75
–
–
Collar floor net
$/bbl
68
69
68
68
69
–
–
Total weighted average
$/bbl
68
69
69
69
70
–
–
Collar ceiling
$/bbl
96
88
88
86
86
–
–
Hedged Volume
Kboe/d
10
6
6
5
4
–
–
Gas hedges
2025
2026
Weighted Average
Units
Q1–25
Q2–25
Q3–25
Q4–25
Q1–26
Q2–26
Q3–26
Put Net
p/therm
–
–
–
–
–
–
–
Swap price
p/therm
84
87
86
90
94
–
–
Collar floor net
p/therm
80
70
70
82
82
64
–
Total weighted average
p/therm
81
82
81
85
85
64
64
Collar ceiling
p/therm
125
121
121
135
135
99
99
Hedged Volume
Kboe/d
4
6
5
7
6
5
5
Included in the Q1 2025 hedged volumes are volumes at fixed pricing under oil offtake agreements for approximately 0.4 million
barrels at an average price of $61 per barrel. These legacy hedges were applied to an individual oil tanker lifting from the Triton area
FPSO and fully utilised during January 2025.
24 l Serica Energy plc Annual Report & Accounts 2024
Field and other capital commitments
Serica’s planned 2025 investment programme includes two remaining wells from the 2024-25 drilling campaign in the Triton Area
(Evelyn Phase 2 (EV02) and Belinda) and further capital work on the Bruce facilities including resilience upgrades as well as a flare
gas recovery project.
At 31 December 2024, the Group had commitments for future capital expenditure relating to its oil and gas properties which relate
primarily to the remaining Triton Area well programme (including EV-02 and Belinda), other Triton area work (including a new water
injection line) and other capital works on Bruce. The Group’s only significant exploration commitment work programme includes
drilling an exploration well on the Licence P2400 (Skerryvore) prospect by the end of September 2025. Given the lack of clarity
regarding the future fiscal and licensing regime, the joint venture has applied for an extension to the licence period.
Cash projections are run periodically to examine the potential impact of extended low oil and gas prices as well as possible
production interruptions. Serica currently has substantial net cash resources and relatively low operating costs per boe which means
that the Company is well placed to withstand such risks and its capital commitments can be funded from existing cashflow in most
scenarios.
Other
Asset values
At 31 December 2024, Serica’s market capitalisation stood at $660 million based upon a share price of 135.2 pence which exceeded
the net asset value of $796.5 million. By 28 March 2025 the Company’s market capitalisation had increased to $697 million.
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 Group is exposed and monitors any agreed mitigating actions. The overall
strategy for the protection of shareholder value against these risks is to carry a broad portfolio of assets with varied risk/reward
profiles, to apply prudent industry practice, to carry insurance where both available and cost effective and to retain adequate
working capital.
Serica has built a strong working capital reserve which is available to respond to a range of risks including production interruptions,
severe commodity price falls and unexpected costs. To supplement this, the Group carries business interruption insurance to
mitigate the impact of ongoing operating costs over sustained periods of production shut-in beyond an initial sixty days, where
caused by events covered under such policies. The Group also uses price hedging instruments to help manage field revenues where
considered cost effective and to meet minimum hedge requirements under its debt financing facility.
The introduction of the Energy Profits Levy in May 2022 and its subsequent increases and extensions has increased the perceived
risk of fiscal instability for UK oil and gas producers. The UK government is conducting consultations on future fiscal and regulatory
regimes for the upstream sector in the UK, which are further sources of uncertainty. Serica monitors UK government policies and
routinely participates in relevant consultation processes.
The principal risks currently recognised and the mitigating actions taken are as follows:
Investment Returns: The Group seeks to invest in a portfolio of oil and gas assets and acreage capable of delivering returns
to shareholders. This is principally conducted through acquisitions of development or producing assets to which it can add
further value, efficient operations and organic investment. Delivery of this business model carries a number of key risks.
Risk
Mitigation
Business conditions may deteriorate and
stock market support may be eroded, lowering investor
appetite and hindering fundraising
• Management regularly communicates its strategy to
shareholders
• Focus is placed on building a diverse and resilient asset
portfolio capable of offering investment options throughout
the business cycle
• Serica has an RBL debt facility with a diverse group of
international banks to end 2029.
Each investment carries its own risk profile and no outcome
can be certain
• Serica aims to avoid over-exposure to individual assets, to
identify the associated risks objectively and mitigate these
where practical
Serica Energy plc Annual Report & Accounts 2024 l 25
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
Operations: Operations may not go according to plan leading to damage, pollution, cost overruns or poor outcomes.
Risk
Mitigation
Production may be interrupted generating significant revenue
loss whilst costs continue to be incurred
• The Group seeks to diversify its revenue streams
• Management determines and retains an appropriate level of
working capital and liquidity
• The Group carries business interruption cover
Safety may be compromised or control of wells may be lost
• Safe operating procedures are applied and updated as
appropriate
• Emergency response planning is carried out and rehearsed
regularly
Asset integrity of the production facilities may cause
production or HSE disruptions
• Strict adherence is applied to Group ‘Integrity Management
Framework’ and 'Performance Standards'
• The Group runs a comprehensive maintenance programme
and assurance process
Third party offtake routes may experience restrictions or
interruptions. Full availability in certain systems may depend
upon production from other fields
• The Group aims to diversify its exposure to offtake routes
where possible
• The Group carries business interruption cover
Capital programmes may be delayed and costs may overrun
• Planned programmes incorporate the potential impact of
normal delays and overruns
• The Group retains working capital reserves
The Company is reliant upon its IT systems to maintain
operations and communications
• The Group employs specialist support
• Protection against external intrusion is incorporated within
the system and tested regularly
Excessive flaring causes increased emissions and exceeds
guidelines
• Close monitoring of flaring is conducted and targets set
• Work is ongoing to eliminate routine flaring from assets
Personnel: The Group relies upon a pool of experienced and motivated personnel to conduct its operations and execute
successful investment strategies
Risk
Mitigation
Key personnel may be lost to other companies
• The Remuneration Committee regularly evaluates
incentivisation schemes to ensure they remain competitive
• The Group seeks to build depth of experience in key
functions to ensure continuity
Personal safety may be at risk in demanding operating
environments, typically offshore
• 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
FINANCIAL REVIEW continued
26 l Serica Energy plc Annual Report & Accounts 2024
Political and commercial environment: World share and commodity markets and political environments continue to be volatile
Risk
Mitigation
Tax rates and allowances may be varied at short notice,
significantly reducing retained income and adding risk to
future investment planning
• Management will utilise investment incentives where
available and consider geographical diversification
Volatile commodity prices mean that the Group cannot be
certain of the future sales value of its products
• Planning and forecasting considers downside price scenarios
• Oil and gas floor price hedging is utilised where deemed
cost effective
• Price mitigation strategies are considered at the point of
major capital commitment
Sanctions imposed by the U.S. government may threaten
continuing production from the Rhum field
• The U.S government via OFAC has provided licences
and written assurances enabling services to be provided
without breaching U.S. sanctions. A new OFAC License and
secondary sanctions assurance was received in February
2025 and runs until 28 February 2027
• Serica operates comprehensive controls to ensure
compliance with the terms of the OFAC license
• The renewal process is initiated well in advance of renewal
dates
The UKCS licensing regime under which Serica’s operational
rights and obligations are defined may be subject to future
change
• Serica maintains regular communication with the relevant UK
government departments and regulatory authorities
• The Group participates in relevant UK government
consultations
Serica’s reputation may be damaged by operational incidents
or adverse publicity impacting its share price, ability to raise
finance or sustain operations
• The Group seeks to comply with all relevant legislation and
regulations
• The Group applies safe operating procedures and adheres to
good governance practices
Climate change brings operational and reputational risks
• The Group operates responsibly and seeks to comply with all
relevant legislation and regulations
• Further details on the risks, mitigations and associated
disclosure requirements, are covered in the following section
on ‘TCFD’.
Task Force for Climate-related Financial Disclosures ('TCFD')
Details of Serica’s ESG strategies directed towards reducing carbon emissions and contributing to the UK’s Net Zero target are
described on pages 16 and 17 and in the Company’s separate ESG Report.
Acting responsibly is one of Serica’s core values and is reflected throughout its business activities. Climate-related risk management
is increasingly integrated into executive decision-making and is factored into Serica’s strategic objective to grow its business.
The TCFD framework aims to formalise the implementation and reporting of financial disclosures related to climate change. Serica
has reviewed guidance issued by the TCFD regarding the identification, management and reporting of climate-related financial risks
and has continuously developed its capabilities to analyse and report climate-related risks.
This disclosure has been made on a voluntary basis and is not yet in full alignment with all 11 recommendations of the TCFD.
The Company supports the release and implementation of the IFRS S1 and S2 standards and, in 2025, Serica will look at further
enhancing its climate-related risk reporting in line with the IFRS standards, addressing gaps in its disclosure.
Serica Energy plc Annual Report & Accounts 2024 l 27
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
Governance
The Serica Board of Directors comprises highly experienced oil and gas industry professionals and is ultimately responsible for the
governance and management of climate change and climate-related risks and opportunities.
The Board recognises climate change as a material risk to Serica with potential financial implications. It understands that responding
to the risks associated with climate change and building resilience is integral to the long-term success of the Company.
It reviews major risks regularly, receives updates from its committees and takes direct reports from key personnel. It sets general
policy related to climate risks and opportunities, identifies where further actions are required and delegates authorities accordingly.
This includes progress on emissions reduction, general environmental performance, developments in climate-related regulation and
cost impacts.
At the end of 2024, there were five committees with accountabilities relating to climate-related risks and opportunities:
• The Sustainability Committee reports to the Board on the effectiveness of the Company’s ESG programmes and the management
of climate-related risks and opportunities. The Committee also reviews Serica’s environmental performance for both operated
and non-operated assets and has input into metrics and targets used to measure environmental performance. The Committee
aids in steering Serica’s long-term decarbonisation strategy ensuring that emissions reduction projects are progressing in a timely
manner.
• The Health, Safety and Environment Committee reports to the Board on the effectiveness of the Company’s HSEQ programme
and ensures that risks, including environmental or carbon-related hazards, are fully assessed and appropriately mitigated. In
addition, this committee ensures that all personnel, including contractors employed by the Company, are fully aware of their HSE
responsibilities and have been properly trained.
• The Audit Committee reviews the Company’s internal financial controls systems that identify, assess, manage and monitor
financial risks, and other internal control and risk management systems. They approve the statements to be included in the
Annual Report concerning internal control, financial risk management, including the assessment of principal risks and emerging
risks, climate-related financial disclosures and the viability statement.
• The Remuneration Committee determines employee compensation packages and bonus structures which incorporate incentives
to deliver climate-related objectives.
• The Nominations Committee ensures that Serica’s Board and Executive team have the right skills to manage the company’s risks
and execute its strategic vision. It also assists in evaluating the performance of the Board, recruitment and succession planning.
Serica’s ESG Team provides information to the Board on climate-related topics and issues, such as government policy, changes
to relevant legislation and insights from the energy industry. This information may be provided directly in Board papers or via the
quarterly Sustainability Committee meetings. During 2024, ESG was both the subject of a dedicated agenda item for a Board
meeting and separately as part of the Board’s corporate strategy day.
The Senior Leadership Team is kept up to date on climate-rated issues during the weekly management team meeting. Members
of Serica’s Senior Leadership Team are also a part of industry forums and taskforces. These groups are run by industry bodies
and regulators providing members with updates on current and upcoming legislation and expectations, as well as creating the
opportunity to hear from peers and other external organisations about their activities. Serica is represented on the OEUK (Offshore
Energies UK) and NSTA ESG Forums and relevant information is shared within Serica as appropriate.
Strategy
The Company’s focus remains on acquiring or developing oil and gas assets, extending the producing lives of mid-to-late life assets
and developing additional reserves where this can be done with a low incremental carbon footprint, typically by utilising existing
processing and export facilities.
Serica aligns with the UK government’s commitment to achieving Net Zero emissions by 2050. Although our current assets are
estimated to cease production well before 2050, Serica takes into account the emissions reduction targets of the North Sea
Transition Deal when making strategic decisions.
Serica uses the risk categories recommended by the TCFD to identify and assess climate-related risk and opportunities: namely
transition risks, including policy, legal, technology, market changes, and physical risks resulting from event driven (acute) or
longer-term (chronic) shifts in climate patterns. Risks are assessed in line with Serica’s internal risk management practices. The
most material climate related risks form the basis of the Company’s Climate Risk Register, which is reviewed by the Sustainability
Committee.
The UK relies on oil and gas imports for around half its requirements. While this situation exists, oil and gas produced in the
UK North Sea plays a valuable role in protecting the country’s energy security while also contributing to economic growth and
quality jobs. Domestic production, especially of gas, also offers a lower carbon source of energy than certain other fuels including
imported LNG.
Serica also recognises, however, the opportunities that may be presented by the transition to a low carbon economy. Below is a
table summarising the actions Serica has taken to apprise itself of such opportunities.
FINANCIAL REVIEW continued
28 l Serica Energy plc Annual Report & Accounts 2024
Opportunity Area
Opportunity Description
Opportunity Exploitation Actions
Markets and
Resilience
Strengthening of relationships with key stakeholders,
including investors, banks, regulators, government
bodies, industry associations, employees, and
communities. This could enhance access to funding
and sustain ongoing investor support as well as
assist in the identification of new developments, and
acquisition opportunities and maintain heightened
social licence to operate
The company actively works with ESG Rating
Agencies to ensure that it’s scoring accurately
reflects performance
The company transparently reports sustainability
information in line with several internationally
recognised frameworks
Serica's Group Investor Relations Manager has
an ongoing dialogue with existing and potential
shareholders to understand their expectations
The company has representatives on both regulator
and industry body forums and takes an active role in
these groups
Products, Services
and Resource
Efficiency
Third parties may seek to sell upstream oil and gas
assets to redirect investment, creating potential
acquisition opportunities for Serica
Serica pro-actively seeks UKCS M&A opportunities
Products, Resource
Efficiency and
Markets
Fiscal incentives or government funding may be
available for in technology and carbon reducing
activities
Serica evaluates emissions reduction initiatives
and technologies that could qualify for investment
incentives (eg, Decarbonisation Allowance)
Serica monitors trends and potential opportunities
in the CCUS and other energy transition businesses
that might complement its core E&P business.
Products, Resource
Efficiency and
Markets
Collaboration with other asset and infrastructure
owners may lead to innovative solutions such as
sharing power sources and area electrification
schemes
Serica is a participant among many other upstream
operators in the WINTOG Programme, which aims
to assess the feasibility of fully/ partially powering
offshore installations via the grid or using wind
turbine generators
Serica remains engaged in INTOG developments in
the CNS area, relevant to the potential Buchan Horst
development
Serica has engaged in identifying, screening and
assessing low carbon power opportunities with other
Operators
Further work will be undertaken in 2025 to inform Serica’s understanding of the opportunities arising from the energy transition.
Serica Energy plc Annual Report & Accounts 2024 l 29
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
FINANCIAL REVIEW continued
Scenario Analysis
The TCFD recommends that business resilience to climate risks should be assessed through scenario analysis. Scenarios can either
by exploratory or normative, whereby they begin with an end goal, i.e. limiting global temperature rise to 1.5°C, and then model the
steps that society, industry, governments, etc. must take in order to achieve it. The scenarios describe the impact on factors such
as supply, demand, regulations, taxes and commodity pricing.
Serica has modelled the economic impact on its business of comparative levels of oil, gas and carbon prices under three scenarios
described in the 2024 International Energy Agency (‘IEA’) World Outlook:
1. Net Zero – accelerated emissions reduction to achieve Net Zero emissions in the energy system by 2050
2. Stated Policies – slower progress based upon existing governmental policies – limiting targets missed
3. Announced Pledges – all current targets and announced pledges are met by countries with temperature-limiting targets narrowly
missed.
The results of this quantitative economic scenario analysis confirmed that Serica’s business model remains valid in the Stated
Policies and Announced Pledges scenarios. There is, however, a major reduction in the value of the Company’s assets in the Net
Zero scenario. These results are reflected in Serica’s current strategy which includes a focus on short cycle investments and M&A
which prioritises producing assets over long-term developments.
Serica will continue to use scenario analysis to test its resilience under different climate scenarios.
Climate Risk Management
Serica’s Executive Leadership Team (‘ELT’) is structured and empowered to ensure that the Board has the necessary information to
understand and assess risks and opportunities, including those presented by climate change.
Serica’s ESG and Business Innovation Manager reports directly to a member of the ELT and is responsible for the development the
ESG Policy and implementation of the ESG Strategy, of which climate risk management is an integral part.
Serica’s risk management policies underline the identification, assessment and mitigation of climate-related risks. Serica uses an
Operating Risk Management Framework and risk assessment matrix to capture, rank and manage significant risks.
Having assessed climate-related risks the Company either identifies specific mitigating actions and programmes or, where such
specific responses are not considered feasible, builds likely financial impacts into valuations and planning.
As Serica’s climate-related risk identification and management programme progresses, regular updates are provided to the Board
and where appropriate added into the Company’s enterprise level risk register which is reviewed regularly.
Serica’s existing assets are all currently projected to cease production within the next fifteen years. Accordingly, the Company
has primarily targeted its considerations of climate-related risks and opportunities over the short and medium-terms. Serica have
defined the time period for short, medium and long-terms risks as:
• Short-term risks: 1 – 3 years
• Medium-term risks: 4 – 9 years
• Long-term risks: 10+ years
Transition Risks:
Transition risks include the policy, legal, technology, and market changes required to deliver the energy transition and adaptation to
the impacts of climate change.
Serica has identified transition risks as of growing importance for its business model.
30 l Serica Energy plc Annual Report & Accounts 2024
TCFD Risk Category
Risk
Potential Consequences
Perceived
impact
timescale
Mitigations
Reputation
Negative perception
of the oil and gas
industry by external
stakeholders
External opposition to
petroleum licenses and
consents leading to
decreased future production,
revenue and supply chain
capacity
Negative impacts on
workforce management/
planning (e.g. employee
attraction/retention/job
security)
Short-term
Serica advocates publicly for the
positive impact the domestic
upstream sector has on economic
growth, jobs, local communities,
government finances and
production emissions
Serica is an active member of
OEUK and Brindex, which promote
the Industry across the UK
Serica reports transparently and
follows internationally recognised
ESG reporting guidelines
Market
Sources of finance
including equity
markets and debt
providers may be
harder to access
or become more
expensive
Lenders reduce funding
available to exploration and
production companies and
this may impact debt terms
and/or debt capacity
Organisations with poor ESG
commitments, disclosures
and performance can expect
to see materially reduced
lending appetite over time
Less debt capacity and
increased cost of debt may
lead to reduced asset and
company valuation
Short-term
Management engages with
potential sources to anticipate their
ESG compliance requirements
Serica seeks to retain a range of
alternative financing options
Potential funding cost increases
and loan structures (i.e.
sustainability led loans) are
considered when planning
investments
Serica has put in place a six-year
financing facility with a group of
international banks
Serica ensures prudent with
commitments with banks (eg ESG
Commitments, such as Net Zero
targets)
Serica maintains a strong balance
sheet with high cash reserves
Serica Energy plc Annual Report & Accounts 2024 l 31
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
FINANCIAL REVIEW continued
TCFD Risk Category
Risk
Potential Consequences
Perceived
impact
timescale
Mitigations
Market
The transition away
from carbon-based
power generation
and transport fuels
Stranded oil and gas
reserves
Increase in unit operating
costs due to falling oil and
gas sales and increases in
the cost of carbon emissions
Abrupt and unexpected
shifts in energy pricing i.e the
rise of LNG supply diluting
natural gas prices in the UK
Re-pricing of assets (e.g.
fossil fuel reserves, land
valuations, securities
valuations)
Accelerated
decommissioning costs
arising from permanent
cessation of production
Medium to
Long-term
The impact of the value of future
reserves is lower for later periods
of production due to discounting
and so has less impact on Net
Present Value
Serica’s oil and gas reserves are
evenly split between oil and gas
mitigating the risk of demand for
one commodity over another
Serica closely follows industry
related commodity price forecasts
and trends from numerous sources
and is able to hedge resources
Serica runs climate related
scenario analysis to test the impact
of different climate scenarios on its
business model
Commercial terms of past
transactions are designed
to limit Serica’s exposure to
decommissioning liabilities
Policy and Legal
Legal challenge
to decisions to
approve new UKCS
field developments
Delay in executing
development projects.
Potential inability to execute
development projects.
Short to
Medium-term
All such risks factored into
development decisions
Serica considers investing overseas
to dilute its UKCS exposure
Policy and Legal
Increased carbon
costs through
higher prices for
carbon credits and
removal of free
allowances
Increased operating costs
may erode financial returns
and the longevity of field
lives
Medium-term
Serica aims to deliver ERAP
projects to reduce carbon
emissions and reduce need for ETS
allowances
Serica and its Partners hedge ETS
allowances when prices are low
Serica works with non-operated
partners to decarbonise assets
Policy and Legal
Failure of Serica
and/or its Operating
Partners to conform
with the OGA
Plan/ Inventory
requirements
Early COP of outlying
assets that do not meet
requirements and/or are
emitting above the industry
average
Fulfilling the OGA Plan
requirements may result in
increased costs
Medium-term
Serica aims to deliver ERAP
projects to reduce carbon
emissions from its operated
facilities and reduce need for ETS
allowances
Serica supports the creation and
execution by operators of ERAPs
for its non-operated assets
Asset emissions profiles are
considered in potential M&A
transactions
32 l Serica Energy plc Annual Report & Accounts 2024
TCFD Risk Category
Risk
Potential Consequences
Perceived
impact
timescale
Mitigations
Market and
Reputation
The range of
potential assets
or company
acquisitions may be
restricted by ESG
considerations
Reduced revenues due to
lower production
Limited Business
Development opportunities
Reputation damage if new
acquisitions are believed
to be not aligned with the
Group's commitments
Short to
Medium-term
Management considers the
emissions profiles of potential
acquisition targets and the
mitigating actions that it can
implement
Serica prioritises opportunities
to deliver low carbon intensity
production into the UK market
compared to imports
Serica considers investing overseas
to dilute its UKCS exposure
Market and
Reputation
Poor ESG
performance of the
operators of Serica’s
non-operated
assets damages
Serica’s value and
reputation
Economic value of assets
damaged
Standing of Serica with
regulatory authorities harmed
Public profile of Serica
harmed
Short to
Medium-term
Serica closely monitors
performance of Joint Venture
operators
Serica share emissions reduction
plans and case studies with
Partners
Serica reviews and monitors
Environmental KPIs of assets and
project future carbon intensities
to understand future trends from
across its portfolio to help identify
potential outliers
Policy, Legal,
Reputation
Lack of awareness
of climate related
issues, regulations
or responsibilities
could result in
disputes, fines or
litigation in the UK
and abroad
Increased costs resulting
from fines and judgments
Damage to the Group's
reputation as a result of fines
or litigation cases
Negative impacts on
workforce management/
planning (e.g. employee
attraction/retention)
Short to
Medium-term
Board and senior management
are updated with information
on climate and ESG topics and
regulations
Serica subscribes to Weston
Compliance Services provides
updates on relevant emerging UK
regulations
Serica engages with key industry
bodies and regulators such as
OEUK and NSTA
Legislation associated with
potential M&A locations are
reviewed
Physical Risks:
Physical risks resulting from climate change can result from event driven (acute) or longer-term (chronic) shifts in climate patterns:
• Acute – More extreme weather may threaten or disrupt operations, in particular major storms or exceptional wave conditions;
• Chronic – Increased severity of weather patterns may cause ongoing or regular disruption, including supply chain logistics
efficiency, asset structural integrity, operational uptime, and offshore development schedules. These risks may need to be
highlighted in Serica’s future transactions.
Serica Energy plc Annual Report & Accounts 2024 l 33
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
TCFD Risk Category
Risk
Potential Consequences
Perceived
impact
timescale
Mitigations
Chronic Physical
More extreme
weather patterns
may threaten or
disrupt operations
or supply chain
Reduced revenue due to
transport difficulties and
supply chain interruption due
to extended shutdowns
Increased operating costs
due to delays within the
supply chain and capital
costs associated with project
delays
Medium to
Long-term
Serica seeks to maintain robust
transport and supply chains
Operations plans such as for
drilling, diving and seismic include
contingencies for adverse weather
Serica looks to identify
technologies that reduce exposure
to weather disruptions
Serica plans work scopes around
weather (eg maintenance
shutdowns take place in the
summer)
Acute Physical
Extreme weather
events could
significantly damage
an asset
Write-offs and early
retirement of existing assets
Increased capital costs (e.g.,
damage to facilities)
Reduced revenues from
lower sales/output from
extended shutdowns
Increased insurance
premiums and potential
for reduced availability of
insurance on assets in ‘high-
risk’ locations
Long-term
The Company operates under a
Severe Weather Action Plan
The impact of extreme climatic
conditions such as exceptional
waves are incorporated into risk
management scenarios
Serica maintains customary
insurance cover
Impact of climate-related risks and opportunities on business, strategy, financial planning:
Serica’s management considers climate-related strategic and financial risks in both its existing asset portfolio and future business
growth, including potential acquisitions. The below table highlights how the identified climate-related risks and opportunities have
impacted areas such as Serica’s operations and services and supply chains.
FINANCIAL REVIEW continued
34 l Serica Energy plc Annual Report & Accounts 2024
Area
Description of impact/change
Access to capital
Management has engaged with potential finance sources to anticipate ESG compliance
requirements and sought alternative financing options
Serica has considered potential funding cost increases and loan structures when planning
investments
Operations
Resource allocation to produce and implement an Emissions Reduction Action Plan (ERAP) for the
Bruce Hub aimed at reducing emissions in line with targets set out in the North Sea Transition Deal
Extensive interaction with operator regarding emissions reduction initiatives for the Triton FPSO
Increased tracking of performance metrics relating to emissions, flaring, waste, and discharges
to sea
Acquisitions or Divestments
Management has evaluated the emissions profiles of potential acquisition targets to assess the
impact these may have on Serica’s emissions and carbon intensity performance
Products and Services
Carbon costs have impacted production costs and are additional factor to be considered in
assessing future investments and the long-term viability of existing assets
Investment in research and
development (R&D)
Serica has contributed, through a combination of cash and in-kind support, to a number of
Research and Development (R&D) initiatives aimed at exploring opportunities for investment in
decarbonisation technology
Adaptation and mitigation
activities
Capital investment and technical support for efficiency and decarbonisation projects relating to
Serica’s assets
Review of potential opportunities arising from the energy transition
Supply Chain and/or Value
Chain
Increased time and cost are deployed to meeting the increasing regulatory requirements and
market expectations for the disclosure of ESG and climate-related information relating to the
supply and value chains
Metrics and Targets
The framework for assessing Serica’s climate-related risks is aligned with Serica’s enterprise-level risk assessment matrix. This matrix
looks at the potential frequency of a risk occurring and the potential financial impact this may have on the organisation. Once its
likelihood and potential financial impact has been determined, it is given a risk rating, which is then used by Serica to rank the risks.
Efforts to mitigate risks are concentrated on those potential events ranked highest in terms of their chance of occurrence and impact.
Carbon emissions data is collected from Serica’s assets, including operated and non-operates facilities. Serica assures this data
for consistency and comparability. It is used to monitor compliance with emissions regulation, operating permits and consents
associated with Serica’s assets, all of which are located in the UKCS. It also enables performance to be benchmarked, potentially
identifying the scope for further meaningful and achievable emissions reductions.
Serica is fully aligned with the emission reduction targets as set out in the North Sea Transition Deal, which commits the UK oil and
gas industry to reduce absolute basin emissions by 10% by 2025, by 25% by 2027, 50% by 2030, and become Net Zero by 2050
from a 2018 baseline. Serica also supports the World Bank’s target of reaching zero routine flaring by 2030.
Serica sets annual emissions targets as part of its annual bonus scheme. Performance against these targets is directly linked to the
remuneration of our staff and executives. Serica has implemented ESG bonus linked targets since 2021.
In 2024, the bonus linked intensity target was:
• Bruce Hub Carbon Intensity < 15.5 kg CO2/boe in 2024
At the end of 2024, a carbon intensity of 17kgCO2/boe as result of production in the second half of the year being lower than
expected. Further details about emissions performance can be found on page 17.
In 2025, Serica will continue to tie emissions reduction initiatives to its remuneration and corporate bonus scheme and has
implemented the following emissions related targets:
• BKR Scope 1 emissions < 210,000 tonnes of CO2
• Company carbon intensity (net)< 20 kgCO2/boe
The above targets are a mix of absolute and intensity based and cover the full 2025 calendar year.
Serica also has a suite of other environmental targets and KPIs used to monitor its performance. These include average daily flaring
volumes, percentage of waste diverted from disposal, volume of general waste generated and quantity of oil in produced water that
is discharged to sea. Performance against these targets is monitored regularly and reported across the organisation.
Serica’s Scope 1, 2 and 3 emissions will be presented within its 2024 ESG Report.
Serica Energy plc Annual Report & Accounts 2024 l 35
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
Alignment to the TCFD Recommendations
This Alignment Table provides information as to the alignment of Serica Energy’s reporting with the Task Force on Climate-related
Financial Disclosures ('TCFD'), implementing the recommendations of the Task Force on Climate-related Financial Disclosures (2021
report). The information herein is associated with the 2024 calendar year. This Alignment Table was produced by Sustain:able.
Serica understands that climate change resilience is integral to the long-term success of its organisation. Serica has used the
TCFD recommendations to further develop its climate-related strategies, programmes, and reporting. While its reporting is not in
full alignment with the TCFD requirements at this stage, Serica will focus on maturing its reporting process to further enhance its
climate-related risk reporting in line with the IFRS standards and will continue to evaluate scenario analyses to support strategic
planning and capital allocation.
Governance
Disclosure
Alignment
Reporting Location
a
Describe the board's oversight of climate-related risks and opportunities
Full
Page 29
b
Describe management's role in assessing and managing climate-related risks and
opportunities
Full
Page 31
Serica fully aligns with the TCFD Governance reporting recommendations. Both its board and management teams
recognise climate change as a material risk to Serica with potential financial implications. As such, climate-related risks and
opportunities are integrated into board and management accountabilities and decision making. Regular reviews, evaluations
and discussions are part of Serica's proactive approach to manage climate change and further organisational resilience.
Strategy
Disclosure
Alignment
Reporting Location
a
Describe the climate-related risks and opportunities the organisation has identified
over the short, medium, and long-term
Full
Pages 31-34
b
Describe the impact of climate-related risks and opportunities on the organisation's
businesses, strategy, and financial planning
Partial
Page 35
c
Describe the resilience of the organisation's strategy, taking into consideration
different climate-related scenarios, including a 2°C or lower scenario
Partial
Page 30
Serica partially aligns with the TCFD Strategy reporting recommendations. Its disclosure of a is generally aligned with the
guidance. Serica is in partial alignment with b and c.
Risk Management
Disclosure
Alignment
Reporting Location
a
Describe the organisation's processes for identifying and assessing climate-related
risks
Full
Page 30
b
Describe the organisation's processes for managing climate-related risks
Partial
Page 30
c
Describe how processes for identifying, assessing and managing climate-related risks
are integrated into the organisation's overall risk management
Full
Page 30
Serica partially aligns with the TCFD Risk Management reporting recommendations. Serica aligns with the Risk Management
guidelines regarding the reporting of our procedures for identifying, evaluating, and mitigating climate-related risks and how
they are integrated into its risk management strategy (a and c). It provides an account of its methodology for determining
materiality, including climate-related risks, within the company, which outlines the relative importance of climate-related
risks in relation to other risks in its materiality matrix. It includes reference to transition and physical risks and opportunities;
however, it does include a comprehensive evaluation of all the risks included on pages 31-34).
Metrics and Targets
Disclosure
Alignment
Reporting Location
a
Disclose the metrics used by the organisation to assess climate-related risks and
opportunities in line with its strategy and risk management process
Partial
Page 35
b
Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas emissions and
the related risks
Full
Page 35
c
Describe the targets used by the organisation to manage climate-related risks and
opportunities and performance against targets
Full
Page 35
Serica partially aligns with a of the Metrics and Targets recommendations and fully aligns with the scope disclosures of
component b as well as the target setting of part c of the guidance. While our disclosure of climate-related metrics includes
GHG emissions, air emissions and others, our reporting does not include the complete range of metrics outlined in Tables A1.1
and A2.2. We also do not disclose our internal carbon prices for confidentiality reasons.
FINANCIAL REVIEW continued
36 l Serica Energy plc Annual Report & Accounts 2024
Section 172 statement
The Directors' statement under Section 172 of the Companies Act 2006 is included on pages 73 to 74.
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.
The Strategic Report has been approved by the Board of Directors
On behalf of the Board
Chris Cox
Chief Executive Officer
31 March 2025
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
Serica Energy plc Annual Report & Accounts 2024 l 37
David Latin, Non-Executive Chair, joined the Board on 7 December 2021, initially serving as an
Independent Non-Executive Director. He was later appointed Non-Executive Chair in June 2023,
succeeding Antony Craven Walker upon his retirement. Additionally, Mr. Latin temporarily took on
the role of Interim CEO from 24 April 2024, to 1 July 2024, until the appointment of Chris Cox as
permanent CEO.
Mr Latin has over 30 years’ experience in Upstream Exploration and Production. He worked at BP
for 18 years, where he was responsible for the BKR assets for 6 years and then held a number
of senior VP and global/regional business roles. He was later OMV Group Senior Vice President
for E&P in NW Europe, Africa and Australasia during which time he was responsible for building
significant businesses in the UK (sold to Siccar Point Energy) and in Norway.
Committees: Nominations Committee (Chair). During his tenure as Interim CEO (24 April 2024 –
1 July 2024), Mr. Latin stepped down from the Nominations Committee and served as a member
of the Health, Safety & Environmental (‘HSE’) Committee, Reserves Committee, and Sustainability
Committee.
Key External Appointments: None
Chris Cox, Chief Executive Officer, joined the Board on 1 July 2024. Mr Cox has over forty years’
experience in oil and gas in a wide range of roles with Majors and Independents. For the last two
decades he has been leading complex multi-asset and multi-country businesses including as CEO
of Spirit Energy, Interim CEO at Capricorn Energy and Chairman of Kellas Midstream. Mr Cox has
experience as a non-executive director of both private equity and publicly listed companies, most
recently with Nostrum Oil and Gas. Mr Cox holds a BSc in Petroleum Engineering from Imperial
College, London.
Committees: HSE Committee, Reserves Committee, and Sustainability Committee
Key External Appointments: None
Martin Copeland, Chief Financial Officer, joined the Board on 5 February 2024. Mr Copeland was
previously a Principal at energy advisory firm Kirk Lovegrove & Co. Ltd and has over 30 years’
experience in oil and gas financing and advisory roles across a number of investment banks. His
more recent transaction related experience includes advising Premier Oil on their reverse takeover
by Chrysaor to create Harbour Energy, advising JX Nippon on the sale of their UKCS business to
Neo Energy and advising Tailwind Energy on their sale to the Company in 2022.
Committees: None
Key External Appointments: None
BOARD OF DIRECTORS
38 l Serica Energy plc Annual Report & Accounts 2024
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Corporate Governance
Auditor’s Report
Financial Statements
Kate Coppinger, Senior Independent Non-Executive Director, joined the Board on 22 April
2020. Ms. Coppinger has over 20 years’ investment banking experience. Ms Coppinger’s career
includes roles at Canadian Imperial Bank of Commerce, Harrison Lovegrove and Managing
Director at Standard Chartered in the Oil and Gas team responsible for origination and execution
of transactions for European clients. Her global M&A transaction experience spans Asia through
to South America with particular emphasis on the North Sea.
Committees: Remuneration Committee (Chair), Audit Committee and Nominations Committee.
Key External Appointments: Star Energy plc
Michiel Soeting, Independent Non-Executive Director, joined the Board on 1 February 2023.
Mr Soeting is a chartered accountant, qualified in both the Netherlands and the United Kingdom,
he has extensive financial expertise, strong governance, risk management and regulatory
compliance experience. Mr Soeting has over 30 years’ experience in the audit and financial
service sector, he was the former global lead partner and global head of energy & natural
resources at KPMG.
Committees: Audit Committee (Chair), Remuneration Committee and Reserves Committee
Key External Appointments: Veon Ltd
Jérôme Schmitt, Independent Non-Executive Director, joined the Board on 1 July 2022.
Mr Schmitt has over 30 years’ experience in the energy and mobility sector, with particular
emphasis across Finance, Sustainability and Business streams. Mr Schmitt was the Head of M&A
and Chief Sustainability officer at TotalEnergies and Chairman of OGCI Executive Committee until
2021. He was responsible for developing and financing gas value chain projects in Middle East &
Asia and created and led the Net Zero Businesses division of TotalEnergies.
Committees: Sustainability Committee (Chair) and HSE Committee
Key External Appointments: Bramble Energy Limited
Robert Lawson, Non-Executive Director, joined the Board on 23 March 2023. Mr Lawson
represents Mercuria Holdings (‘Mercuria’) (a major shareholder of the Company) which was
agreed following the acquisition of Tailwind Energy Investments Ltd. Mr Lawson spent a large
part of his career with BP in various roles including Commercial Vice President for BP’s Refining
and Marketing Segment then becoming the Global Head of Mergers and Acquisitions. He was
Executive Vice President and a member of the Board at Mercuria Energy Group from end 2022
to 2025 and left Mercuria to take up the role of Chief Executive & Secretary at Marylebone
Cricket Club.
Committees: Nominations Committee
Key External Appointments: Marylebone Cricket Club
Serica Energy plc Annual Report & Accounts 2024 l 39
BOARD OF DIRECTORS continued
Kaat Van Hecke, Independent Non-Executive Director, joined the Board on 17 July 2023. Ms Van
Hecke has over 25 years’ experience in the petrochemicals and oil and gas business, she has held
positions with ExxonMobil, Shell, OMV and Nostrum in Belgium, the Netherlands, Nigeria, Russia,
Austria and Kazakhstan. Ms Van Hecke was previously MD and Senior Vice President OMV Austria
E&P and interim CEO at Nostrum Oil and Gas, she is also a Non-Executive director of Glover Gas &
Power BV/ Axxela Ltd.
Committees: HSE Committee (Chair), Reserves Committee (Chair) and Audit Committee
Key External Appointments: Glover Gas & Power B.V/Axxela Limited
Sian Lloyd Rees, Independent Non-Executive Director, joined the Board on 17 July 2023. Ms
Rees' career includes roles at Halliburton Corporation, Oracle Corporation and Aker Group and
most recently as UK MD of Aker Horizons and Mainstream Renewable Power responsible for
growing a renewable energy portfolio in offshore wind and hydrogen. Ms Rees has over 30 years’
experience in the Oil and Gas, IT and Renewable Energy industries, she is also a Non-Executive
director and co-chair of OEUK, non-executive director for the Net Zero Technology Centre and
non-executive director of Port of Aberdeen.
Committees: Remuneration Committee and Sustainability Committee
Key External Appointments: OEUK, Net Zero Technology Centre Ltd, Port of Aberdeen
Guillaume Vermersch, Non-Executive Director, joined the Board on 23 March 2023.
Mr Vermersch also represents Mercuria. Mr Vermersch started his career with Arthur Andersen
in Paris. His career includes roles at ING/BBL Bank and CIB in Geneva and Paris and as head of
the Credit and Finance Risk department of Sempra Oil Trading for Europe and Asia where he
was responsible for defining, implementing and monitoring the full scope of the Sempra Energy
credit and financial strategies, from trading business requirements to banking, finance and risk
management responsibilities to support the oil and energy division’s expansion. He is the group
chief financial officer and a group board member of Mercuria Energy Group.
Committees: None
Key External Appointments: Mercuria Energy Group
Directors that stood down or retired during 2024
Mitch Flegg, Chief Executive Officer, retired from the Board on 23 April 2024.
Andy Bell, Chief Financial Officer, stepped down from the Board on 5 February 2024.
Malcolm Webb, Senior Independent Non-Executive Director, retired from the Board on 27 June 2024.
40 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
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.
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
Chief Executive Officer’s Review, a
Review of Operations and Financial
Review) and Chair’s Statement (all of
which, together with the Corporate
Governance Statement, are incorporated
by reference into this Directors’ Report).
Engagement with employees,
suppliers, and customers
Information regarding Serica’s
engagement with employees, suppliers
and customers is included in the
Directors’ statement under Section 172
of the Companies Act 2006 on pages
73 to 74.
Results and dividends
The profit for the year was $92,429,000
(2023: $127,757,,000).
The Directors are recommending the
payment of a final dividend by the
Company of 10 pence per share for the
year to 31 December 2024, see note
11 (2023: 14 pence per share). Subject
to shareholder approval at the AGM,
this will be payable on 25 July 2025
to shareholders registered on 27 June
2025 with an ex-dividend date of 26
June 2025.
Financial instruments
The Group’s financial risk management
objectives and policies are discussed in
note 22.
Events since balance sheet date
There are no post balance sheet events.
Directors and their Interests
The following Directors have held office
in the Company since 1 January 2024 to
the date of this report:
David Latin
Mitch Flegg (stepped down on
23 April 2024)
Chris Cox (appointed 1 July 2024)
Andrew Bell (retired 5 February 2024)
Martin Copeland (appointed
5 February 2024)
Malcolm Webb (retired 27 June 2024)
Kate Coppinger
Jérôme Schmitt
Michiel Soeting
Robert Lawson
Guillaume Vermersch
Kaat Van Hecke
Sian Lloyd Rees
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:
The Directors of the Company present their report and the Group financial statements of Serica
Energy plc for the year ended 31 December 2024.
DIRECTORS’ REPORT
Class
of share
Interest at
end of year
Interest at
start of year (or date of
appointment if later)
David Latin
Ordinary
218,567
45,000
Chris Cox
Ordinary
432,027
–
Martin Copeland
Ordinary
62,500
–
Kate Coppinger
Ordinary
–
–
Jérôme Schmitt
Ordinary
9,100
–
Michiel Soeting
Ordinary
42,300
42.300
Robert Lawson
Ordinary
–
–
Sian Lloyd Rees
Ordinary
2,114
–
Kaat Van Hecke
Ordinary
–
–
Guillaume Vermersch
Ordinary
–
–
Serica Energy plc Annual Report & Accounts 2024 l 41
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.
Details of share awards that have been
granted to certain Directors under the
Serica Energy plc Share Option Plan
2005 (‘Serica 2005 Option Plan’) and
under the Serica Energy plc Long-Term
Incentive Plan (the ‘LTIP’) are included in
note 25.
Greenhouse gas (‘GHG’) emissions
Information regarding Serica’s
GHG disclosure is included in the
Environmental, Social and Governance
(‘ESG’) section on pages 16 and 17, with
further details in our ESG Report.
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 they are obliged to take as
a director in order to make themselves
aware of any relevant audit information
and to establish that the auditor is
aware of that information.
On behalf of the Board
Chris Cox
Director
31 March 2025
DIRECTORS’ REPORT continued
42 l Serica Energy plc Annual Report & Accounts 2024
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Corporate Governance
Auditor’s Report
Financial Statements
CORPORATE GOVERNANCE STATEMENT
Chair’s Corporate Governance Statement:
The Corporate Governance section
of our report outlines the Company’s
comprehensive framework, designed
with clearly defined responsibilities and
accountabilities, to safeguard long-term
shareholder value. As Non-Executive
Chair, it is my role to collaborate with
my fellow Board members to ensure
the Company upholds high governance
standards and maintains structures
and processes that support effective
decision making.
As a Board, we firmly believe that
good corporate governance is
fundamental to building a successful
and sustainable business. This requires
strong leadership, a healthy corporate
culture, robust systems, and a sound
understanding of risk. It is essential that
the Board brings together a diverse
range of skills, ensuring we are well
positioned to seize new opportunities.
A key focus in 2024 has been
developing our leadership capabilities.
We have made significant progress in
strengthening the Board’s composition,
particularly with the appointments of
Chris Cox as Chief Executive Officer
and Martin Copeland as Chief Financial
Officer. I am proud of the strong and
diverse Board we have assembled,
which combines an excellent mix of
skills and experience relevant to Serica’s
challenges and opportunities.
The Company has a robust governance
structure in place, which will underpin its
growth and drive future success.
This report, together with the
reports of the Audit, Nominations,
Remuneration, Reserves, Health, Safety
and Environment, and Sustainability
Committees, seeks to demonstrate
our commitment to high standards of
governance.
In 2018, the Company adopted the
Quoted Companies Alliance (‘QCA’)
Corporate Governance Code 2018.
Following the updates introduced by
the 2023 Quoted Companies Alliance
Corporate Governance Code (‘2023
QCA Code ’), the Company chose to
comply as far as possible with the
updated code earlier than required to
maintain the highest possible standards
of governance.
The directors believe that the 2023
QCA Code, with its updates, continues
to be the most appropriate recognised
governance framework for the Company
at this stage. The 2023 QCA Code
provides a robust framework to support
the Company in maintaining strong
governance standards, embedding
its governance culture, and building a
successful and sustainable business for
the benefit of all stakeholders.
The QCA has 10 principles which the
Company is required to adhere to and
to make certain disclosures both within
this report and on its website. This
has been updated to comply, as far as
possible, with the 2023 QCA Code. The
Company’s website disclosures can be
found at www.serica-energy.com
Work is ongoing regarding a potential
move from the AIM to the Main Market
of the LSE in 2025. As part of this
process, a comprehensive review was
conducted to identify and address
areas requiring enhancement to ensure
full compliance with the UK Corporate
Governance Code 2024. The review
concluded that the Company already
has a robust corporate governance
framework in place, supported by
significant progress made over recent
years. This foundation positions the
Company well to meet many of the
requirements of the UK Corporate
Governance Code.
However, a few areas were identified
that require enhancement to achieve
full compliance in preparation for a
potential move. One of the key areas for
improvement is workforce engagement,
and initiatives to strengthen this are
already underway. Additionally, the
establishment of a formal Remuneration
Policy was highlighted as a priority,
and FIT Remuneration Consultants
have been engaged to assist with its
development.
The Board is fully aware of the
necessary enhancements and is
committed to addressing them. Progress
has already been made in many areas,
reflecting the Company’s dedication
to achieving the highest standards of
corporate governance.
The success of the Company relies on
a united Board dedicated to delivering
value for shareholders while upholding
high standards in employee welfare,
safety, corporate governance, and
environmental stewardship. These
principles are fundamental to ensuring
the long-term sustainability and growth
of the business.
Maintaining strong relationships and
actively engaging with shareholders
remains a top priority and is integral
to the Company’s success. The Board
is committed to offering numerous
opportunities for investors to engage
with both the Board and Executive
Directors. Executive Directors engage
regularly with shareholders and analysts,
including after the announcement
of key financial statements, at
conferences, and hold meetings with
major shareholders throughout the year
to strengthen these key relationships.
Shareholders were also invited to
participate in the Annual General
Meeting, promoting transparency
and open dialogue, our commitment
to which was emphasised through
the appointment of a Group Investor
Relations Manager.
Serica Energy plc Annual Report & Accounts 2024 l 43
The Company is fully committed to the Quoted Companies Alliance (QCA) Code’s ten principles of corporate governance,
embedding these within the business’s core foundations. These principles are:
QCA Code
Principle
Number
QCA Code Principle
Disclosure
One
Establish a purpose, strategy
and business model which
promotes long-term value for
shareholders.
a) Explain the Company’s purpose, business model and strategy including key
challenges in their execution.
Comment
a) See page 6, the Strategic Report on pages 1 to 37 and the Company’s website.
The Company’s purpose is to contribute responsibly towards meeting the world’s energy needs through the safe and efficient
production of hydrocarbons.
It operates in the upstream oil and gas exploration, development, and production sector and is therefore exposed to political,
operational, commercial, commodity pricing, and hazard risk. The Company’s strategy is to maintain a portfolio of diverse assets
which enables it to manage the risks, the financial requirements, and take advantage of the growth opportunities in the business.
It does this both by an active programme of acquisition and divestment where possible to balance risk and potential whilst also
seeking to optimise operating costs and procedures to improve performance and by identifying where new technologies can
enhance value. The Company strives to maintain a forward looking, professional and safety conscious culture in all that it does as
this also provides essential checks and balances and underpins a value creative environment to the benefit of all stakeholders.
Two
Promote a corporate culture
that is based on ethical values
and behaviours
a) Describe the desired company culture within the strategic report. How is the
desired corporate culture supportive of the Company’s purpose, strategy, and
business model? How is the tone from the top (board, chief executive, and senior
management) supportive of this culture? How does the board assess and monitor
corporate culture and how were any actions which notably deviated from what is
expected addressed?
Comment
a) The corporate culture of the Company is established within the Board of directors and communicated to the Company by
the CEO and senior management through a regular series of internal meetings and supporting processes. By this means the
Company’s strategy, objectives and approach to health, safety, environmental and diversity issues are communicated to all
employees with the Board maintaining full oversight.
The Company operates a full feed-back system directly to the Chair, CEO or Senior Independent Director (SID) which provides the
mechanism to enable the Company to become aware of any deviation from the Company’s ethical values.
Three
Seek to understand and
meet shareholder needs and
expectations
a) Describe the shareholder engagement activities, including the topics discussed
and actions taken in response.
b) Provide appropriate quantitative and qualitative reporting of a company’s
environmental and social matters to meet investor needs and expectations
Comment
a) The Company engages with its shareholders through regulatory news flow, providing financial results on a half yearly basis,
operational updates to maintain information on overall performance, additional news flow when there is a material deviation
from the operational updates, releases relating to matters of material importance to the Company’s business and releases of a
regulatory nature.
The Company maintains an informative and regularly updated website at www.serica-energy.com through which shareholders
can obtain copies of the Company’s annual report, interim report, ESG report and other regulatory documents and regulatory
news service releases. The website includes copies of all presentations made from time to time to analysts, shareholders and
the general market and includes a facility under which shareholders may submit questions or make comments relating to the
Company’s business. Whenever possible the Company endeavours to respond to enquiries.
The Company’s AGM is a regular opportunity for shareholders to meet with the Company and receive a corporate presentation.
There is also an opportunity for shareholders to ask questions after the presentation, during the formal business of the meeting
and informally following the meeting. The Board pro-actively engages with investors on governance matters.
The Chair, CEO and the CFO are together responsible for shareholder liaison and a listening board for shareholders. In all
communications with shareholders and the general market the Company maintains strict compliance with the requirements of the
AIM Rules and Market Abuse Regulations.
b) See the ESG Report published on the Company’s website and the ESG report.
CORPORATE GOVERNANCE STATEMENT continued
44 l Serica Energy plc Annual Report & Accounts 2024
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Corporate Governance
Auditor’s Report
Financial Statements
Four
Take into account wider
stakeholder interests,
including social and
environmental responsibilities,
and their implications for long-
term success.
a) Describe the environmental and social issues that the board has identified
as being material to the company with reference to its purpose, strategy, and
business model.
b) Set out any relevant associated KPIs that are used for tracking performance
on such matters and, where relevant, key forward-looking targets that have been
established.
Comment
a) The Company annually reviews and updates an ESG Materiality assessment which relies on stakeholder engagement activities
throughout the reporting year and incorporates insights from experts across the business. The assessment covers the materiality
of topics, ranging from economic and environmental considerations to social aspects and potential human rights implications.
Material environmental issues include, GHG Emissions, Environmental Compliance, Waste, Water and Effluents. Material social
topics include, Occupational Health and Safety, Diversity and Equal Opportunities, Training and Education and Employment
practices. More information can be found in the ESG report.
b) The Company is aligned to the emission reduction targets as set out in the North Sea Transition Deal, which commits the UK
oil and gas industry to reduce absolute production emissions by 10% by 2025, by 25% by 2027, by 50% by 2030, and become Net
Zero by 2050 from a 2018 baseline. The Company also supports the World Bank’s target of reaching zero routine flaring by 2030.
Since 2021, the Company has set annual emissions targets as part of its annual bonus scheme. Performance against these targets
is directly linked to the remuneration of its employees, senior management and executives.
In 2025, the Company will continue to tie emissions reduction initiatives to its remuneration and corporate bonus scheme and has
implemented the following emissions related targets:
The Company also has a suite of other environmental targets and KPIs used to monitor its performance, these include the average
daily flaring volumes, the percentage of waste diverted from disposal, the volume of general waste generated and quantity of oil
in produced water that is discharged to sea. Performance against these targets is monitored on a regular basis and performance
is reported across the organisation.
Five
Embed effective risk
management, internal controls
and assurance activities,
considering both opportunities
and threats, throughout the
organisation
a) Describe how the board has embedded effective risk management, internal
controls and assurance activities in order to execute and deliver strategy. This
should include a description of what the board does to identify, assess and
manage risk and how it gets assurance that the risk management and related
control systems in place are effective.
b) Risk and control information should be disclosed as required in the strategic
report and corporate governance statements, including the non-financial reporting
narrative.
c) Explain the Company’s governance around climate-related risks and
opportunities; the process for identifying, assessing and managing climate-related
risks and how these processes are integrated into the Company’s overall risk
management framework.
d) Explain how the audit committee has monitored and formally considered auditor
independence during the corporate reporting cycle.
Comment
a) The Company’s approach to the management and identification of risk is set out in the Business Risks and Uncertainties section
of the Strategic Report on pages 25 to 27.
The Company encourages a culture of risk awareness and management at all levels throughout the Company. Risks are reviewed
by the Board at every Board meeting and, at executive level, the Company employs outside advisors to assess and advise on risk
when it is felt additional third-party expertise is required.
Through the HSE and Audit Committees and the feedback provided by these committees to the Board via verbal and/or written
reports and accessible minutes, the Board maintains a full and active awareness of operational and financial risks and the
assurances that effective control systems are in place.
b) See Business Risks and Uncertainties section of the Strategic Report on pages 25 to 27.
c) The ESG team work on the process of identifying climate-related risks. More information can be found in ESG report.
A dedicated Sustainability Committee was set up in 2023 and reports to the Board on climate-related risks and issues. The Board
discusses climate-related risks on a regular basis.
d) The Audit Committee formally assesses the independence of the Company’s auditors on an annual basis, there has been a
rotation of audit partners after five years to ensure independence is maintained. An audit tender policy was put in place during
2023 which will continue to support auditor rotation and independence
Serica Energy plc Annual Report & Accounts 2024 l 45
Six
Establish and maintain the
board as a well-functioning,
balanced team led by the
chair.
a) Identify each director and describe the relevant experience, skills, and
capabilities that each director has brought to the board’s agenda during the year.
b) Explain how the board contains (or will contain) the necessary mix of
experience, skills, and capabilities – including with reference to diversity
characteristics
c) Identify those directors who the board considers to be independent; where
there are grounds to question the real, or perceived independence of a director,
this must be explained.
d) Describe the time commitment required from directors (including non-executive
directors as well as part-time executive directors) and any restrictions on both
executives and non-executives with respect to assuming external roles.
e) Include the number of meetings of the board (and any committees) during the
year, together with the attendance record of each director.
f) Where performance-related remuneration for non-executive directors has been
introduced, the company must disclose how it has consulted its shareholders and
how their support was obtained.
Comment
a) Information on each of the directors as at 31 March 2025 is provided on pages 38 to 40. All their details can be found on the
Company’s website.
b) The make-up of the Company’s Board of directors has kept pace with transformational changes made by the Company within
the last few years with the introduction of new experience and skill-sets complementing those already on the Board. By this
means the Board is continuing to refresh and enhance its performance.
The Board of directors covers a wide range of experience and skills. To meet the requirements of an independent upstream oil and
gas exploration, development and production company these experiences and skills must cover financial, legal, operational and
technical knowledge experience of risk management and growth in the independent sector and of public markets.
Each of the directors on the Board, Executive, Independent Non-Executive Directors ('INEDs') and Non-Executive Directors
(‘NEDs’), have considerable experience and all have demonstrated skills which are complementary, independent and sufficient to
cover all of the requirements of the Board.
All directors have extensive and complementary skills, knowledge and experience covering all facets of the business which
requires both entrepreneurial and custodian oversight.
As the Company continues to grow its business and to refresh the Board the Nominations Committee maintains oversight of the
Company’s requirements to ensure that the make-up of the Board is kept in line with the Company’s needs and provides a mix of
experience, skills, personal qualities and capabilities appropriate to the task. These include full consideration to maintain a healthy
diversity where this is possible, including gender and ethnic diversity.
c) The Board as at 31 March 2025 comprises of Non-Executive Chair, CEO, CFO, five INEDs (all are considered independent in
terms of character and judgement) and two NEDs The Board is aware of the need to maintain and build upon this balance of
backgrounds and to maintain a diversity of talent through succession planning as the Company further develops and the needs of
its business grows.
Kate Coppinger, Jérôme Schmitt, Michiel Soeting, Kaat Van Hecke and Sian Rees are INED’s and considered to be independent.
For full background refer to 'Board Composition' on page 49 and the Company’s website.
d) The Executive directors are expected to devote substantially the whole of their time to their duties with the Company. INEDs and
NEDs have a lesser time commitment which is set out in their letter of appointment. It is anticipated that INEDs and NEDs will each
dedicate 12 days a year in addition to their duties as Board members and as members from time to time of Board committees.
There is no formal policy restricting the directors external appointments, however, the Nominations Committee (and Board)
review external appointments and time commitments at least annually, and each director discusses with the Chair any proposed
additional appointments prior to being appointed.
e) See page 51.
f) NEDs nor INEDs are not awarded any performance related pay.
CORPORATE GOVERNANCE STATEMENT continued
46 l Serica Energy plc Annual Report & Accounts 2024
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Corporate Governance
Auditor’s Report
Financial Statements
Seven
Maintain appropriate
governance structures and
ensure that individually and
collectively the directors
have the necessary up to
date experience, skills and
capabilities
a) Explain how each director keeps their skillset up-to-date, setting out how the
company provides the necessary resources for updating and developing each
director’s knowledge and skills.
b) Set out any board sub-committees that have been established to facilitate more
focused discussions and/or oversight of particular subject matters.
c) Where the board or any committee has sought external advice on a significant
matter, this must be described and explained.
d) Where external advisers to the board or any of its committees have been
engaged, explain their role.
Comment
a) The directors are provided with an AIM Rule briefing from the Company’s Nominated Advisor on an annual basis along with
dedicated sessions on varying topics from the Company’s legal advisors.
The Company’s lawyers attend meetings and deliver updates and training to the Board as a whole and individual directors as and
when required.
The Audit Committee has requested that the Company’s auditor provide details of training that the Audit Committee members may
find useful to develop their knowledge further and for them to keep up to date with changes in auditor and accounting regulations,
standards and areas of focus.
The Board is aware that there is a need for a structured training plan for all directors. One training plan already in place is
the ‘Major Accident Awareness Training’ course at the Spadeadam facility in north east England. One of the Company’s key
objectives is to ensure the highest possible standards of Process Safety Awareness. Process Safety is seen as a Company-
wide responsibility to prevent major accidents from occurring. All directors will undergo this training which demonstrates the
significance of the hazards faced in the industry and the critical importance of Process Safety.
b) The Audit Committee assists with the Board’s oversight of the integrity of the financial reporting and the independence and
performance of the Company’s Auditor.
The Reserves Committee meets prior to the publication of the annual results. The Committee is a sub-committee of the Audit
Committee and meets to review the reports of the independent reserves auditors.
The Nominations Committee is responsible for monitoring the overall effectiveness of the Board and its Committees, proposing to
the Board new nominees for election as directors to the Board, determining succession plans and for assessing directors on an
ongoing basis.
The Remuneration Committee meets to consider all material elements of remuneration for executive directors and senior
management, including remuneration policy, share incentive plans and other employee incentive schemes.
The HSE Committee is responsible for matters affecting health, safety and the environment.
The Sustainability Committee is responsible for matters relating to emissions reductions and climate change.
Details of the Terms of Reference for all committees can be found on the Company’s website.
c) During 2024, the Board and committees have used a number of external professional advisers in respect of various segments of
its business where it was felt that external advice was required.
The Remuneration Committee engaged remuneration consultants to assist in various matters relating to executive remuneration
and packages. Further details can be found in the Remuneration Committee report.
The Nominations Committee engaged a leadership advisory firm to assist with executive and non-executive search.
d) The directors have access to the Company’s Nominated Advisor, company secretary, lawyers and appointed remuneration
consultants and are able to obtain advice from other external bodies as and when required.
The management team and directors are in regular dialogue with the Company’s Nominated Adviser. The Nominated Adviser
provides ongoing advice on matters pertaining to the Company’s compliance with the AIM Rules for Companies.
The Company Secretary advises on corporate governance, arranges, attends and minutes all Board and committee meetings.
The Company Secretary works closely with the Chair, CEO, members of the Executive Management team, all Board members, and
advisors of the Company as and when required.
Lawyers are engaged to provide legal advice when required by the management team and by the Board or committees.
The Remuneration Committee has engaged remuneration consultants to provide advice in relation to executive remuneration,
benchmarking and remuneration policy.
The Nominations Committee have engaged a leadership advisory firm to assist with executive and non-executive search.
Serica Energy plc Annual Report & Accounts 2024 l 47
Eight
Evaluate board performance
based on clear and relevant
objectives, seeking continuous
improvement
a) Include a high-level explanation of the board performance effectiveness
process.
b) Set out when the last externally facilitated board review took place and when
the next one is planned for. Where an externally facilitated review has not taken
place and there are no plans to have one, this must be explained.
c) Where a board performance evaluation has taken place in the year, provide a
brief overview of it, how it was conducted and its results and recommendations.
Progress against previous recommendations should also be addressed.
d) Provide an outline description of the succession planning process including any
indicative timelines for expected appointments (to the extent practicable).
Comment
a) See website disclosure, Principle Eight above and page 50.
The Board conducted an external Board and Committee evaluation process at the end of 2023 and in line with the 2023 QCA
Code will conduct a Board evaluation every year. An external director evaluation survey was conducted in 2024.
b) As set out above, the Board conducted an external Board evaluation at the end of 2023, a director evaluation survey was
conducted in 2024. The Company plan to conduct a Board evaluation every year and a review of the Board Committees and NEDs
bi-annually.
c) See website disclosure, Principle Eight above. For further information see ‘Board Evaluation’ page 50.
d) The Nominations Committee meets regularly to consider the requirements of the Board. Consideration is given to succession
both planning and timelines and expected changes.
Nine
Establish a remuneration
policy which is supportive
of long-term value creation
and the Company’s purpose,
strategy and culture.
a) Explain how the remuneration structure and practice supports the delivery and
attainment of the Company’s purpose, business model, strategy, and culture.
Comment
a) The Remuneration Committee meet regularly to discuss the remuneration structure to ensure that it motivates the executive
team and senior management team and promotes the long-term growth of shareholder value. The Remuneration Committee
consults with other committees (HSE and Sustainability) in order to set appropriate incentive targets and to appraise performance
in respect of those targets.
Pay structures for the executive team and senior management team are simple and easy to understand and foster alignment with
shareholders through building and holding a meaningful shareholding in the Company.
The Remuneration Report on pages 58 to 72 will as it did in 2024 be put to an advisory vote at the 2025 AGM. The recently
drafted Remuneration Policy will be put to an advisory vote at the 2025 AGM.
Ten
Communicate how the
Company is governed and is
performing by maintaining a
dialogue with shareholders
and any other key
stakeholders
a) Within the corporate governance report, reflect on challenges experienced in
the year and signpost to how these were addressed at the board and whether any
changes were made to board structure or process.
b) Include an audit committee report (or equivalent report if such committee is not
in place).
c) Include a remuneration committee report (or equivalent report if such committee
is not in place).
d) If the Company has not published one or more of the disclosures set out under
Principles 1-10, the omitted disclosures must be identified and the reason for their
omission explained.
Comment
a) See Corporate Governance Report on pages 38 to 75.
The Board maintains a healthy dialogue between it and its stakeholders including its shareholders. The Chair is primarily responsible
for communicating with shareholders, with the support of the CEO who also maintains regular dialogue. The SID is also available to
communicate with shareholders as required.
Copies of the Company’s report and accounts, and all other shareholder communications are maintained on the Company’s website.
b) See pages 53 to 54.
c) See pages 58 to 72.
d) The Company has published all of the disclosures set out under Principles 1-10.
CORPORATE GOVERNANCE FRAMEWORK
48 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
Governance structure
The Board of Directors recognises
the critical importance of corporate
governance and believes that the QCA
Code provides an effective framework
for maintaining high standards of
governance within the Company. The
Company fully complies with the QCA
2023 Corporate Governance Code.
The Board holds ultimate accountability
for ensuring a robust governance
framework is in place and embedded
throughout the business. Regular
Board meetings are held to review
and vote on financial, operational,
risk, strategy and other key matters,
with updates provided by the Board
Committees during these sessions. The
Board is responsible for overseeing
the Company’s strategy, performance,
risk management, financial and
compliance matters, approval of major
capital expenditures, and maintaining a
framework of internal controls.
The Chair has overarching responsibility
for managing the Board through a formal
schedule of matters reserved for Board
approval. An annual rolling Board agenda
ensures that governance issues are
consistently reviewed and addressed
throughout the year. Additionally, an
internal financial calendar is maintained
to ensure that management remains
aware of key dates and adheres to
them, promoting discipline planning and
execution across the organisation.
The Company has a well-defined
organisational structure with clear lines
of responsibility and delegated authority
to executive management. The Board
retains oversight and is responsible for
monitoring the activities of executive
management to ensure effective
governance.
As of 31 March 2025, the Board
consists of ten Directors, including five
Independent Non-Executive Directors.
One of these, Kate Coppinger, serves
as the Senior Independent Director,
providing additional support to the
Chair. The Chair is tasked with ensuring
the Board fulfils its responsibilities,
fostering full and constructive
contributions from all Board members in
shaping the Group’s strategy and overall
commercial objectives. In the event of
a tied vote during Board meetings, the
Chair holds a second or casting vote to
resolve the decision.
The Company is deeply committed
to a corporate culture that prioritises
equal opportunity, diversity, social
responsibility, safety, and environmental
stewardship, grounded in strong ethical
values and behaviours. These values
are instilled across the organisation
and reflected in the Company’s public
statements on its website, annual
reports and accounts, ESG reports, and
communications with employees and
stakeholders.
The Company has adopted a code of
dealings in securities which the Board
regards as appropriate for an AIM
listed company and is compliant with
the UK Market Abuse Regulations. The
Company takes all reasonable steps to
ensure compliance by the Directors,
employees and agents with the
provisions of the AIM rules relating to
dealings in securities.
The Directors acknowledge the
importance of ensuring that the
Company and those third parties with
which it engages are operating within
the requirements of the Bribery Act.
The Company has a zero-tolerance
approach to bribery and corruption
and has adopted an anti-bribery policy.
All Directors, employees and key
contractors are required to undertake
the Company’s annual online training
session to ensure compliance with the
anti-bribery policy. The policy includes
maintenance of a gift register for
Directors and employees.
Board composition
As of 31 December 2024, the Board
of the Company comprised the Non-
Executive Chair, the Chief Executive
Officer, the Chief Financial Officer,
five Independent Non-Executive
Directors, and two Non-Executive
Directors. The Chair, along with Kate
Coppinger, the Senior Independent
Non-Executive Director, and the other
Independent Non-Executive Directors,
ensures the Board’s independence. All
Independent Non-Executive Directors
are independent in both character
and judgment. The two Non-Executive
Directors further strengthen the Board’s
composition. The Board is mindful of
the importance of ensuring that the
directors have a mix of experience,
skills, independence, and diversity.
2024 has been a year of significant
changes in the Executive Leadership
team. Chris Cox, with his strong
technical and commercial acumen
and proven leadership track record, is
well-positioned to drive the Company’s
ambitions, both through maximising
the value of the current portfolio and
delivering growth through M&A. Martin
Copeland, appointed Chief Financial
Officer, brings a comprehensive range of
financial expertise and relevant market
knowledge to the organisation. These
appointments are key to the Company’s
future success.
Board committees and structure
The Board has the following
Committees: Nominations, Audit (which
includes the consideration of Reserves),
Health, Safety & Environment,
Remuneration, and Sustainability. All
Committees operate under clearly
defined terms of reference to ensure
proper functioning and effective
application of best practice. The
Committee terms of reference are
reviewed by the Committees and by the
Board on an annual basis. Committees
are required to report back to the Board
following a Com mittee meeting.
More detailed information about the
Committees can be found on pages
52 to 57.
The effectiveness of the Board, as
well as the appointment of directors
and senior management, is regularly
evaluated, alongside the Company’s
succession planning.
David Latin
Non-Executive Chair
31 March 2025
Serica Energy plc Annual Report & Accounts 2024 l 49
BOARD EVALUATION/REVIEW OF THE BOARD’S EFFECTIVENESS
The Board considers that its
effectiveness and the individual
performance of its directors is vital to
the success of the Company.
As outlined in our report last year, it was
acknowledged that to comply with the
QCA Code, a formal evaluation process
for both the Board and its Committees
was necessary. In November 2023,
performance evaluations of the Board
and each of its Committees were
conducted by an external advisor,
Nurole. Recommendations from these
evaluations were presented to the
Board and each Committee for review.
Key findings from the review included
the Board’s desire for greater emphasis
on strategy and growth. In 2024, a
director evaluation exercise was carried
out by Nurole. Directors’ feedback was
collected, anonymised, and grouped into
themes, which were then shared with
the Chair. This exercise was deemed
valuable, with each director receiving
personalised feedback, alongside
insights into the Chair’s role. One-to-
one meetings were arranged with each
director to discuss the results and
overall value of the exercise.
There is a strong flow of communication
among the Directors, particularly
between the Chief Executive Officer,
Chief Financial Officer, and the Chair,
ensuring that both strategic and
operational needs of the business
are carefully considered. Meetings
are also regularly held with the Non-
Executive Directors and Independent
Non-Executive Directors. Additionally,
a recent change in the organisational
structure has enabled more tasks to
be delegated to a team of C-suite
executives reporting directly to the
Chief Executive Officer, allowing him
to focus on more strategic activities.
Comprehensive Board and committee
papers are distributed ahead of
meetings, allowing Directors sufficient
time to review the materials to facilitate
productive discussions. Minutes are
accurately recorded to capture the key
points of the discussions and decisions
made. Actions arising from these
meetings are tracked to ensure timely
execution and follow-up.
The Directors possess extensive
knowledge of the Company’s
business and are fully aware of their
responsibilities as directors of a listed
company. They have access to the
Company’s Nominated Adviser (Nomad),
auditors, and solicitors whenever
necessary. The Company’s Nomad
also conducts annual boardroom
training. These advisors are available
to offer formal support and guidance
to the Board as needed, ensuring their
involvement aligns with best practices.
The Company Secretary ensures
that the Board is kept informed of
developments in corporate governance
and works closely with the Nomad on
matters related to AIM requirements.
The Company Secretary maintains
regular communication with the
Chair, Chief Executive Officer, Chief
Financial Officer, and the Chairs of the
Committees, and is available to other
Board members as needed. Additionally,
the Directors have the ability, at the
Company’s expense, to seek advice
from external advisers if necessary.
The Board is mindful of the importance
of succession and diversity planning
when considering Board changes.
The Nominations Committee oversees
succession planning and Board
appointments to ensure the Board
remains effective and aligns with the
Company’s evolving needs. An external
recruitment advisor was engaged
for recent Board appointments, and
should the Committee require further
recruitment support, this resource will
continue to be available.
Matters reserved for the Board
The Board retains full and effective
control over the Company and is
responsible for the Company’s strategy
and key financial and compliance issues.
There are certain matters that are
reserved for the Board and they include
but are not limited to:
Strategy and Management
Approval of: long-term objectives;
commercial strategic aims; annual
operating and capital expenditure
budgets; new business activity; any
decision to cease to operate all or any
material part of the Company’s business.
Structure and capital
Capital structure; major changes to
the Company’s corporate structure;
changes to the management and control
structure; change to the Company’s
listing; alteration of the Company’s
articles of association; change in the
Company’s accounting reference date,
registered name or business name.
Financial reporting and controls
Approval of finance reports; interim
management statements and any other
preliminary announcement of the final
results; annual reports and accounts;
dividend policy and declaration of any
dividend and significant changes in
accounting policies/practice.
Internal controls
Ensuring maintenance of a sound
system of internal control and risk
management including regular risk
review.
Finance
Raising new capital and confirmation
of major financing facilities;
recommendation of dividends; operating
and capital expenditure budgets;
granting of security over any material
Company asset; financial stress testing.
Contracts
All contracts above £20m; major capital
contracts over £20m; contracts which
are material or strategic; contracts
outside of the approved budget and
not in the ordinary course of business;
major investments or any acquisitions/
disposals and transactions with
Directors or other related parties
which are not in the ordinary course of
business.
Communications
Approval of resolutions and
documentation put forward to
shareholders; approval of circulars,
prospectuses and listing particulars, and
approval of press releases concerning
matters decided by the Board.
50 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
Board membership and succession
planning
Director appointments and succession
planning for the Board and senior
executives is evaluated on a regular
basis commensurate with good
corporate governance practice on
diversity, experience and skills and the
evolving needs of the Company.
Remuneration
Determining the remuneration policy
for the Executive Directors, senior
executives and all staff and the
remuneration of the Non-Executive
Directors. Introduction of new share
incentive plans or major changes to
existing plans, to be put to shareholders
for approval.
Delegation of authority
Division of responsibilities between
the Chair, the Chief Executive and
Executive Directors; delegated levels of
authority, including the Chief Executive’s
authority limits; establishment of Board
Committees and approval of terms of
reference of Board Committees.
Corporate governance matters
Review of the Company’s overall
corporate governance arrangements.
Other
Policies including the share dealing
code; appointment or change of the
Company’s principal professional
advisers and auditors; overall levels of
insurance for the Company; material
litigation; any decision likely to have
a material impact on the Group or
Company from any perspective
including, but not limited to, financial,
operational, strategic or reputational;
matters reserved for Board decisions
and which the Board considers suitable
for delegation are contained in the
terms of reference of its Committees;
and the grant of options, warrants or
any other form of security convertible
into shares.
Directors’ attendance at meetings
The Directors’ attendance at Board
meetings and Board committees during
2024 is detailed in the table below:
Director
Board
(attended/
eligible to
attend)
Ad hoc Board
(which include
administrative
meetings (e.g.
share allotments
where the whole
Board is not
required)
Audit
Remuneration
Nominations
HSE
Reserves
Sustainability
D. Latin*
8/8
8
1
1
1
M. Flegg**
2/2
2
1
1
C. Cox***
3/3
4
1
1
M. Copeland***
7/7
7
M. Webb**
5/5
3
3
4
K. Coppinger
8/8
8
5
8
2
A. Bell**
1/2
2
J. Schmitt
7/8
7
4
4
M. Soeting
8/8
8
5
8
1
K. Van Hecke
8/8
7
5
4
1
S. Lloyd Rees
8/8
8
8
1
R. Lawson
8/8
8
4
G. Vermersch
8/8
8
Notes:
During the year, following a change in the composition of the Board, there were a number of changes made to each Committee membership including
changes made to the Chair of each Committee.
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 Chair, the number of meetings attended by non-committee members have not been recorded in the above table.
*
Chair
** Mitch Flegg stepped down from the Board in April 2024, Andy Bell retired from the Board in February 2024, and Malcolm Webb retired from the
Board in June 2024.
*** Martin Copeland joined the Board in February 2024, and Chris Cox joined the Board in July 2024.
Serica Energy plc Annual Report & Accounts 2024 l 51
NOMINATIONS COMMITTEE REPORT (PREVIOUSLY NOMINATIONS & CORPORATE
GOVERNANCE COMMITTEE)
In March 2024, the Committee’s Terms
of Reference were refocused solely on
matters related to succession planning
and senior appointments, with full
responsibility for Corporate Governance
returned to the Board and its Chair,
advised by the Company Secretary.
The Committee’s purpose is to assist
the Board in fulfilling its responsibilities
regarding Board Evaluation, recruitment
and succession planning.
Members
In 2024, the Committee consisted of
Malcolm Webb (Senior Independent
Non-Executive Director and Committee
Chair until June 2024), David Latin
(Non-Executive Chair of the Company),
and Robert Lawson (Non-Executive
Director). During the latter half of
2023, the Committee progressed
plans for CEO succession, which were
implemented in the first half of 2024.
Subsequently, the Board appointed
David Latin as Interim CEO in April
2024. Following his appointment, David
Latin temporarily stepped down from
the Committee, and Kate Coppinger
(Independent Non-Executive Director)
joined the Committee and an impartial
search for a permanent CEO candidate
was conducted.
The Committee now comprises David
Latin (Chair), Robert Lawson (Non-
Executive Director), and Kate Coppinger
(Senior Independent Non-Executive
Director).
The Committee met four times during
2024, and has, so far, met once in 2025.
Independence of Non-Executive
Directors
The Committee and the Board are
satisfied that each Independent Non-
Executive director of the Company
remains independent and that all of the
Non-Executive Directors continue to
have sufficient time to discharge their
responsibilities to the Company.
Board changes
In April 2024, Mitch Flegg stepped down
as Chief Executive Officer and David
Latin (Chair of the Company) assumed
the role of Interim CEO until Chris Cox
was appointed as CEO designate in
June 2024 and formally as CEO in
July 2024. Andy Bell (Chief Financial
Officer) retired during the year and was
replaced by Martin Copeland, who was
appointed in February 2024. Malcolm
Webb retired in June 2024 as Senior
Independent Non-Executive Director
and was replaced in this role by Kate
Coppinger, who has served on the
Board since 2020.
2024 and early 2025 activities
included:
• Leading a comprehensive CEO
search and interview process,
with support from an external
search agency, and providing
recommendations to the Board
• Enhancing the interview and
recruitment process for Executive
Directors and Senior Executives
• Reviewing feedback from the
external professional advisor (Nurole)
on Committee evaluation and
identifying areas for improvement
• Recommended developing an
induction template for newly
appointed Senior Executives
• Reviewing and updating the
Committee’s terms of reference as
necessary
• Recommending actions for the Board
following updates to the QCA Code
2023
• Assessing the independence of
Independent Non-Executive Directors
and evaluating the time commitment
of INEDs and NEDs to effectively
discharge their duties
2025 looking forward:
The Committee shall continue to focus
its time and attention on evaluating
its own effectiveness and reviewing
the independence and capacity of
both Independent Non-Executive
Directors and Non-Executive Directors
to effectively fulfil their duties. It will
focus on succession planning for Board
and senior management roles while also
reviewing committee memberships and
exploring the potential implementation
of a membership rotation at a future
date. Additionally, the Committee will
oversee the recruitment of directors
and support their ongoing education to
ensure they remain well-equipped to
meet the Company’s evolving needs.
David Latin
Chair of the Nominations Committee
31 March 2025
52 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
AUDIT COMMITTEE REPORT
The Audit Committee is a standing
committee of the Board, responsible for
reviewing and making recommendations
on all material financial decisions
affecting the Company, including:
• Changes in accounting policies
• Matters requiring significant
judgement and risk
• Compliance with accounting
standards, legal, and regulatory
requirements
• Disclosures in the interim and annual
reports and financial statements
• The integrity of the Group’s financial
and internal controls
• Significant concerns raised by
the external auditor regarding the
conduct, results, or outcomes of the
annual audit
• Issues that may affect the
independence of the external auditor
Ensuring the integrity of the financial
statements is critical, particularly
regarding key assumptions and
judgements. The Committee reviews
these judgements prior to the
publication of financial statements at
year-end and the interim six-month
period, while also addressing significant
issues throughout the year. This
includes assessing subjective material
assumptions related to asset valuation,
provisioning, and their accounting
treatment.
The Committee reviewed and was
satisfied that the judgements exercised
by management on material items
contained within the Report and
Financial Statements are reasonable.
Membership
The Committee comprises Michiel
Soeting (Committee Chair), Kate
Coppinger, and Kaat Van Hecke, all of
whom are Independent Non-Executive
Directors. The Chief Financial Officer,
Group Treasurer, and external auditors
are also invited to attend meetings.
Michiel Soeting, the Committee Chair,
is a qualified Chartered Accountant
with over 30 years of experience in the
audit and financial sector, including 20
years in the oil and gas industry. He
brings extensive financial expertise
and strong experience in governance,
risk management, and regulatory
compliance.
The Committee meets at least four
times a year and in 2024 met on five
occasions. It has met twice so far in
2025. The Committee also holds private
sessions with management and with the
external auditor without management
present whenever it deems it
appropriate to do so.
2024 and early 2025 activities
included:
• Reviewing feedback from the
external professional advisor (Nurole)
on Committee evaluation and
identifying areas for improvement
• Reviewing and updating the
Committee’s terms of reference, as
necessary
• Reviewing and approving the
Hedging Execution Strategy and
Price Commodity Price Hedging
Policy
• Reviewing and approving an updated
Delegations of Authority and
recommending it to the Board for
approval
• Obtaining assurance from the
management team that all
transactions with the Mercuria Group
were conducted at arm’s length
• Reviewing the findings of
the Reserves Committee and
recommending approval of the CPRs
to the Board
• Reviewing and approving
management’s proposal to present
the Group financial results in US
Dollars, replacing GBP as the
presentational currency
• Reviewing tax exposures and fraud
risks presented by management
• Reviewing the financial reporting
judgements and key accounting
estimates related to half and full-year
results
• Agreeing a Committee work
programme for 2025
• Determined that the Group does not
currently require an internal audit
function, agreeing that this would
kept under review as the Company
continues to grow
• Reviewing and making
recommendations to the Board
regarding dividends and other
shareholder payments (such as the
implementation of further share
buyback programmes)
External Auditors
The external auditors, EY, were
re-appointed in 2024 at the Company’s
annual general meeting. The Serica
Group fee to EY for the financial year to
31 December 2024 is $1.1 million.
The Audit Committee conducted a
comprehensive review of the quality,
effectiveness, value, and independence
of EY’s audit. Auditor independence is
evaluated at the planning stage of each
reporting cycle. In 2023, the Committee
introduced an Audit Tender Policy,
requiring a tender process every ten
years, effective from 2018 when the
Company underwent significant growth
and transformation.
The Committee is satisfied that EY’s
audit remains independent.
Audit Quality Review (AQR)
Inspection Report
In March 2025, the Audit Committee
was notified by the AQR team of the
Financial Reporting Council (‘FRC’) of
the findings of its inspection of Ernst
& Young LLP’s audit of the Company’s
2023 financial statements. The
inspection covered the complete audit
process, including key audit areas
such as the purchase price allocation
for the acquisition of Tailwind and
decommissioning and restoration
provisions. The Audit Committee
considered the AQR report and it was
noted that no key findings arose from
this inspection.
Serica Energy plc Annual Report & Accounts 2024 l 53
FRC Corporate Reporting Review
The FRC Corporate Reporting Review
(CRR) team reviewed the Group and
Company 2023 annual report during
the year ended 31 December 2024
in accordance with Part 2 of the FRC
Corporate Reporting Review Operating
Procedures. The review considered
compliance with reporting requirements
but was limited in scope. The Audit
Committee reviewed and approved
the company’s explanation in relation
to the FRC’s query on the difference
between the amount of share premium
reserves reported by the group and
parent company, which enabled the FRC
to close its enquiry. In addition, some
suggestions were made as reporting
improvements (to the extent that they
are considered to be material and
of relevance). The Audit Committee
considered the recommendations as
part of its review of this year’s Annual
Report and Accounts and are satisfied
that they have been addressed.
2025 looking forward:
The Committee will continue to operate
in line with its Terms of Reference, with
a focus on:
• Reviewing the Company’s control
framework
• Ensuring risk management
procedures and financial reporting
controls remain robust
• Requesting management to assess
IT risks and the effectiveness of
key internal controls over financial
reporting
AUDIT COMMITTEE REPORT continued
• Reviewing and approving a Policy on
Non-Audit Work by external auditors
• Continuing to assess tax and fraud
risks presented by management
• Evaluating the need for an internal
audit function
• Reviewing and monitoring the
Company’s hedging policy and
practices
• Adhering to the Quoted Companies
Alliance Corporate Governance Code
and updates introduced in 2023
• Reviewing appropriate climate-
related disclosures in the Annual
Report
• Assessing whether dividends or
other payments can be made to
shareholders under the financial
framework
• Monitoring the quality and
independence of the external
auditors
• Undertaking a review of the
Committee’s Terms of Reference
Michiel Soeting
Chair of the Audit Committee
31 March 2025
54 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
RESERVES COMMITTEE REPORT
The Reserves Committee is a sub-
committee of the Audit Committee. The
Committee’s purpose is to review the
reports of the independent reserves
auditor which require that the Board
discuss the reserves reports with
the independent reserves auditor
or delegate authority to a reserves
committee comprised of at least two
independent Directors.
Members
During 2024, David Latin joined the
Committee for a short period, replacing
Mitch Flegg upon his departure from
the Company in April 2024, whilst he
undertook his Interim CEO position.
He stepped down from the Committee
when Chris Cox was appointed as Chief
Executive Officer on 1 July 2024.
The current Committee members are
Kaat Van Hecke (Independent Non-
Executive Director and Committee
Chair), Chris Cox (Chief Executive
Officer of the Company) and Michiel
Soeting (Independent Non-Executive
Director). The Committee met once
in 2024 and typically meets once a
year prior to publication of the annual
results. Members of the senior Technical
leadership who managed the audit are
invited to attend the meeting.
2024 and early 2025 activities
included:
• Reviewing feedback from the
external professional advisor (Nurole)
on Committee evaluation and
identifying areas for improvement
• Reviewing and updating the
Committee’s terms of reference, as
necessary
• Collaborated with the reserves
auditor, RISC Advisory, who
audited the work conducted by
the Company’s technical team to
calculate reserves for each field
• Reviewing the key changes from
prior year in respect of Serica’s
current portfolio of assets, which
broadly fall into three hubs, being the
Bruce Hub (Bruce, Keith and Rhum),
the Triton Hub (Bittern, Gannet E,
Guillemot West and North West,
Evelyn, Belinda and Kyle), and Other
Producing Assets (Columbus, Erskine
and Orlando). Contingent Resources
are contained in the Greater Buchan
Area, Mansell and Skerryvore, and
there are material 2C contingent
Resource additions through the
addition of the Buchan and Kyle
projects, plus asset life extension
activities on the Bruce platform,
Triton FPSO and Erskine
• Meeting with management and the
qualified reserves auditor to review
the reserves data and the auditor’s
annual reserves report
• Discussing assumptions related to
cessation of production and life
extension
• Reviewing assets added to the
portfolio since the last CPR and
assessing the evaluation process
used to incorporate them into the
expanded reserves portfolio
• Reviewing and recommending to
the Board approval of the content
and filing of the Company’s annual
statement of reserves
Kaat Van Hecke
Chair of the Reserves Committee
31 March 2025
Serica Energy plc Annual Report & Accounts 2024 l 55
The Health, Safety & Environment
Committee provides assurance to the
Board on occupational health and
safety leadership. It is primarily focused
on ensuring that health and safety
policies are adopted and applied across
the Group.
Members
During 2024, David Latin joined the
Committee for a short period during
his tenure as Interim CEO. He stepped
down from the Committee when Chris
Cox was appointed as Chief Executive
Officer on 1 July 2024.
The current Committee members are
Kaat Van Hecke (Independent Non-
Executive Director and Committee
Chair), Chris Cox (Chief Executive
Officer of the Company) and Jérôme
Schmitt (Independent Non-Executive
Director).
During 2024, the Committee has met
quarterly to discuss matters pertaining
to Health, Safety & Environmental
issues. The Committee considers all
of the Company’s operations, ensuring
that adequate HSE policies are adopted
and applied across the Group, and the
Safety Leadership of both management
and the workforce is visible and
impactful. The Chief Operating Officer
Mike Killeen and the HSE Manager Craig
Robertson have a standing invitation
for each meeting. Other senior staff
are regularly invited depending on the
agenda subject.
2024 and early 2025 activities
included:
• Evaluating HSE performance against
industry standards – comparing
Total Recordable Injury Frequency
performance versus IOGP benchmark
– and discussing improvement steps
• Reviewing the HSE Safety
Performance of the Well Operations
and discussing the upcoming well
work and drilling programme
• Reviewing and discussing key
findings from the Risk & Assurance
team
• Monitoring interactions with the HSE
& Safety Executive and ensuring that
the relationship with the Regulator
remains constructive and responsive
• Monitoring delivery of HSE
performance against the HSEQ Plan
at each meeting
• Performance discussion on HSE
personal and process safety metrics,
looking at both leading and lagging
indicators
• Reviewing and feeding into the
Process Safety Improvement Plan
• Reviewing major and reportable
HSE incidents that occurred,
investigations and lessons learned at
each meeting
• Reviewing Maintenance Backlogs to
address the backlog at each meeting
• Agreeing with the Remuneration
Committee the HSE performance
metrics linked to the Company bonus
scheme
• Reviewing feedback from the
external professional advisor (Nurole)
on Committee evaluation and
identifying areas for improvement
• Reviewing and updating the
Committee's terms of reference, as
necessary
In 2024, the chair of the HSE Committee
had a three days offshore visit to Bruce
platform to get a first-hand appreciation
for the process safety and integrity of
the installations. At the same time a
Process Safety Leadership Engagement
session in the Control Room was held
and many operational staff were met.
Finally a focused discussion with
the offshore safety representatives
took place.
2025 looking forward:
During 2025, the Committee plans to
continue to review the ongoing HSE
procedures and culture, evaluate HSE
performance against our internal plan
and industry standards, agree a HSE
bonus scorecard for 2025 to be linked
to the Company bonus scheme for
2025, and ensure that the HSE policy
and procedures remain effective.
The Committee will place greater
focus on monitoring progress against
the maintenance backlog, on the
implementation of the process safety
improvement plan and on the follow-up
of the findings and recommendations of
the HSE risk and assurance team.
Kaat Van Hecke
Chair of the Health, Safety and
Environmental Committee
31 March 2025
HEALTH, SAFETY AND ENVIRONMENTAL COMMITTEE REPORT
56 l Serica Energy plc Annual Report & Accounts 2024
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Financial Statements
The Sustainability Committee is
appointed by the Board to assist the
Board in fulfilling its responsibility to
review and provide oversight of the
Company’s strategies, goals, policies,
performance and disclosures related
to sustainability and Environmental,
Social, and Governance matters. Its
primary focus areas include monitoring
environmental performance, providing
assurance that Emissions Reduction
Action Plan projects are being delivered,
reviewing potential investment
opportunities in the energy transition,
and overseeing ESG reporting and ESG
and climate-related risk management.
In addition, the Committee oversees
workforce diversity and inclusion
initiatives, biodiversity, education, and
charity support programs.
The Company also publishes a separate
annual ESG Report detailing these
efforts.
Membership
During 2024, David Latin joined the
Committee for a short period, replacing
Mitch Flegg upon his departure from
the Company in April 2024, while he
undertook his Interim CEO position. Mr
Latin stepped down from the Committee
when Chris Cox was appointed as Chief
Executive Office on 1 July 2024.
The current Committee members are
Jérôme Schmitt (Independent Non-
Executive Director and Committee
Chair), Chris Cox (Chief Executive
Officer of the Company), and Sian Lloyd
Rees (Independent Non-Executive
Director). The Chief Operating Officer,
Chief Corporate Affairs Officer, ESG &
Business Innovation Manager and Senior
ESG Analyst are invited to attend the
meetings.
During 2024, the Committee met
quarterly to address matters related
to ESG.
2024 and early 2025 activities
included:
• Reviewing feedback from the
external professional advisor (Nurole)
on Committee evaluation and
identified areas for improvement
• Reviewing and updating the
Committee’s terms of reference, as
necessary
• Evaluating environmental
performance on the Company’s
assets
• Monitoring ESG KPI targets versus
actual results and discussing
opportunities for improvement
• Advising the Remuneration
Committee on agreed ESG
performance metrics linked to the
Company’s bonus scheme
• Reviewing the results of the
Materiality Assessment, key to
ESG reporting which led to the
development of a Materiality Matrix
• Overseeing and reviewing the
Company’s ESG & climate-related
Risk Register
• Consideration of external activities
and legislation relevant to ESG and
sustainability
• Reviewing the Government’s
approach to energy security and its
alignment with delivering net-zero
targets
• Reviewing the Emissions Reduction
Action Plan and associated projects
• Reviewing the Methane Action Plan
• Providing input on management’s
Investment Hopper for potential
energy transition investments
• Assessing the Company’s ‘Social’
initiatives and proposed areas for
enhancement
• Considering the Company’s Energy
Transition roadmap and providing
feedback to management
• Conducting ESG and energy
transition training for the Board
2025 looking forward:
During 2025, the Committee plans to
continue monitoring the Company’s
progress in reducing carbon intensity
and emissions, ensuring alignment with
established targets. It will also review
potential energy transition projects
and work to ensure transparent and
comprehensive ESG reporting. The
Committee aims to raise awareness
and understanding within the Board
on what the energy transition might
entail regarding threats, opportunities,
and timeline, to gain greater Board
engagement. Additionally, the
Committee intends to place greater
emphasis on the Social aspect of ESG.
Jérôme Schmitt
Chair of the Sustainability Committee
31 March 2025
SUSTAINABILITY COMMITTEE REPORT
Serica Energy plc Annual Report & Accounts 2024 l 57
DIRECTORS’ REMUNERATION REPORT
Chair’s Statement
Dear shareholders,
This is Serica Energy’s Directors’
Remuneration Report (the ‘Report’) for
the year ended 31 December 2024.
Business performance in 2024
Serica experienced a challenging 2024,
with issues at the Triton FPSO causing
production for the year to fall short of
our expectations. This was especially
frustrating as the drilling campaign at
Triton is delivering excellent results, and
management is focused on ensuring
that, going forward, our facilities are
able to produce closer to the potential
of our wells. There is considerable
work to do in this area, but we know
the issues and are confident they can
get fixed. As this work continues at the
Triton FPSO, the retention of investment
allowances means we can now turn
our attention to the untapped potential
across our portfolio, and the Company
is well positioned to unlock value for
shareholders through both organic and
inorganic growth. Despite the difficult
fiscal regime, Serica’s assets remain
highly cash generative, allowing us to
continue delivering on core priorities,
investing in our UK North Sea assets
while maintaining material shareholder
returns.
Board changes
As announced in November 2023,
Andy Bell stepped down as Chief
Financial Officer in February 2024
after almost twenty years of service
with the Company. Martin Copeland
was appointed to the Board as Chief
Financial Officer on 5 February 2024.
Mitch Flegg stepped down as Chief
Executive Officer on 24 April 2024. From
that date until 1 July 2024, David Latin,
Chair held the role of Interim CEO and
effectively Executive Chair. Chris Cox
was then formally appointed as Chief
Executive Officer from 1 July 2024 after
assuming the role of CEO Designate for
a short period from June 2024.
For pay purposes, Andy Bell and Mitch
Flegg were treated as good leavers
and hence they remained eligible for
annual bonuses for 2024, pro-rated for
the months served during the year and
subject to the performance outturns
as determined by the Remuneration
Committee. Unvested awards under
the Long-Term Incentive Plan ('LTIP')
continue until the normal vesting date,
subject to the original performance
conditions and pro-rated according to
the elapsed time between the date of
grant and the last day of employment.
The salaries for the new CEO and
CFO were set after consideration of
their skills and experience. David Latin
received a salary for his role as Interim
CEO, in addition he received a fee for
his continuing role as Chair of the Board.
He was, for the period that he served in
an executive role, eligible for an annual
bonus but not for any award under the
LTIP. Both the new CEO and CFO were
eligible to participate in the 2024 annual
bonus on a time pro-rated basis. Chris
Cox and Martin Copeland had measures
which reflected the circumstances and
timing of their respective appointments
during the performance period. The
performance goals were based on
the all-employee corporate scorecard
and supplemented by additional
measures and targets in relation to
growth, organisational development
and financial goals. An award under
the LTIP was granted to both Chris Cox
and Martin Copeland shortly following
their respective appointments using
the same performance criteria as
other participants (namely share price
performance 35%, relative TSR 35% and
emissions intensity targets 30%).
Incentive outcomes
The Company delivered against a
number of the performance measures.
The details of the targets are shown on
page 67. The Committee considered the
performance outcomes particularly in
the light of overall performance outcome
for all of Serica’s employees and was
satisfied that the formulaic results were
appropriate. As a result bonuses of 36%
of maximum were paid to each of Chris
Cox and Martin Copeland at the end of
the year. Both executives are eligible for
a maximum of 125% and 100% of salary
respectively, which was pro-rated for
service in 2024.
The Directors’ Remuneration Policy
Serica Energy, on an annual and
voluntary basis, seeks shareholders’
approval of the Directors’ Remuneration
Report ('DRR') at the AGM. At the 2024
AGM, the DRR was passed with 99.8%
support. During 2024, the Committee
considered the new QCA Corporate
Governance Code which encourages
companies to seek shareholders’
approval of the Directors’ Remuneration
Policy (the 'Policy') on a voluntary
basis. The Committee has undertaken
a review of the Policy with the intention
of putting it to an advisory vote at the
2025 AGM.
The Policy which is set out on pages 59
to 61 is considered to be proportionate
yet competitive and recognises the
size and scale of the business as well
as the flexibility which is a feature
of AIM market practice. The main
objectives of the Policy are to support
the retention and recruitment of high
calibre individuals who can deliver
the Company strategy. The Policy is
deliberately weighted towards variable
pay which is aligned to Company
performance and the creation of
long-term sustainable value. The
Policy contains additional features
expected for larger companies such
as malus and clawback provisions as
well as comprehensive shareholding
requirements.
Implementing the Policy for 2025
The salaries for the Executive Directors
will be increased by 3.33% and 3.75%
for the CEO and CFO respectively, with
effect from 1 January 2025, which is
broadly aligned to increases for all other
employees.
The 2025 annual bonus maximum will
remain unchanged at 125% of salary
for the CEO and 100% of salary for the
CFO. The performance measures for
the CEO and CFO are based on the
corporate all-employee scorecard and
are supplemented with growth, financial
and other (which includes organisational
elements). The face value on grant of
the 2025 award under the LTIP will be
150% of salary for the CEO and 125%
of salary for the CFO. Vesting will be
subject to performance conditions
which have yet to be set.
58 l Serica Energy plc Annual Report & Accounts 2024
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Corporate Governance
Auditor’s Report
Financial Statements
Conclusions
The Committee believes that the
current Policy remains appropriate for
the Company whilst it is AIM listed. We
hope that shareholders will support
our remuneration resolutions at the
2025 AGM.
Work is ongoing regarding a potential
move from the AIM to the Main Market
of the LSE in 2025, and the Board
will ensure that the Policy remains
appropriate.
This has been my first full year as
Chair of the Remuneration Committee
and I am looking forward to talking
to shareholders and indeed our
stakeholders more broadly on executive
remuneration. I very much welcome any
feedback or comments on the Directors’
Remuneration Report and the Policy. I
can be contacted via our Group Head
of Investor Relations, Andrew Benbow –
andrew.benbow@serica-energy.com.
Kate Coppinger
Chair of the Remuneration Committee
31 March 2025
The Directors’ Remuneration Policy
In light of the recent changes to
the QCA Code, the Remuneration
Committee will ask Serica Energy’s
shareholders to approve the Policy
at the 2025 AGM. The vote will be
advisory in the same way that the vote
on the Directors’ Remuneration Report
is advisory.
The Policy was reviewed by the
Remuneration Committee and
recommended to be approved by the
Board. The Remuneration Committee
had overall oversight of the Policy and
our independent external advisers
provided independent specialist advice
to the Remuneration Committee. The
Board provided approval of the Policy in
early 2025.
Objectives of the policy
The proposed Directors’ Remuneration
Policy, effective from the date of the
2025 AGM, has been designed to
support wider talent management
activities and recruit, retain and
incentivise high calibre executives to
deliver our corporate strategy.
The Policy has appropriate safeguards
to monitor, manage and mitigate
undue risk taking. The heavy weighting
towards variable pay, particularly long-
term share-based pay, is reflective of
the culture of the business with a focus
on sustainable performance.
Overall, the Policy allows for
competitive, but not excessive pay
outcomes, which are aligned to
stakeholder outcomes.
The Remuneration Policy for the Executive Directors
The following table summarises each element of the remuneration policy for the Executive Directors, explaining how each element
operates and links to the corporate strategy.
Element
of pay
Purpose/
link to strategy
Operation/
performance
Maximum
Base salary
Set to attract and retain
individuals with the
required capabilities to
deliver the Company
strategy
Salaries are set on appointment and take
into account the individual’s skills and
experience, and the recruitment market.
Pay levels in companies of a similar size
and scale will be used as necessary
to help determine the appropriate pay
positioning.
Salaries are normally reviewed, but not
necessarily increased, annually.
Annual increases will normally be in line
with the increases for UK employees
except in exceptional circumstances,
including but not limited to a change in
the scope and scale of the organisation,
change in role, the need for accelerated
pay progression, internal differentials and
external relativities.
Pension
Encourage our
employees to save for
the long-term whether
through participation
in an occupational
scheme or payment
of a cash allowance
instead.
Contribution or cash allowance in lieu
(or a combination) determined as a
percentage of annual salary.
The level of contribution or cash
allowance in lieu is intended to be in line
with the maximum contribution available
to all employees.
No more than the pension contribution
available to all UK employees (which
at the date of Policy approval is 15% of
salary).
Serica Energy plc Annual Report & Accounts 2024 l 59
Element
of pay
Purpose/
link to strategy
Operation/
performance
Maximum
Benefits
To provide cost-effective
employment benefits
and to encourage
wellbeing.
A range of benefits can be provided in
line with typical market practice including,
but not limited to, medical insurance,
permanent health insurance, car
allowance and life assurance.
Additional benefits may be provided
within the Directors’ Remuneration Policy
for other reasonable business reasons
such as relocation, whether domestic or
international.
Executive Directors are eligible to
participate in other benefit schemes,
including all-employee share schemes, on
the same terms as other employees.
The maximum value of benefits will vary
depending on the cost to the Company of
providing them.
This excludes any relocation benefits,
which will be capped by any such
approved relocation policy in place at
the time.
Annual Bonus
Plan
To incentivise and
reward the Executive
Directors for achieving
results based on targets
set in line with the
annual business plan
and the longer-term
corporate strategy.
The annual bonus will be based on
financial, operational and/or strategic
measures and targets set for and
measured over the performance period.
They may also include individual and
team-based objectives and targets.
It is expected that the majority of the
measures will be quantifiable.
Part of the annual bonus maybe deferred
into shares for a period of two years.
Dividends or dividend equivalents may be
paid to the extent the shares vest.
The annual bonus will be subject to malus
and clawback provisions.
The maximum for the CEO and for any
other Executive Director will be 150% of
salary a year. Award levels for FY25 are
set out on page 66
No bonus will be paid below threshold
and the full bonus will be paid only for
meeting or exceeding the maximum
performance standards set.
The bonus earned for meeting targets
may vary from year to year depending on
the measures and a range of commercial
factors.
Long-Term
Incentive Plan
(‘LTIP’)
To align the long-
term interests of the
Executive Directors with
those of shareholders.
To reward the delivery
of long-term sustainable
results and to retain.
Annual awards of performance shares.
The share scheme will allow for a variety
of share-based arrangements including
conditional shares, forfeitable shares and
nil-cost or nominal cost options.
The Remuneration Committee may set
any measures as it considers appropriate
from year to year based on the Board’s
strategic objectives. This may include,
but is not limited to, financial, operational,
strategic or value creation measures.
The awards normally vest three years
after the date of grant. The Committee
may determine that Executive Directors
will be required to hold (if necessary after
tax has been paid) the shares for two
years after they have vested.
Dividends or dividend equivalents may be
paid to the extent the shares vest.
Malus and clawback will apply.
Maximum annual award of up to 200%
of salary. Award levels for FY25 are set
out on page 68
No more than 25% of the shares under
award will vest at threshold or the
deemed equivalent.
DIRECTORS’ REMUNERATION REPORT continued
60 l Serica Energy plc Annual Report & Accounts 2024
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Financial Statements
Element
of pay
Purpose/
link to strategy
Operation/
performance
Maximum
Share
ownership
requirement
To align the interests
of Executive Directors
and shareholders and
encourage sustainable
value creation.
Executive Directors are expected to build
and maintain a material shareholding.
It is expected that this will be achieved
by personal investment and the retention
of a proportion of shares vesting from
incentive plans until they have met the
requirement.
The Remuneration Committee will monitor
progress against the guideline on an
annual basis. It is expected that the full
guideline will normally be met within five
years of employment.
200% of salary for any Executive Director.
The Committee may, at its discretion,
require Executive Directors to maintain
their shareholding for a further two years
after they leave the board.
Illustration of remuneration policy
The chart below set out the potential values of the remuneration package for FY25 under various performance scenarios.
100%
46%
30%
25%
100%
48%
32%
27%
25%
32%
27%
26%
34%
29%
29%
38%
32%
26%
34%
29%
16%
15%
Below
threshold
On target
Max
Max with
growth
Below
threshold
On target
Max
Max with
growth
Total Fixed Remuneration
Annual Bonus
LTIP
Share price growth
CEO (£000)
CFO (£000)
£714
£1,566
£2,418
£478
£997
£1,515
£2,883
£1,774
Notes
a) Salary represents annual salary for 2025. Benefits have been included based on actual 2024 figures.
b) Pension represents the value of the annual pension allowance for Executive Directors of 15% of salary.
c) Below threshold comprises salary, benefits and pension only (i.e. no bonus awarded and no LTIP vesting).
d) Target performance comprises annual bonus payouts and LTIP vesting at 50% of maximum (provided for illustrative purposes only) but with no
share price appreciation.
e) Maximum performance comprises annual bonus payouts and LTIP vesting at maximum level but with no share price appreciation.
f) Maximum + 50% share price growth comprises the figures referred to in note e) above plus an assumed increase of 50% in the value of the LTIP
award to take account of potential share price appreciation.
Serica Energy plc Annual Report & Accounts 2024 l 61
DIRECTORS’ REMUNERATION REPORT continued
Fees policy for Chair and Non-Executive Directors
The following table summarises the fees policy for the Chair and the NEDs.
Element of
pay
Purpose/link to strategy
Operation/performance
Maximum
Fees
To provide a
competitive fee to
attract Non-Executive
Directors who have
the required skills and
experience to oversee
the implementation of
the Company’s strategy.
Fees for the Chair are set by the
Committee.
Fees for the other NEDs are set by the
Board excluding the NEDs.
Fees are normally reviewed, but not
necessarily increased, annually.
Fee levels are initially determined based
on expected time commitments of each
role and by reference to comparable fee
levels in companies of a similar size and
complexity.
The Chair can receive a chair fee
and separate NED fee or a single
all-encompassing Chair fee. NEDs
will receive a standard base fee
which recognises the expected time
commitments associated with the role.
Additional fees are permitted to
recognise the additional responsibilities
associated with being the Senior
Independent Director and/or chairing a
Board committee.
Additional fees may also be paid for
other roles and/or responsibilities
which include a materially higher time
commitment than normal.
Reasonable business expenses (including
any tax thereon) will be reimbursed.
There is no limit for fees payable to the
NEDs, although the aggregate fees are
set in accordance with the limit set in the
Articles of Association (which is currently
£600,000)
Selection of performance
measures and targets
The Remuneration Committee
will choose the most appropriate
performance measures for the annual
bonus and LTIP based on the business
strategy and KPIs.
The measures, the weightings and the
targets may vary from year to year to
reflect the strategic priorities of the
business at the time.
Measures used may include financial,
operational, HSE, ESG, strategic,
individual or team-based non-financial
metrics. The use of a combination
of measures is intended to ensure
performance is assessed on a complete
basis. Performance targets are set on a
basis so that they include appropriate
levels of stretch, particularly to achieve
the top of the range, but without
incentivising undue risk taking. Where
possible the Committee will set
quantifiable targets. Where subjective
measures are used, the Committee will
still apply a rigorous assessment criteria.
Targets are set based on a range of
factors, including but not limited to,
internal business forecasts, external
analyst consensus and other economic
or market-based indicators.
Discretion retained by the Committee in
operating the incentive plans
The respective incentive plans are
administered in line with their rules,
in accordance with HMRC regulations
and the Listing rules where relevant. To
maintain the efficient administration of
these plans, the Committee will retain
discretions which include (but are not
limited to) the following:
• the participants of the plans;
• the timing of grants/award, vesting
and/or payments under the plans;
• the quantum of any grant, vesting
and/or payment (within the limits
set out in the approved Policy for
Executive Directors);
• approving the performance measures
and targets for each incentive plan;
• the use of any discretion to amend
the outcome under incentive plans;
• the appropriate leaver status and
subsequent treatment under the
incentive plans;
• the relevant treatment of awards in
the event of a change of control; and
• the relevant treatment of awards
in certain capital events or similar
circumstances (e.g. corporate
62 l Serica Energy plc Annual Report & Accounts 2024
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restructuring events, variation of
capital and special dividends).
• the ability to amend or replace the
performance conditions applying
to outstanding awards if an event
occurs which causes the Committee
to believe that the original condition
is no longer appropriate.
Malus and clawback
Malus and clawback may be applied at
any time before an award vests or for
three years after vesting in the following
circumstances:
• material financial misstatement or
that any other results or information
relied on in making such assessment
proves to have been incorrect;
• an error in calculation; and
• misconduct
Malus permits the Company to reduce
the amount of any unvested award.
Clawback permits the Company to
reduce the amount of any vested award
or any future salary or bonus and also
require the employee to pay back
amounts. The three-year time period
aligns with market practice and, in the
opinion of the Remuneration Committee
strikes a sound balance between the
mitigation of corporate risk without
weakening the incentive effect of our
variable pay arrangements.
Legacy arrangements
This Policy gives authority to the
Committee to honour the commitments
entered into with current Directors
prior to the approval of this Policy and/
or prior to the Director’s appointment
to the Board. Details of any
payments under the legacy incentive
arrangements will be set out in future
Directors’ Remuneration Reports as
they arise.
Executive Directors’ service
contracts
Chris Cox’s service agreement is
terminable with 6 months written
notice by either party up to July 2025,
thereafter being terminable by 12
months written notice by either party.
Other Executive Director’s service
agreement will be terminable by the
Company or the respective Executive
Director on up to 6 months’ written
notice.
The Company will also be entitled to
terminate an Executive Director’s service
agreement with immediate effect by
payment in lieu of notice, equal to the
basic annual salary that would have
been payable during the notice period.
The service contracts are available for
inspection at the Company’s registered
office. The dates of each service
contract are set out on page 72 in the
Annual Report on Remuneration.
The service contract of any new
appointment is expected to be
consistent with that of current Executive
Directors.
Executive Directors’ external
appointments
Executive Directors may accept an
external appointment as a Non-
Executive Director if approved by the
Board. They are entitled to retain any
fees which are payable.
Non-Executive Directors’ terms of
appointment
The Non-Executive Directors do
not have service contracts with the
Company but instead have letters of
appointment. The date of appointment
and the length of service for each Non-
Executive Director are shown in the
table on page 72 in the Annual Report
on Remuneration.
For the Chair and the Non-Executive
Directors, each appointment is subject
to annual re-election by shareholders at
each Annual General Meeting.
The appointments of the Chair and Non-
Executive Directors may be terminated
at any time by either party giving the
other 3 months’ written notice or in
accordance with the Articles.
Policy on payment for departure
from office
The Company may terminate an
Executive Director’s service agreement
with immediate effect by payment in
lieu of notice equal to the basic annual
salary the Executive Director would
have been entitled to receive during
the notice period, payable as a lump
sum or in equal monthly instalments.
Such payment is subject to mitigation
and may be reduced if the Executive
Director secures alternative employment
within that notice period.
The Committee will take into account
the specific circumstances of the
departure, the contractual entitlements,
and rules of the relevant incentive
plans when determining the termination
treatment which is summarised below:
Serica Energy plc Annual Report & Accounts 2024 l 63
Component of pay
Voluntary resignation or
termination for cause
‘Good leaver’ (e.g. death, injury, disability, ill health, redundancy,
transfer of business outside the Group, retirement at the
satisfaction of the Board or any other reason at the Committee’s
discretion)
Fixed pay
Will be paid for the proportion of
any notice period which is worked
and pro-rated as necessary.
Any untaken holiday pay will be pro-
rated as required.
Will be paid for the proportion of any notice period which is worked
and pro-rated as necessary.
Any untaken holiday pay will be pro-rated as required.
A Payment In Lieu of Notice for salary, benefits and pension for the
balance of any notice period may be made in instalments subject to
mitigation.
Annual bonus
Will normally result in no bonus
being paid.
Good leavers are eligible to receive a bonus at the normal payment
date, pro-rated for time served and subject to the achievement of the
performance conditions.
Deferred bonus
awards
Unvested deferred bonus awards
will normally lapse.
Awards will normally continue to vest on their original vesting date.
LTIP awards
Unvested LTIP awards will lapse.
LTIP awards will normally be retained by the individual for the
remainder of the vesting period and remain subject to the relevant
performance conditions, with the award time pro-rated.
The Committee will retain discretion to assess the performance
conditions and allow awards to vest at an earlier date if considered
appropriate (and to disapply time pro-rating if considered
appropriate).
The Committee may reimburse reasonable legal costs associated with the termination. If felt appropriate, the Committee may
provide a contribution towards outplacement support. Any outstanding all-employee awards will be treated in line with the relevant
HMRC regulations.
The Committee retains the authority to settle any legal claims against the Company, if considered to be in the best interests of
shareholders.
Any payments to Executive Directors on termination will be disclosed in the respective Annual Report on Remuneration.
Recruitment policy
The remuneration package for any new Executive Director will be set in accordance with the terms of the Policy in place at the time
of appointment. The principles which will be applied are set out below:
Element of pay
Recruitment Policy
Base salary
Set on appointment taking into account the skills and knowledge of the individual and the scope of
responsibilities associated with the role.
Base salary will be set taking into account other elements of the pay package to achieve the
appropriate total remuneration pay positioning.
The relevant experience of the individual may mean it is appropriate to set the initial salary at a lower
position compared to market with an outline plan to make subsequent increases to achieve the desired
market position in line with the individual’s development in the role. Where possible, these planned
increases will be signposted in advance.
Benefits
Expected to be in line with the Policy table.
Benefits in line with local market norms for overseas executives will be agreed as necessary.
The Committee will have the discretion to pay certain relocation expenses as deemed necessary.
These are expected to be on a time limited basis.
Pension
To be in line with the Policy.
Annual bonus
To be in line with the Policy, including any ongoing bonus limit.
Any bonus for the year of appointment will be pro-rated based on service rendered. Depending on
the timing and circumstances of the appointment, it may be appropriate to use different performance
measures compared to other executives for the remainder of the initial performance period.
DIRECTORS’ REMUNERATION REPORT continued
64 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
Element of pay
Recruitment Policy
LTIP
To be in line with the Policy. An appropriate award may be made shortly after appointment, assuming
the Company is not in a closed period. It is expected that the initial award will have the same
performance conditions as other executives.
External appointments
To secure an appointment, the Committee may determine that it is necessary to buy-out existing
remuneration from a previous employer. The intention will be that any buy-out compensation will be
of the same value as that of any remuneration forfeited. Where possible, buy-out compensation will
be on a comparable basis taking into account the form, time horizons and any relevant performance
conditions. For completeness, any buy-out may be in excess of the normal LTIP limits and thus require
bespoke arrangements in accordance with the relevant listing rules.
Internal appointments
For an internal appointment, any existing pay or contractual arrangements agreed prior to them being
appointed to the Board, may be allowed to continue on its original terms, adjusted as relevant to take
into account the new appointment.
Non-Executive
Directors’ fees
To be in line with the Policy.
Policy on a change of control
In the event of a change of control or similar occurrence, outstanding awards may vest early subject to any performance criteria
assessment. The Committee retains the discretion to apply time pro-rating if considered appropriate.
Alternatively, awards may be rolled over into equivalent awards (with equivalent value) in any acquirer.
Statement of consideration of shareholder views
The Committee will engage with shareholders and respond to shareholder feedback, and any future material changes to the Policy
will normally be subject to prior consultation with major shareholders.
Statement of consideration of employment conditions elsewhere in the Group
Serica has 228 employees as at the end of the financial year. Our employees contain a combination of on-shore and off-shore
roles, all of which are in the UK. The pay and employment conditions throughout the Company are monitored by the Remuneration
Committee on a regular basis. This includes updates on base salary increases, annual incentive outcomes and gender pay reporting.
The Committee also approves the share incentives which are granted.
Differences in the Policy for Executive Directors and all other employees
The Company provides a market competitive package to all employees with the potential for further reward through annual
incentives linked to the achievement of key performance objectives. At present, this is based on a corporate scorecard which is
consistent with that used for the senior management team, noting that the senior team also have additional metrics related to
strategic objectives.
All eligible employees are able to participate in all-employee share plans in order to become shareholders in the business.
When making other long-term incentive grants, the Committee will consider the ability of the individual to influence Group level
performance and the overall competitiveness of their pay package compared to equivalent roles in similar sized businesses.
The overall pay package for the Executive Directors is more heavily weighted towards variable pay so more is ‘at risk’ than it is for
other employees. More of Executive Director pay is long-term in nature, reflecting the time horizon of share incentives and the
inclusion of shareholding requirements.
Serica Energy plc Annual Report & Accounts 2024 l 65
Annual Report on Remuneration
Single total figure of remuneration
The following tables set out the total remuneration received by Executive Directors and Non-Executive Directors in relation to the
current year 31st December 2024. These figures are reported below in £ Sterling, the currency in which they are paid, rather than
the Group's reporting currency of USD. see Note 7 for further disclosures.
£’000
Salary/ fees
Committee
Chair Fee
Benefits
Pension
Annual
Bonus
Total
remuneration
Total fixed
pay
Total
variable
Executive Directors
Chris Cox¹
300,000
–
312
32,952
135,000
468,264
333,264
135,000
Martin Copeland²
362,564
–
572
39,543
132,000
534,679
402,679
132,000
Former Executive Directors
Mitch Flegg³
186,923
–
194
24,639
233,654
445,410
211,756
233,654
Andy Bell⁴
33,173
–
122
4,325
10,035
47,655
37,620
10,035
Non-Executive Directors
David Latin⁵
250,000
(Interim CEO)
200,000
(Chair)
60,000
(INED Fee)
–
–
–
250,000
760,000
510,000
250,000
Kate Coppinger
5,000
(SID Fee)
60,000
(INED Fee)
10,000
–
–
–
75,000
75,000
–
Jerome Schmitt
60,000
(INED Fee)
10,000
–
–
–
70,000
70,000
–
Michiel Soeting
60,000
(INED Fee)
10,000
–
–
–
70,000
70,000
–
Robert Lawson
60,000
(NED Fee)
-
–
–
–
60,000
60,000
–
Guillaume Vermersch
60,000
(NED Fee)
-
–
–
–
60,000
60,000
–
Kaat Van Hecke
60,000
(INED Fee)
10,000
–
–
–
70,000
70,000
–
Sian Lloyd Rees
60,000
(INED Fee)
–
–
–
–
60,000
60,000
–
Malcolm Webb6
45,000
(INED Fee)
5,000
–
–
–
50,000
50,000
–
Total
2,771,008
2,010,319
760,689
Notes:
1. Chris Cox was appointed on 1 July 2024 and his pay reflects his period of service
2. Martin Copeland was appointed on 5 February 2024 and his pay reflects his period of service
3. Mitch Flegg stepped down as a Director on 24 April 2024. See page 70 ‘payments for loss of office and payments to former directors’
4. Andy Bell stepped down as a Director on 5 February 2024
5. David Latin was officially appointed as Interim CEO on 24 April 2024, until 30 June 2024. However, he began fulfilling the responsibilities of the role
on 1 February 2024, following the announcement of Mitch Flegg’s resignation as CEO. He was paid a salary covering his executive responsibilities of
£250,000, the equivalent on a time pro rated basis of the departing CEO’s salary. This was in addition to his fee as Chair of the Board. He was also
eligible to receive a time-pro-rated bonus – see below
6. Malcolm Webb retired from the Board on 27 June 2024. His fees were adjusted and he was paid an additional £15,000 due to additional time
commitment associated with the succession planning of the CEO role as well as operating as the Senior Independent Director.
DIRECTORS’ REMUNERATION REPORT continued
66 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
Base salary
The former CEO, Mitch Flegg, had a salary of £600,000 effective from 1 January 2024. The salary for Chris Cox was set on
appointment at £600,000 which reflects his significant experience in the industry and prior experience with leading oil and gas
companies. Martin Copeland’s salary was set at appointment at £400,000, which was higher than his predecessor Andy Bell
(£345,000), which reflects his substantial experience in the oil and gas industry and the scope of his role.
The Interim CEO was appointed on an equivalent salary of £600,000 p.a. for the time served in an Executive capacity (i.e. in line
with the former CEO) to reflect the additional time commitment and responsibilities whilst in role. He continued to receive his fee as
Chair of the Board as he was fulfilling both roles.
Benefits and pension
The executive directors are entitled to a suite of company benefits which include private medical insurance and income protection
insurance. A pension allowance of up to 15% of salary is payable (which is aligned to that of the wider workforce). If paid as cash in
lieu, the cost of employers’ national insurance is deducted so is cost neutral for the business.
Annual Bonus
The annual bonus maximum for 2024 was set at 125% of salary for the CEO and 100% of salary for the CFO. The award levels were
set taking into account the size and scale of the business. As is market practice with many AIM companies, the annual bonus is paid
fully in cash.
For 2024, the annual bonus was based on a scorecard as set out below. The targets were set to be challenging, yet realistic in light
of market conditions, internal forecasts and external consensus.
Category
Measure
Weighting
(% of max)
Performance considerations
Actual
performance
assessed
Growth
Strategic development based
around M&A activity
30% of max
Execution of M&A activity was
considered in the round, but noted
that some tangible achievements were
made in 2024 including the acquisition
of assets from Parkmead Group
5% of max
Financial
Absolute share price growth
20% of max
Average monthly share price at the end
of the year had not met the threshold
target
0% of max
Organisational
development
Identification of improvement
areas and presentation of
improvement plan before
year end
20% of max
Presentations made to the Board and
improvement plans agreed. Tangible
improvements noted by the year end
reflecting leadership initiatives
20% of max
Operational
scorecard
measures
Production targets –
OPEX/ bbl
4% of max
Targets not met
0% of max
Maintenance backlog
4% of max
Targets partially met
1.5% of max
Safe delivery of well
operations
4% of max
Targets mainly met
3.5% of max
Operational milestones
4% of max
Targets partially met
2.5% of max
HSE and ESG
scorecard measures
HSE performance
4% of max
Targets partially met
1% of max
Process safety leadership
5% of max
Targets met but discretion applied to
reflect overall performance
0% of max
BKR carbon intensity
4% of max
Targets partially met
2% of max
Total
100% of max
35.5% of max
Serica Energy plc Annual Report & Accounts 2024 l 67
Achievement against the scorecard was assessed by the Committee, taking into account input from the HSE and ESG Committees
and other independent directors as appropriate. When determining performance, the Committee considered a number of quantitative
and qualitative factors which included, for example, production levels, overall safety performance and carbon dioxide emissions.
The Committee determined the annual bonus for 2024 was 36% for the CEO and the CFO. In both cases the annual bonus is pro-
rated for the period of service in the year and therefore equates to £135,000 and £132,000 respectively. The Committee considered
the bonus outcomes in light of wider stakeholder experience and was satisfied that no adjustments were required.
The annual bonus for the former CEO was set in the knowledge that he was stepping down during the year. Given this timing, the
Committee determined that any bonus as a good leaver should be contingent on an effective handover process. The Committee
deliberated the support provided to the Interim CEO and the onboarding of the new CFO and based on positive feedback from the
Board and was comfortable that the transition had been managed in a supportive and helpful manner. As such, the Committee was
comfortable with agreeing a bonus for the former CEO which was 125% of salary pro-rated for the period of service. This resulted in
a bonus of £233,654 being payable.
The bonus for the Interim CEO was assessed based on his leadership of the business including through the 2024 reporting and
AGM process whilst maintaining the high quality and safe operational performance of the business. The Interim CEO received
an equivalent bonus of 80% of max (i.e. equivalent to 100% of salary) for his period of service, which was longer than had been
originally expected, which equated to £250,000.
Long-Term Incentive Plans – awards granted during 2024
The Company operates the Serica Energy Plc Long-Term Incentive Plan, which was adopted by the Board on 20 November 2017
which permits the grant of share-based awards. The objective of the LTIP is to align the interest of executives with shareholders
and to incentivise for growth and development of the Group. Awards vest three years after grant subject to the achievement of
performance conditions and continued service.
In 2024, the following awards were made to Executive Directors:
Executive
Date of
grant
No. of
awards
Basis of
award
(% of salary)
Chris Cox (CEO)
24.07.2024
494,233
150% of salary
Martin Copeland (CFO)
24.05.2024
274,574
125% of salary
The performance vesting criteria includes sliding scale measures of share price performance (35% weighting) and of relative total
shareholder return performance (35% weighting), in each case, in respect of a three year period ending at the end of April 2027;
together with annual emissions intensity targets (30% weighting) in respect of 2024, 2025 and 2026.
Performance measure
Weighting
Threshold (25% vesting)
Maximum (100% vesting)
Share price performance
35%
8.75%
35%
Relative TSR vs Capricorn
Energy, Deltic Energy,
Diversified Energy Company,
DNO Oslo, Energean, Enquest,
Harbour Energy, Ithaca Energy,
Jadestone Energy, Jersey Oil &
Gas, Kistos, Kosmos Energy,
Okea, Pharos Energy, Tullow Oil
35%
Median ranking
Upper Quartile ranking
Emissions intensity target
30%
N/A
18kgCO₂e/boe
Notes:
Based on the Company’s producing assets on a net equity basis using CO2e/boe and based on any calendar year during the performance period
(i.e. 10% of max award per annum is available)
DIRECTORS’ REMUNERATION REPORT continued
68 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
The table below shows the outstanding LTIP awards.
Executive
Award
type
Date of
grant
As at
1.1.24
No. of
awards
granted Adjusted
Lapsed
Exercised
As at
31.12.24
Date
potentially
vested Expiry date
Executive Directors
Chris Cox
2024
LTIP
24.07.24
–
494, 233
–
–
–
494,233
24.07.27
24.07.34
Martin Copeland
2024
LTIP
24.05.24
–
274,574
–
–
–
274,574
24.05.27
24.05.34
Former Executive Directors
Mitch Flegg
2023
LTIP
18.05.23
–
319,444
–
–
–
115,354
(pro rated)
18.05.26
18.05.33
2022
LTIP
17.05.22
–
147,615
–
–
–
102,510
(pro rated)
17.05.25
17.05.32
2021
LTIP
16.05.21
–
587,349
– 146,837
–
440,512
16.05.24
16.05.31
2020
LTIP
18.05.20
–
386,100
–
–
386,100
–
18.05.23
18.05.30
2019
LTIP
5.03.19
–
411,067
–
–
411,067
–
5.03.22
5.03.29
2018
LTIP
25.05.18
– 1,500,000
–
– 1,500,000
–
30.11.20
25.05.28
Andy Bell
2024
LTIP
24.05.24
–
189,456
–
–
–
36,839
(pro rated)
24.05.27
24.05.34
2023
LTIP
18.05.23
–
153,333
–
–
–
89,206
(pro rated)
18.05.26
18.05.33
2022
LTIP
17.05.22
–
92,576
–
–
–
92,576
17.05.25
17.05.32
2021
LTIP
16.05.21
306,210
–
76,552
–
229,658
16.05.24
16.05.31
2020
LTIP
18.05.20
–
224,478
–
–
–
224,478
18.05.23
18.05.30
2019
LTIP
5.03.19
234,308
–
–
–
234,308
5.03.22
5.03.29
2018
LTIP
25.05.18
–
800,000
–
–
–
800,0000
30.11.20
25.05.28
All Performance Share Awards are structured as nil-cost options and may be exercised up until the tenth anniversary of the date of
grant. Participants are entitled to dividend equivalents on vested awards.
Performance Share Awards granted in 2022 and 2023, were subject to different vesting criteria based on absolute share price
performance and ESG performance targets.
The 2023 ESG target was corrected in December 2024. The Carbon Reduction Performance Condition was adjusted to relate to
only the Bruce and Triton Assets.
Award numbers above do not include dividends which may be payable. Outstanding awards are as at 30th December 2024 for
current employees and as at date of leaving for former executive directors.
Serica Energy plc Annual Report & Accounts 2024 l 69
Payments for loss of office and payments to former directors
Andy Bell stepped down from the Board on 5 February 2024. He remained employed until November 2024 when he retired. He
remained eligible for an annual bonus for the period of service. No further compensation was paid following retirement. He is
treated as a good leaver for share plan purposes and his outstanding awards are eligible to vest on their original terms, subject to
performance being achieved and pro-rated for time served.
Mitch Flegg stepped down from the Board on 24 April 2024. Mitch was paid £350,000 as payment in lieu of remaining notice.
He remained employed until 30 June 2024. He was eligible for an annual bonus for the period of service. He is treated as a good
leaver for share plan purposes and his outstanding awards are eligible to vest on their original terms, subject to performance being
achieved and pro-rated for time served.
Directors’ interests as at 31 December 2024
The table below shows the share interests of those individuals who served as Directors during the year.
Director
Beneficial
shareholding
Awards subject
to performance
conditions
Awards not
subject to any
performance
conditions
Shareholding
requirement
(% of salary)
Achieved
(yes/no)
Chris Cox
432,027
494, 233
–
200
No
Martin Copeland
62,500
274,574
–
200
No
David Latin
218,567
–
–
–
–
Kate Coppinger
–
–
–
–
–
Jerome Schmitt
9,100
–
–
–
–
Michiel Soeting
42,300
–
–
–
–
Robert Lawson
–
–
–
–
–
Guillaume Vermersch
–
–
–
–
–
Kaat Van Hecke
–
–
–
–
–
Sian Lloyd Rees
2,114
–
–
–
Former Directors¹
Mitch Flegg
391,165
658,376
2,297,167
–
–
Andy Bell
19,340
1,685,927
–
–
–
Malcolm Webb
80,873
–
–
–
–
1. Former Directors’ shareholdings are as at date of cessation of employment.
The Executive Directors are required build a minimum shareholding equivalent to 200% of their annual salary, with a target of 1x
salary within three years and 2x salary within five years. As the current Executive Directors are recent appointments, they are
working towards the guideline.
Chief Executive Officer’s pay ratio
The Company currently has 228 UK employees and therefore has no statutory requirement to publish a CEO pay ratio. Given the
relatively few employees, the Committee is aware of pay levels and does not feel the need to produce a ratio. The Committee will
continue to review the appropriateness of publishing pay ratios in the future.
DIRECTORS’ REMUNERATION REPORT continued
70 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
Implementation of Policy for 2025
Element of Pay
Considerations
Application for 2025
Base salary
All employee pay increase was 4% of salary
3.33% increase to CEO salary, and
3.75% for CFO effective from 1
January 2025.
CEO: £620,000
CFO: £415,000
Benefits and pension
No changes to benefits or pension
provisions
Cash contribution in lieu of pension
of up to 15% of salary (minus any
deduction for employers’ NI)
Annual Bonus Plan
Subject to performance measures including:
Company Performance
Operations Performance
ESG Performance
HSE Performance
Wells Performance
Growth – organic and M & A
Free Cash Flow
Organisational measures including main
market move
CEO: 125% of salary
CFO: 100% of salary
LTIP
Subject to performance conditions
including:
Relative Total Shareholder Return
ESG
CEO: 150% of salary
CFO: 125% of salary
Non-Executive Director’s fees
NED fees were increased
Chair’s fee: £210,000
NED base fee: £70,000
SID fee: £15,000
Committee Chair fee: £15,000
The Remuneration Committee
The Remuneration Committee is a standing Committee of the Board and meets regularly to consider all material elements of
remuneration policy, share schemes, 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 Committee assists the Board
in discharging its oversight responsibilities relating to the attraction, compensation, evaluation and retention of Executive Directors
and key senior management employees. The Committee aims to ensure that the Company has the right skills and expertise needed
to enable the Company to achieve its goals and strategies and that fair and competitive compensation is awarded with appropriate
performance incentives across the Company.
The Committee comprises Kate Coppinger (Senior Independent Non-Executive Director and Committee Chair since July 2023),
Michiel Soeting (Independent Non-Executive Director) and Sian Lloyd-Rees (Independent Non-Executive Director). Malcom Webb
(Senior Independent Non-Executive Director) was a member of the Committee until March 2024. The Committee met eight times
in 2024.
The Committee invites the Chief Executive Officer to attend meetings to provide business context, but he is not present when his
own remuneration is discussed. FIT Remuneration Consultants LLP (FIT) is appointed by the Remuneration Committee and provides
no other services to the Company. FIT is a founding member of the Remuneration Consultants Group and is a signatory to its
Code of Conduct. In the opinion of the Committee FIT Remuneration Consultants LLP and the advice provided are objective and
independent. FIT attended some Remuneration Committee meetings during the year. FIT fees were charged on a time and expenses
basis until September when a fixed fee arrangement was agreed. The fees for the year were £29,837.
Consideration by the Committee of matters relating to Directors’ remuneration
The Committee approves the remuneration of the Executive Directors, Chair of the Board and other members of executive
management. The Committee works within its terms of reference, and its role includes:
• Reviewing the Company’s overall remuneration philosophy and programs.
• Determining the remuneration policy for all Executive Directors and, under guidance of the Executive Directors, other members of
the Executive Management Team.
Serica Energy plc Annual Report & Accounts 2024 l 71
• Ensuring executive remuneration packages are competitive.
• Determining the structure of the annual bonus plan, whether annual bonus payments should be made and approving payments to
the Executive Directors.
• Determining each year whether any awards/grants should be made under the incentive schemes and the value of such awards.
• Considering long-term incentive (LTIP) scheme awards and performance criteria.
• Approving all employee share schemes.
• Agreeing the Executive Director service contracts and notice periods with the Nominations committee
• Reviewing the Gender Pay Gap.
• Review the Company’s compliance with any applicable Corporate Governance Code in relation to remuneration policy.
The Company is committed to maintaining an open and transparent dialogue with shareholders on all aspects of Remuneration
within the Group.
Executive Directors’ service contracts and Non-Executive Directors’ letters of appointment
The Executive Directors’ service contracts are available for inspection as are the letters of appointment of the Chair and the
Non-Executive Directors at the Company’s registered office.
Executive Director
Effective term
Notice period
Chris Cox
1 July 2024
6 months from Executive
6 months from the Company up until 30 June 2025
12 months from Executive from 1 July 2025
12 months from Company from 1 July 2025
Martin Copeland
5 February 2024
6 months from Executive
6 months from Company
The Chair and the other Non-Executive Directors Date of appointment
The Chair and the other Non-Executive Directors
Date of appointment
Date of Resignation
David Latin
07.12.2021
Kate Coppinger
22.04.2020
Jerome Schmitt
01.07.2022
Michiel Soeting
01.02.2023
Robert Lawson
23.03.2023
Guillaume Vermersch
23.03.2023
Kaat Van Hecke
17.07.2023
Sian Lloyd Rees
17.07.2023
Malcolm Webb
30.11.2018
27.06.2024
Shareholder voting
The 2023 Directors’ Remuneration Report was approved by shareholders at the 2024 AGM:
Votes For
Votes Against
Total Votes
Votes Withheld
2023 Report
251,367,623
(99.82%)
459,555
(0.18%)
251,827,178
170,498
Kate Coppinger
Chair of the Remuneration Committee
31 March 2025
DIRECTORS’ REMUNERATION REPORT continued
72 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
DIRECTORS’ STATEMENT UNDER SECTION 172 (1) OF THE COMPANIES ACT 2006
The Section 172 (1) of the Companies
Act obliges the Directors to promote the
success of the Company for the benefit
of the Company’s members as a whole.
The section specifies that the Directors
must act in good faith when promoting
the success of the Company and in
doing so have regard (amongst other
things) to:
a. the likely consequences of any
decision in the long-term,
b. the interests of the Company’s
employees,
c. the need to foster the Company’s
business relationship with suppliers,
customers and others,
d. the impact of the Company’s
operations on the community and
environment,
e. the desirability of the Company
maintaining a reputation for high
standards of business conduct, and
f. the need to act fairly as between
members of the Company.
Stakeholder engagement is a priority
for the Board, with a view to obtaining
a wide range of views and achieving
a common understanding of the
opportunities and challenges that
underpin a long-term sustainable
business plan.
Engagement typically takes place with
stakeholders through both the Board
and the senior management team.
Outcomes are reported through to the
Board to have a holistic understanding
of all stakeholder positions, to balance
competing interests and to take into
account various views when making
decisions.
The Board of Directors is collectively
responsible for the decisions made
towards the long-term success of
the Company and the way in which
the strategic, operational and risk
management decisions have been
implemented throughout the business is
detailed in the Strategic Report.
Selective examples of the highlights in
respect of each stakeholder group are
set out below.
Employees
Our employees are one of the primary
assets of our business and the Board
recognises that our employees are the
key resource which enables the delivery
of Company’s vision and goals.
We ensure that:
• Health, Safety and the Environment
are considered paramount
throughout the organisation (both
on-shore and off-shore).
• Annual pay and benefit reviews are
carried out to determine whether all
levels of employees are benefitting
fairly and to retain and encourage
skills vital for the business.
• There is competitive pay and
employee benefits.
• There is ongoing necessary training
and development and career
prospects available.
• There are freely available Company
policies and procedures.
• Staff engagement surveys are
conducted.
• Personal development reviews and
work appraisals are conducted.
• Employees are informed of the
results and important business
decisions and are encouraged to
feel engaged and to improve their
potential. This is carried out with
Company Town Hall meetings
together with individual team and
one to one engagement.
• Working conditions are favourable.
• Newsletters and management
updates are provided.
• Team-building sessions and social
events are arranged.
The Remuneration Committee oversees
and makes recommendations of
executive remuneration and any
long-term share awards. The Board
encourages management to improve
employee engagement and to provide
necessary training in order to use
their skills in the relevant areas in
the business. The Health, Safety and
Environmental Committee reviews
the health and safety measures
implemented across the business on
a quarterly basis and improvements
are continuously recommended for
better practice.
Suppliers, Customers and Regulatory
Authorities
The Board acknowledges that a strong
business relationship with suppliers
and customers is a vital part of
growth. Whilst day to day business
operations are delegated to the
executive management and the senior
management team, the Board sets
directions with regard to new business
ventures. The Board upholds ethical
business behaviour across all of the
Company’s activities and encourages
management to seek comparable
business practices from all suppliers
and customers doing business with
the Company. We value the feedback
we receive from our stakeholders and
we take every opportunity to ensure
that where possible their wishes are
duly considered. The Board supported
the Company’s adoption of the OEUK
Energy Services Agreement that sets
base terms for employees working
offshore in the UK and promotes a ‘safe,
stable and fair operating environment’.
Community and Environment
The Company runs an active community
support programme through its
committees; Charity and Fundraising,
Education and Diversity and Inclusion.
The Board is kept informed of events
through monthly Board papers and
regular HSE subcommittee meetings.
Recently, the Board has put in place
a dedicated Sustainability Committee,
who focusses primarily on sustainability,
environmental and social aspects of
the Company. Staff and stakeholders
are updated by various means such
as the Company newsletter, a weekly
staff ‘round-up’ email, posts on social
media – LinkedIn and Twitter, as well as
staff HSE and sustainability meetings.
The annual ESG report provides details
of the Company’s social activities and is
approved by the Board.
Serica Energy plc Annual Report & Accounts 2024 l 73
Improving environmental performance
of the Company and acting responsibly
is a key Company objective and the
Board receives monthly performance
updates of key environmental metrics
such as emissions, flaring and waste.
More detailed updates are given in the
HSE quarterly meetings, the recently
formed Sustainability Committee and by
in-person updates in the main board.
The Board is regularly updated on the
activities and progress of the Emissions
Reduction Group and the offshore
ESG Champions. Feedback from
industry bodies and the Regulator is
also provided via the Board committee
meetings.
Maintaining High Standards of Business
Conduct
The Company is incorporated in the
UK and governed by the Companies
Act 2006. The Company has adopted
the QCA Code (and updates made
to the QCA code in 2023) and the
Board recognises the importance of
maintaining a good level of corporate
governance, which together with
the requirements to comply with the
AIM Rules ensures that the interests
of the Company’s stakeholders are
safeguarded. The Board has prompted
that ethical behaviour and business
practices should be implemented
across the business. Anti-corruption
and anti-bribery training are compulsory
for all staff and contractors and the
anti-bribery statement and policy is
provided on the Company’s website. The
Company’s expectation of honest, fair
and professional behaviour is reflected
by this and there is zero tolerance for
bribery and unethical behaviour by
anyone representing the Company.
The importance of making all employees
feel safe in their environment is
maintained and a Whistleblowing
Policy is in place to enable staff to
confidentially raise any concerns freely
and to discuss any issues that arise.
Strong financial controls are in place
and are well documented. The Board
regularly considers the key business
risks and a risk matrix is discussed by
the Board on a monthly basis.
Shareholders
The Board places equal importance
on all shareholders and recognises the
significance of transparent and effective
communications with shareholders. As
an AIM listed company there is a need
to provide fair and balanced information
in a way that is understandable to
all stakeholders and particularly our
shareholders.
The primary communication tool
with our shareholders is through the
Regulatory News Service ('RNS') on
regulatory matters and matters of
material substance. The Company’s
website provides details of the business,
investor presentations and details of the
Board and Board Committees, changes
to major shareholder information, QCA
Code disclosure and updates under
AIM Rule 26. Changes are promptly
published on the website to enable
the shareholders to be kept abreast
of Company’s affairs. The Company’s
Annual Report and Notice of AGM
are available to all shareholders. The
Company also published its ESG report
which is available to all shareholders.
The Interim Report and other investor
presentations are also available on
our website.
The Board acknowledges that
encouraging effective two-way
communication with shareholders
encourages mutual understanding
and better connection with them.
Investor events are also arranged
with shareholders throughout the
year which present an opportunity
for shareholders to speak with the
Executive Directors in a formal
environment and in more informal one
to one meetings. By providing a variety
of ways to communicate with investors
the Company feels that it reaches out
to engage with a wide range of its
stakeholders.
On behalf of Board
David Latin
Non-Executive Chair
31 March 2025
DIRECTORS’ STATEMENT UNDER SECTION 172 (1) OF THE COMPANIES ACT 2006
continued
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DIRECTORS’ RESPONSIBILITIES STATEMENT in relation to the Group 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 UK-adopted
International Accounting Standards.
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
UK adopted International Accounting
Standards. Under United Kingdom
company law the Directors have
elected to prepare the parent company
financial statements in accordance with
United Kingdom Generally Accepted
Accounting Practice, including FRS
101 ‘Reduced Disclosure Framework’
(United Kingdom Accounting Standards
and applicable law). 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 profit or loss of the Group for
that period.
In preparing these Group financial
statements the Directors are required to:
• select suitable accounting policies
and then apply them consistently;
• make judgements and estimates that
are reasonable and prudent;
• state that the Group has complied
with UK-adopted International
Accounting Standards, 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 UK adopted
International Accounting Standards
is insufficient to enable users to
understand the impact of particular
transactions, other events and
conditions on the Group’s financial
position and financial performance;
and
• prepare the financial statements on
the going concern basis, unless it is
inappropriate to presume that the
Group will continue in business.
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
enable them to ensure that the Group
financial statements comply with the
Companies Act 2006. They are also
responsible for safeguarding the assets
of the Group 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 Group have adequate resources to
continue in operational existence for
the foreseeable future, will continue
to adopt the going concern basis in
preparing the financial statements.
Serica Energy plc Annual Report & Accounts 2024 l 75
INDEPENDENT AUDITOR’S REPORT to the members of Serica Energy plc
Opinion
In our opinion:
• Serica Energy plc’s group financial statements and parent company financial statements (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 2024 and of the group’s profit for
the year then ended;
• the group financial statements have been properly prepared in accordance with UK adopted international accounting standards;
• the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Serica Energy plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year
ended 31 December 2024 which comprise:
Group
Parent company
Group balance sheet as at 31 December 2024
Company balance sheet as at 31 December 2024
Group income statement for the year then ended
Company statement of changes in equity for the year then
ended
Group statement of comprehensive income for the year
then ended
Related notes 1 to 9 to the financial statements including
material accounting policy information
Group statement of changes in equity for the year then ended
Group cash flows statement for the year then ended
Related notes 1 to 32 to the financial statements, including
material accounting policy information
The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and
UK adopted international accounting standards. The financial reporting framework that has been applied in the preparation of the
parent company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 ‘Reduced
Disclosure Framework’ (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements
section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in
the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group and parent
company’s ability to continue to adopt the going concern basis of accounting included:
• obtaining an understanding of management’s going concern assessment process including discussions with management to
assess whether key factors were taken into account;
• obtaining management’s going concern assessment including the cash forecast covering the period to 30 June 2026 (the 'going
concern period'). Management’s assessment included a base case and a downside scenario, which are described in the basis of
preparation in note 2 to the financial statements;
• evaluating the appropriateness of the period used for management’s going concern assessment, which is defined as the period
up to 30 June 2026;
• testing the clerical accuracy of the model and confirming that the method used to calculate the cash forecast in management’s
model is appropriate;
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• challenging the key assumptions included in the forecasts by agreeing them to supporting evidence. We compared management’s
price assumptions with the most recently available price forecasts issued by a range of banks, brokers and consultants, which we
obtained independently. We evaluated the forecast production profile, operating and capital expenditure and other assumptions
used in the going concern assessment for consistency with the business plans and information obtained through auditing other
areas of the business. We also determined whether management’s forecasts reflected the expected cash cost to Serica of
executing plans aimed towards delivering the group’s ESG and climate change commitments;
• assessing management’s ability to forecast accurately based on their historical performance and identifying where management
have experienced differences between forecasts and actuals (whether due to oil and gas prices or other factors). This has
informed our view of the adequacy of the stress testing performed by management in their assessment;
• obtaining bank confirmations of the Group’s cash and cash equivalent balances as at 31 December 2024 and bank statements to
confirm the balances as at 27 March 2025;
• reading the reserves based lending (RBL) facility agreement and confirming the terms of the facility, including the maturity date,
redetermination mechanism and covenant calculations. We also confirmed the total amount available under the facility and the
amount utilised as at the start of the going concern assessment period;
• independently conducting a reverse stress test to determine the conditions under which the group could potentially experience a
liquidity shortfall during the going concern period;
• considering the likelihood of management’s ability to execute mitigating actions, if required, to continue its business activities;
and
• reviewing the appropriateness of management’s going concern disclosures and to ensure such disclosures are in accordance
with relevant standards.
In relation to the possible combination with EnQuest, our procedures included:
• obtaining an update from management and the Audit Committee including the sequencing of events ahead of any Takeover Code
Rule 2.7 announcement by the offeror and subsequently;
• corroborating the update provided by management with Serica's external advisor;
• reading the RBL facility agreement to assess the impact of this potential transaction on the facility; and
• discussing with the RBL banking syndicate agent the process to be followed ahead of any potential transaction.
Our key observations:
In management’s downside scenario, there is sufficient liquidity headroom, and the group operates within the requirements of its
covenants. In addition, we have concluded that our independently modelled reverse stress scenario, under which there is a liquidity
shortfall prior to any covenant breaches, has a remote likelihood of occurrence.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the group and parent company’s ability to continue as a going concern for a
period to 30 June 2026.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections
of this report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the
group’s ability to continue as a going concern.
Overview of our audit approach
Audit scope
• We performed an audit of the complete financial information of four components and audit procedures
on specific balances for a further component.
• We performed centralised procedures on estimation of oil and gas reserves, impairment of oil and
gas properties, decommissioning provisions, recoverability of deferred tax assets, and consolidation
adjustments.
Key audit matters
• Assessment of commercial oil and gas reserves and their impact on the financial statements
• Impairment of oil and gas properties
• Impairment of investments in subsidiaries in the parent company financial statements
Materiality
• Overall group materiality of $13 million which represents 5% of normalised profit before tax, which has
been normalised for production levels and adjusted to exclude non-recurring items being exploration and
evaluation assets write-offs (‘adjusted profit before tax’).
Serica Energy plc Annual Report & Accounts 2024 l 77
INDEPENDENT AUDITOR’S REPORT to the members of Serica Energy plc continued
An overview of the scope of the parent company and group audits
Tailoring the scope
In the current year our audit scoping has been updated to reflect the new requirements of ISA (UK) 600 (Revised). We have followed
a risk-based approach when developing our audit approach to obtain sufficient appropriate audit evidence on which to base
our audit opinion. We performed risk assessment procedures, to identify and assess risks of material misstatement of the Group
financial statements and identified significant accounts and disclosures. When identifying components at which audit work needed
to be performed to respond to the identified risks of material misstatement of the Group financial statements, we considered
our understanding of the Group and its business environment, the potential impact of climate change, the applicable financial
framework, the group’s system of internal control at the entity level, the existence of centralised processes, applications and any
relevant internal audit results.
We determined that centralised audit procedures can be performed in the following audit areas: estimation of oil and gas reserves,
impairment of oil and gas properties, decommissioning provisions, recoverability of deferred tax assets, and consolidation
adjustments.
We then identified four components as individually relevant to the Group due to relevant events and conditions underlying the
identified risks of material misstatement of the group financial statements being associated with the reporting components or a
pervasive risks of material misstatement of the group financial statements or a significant risk or an area of higher assessed risk of
material misstatement of the group financial statements being associated with the components.
For those individually relevant components, we identified the significant accounts where audit work needed to be performed at
these components by applying professional judgement, having considered the group significant accounts on which centralised
procedures will be performed, the reasons for identifying the financial reporting component as an individually relevant component
and the size of the component’s account balance relative to the group significant financial statement account balance.
We then considered whether the remaining group significant account balances not yet subject to audit procedures, in aggregate,
could give rise to a risk of material misstatement of the group financial statements. We selected one component of the group to
include in our audit scope to address these risks.
Having identified the components for which work will be performed, we determined the scope to assign to each component.
Of the five components selected, we designed and performed audit procedures on the entire financial information of four
components ('full scope components'). For one component, we designed and performed audit procedures on specific significant
financial statement account balances or disclosures of the financial information of the component ('specific scope components').
Our scoping to address the risk of material misstatement for each key audit matter is set out in the key audit matters section of our
report.
Changes from the prior year
The current year audit work has covered four full scope components and one specific scope component compared with the five full
scope components in the 2023 audit, reflecting a change in the designation of one component from full scope to specific scope.
Involvement with component teams
All audit work performed for the purposes of the audit was undertaken by the group audit team.
Climate change
Stakeholders are increasingly interested in how climate change will impact Serica Energy plc. The Group has determined that the
most significant future impacts from climate change on their operations will be from decarbonisation and the investment required
to reduce carbon emissions and to improve energy efficiency. These are explained on pages 27-36 in the Task Force On Climate
Related Financial Disclosures and on pages 25-27 in the principal risks and uncertainties. All of these disclosures form part of the
“Other information”, rather than the audited financial statements. Our procedures on these unaudited disclosures therefore consisted
solely of considering whether they are materially inconsistent with the financial statements or our knowledge obtained in the course
of the audit or otherwise appear to be materially misstated, in line with our responsibilities on “Other information”.
In planning and performing our audit we assessed the potential impacts of climate change on the Group’s business and any
consequential material impact on its financial statements.
The group has explained in the Basis of Preparation in note 2 how they have reflected the impact of climate change in their financial
statements. These disclosures also explain where governmental and societal responses to climate change risks are still developing,
and where the degree of certainty of these changes means that they cannot be taken into account when determining asset and
liability valuations under the requirements of UK adopted international accounting standards.
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Our audit effort in considering the impact of climate change on the financial statements was focused on evaluating management’s
assessment of the impact of climate risk, physical and transition, the effects of material climate risks disclosed on page 30 and
whether these have been appropriately reflected in asset values where these are impacted by future cash flows and associated
sensitivity disclosures, and in the timing and nature of liabilities recognised, following the requirements of UK adopted international
accounting standards. As part of this evaluation, we performed our own risk assessment, supported by our climate change internal
specialists, to determine the risks of material misstatement in the financial statements from climate change which needed to be
considered in our audit.
We also challenged the Directors’ considerations of climate change risks in their assessment of going concern and associated
disclosures. Where considerations of climate change were relevant to our assessment of going concern, these are described above.
Based on our work we have not identified the impact of climate change on the financial statements to be a key audit matter or to
impact a key audit matter.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit
of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.
Risk
Our response to the risk
Assessment of commercial oil and gas reserves and its impact
on the group financial statements
Refer to the Accounting policies section “Use of judgement and
estimates and sources of estimation uncertainty” (page 92)
As described in note 13 to the group financial statements,
oil and gas properties amounted to $985.2 million (net of
depletion, depreciation and amortisation ('DD&A')) and have an
associated DD&A charge of $590.4 million, decommissioning
provision of $145.7 million (note 20) and deferred tax assets
('DTA') of $55.1 million (note 9).
The estimate of oil and gas reserves has a significant impact on
the financial statements, particularly in impairment assessments
the calculation of DD&A, estimation of decommissioning
provision and DTA recoverability.
The estimation of oil and gas reserves involves subjective
judgements and determinations based on geopolitical, technical
and economic information. Estimates can change over time as
a result of new information for production or drilling activities,
changes in economic factors such as oil & gas price and other
events.
The estimation of oil & gas reserves is a higher risk estimate
given the significant judgement by management including the
use of management’s third-party specialists in developing the
reserves volumes. Estimation uncertainty is further elevated
given the transition to a low-carbon economy which could
impact life-of-field assumptions and increase the risk of
underutilised or stranded oil and gas assets.
Our procedures included, amongst others:
• confirming our understanding of the group’s reserves
estimation process by performing a walk through and
assessing the design effectiveness of controls including
management’s controls over the appointment of the technical
and commercial specialists;
• assessing the competence and objectivity of management’s
third-party specialists (independent reserves auditor), to
satisfy ourselves they were appropriately qualified to carry
out the volumes estimation;
• meeting separately with management’s third-party specialist
and obtaining confirmation that they are independent from
Serica and have performed their procedures in line with the
guidelines set out by the Society of Petroleum Engineers;
• confirming that any material changes in reserves align
with our understanding and were made in the appropriate
accounting period;
• assessing, where relevant, whether life of field and cessation
of production assumptions incorporated Serica’s estimate of
costs associated with the potential impact of climate change
and the energy transition;
• validating that the reserves estimates were included
appropriately as key inputs to calculations of balances within
the group’s financial statements.
The above audit procedures were performed by the group audit
team.
Key observations communicated to the Audit Committee
We reported to the Audit Committee that we did not identify any exceptions as a result of our audit procedures. We confirmed
that material changes in reserves volumes have been made in the appropriate accounting period and validated that the updated
reserves estimates are included appropriately in the group’s forecasts for impairment assessments and the calculation of DD&A,
decommissioning provision and DTA recoverability. We confirmed that the disclosures in the financial statements were appropriate.
Serica Energy plc Annual Report & Accounts 2024 l 79
Risk
Our response to the risk
Impairment of oil and gas properties
Refer to the Accounting policies section “Use of judgement and
estimates and sources of estimation uncertainty” (page 92)
As described in note 13 to the consolidated financial
statements, oil and gas properties recorded within property,
plant and equipment ('PP&E') amounted to $985.2 million as at
31 December 2024.
In accordance with IAS 36, PP&E is assessed for impairment
when there are facts and circumstances that suggest that the
carrying amount may be higher than the recoverable amount.
In the current year, management identified an impairment
indicator, with the market capitalisation of the group lower than
the net assets. As a result, management undertook impairment
tests across all oil & gas properties.
Management prepared its impairment tests using the Fair
Value Less Cost to Sell methodology. The impairment models
include a number of estimates including: future oil and gas
prices; discount rates; inflation rates; production forecasts;
operating expenditures; and capital expenditures for each Cash
Generating Unit ('CGU').
Forecasting future prices is inherently difficult. The estimation
of future oil and gas prices is subject to increased uncertainty,
given climate change and the energy transition on the demand
for both crude oil and natural gas products.
A further key input to management’s impairment assessment
relates to the estimation of oil and gas reserves. There is
significant estimation uncertainty assessing the quantities of
commercial reserves. We have described the risk within the
assessment of commercial reserves and its impact on the Group
financial statements key audit matter above.
Our procedures, with respect to management’s impairment
assessments included:
• confirming our understanding of the group’s controls over
the impairment assessment process by performing a walk
through and assessing the design effectiveness of the
controls;
• assessing management’s determination of CGUs;
• testing the integrity of management’s models of the
recoverable amount of each of the CGUs;
• evaluating the appropriateness of management’s oil and
gas price assumptions through comparison with consensus
analysts’ forecasts and those adopted by other oil and gas
companies;
• engaging our EY valuations specialists, to assess the
appropriateness of management’s impairment discount rates
for each CGU;
• evaluating management’s production profiles by reconciling
them with the results of our audit work as described above
within the assessment of commercial oil and gas reserves
key audit matter;
• testing the appropriateness of other cashflow assumptions
to supporting evidence including engaging our internal
specialist to assess management’s inflation and foreign
exchange rates;
• executing sensitivity testing on key assumptions by reducing
oil and gas prices and increasing discount rate; and
• evaluating the accuracy and completeness of the impairment
disclosures included in the financial statements.
The above audit procedures were performed by the group audit
team.
Key observations communicated to the Audit Committee
We reported to the Audit Committee that we are satisfied that the assumptions used in the impairment assessments are
reasonable. We confirmed that we are satisfied that no impairment of oil and gas properties as at 31 December 2024 is
appropriate.
INDEPENDENT AUDITOR’S REPORT to the members of Serica Energy plc continued
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Risk
Our response to the risk
Impairment of investments in subsidiaries in the parent
company financial statements
Refer to the Accounting policies section “Use of judgement and
estimates and sources of estimation uncertainty” (page 92)
As described in note 3 to the parent company financial
statements, investments amounted to $525.8 million as at
31 December 2024.
In the current year, management identified an impairment
indicator, with the market capitalisation of the group lower
than the parent company net assets. As a result, management
undertook impairment tests of the parent company’s
investments in subsidiaries.
Management prepared the impairment assessment of
investments based on the impairment testing of CGUs
performed for the purposes of the Group financial statements,
as these investments contain one or more CGUs in their
entirety.
Management adjusted the recoverable amount of the CGUs,
within each subsidiary, to reflect the recoverable amount of the
investment. This required further estimations including the fair
value of external borrowings within the subsidiaries.
Our procedures, with respect to management’s impairment
assessments included:
• confirming our understanding of the controls over the parent
company's investment impairment assessment process
by conducting a walkthrough and evaluating the design
effectiveness of these control;
• verifying that management’s recoverable amount of CGUs
used in the investment in subsidiaries’ impairment test
reconciles to the results of our audit work as described
above within the impairment of oil and gas properties key
audit matter;
• assessing the appropriateness of other assumptions
considered for the recoverable value of investments, such
as inter-group balances and external borrowings within
the subsidiaries. We engaged an EY valuation specialist to
evaluate the fair value of the borrowings.
• evaluating the accuracy and completeness of the impairment
disclosures included in the financial statements.
The above audit procedures were performed by the group audit
team in respect of the parent company financial statements.
Key observations communicated to the Audit Committee
We confirmed to the Audit Committee that we are satisfied that the assumptions used by Serica are reasonable. We confirmed
that we are satisfied that no impairment of investments in subsidiaries in the parent company financial statements was
appropriate.
In the prior year, our auditor’s report included a key audit matter in relation to the acquisition of Tailwind, specifically the judgements
around the purchase price allocation (PPA). In the current year, this has not been considered as a key audit matter as this was non-
recurring transaction that took place in 2023.
In the current year, we have two new key audit matters in respect of impairment of oil and gas properties and impairment of
investments in subsidiaries in the parent company financial statements that required significant management and auditor judgement
and audit effort including reliance on both management’s external and EY internal specialists. Hence, we have included these as key
audit matters.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the
audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence
the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and
extent of our audit procedures.
We determined materiality for the Group to be $13 million (2023: $15 million), which is 5% (2023: 5%) of adjusted profit before tax.
We believe that adjusted profit before tax provides us with appropriate basis for planning materiality for the current year audit.
Our key criterion in determining materiality remains our perception of the needs of Serica’s stakeholders. We consider which
earnings, activity or capital-based measure aligns best with the expectations of the users of the financial statements. In doing so,
we apply a ‘reasonable investor perspective’, which reflects our understanding of the common financial information needs of the
members of the Company as a group.
Serica Energy plc Annual Report & Accounts 2024 l 81
Consistent with our approach in the prior period, the financial measure on which we determined materiality is adjusted profit before
tax, with the only change being that we have normalised for production interruptions that are not expected to recur going forward.
We believe that adjusted profit before tax is the most appropriate measure upon which to calculate materiality as it represents a key
performance indicator used by Serica’s investors and is the expectation for a listed company that is generating profits. The Group
and parent company have changed their presentation currency from Pounds sterling to US dollars. The comparative materiality
figures, which were previously in Pounds sterling, are now presented in their US dollar equivalents.
Adjusted profit before tax:
Starting basis
Profit before tax: $160 million
Adjustments
Normalising non-recurring production interruptions: $94 million
Exploration and evaluation assets write-offs: $1.0 million
Materiality
Total: $255 million [Adjusted profit before tax]
Materiality of $13 million (5% of Adjusted profit before tax)
We determined materiality for the parent company to be $10.2 million (2023: $12 million), which is 2% (2023: 2%) of equity. We use
equity as the basis for materiality as the purpose of the parent company is to hold investments in its subsidiaries. The annual profits
generated by the company in future periods, will be dependent on the level and timing of any intra-group dividends paid by the
parent’s operating subsidiaries.
During the course of our audit, we reassessed initial materiality and based on final results for 2024, we concluded that no changes
were required other than to adjust for the impact of the non-recurring production interruption by normalising production levels,
which was not known at the planning stage of our audit.
Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low
level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was
that performance materiality was 75% (2023: 75%) of our planning materiality, namely $9.7 million (2023: $11.4 million). We have
set performance materiality at this percentage due to quantitative and qualitative assessment of prior year misstatement and our
assessment of the Group’s overall control environment.
Audit work was undertaken at component locations for the purpose of responding to the assessed risks of material misstatement
of the group financial statements. The performance materiality set for each component is based on the relative scale and risk of
the component to the Group as a whole and our assessment of the risk of misstatement at that component. In the current year, the
range of performance materiality allocated to components was $4.2 million to $7.3 million (2023: $6.7 million to $ 10.8 million).
Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of $0.65 million
(2023: $0.8 million), which is set at 5% of materiality, as well as differences below that threshold that, in our view, warranted
reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of
other relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report set out on pages 1 to 75, 141 to 145, other than the
financial statements and our auditor’s report thereon. The directors are responsible for the other information within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in
this report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained
in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements
themselves. If, based on the work we have performed, we conclude that there is a material misstatement of the other information,
we are required to report that fact.
We have nothing to report in this regard.
INDEPENDENT AUDITOR’S REPORT to the members of Serica Energy plc continued
82 l Serica Energy plc Annual Report & Accounts 2024
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Corporate Governance
Auditor’s Report
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Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• 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; and
• the strategic report and directors’ report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of
the audit, we have not identified material misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following matters in relation to which 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.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 75, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the
directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group and parent company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to
fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example,
forgery or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the
company and management.
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and determined that
the most significant are UK adopted international accounting standards, the Companies Act 2006, AIM listing rules and UK tax
legislation.
• We understood how Serica Energy plc is complying with those frameworks by making enquiries of management and those
responsible for legal and compliance procedures. We corroborated our enquiries through our review of Board minutes, papers
provided to the Audit Committee and correspondence received from regulatory bodies, and noted there was no contradictory
evidence.
• We assessed the susceptibility of the group’s financial statements to material misstatement, including how fraud might occur
by meeting with management from various parts of the business to understand what areas were susceptible to fraud. We also
considered performance targets and their propensity to influence management to manage earnings.
Serica Energy plc Annual Report & Accounts 2024 l 83
• Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations.
Our procedures involved incorporating data analytics across our audit approach, journal entry testing with a focus on manual
consolidation journals and journals meeting our defined risk criteria based on our understanding of the business; enquiries of
management, review of Board and Audit Committee reporting; and focused testing as referred to in the key audit matters section
above.
We ensured our audit team has appropriate industry experience through working for many years on relevant audits, including
experience of oil and gas companies. Our audit planning included considering external market factors, for example geopolitical risk,
the potential impact of climate change, commodity price risk and major trends in the industry.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
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.
Khilan Shah (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London, United Kingdom
1 April 2025
INDEPENDENT AUDITOR’S REPORT to the members of Serica Energy plc continued
84 l Serica Energy plc Annual Report & Accounts 2024
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Corporate Governance
Auditor’s Report
Financial Statements
GROUP INCOME STATEMENT for the year ended 31 December 2024
Note
2024
$000
2023
$000
(Restated*)
Continuing operations
Sales revenue
4
727,178
788,920
Cost of sales
5
(503,981)
(406,790)
Gross profit
223,197
382,130
Hedging (expense)/income
16
(43,474)
5,848
Contract revenue – other
16
31,292
29,951
Exploration and pre-licence costs
(1,595)
(2,622)
E&E asset write-offs
12
(851)
(10,871)
General and administrative expenses
6
(21,601)
(24,486)
Transaction costs
29
–
(12,539)
Foreign exchange gain/(loss)
3,234
(4,465)
Share-based payments
25
(3,735)
(4,942)
Gain on acquisition
29
–
41,889
Operating profit before net finance costs and tax
186,467
399,893
Change in fair value of financial liabilities
19
(2,538)
(9,446)
Finance revenue
8
13,927
16,830
Finance costs
8
(37,358)
(26,906)
Profit before taxation
160,498
380,371
Taxation charge for the year
9
(68,069)
(252,614)
Profit for the year
92,429
127,757
Profit for the year attributable to:
Equity owners of the Company
92,429
127,757
Earnings per ordinary share – EPS
Basic EPS on profit for the year ($)
10
0.24
0.35
Diluted EPS on profit for the year ($)
10
0.23
0.34
*See note 2
Serica Energy plc Annual Report & Accounts 2024 l 85
GROUP STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 December 2024
2024
$000
2023
$000
(Restated*)
Profit for the year
92,429
127,757
Other comprehensive (loss)/profit
Items that may be subsequently reclassified to income statement:
Exchange differences on translation
(5,217)
22,594
Other comprehensive (loss)/profit for the year
(5,217)
22,594
Total comprehensive profit for the year
87,212
150,351
Total comprehensive profit attributable to:
Equity owners of the Company
87,212
150,351
*See note 2
86 l Serica Energy plc Annual Report & Accounts 2024
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Financial Statements
GROUP BALANCE SHEET as at 31 December 2024
Note
2024
$000
2023
$000
(Restated*)
1/1/2023
$000
(Restated*)
Non-current assets
Exploration & evaluation assets
12
20,367
2,457
1,210
Property, plant and equipment
13
991,588
905,760
321,474
Deferred tax asset
9
55,139
107,071
–
1,067,094
1,015,288
322,684
Current assets
Inventories
14
14,884
13,860
4,833
Trade and other receivables
15
158,117
176,455
162,761
Corporate tax receivable
71,013
–
–
Hedging security advances
–
–
29,402
Derivative financial assets
16
5,185
–
–
Decommissioning security advances
17
–
35,055
–
Cash and cash equivalents
17
148,460
335,433
522,914
397,659
560,803
719,910
TOTAL ASSETS
1,464,753
1,576,091
1,042,594
Current liabilities
Trade and other payables
18
168,287
121,652
84,491
Corporate tax payable
–
68,311
181,343
Derivative financial liabilities
16
31,185
5,564
30,121
Contract liabilities
16
5,408
36,700
1,193
Financial liabilities
19
–
4,627
–
Lease liabilities
26
1,418
709
–
Provisions
20
–
16,467
–
Non-current liabilities
Derivative financial liabilities
16
11,201
–
–
Financial liabilities
19
81,923
82,751
35,517
Deferred tax liability
–
–
185,329
Lease liabilities
26
3,769
1,651
–
Provisions
20
145,974
132,291
30,465
Interest bearing loans
21
219,130
271,200
–
TOTAL LIABILITIES
668,295
741,923
548,459
NET ASSETS
796,458
834,168
494,135
Share capital
23
245,537
245,257
233,260
Merger reserve
23
286,590
283,367
–
Other reserve
25
37,540
37,650
32,708
Treasury/own shares
23
(8,931)
–
–
Accumulated funds
249,834
276,789
259,656
Currency translation reserve
(14,112)
(8,895)
(31,489)
TOTAL EQUITY
796,458
834,168
494,135
Approved by the Board on 31 March 2025
Chris Cox
Martin Copeland
Chief Executive Officer
Chief Financial Officer
Serica Energy plc Annual Report & Accounts 2024 l 87
GROUP STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2024
Share
capital
$000
Merger
reserve
$000
Other
reserve
$000
Treasury/
own shares
$000
Currency
translation
reserve
$000
Accumulated
funds
$000
Total
$000
At 1 January 2023
(Restated*)
233,260
–
32,708
–
(31,489)
259,656
494,135
Profit for the year
(Restated*)
–
–
–
–
–
127,757
127,757
Other comprehensive
income (Restated*)
–
–
–
–
22,594
–
22,594
Total comprehensive
income (Restated*)
–
–
–
–
22,594
127,757
150,351
Issue of shares
(Restated*)
11,997
283,367
–
–
–
–
295,364
Share-based payments
(Restated*)
–
–
4,942
–
–
–
4,942
Dividend paid
(Restated*)
–
–
–
(110,624)
(110,624)
At 31 December 2023
(Restated*)
245,257
283,367
37,650
–
(8,895)
276,789
834,168
Profit for the year
–
–
–
–
–
92,429
92,429
Other comprehensive
loss
–
–
–
–
(5,217)
–
(5,217)
Total comprehensive
(loss)/income
–
–
–
–
(5,217)
92,429
87,212
Issue of shares
280
3,223
–
–
–
–
3,503
Share-based payments
–
–
3,735
–
–
–
3,735
Treasury/own shares
–
–
–
(18,775)
–
–
(18,775)
Release of shares
–
–
–
9,844
–
(9,844)
–
Share-payments
–
–
(3,845)
–
–
3,845
–
Dividend paid
–
–
–
–
–
(113,385)
(113,385)
At 31 December 2024
245,537
286,590
37,540
(8,931)
(14,112)
249,834
796,458
*See note 2
88 l Serica Energy plc Annual Report & Accounts 2024
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Corporate Governance
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Financial Statements
GROUP CASH FLOW STATEMENT for the year ended 31 December 2024
Note
2024
$000
2023
$000
(Restated*)
Cash inflow from operations
24
452,222
470,022
Taxation paid
(152,517)
(347,588)
Decommissioning spend
(18,142)
(1,115)
Net cash inflow from operating activities
24
281,563
121,319
Investing activities:
Interest received
13,927
16,830
Purchase of E&E assets
(11,123)
(12,027)
Purchase of property, plant and equipment
(249,050)
(85,626)
Acquisition of subsidiary
30
(7,665)
–
Acquisition of subsidiary, net of cash acquired
29
–
(54,177)
Net cash flow from investing activities
(253,911)
(135,000)
Financing activities:
Payments of lease liabilities
24
(2,697)
(777)
Proceeds from issue of shares
23
280
996
Repayment of borrowings
21
(323,700)
(102,000)
Proceeds from borrowings
21
283,500
43,200
Dividends paid
11
(113,385)
(110,400)
Share buyback
23
(18,775)
–
Finance costs paid
(38,501)
(23,595)
Net cash flow from financing activities
(213,278)
(192,576)
Net decrease in cash and cash equivalents
(185,626)
(206,257)
Effect of exchange rates on cash and cash
equivalents
(1,347)
18,776
Cash and cash equivalents at 1 January
24
335,433
522,914
Cash and cash equivalents at 31 December
24
148,460
335,433
*See note 2
Serica Energy plc Annual Report & Accounts 2024 l 89
NOTES TO THE FINANCIAL STATEMENTS
1.
Authorisation of the financial statements and statement of compliance with UK adopted international
accounting standards
The Group’s financial statements for the year ended 31 December 2024 were authorised for issue by the Board of Directors on
31 March 2025 and the balance sheet was signed on the Board’s behalf by Chris Cox and Martin Copeland. Serica Energy plc is a
public limited company incorporated and domiciled in England & Wales with its registered office at 72 Welbeck Street, London, W1G
0AY. The principal activity of the Company and its subsidiaries (together the ‘Group’) is to identify, acquire and subsequently exploit
oil and gas reserves. A listing of the Group’s companies is contained in note 31 to these Group financial statements. Its current
activities are located in the United Kingdom. The Company’s ordinary shares are traded on AIM.
The Group’s financial statements have been prepared in accordance with UK adopted International Accounting Standards as they
apply to the financial statements of the Group for the year ended 31 December 2024. The principal accounting policies adopted by
the Group are set out in note 2.
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 2024.
The Group financial statements have been prepared on a historical cost basis and presented in US dollars. All values are rounded to
the nearest thousand US dollars ($000) except when otherwise indicated.
In preparing the Group financial Statements management has considered the impact of climate change. These considerations did
not have a material impact on the financial reporting judgements and estimates and consequently climate change is not expected
to have a significant impact on the Group’s going concern assessment to June 2026 nor the viability of the Group over the next
five years. However, governmental and societal responses to climate change risks are still developing, and are interdependent upon
each other, and consequently financial statements cannot capture all possible future outcomes as these are not yet known. It is
recognised that Net Zero targets and third-party expectations may drive government action that imposes further requirements and
costs on companies in the future. The Group has additional planned expenditure related to flare gas recovery and other emission
reduction measures, however, as all of the Group’s existing portfolio of producing assets are currently projected to cease production
by 2036, it is believed that any such future changes would have a relatively limited impact compared to assets with longer durations.
The Group will continue to consider the impact of climate change on any future business developments.
Change in presentation currency
On 1 January 2024, the Group changed its reporting currency from Pounds Sterling to US Dollars as the Group believes that the
presentation currency change will give investors and other stakeholders a clearer understanding of Serica’s performance over time
and align with the presentation currency of its peers.
In accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, this change in presentation currency
was applied retrospectively and accordingly, prior year comparatives have been restated.
Financial information included in the consolidated statements for the year ended 31 December 2023 has been restated in US Dollars
as follows:
• Assets and liabilities in non-US denominated currencies were translated into US Dollars at the rate of exchange ruling at the
relevant balance sheet date;
• Non-US Dollar income statements and cash flows were translated into US Dollars at average rates of exchange for the relevant
period; and
• Share capital, merger reserve, and all other equity items were translated using the rates that were used in 2018 when the Group
had changed its presentation currency from US Dollars to Pounds Sterling, or the subsequent rates prevailing on the date of each
relevant transaction since.
In preparing these financial statements, the exchange rates used in respect of the US Dollars ($) and Pounds Sterling (£) are:
Pounds Sterling to US Dollar
Year
ended 31
December
2024
Year
ended 31
December
2023
At 1 January
2023
Average for the period
1.278
1.243
N/A
At the end of the period
1.253
1.273
1.209
90 l Serica Energy plc Annual Report & Accounts 2024
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Financial Statements
2. Accounting policies continued
Going concern
The Directors are required to consider the availability of resources to meet the Group’s liabilities for the period ending 30 June 2026,
the ‘going concern period’.
As at 27 March 2025 the Group held cash and term deposits of $141 million and undrawn RBL facility amount of $294 million. See
note 21 for further details of the current RBL facility.
The Group has a balance in product mix between gas and oil, and two main operating hubs which reduces the potential impact
of production interruptions. The Group regularly monitors its cash, funding and liquidity position, including available facilities and
compliance with facility covenants. Near-term cash projections are revised and underlying assumptions reviewed, generally monthly,
and longer-term projections are also updated regularly. Downside price and other risking scenarios are considered. In addition
to commodity sales prices the Group is exposed to potential production interruptions and these are also considered under such
scenarios. In recent years, management has given priority to building a strong cash reserve which can respond to different types
of risk.
For the purposes of the Group’s going concern assessment we have reviewed two cash projections for the going concern period.
These projections cover a base case forecast and an extreme stress test scenario for the operations of the Group. RBL repayments
have been assumed based on the current redetermination and no covenant compliance matters noted.
The base case assumptions for the going concern period included commodity pricing of 82 pence/therm for gas and US$75/
bbl for oil for the remainder of 2025 and 82 pence/therm gas and US$72.5/bbl oil for H1 2026. Production, opex, capex and
tax assumptions are those currently included in standard management forecasting. The forward looking price assumptions are
considered as reasonable in light of recent commodity forward pricing and a consensus of published forecasts from the industry,
brokers and other analysts.
The stress test assumptions assume a continued full six month period shut-in of Triton hub production until 1 October 2025 and 25%
reduced production volumes from the base case across the full portfolio of producing assets for H1 2026. Base case commodity
pricing is retained for 2025 but lower commodity pricing of 50 pence/therm gas and US$60/bbl oil are assumed for the H1 2026
period in this scenario which are significantly below the range of current market expectations for the going concern period. Under
this scenario, which would result in lower cash inflows and any repayments of the RBL facility as redetermined, the Group was able
to maintain sufficient cash to meet its obligations and maintain covenant compliance. A number of mitigating factors and mitigating
actions that are under management control are available to management in the stress test event. These would mitigate the reduced
operating cash outflows experienced and are not included in the projection.
After making enquiries and having taken into consideration the above factors, the Directors considered it appropriate that the Group
has adequate resources to continue in operational existence for the going concern period. Accordingly, they continue to adopt the
going concern basis in preparing the financial statements.
Potential transaction
On 7th March 2025, the Company announced that it was in discussion with Enquest Plc regarding a possible business combination
(the ‘Potential Transaction’). The announcement was issued following media speculation, pursuant to Rule 2.4 of the UK Takeover
Code and as such there is no certainty that a Firm Intention to Offer pursuant to Rule 2.7 will be made nor as to the terms of any
such offer if made. The Potential Transaction is envisaged to be implemented by way of a reverse take-over with Enquest Plc
making an all share offer for Serica.
Notwithstanding the preliminary nature of the discussions of the Potential Transaction, the Directors have undertaken appropriate
analysis, commensurate with the early stage and uncertainty of the Potential Transaction, to satisfy themselves with the
appropriateness of the going concern basis of reporting the Group’s financial statements. The analysis considered inter alia the
regulatory provisions of the Financial Conduct Authority (‘FCA’) and the Companies Act under the likely structure of the transaction
as a reverse takeover, including requirements for shareholder approvals and the publishing of a prospectus covering the combined
group, and consequently the obligations of directors and of the FCA Sponsor regime that would be available to the Board prior to
recommending approval of any Potential Transaction to shareholders and to the legal completion of any such Potential Transaction.
Use of judgement and estimates and sources of estimation uncertainty
The preparation of financial statements in conformity with UK-adopted International Accounting Standards requires management
to make judgements and estimates 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 judgements 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 Group has identified the following areas where significant judgement, estimates, and assumptions are required.
Serica Energy plc Annual Report & Accounts 2024 l 91
2. Accounting policies continued
I) Uses of judgement
Key sources of judgement that may have a significant risk of causing material adjustment to the amounts recognised in the
financial statements are as follows: assessing whether impairment triggers exist that might lead to the impairment of the Group
assets (including oil and gas producing & development assets and Exploration and Evaluation ‘E&E’ assets); and taxation including
recognition of deferred tax assets.
Details on these sources of judgements are given below.
Assessment of the impairment indicators of intangible and tangible assets
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 licence performance obligations can be met within the required regulatory
timeframe, 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.
A review was performed for any indication that the value of the Group’s oil and gas assets may be impaired at the balance
sheet date of 31 December 2024 in accordance with the stated policy. The Group considers the relationship between its market
capitalisation and its book value, among other factors, when reviewing for indicators of impairment. As at 31 December 2024, the
market capitalisation of the Group was below the book value of its equity, which was assessed by management as a trigger for
potential impairment of its oil and gas assets.
The future recoverable amounts of the Group’s oil and gas assets were assessed for impairment and no impairment was identified.
See note 13 for further information.
Acquisition through business combination
The Group made a significant acquisition in prior year which was accounted for as a business combination under IFRS 3 (see note
29). In determining the fair value on acquisition of a pre-existing oil revenue contract a judgement was made to value the contract
at the differential between the contract pricing and market price and to unwind the liability through ‘contract revenue – other’ in the
income statement upon satisfaction of the performance obligations of the contract.
Taxation including the recognition of deferred tax assets
The Group’s operations are subject to a number of specific tax rules which apply to exploration, development and production
companies such as the Energy Profits Levy, ring-fenced Corporation Tax at 30%, Supplementary Charge Tax of 10% and the
application of investment allowances. As a result of these factors, the tax provision process necessarily involves the use of a number
of judgements around expenditure deductible under different ring-fenced tax rules.
II) Sources of estimation uncertainty
Key sources of estimation uncertainty
The key sources of estimation uncertainty that may have a significant risk of causing material adjustment to the amounts recognised
in the financial statements are: the assessment of commercial reserves and production profiles; and decommissioning provisions.
Details on these key sources of estimation uncertainty are given below.
Assessment of commercial oil and gas 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 depletion charge for the period, decommissioning provisions, whether
deferred tax assets are recoverable and assessing whether any impairment charge is required. Estimates of oil and gas reserves
require critical judgement. The Group uses proven and probable ('2P') reserves (excluding fuel gas) (see page 12) as the basis for
calculations of depletion and expected future cash flows from underlying assets because this represents the reserves management
intends to develop. 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 data sets
using its own internal expertise. A 10% reduction in the assessed quantity of commercial reserves would lead to an increase in the
depletion charge for 2024 of $20.4 million (2023: $15.4 million).
NOTES TO THE FINANCIAL STATEMENTS continued
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Decommissioning provisions
Amounts used in recording a provision for decommissioning are estimates based on current legal and constructive requirements and
current technology and price levels for the removal of facilities and plugging and abandoning of wells. Due to changes in relation
to these items, the future actual cash outflows in relation to decommissioning are likely to differ in practice. To reflect the effects
due to changes in legislation, requirements and technology and price levels, the carrying amounts of decommissioning provisions
are reviewed on a regular basis. The effects of changes in estimates do not give rise to prior year adjustments and are dealt with
prospectively. While the Group uses estimates and assumptions, actual results could differ from these estimates. Expected timing
of expenditure can also change, for example in response to changes in laws and regulations or their interpretation, and/or due to
changes in commodity prices. The payment dates are uncertain and depend on the production lives of the respective fields. For
further details including sensitivities of the calculation to changes in input variables (see note 20).
Non-key sources of estimation uncertainty
Non-key sources of estimation uncertainty include determining the fair value of contingent consideration, royalty liabilities, and the
recoverability of deferred tax assets.
Determining the fair value of contingent consideration on BKR acquisitions
The Group determined the fair value of initial contingent consideration payable based on discounted cash flows at the time of
the acquisition in 2018, calculated for each separate component of the contingent consideration. Any cash flows specific to the
contingent consideration also reflect applicable commercial terms and risks. In calculating the fair value of the remaining contingent
consideration on the BKR acquisitions payable as at 31 December 2024, assumptions underlying the calculation were updated from
2023. These included updated commodity prices, production profiles, future opex, capex and decommissioning cost estimates,
discount rates, proved and probable reserves estimates and risk assessments. For further details including sensitivities of the
calculation to changes in input variables (see note 19).
Royalty liabilities
The Group determined the fair value of a royalty liability assumed upon the Tailwind acquisition in 2023 at the time of the acquisition
and subsequently as at 31 December 2023 and 2024. In calculating the fair value of the royalty payable, assumptions included
commodity prices, future production and discount rates. For further details including sensitivities of the calculation to changes in
input variables (see note 19).
Recoverability of deferred tax assets
Deferred tax assets, including those arising from unutilised tax losses, require management to assess the likelihood that the Group
will generate sufficient taxable profits in future periods, in order to utilise recognised deferred tax assets. Assumptions about the
generation of future taxable profits depend on management’s estimates of future cash flows. These estimates are based on forecast
cash flows from operations (which are impacted by production and sales volumes, oil and natural gas prices, reserves, operating
costs, decommissioning costs, capital expenditure, dividends and other capital management transactions) and judgement about
the application of existing tax laws – see use of judgements: Taxation. There is no critical estimation uncertainty at the end of the
reporting period.
Basis of Consolidation
The consolidated financial statements include the accounts of Serica Energy plc (the ‘Company’) and entities controlled by the
Company (its subsidiaries) made up to 31 December each year. Together these comprise the ‘Group'.
Control is achieved when the Company:
• has power over the investee;
• is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one
or more of the three elements of control listed above. Consolidation of a subsidiary begins when the Company obtains control over
the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, the results of the subsidiaries acquired or
disposed of during the year are included in profit or loss from the date the Company gains control until the date when the Company
ceases to control the subsidiary.
The results and financial position of all of the Group entities that have a functional currency different from the presentation currency
are translated into the presentation currency as follows:
• Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
• Income and expenses for each income statement are translated at average exchange rates (unless this average is not a
reasonable approximation of the rates prevailing on the transaction dates, in which case income and expenses are translated at
the rate on the dates of each transaction);
Serica Energy plc Annual Report & Accounts 2024 l 93
2. Accounting policies continued
• The exchange differences arising on translation for consolidation are recognised in other comprehensive income; and
• Any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and
liabilities of the acquired entity and are translated at the spot rate of exchange at the reporting date.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with
the Group’s accounting policies. All inter-company balances and transactions have been eliminated upon consolidation.
Foreign currency translation
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (‘functional currency’). The Group’s financial statements are presented in US dollars, the
currency which the Group has elected to use as its presentational currency.
In the financial statements of Serica Energy plc and its individual subsidiaries, 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
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.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.
Any contingent consideration to be transferred to the acquirer will be recognised at fair value at the acquisition date. Contingent
consideration classified as an asset or liability that is a financial instrument and within the scope of IFRS 9 Financial Instruments, is
measured at fair value with the changes in fair value recognised in the statement of profit or loss in accordance with IFRS 9.
Goodwill/gain on acquisition
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. If the fair value of the net assets acquired is in excess
of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and
all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If
the reassessment still results in an excess of fair value of net assets acquired over the aggregate consideration transferred, then the
gain on acquisition is recognised in profit or loss.
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
Oil and gas operations are usually conducted by the Group as co-licensees in unincorporated joint operations with other companies.
Most of the Group’s activities are conducted through joint operations, 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 recognises its share of assets,
liabilities, income and expenses of the joint operation in the consolidated financial statements on a line-by-line basis.
Full details of Serica’s working interests in those petroleum and natural gas exploration and production activities classified as joint
operations are included in table of Licence Holdings at the end of this report.
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.
NOTES TO THE FINANCIAL STATEMENTS continued
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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.
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.
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. Where conditions giving rise to impairment subsequently reverse, the effect of the impairment charge is reversed as a
credit to 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, any applicable 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 management’s assessment of proved and probable reserves,
reflecting risks applicable to the specific assets. Changes in reserve quantities and cost estimates are recognised prospectively from
the last annual reporting date. Proved and probable reserves estimates obtained from an independent reserves specialist have been
used as the basis for 2023 and 2024 calculations.
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 through the income statement if the carrying amount of the cash generating unit exceed the recoverable amount of the
related commercial oil and gas reserves.
Serica Energy plc Annual Report & Accounts 2024 l 95
2. Accounting policies continued
Acquisitions, asset purchases and disposals
Acquisitions of oil and gas properties are accounted for under the acquisition method when the assets acquired and liabilities
assumed constitute a business.
Transactions involving the purchase of an individual field interest, or a group of field interests, that do not constitute a business, are
treated as asset purchases. Accordingly, no goodwill and no deferred tax gross up arises, and the consideration is allocated to the
assets and liabilities purchased on an appropriate basis. When the cost of an asset includes contingent or variable consideration
that may become payable to the vendor, the Group develops an accounting policy for the recognition and measurement of those
costs and the associated liability as is appropriate having regard to the nature of the obligation to make the contingent or variable
payments. The policy is applied consistently to similar transactions. See note 30 for details of the policy adopted for the acquisition
of interests in the Greater Buchan Area.
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 are added to or deducted from the cost of the assets to which it
relates. If a change in the decommissioning liability exceeds the carrying amount of the asset, the excess is recognised immediately
in profit or loss. 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. The discount and inflation rates applied
have taken into consideration the applicable rig rates and expected timing of cessation of production on each field.
Underlift/overlift
Lifting arrangements for oil and gas produced in certain fields are such that each participant may not receive its share of the overall
production in each period. The difference between cumulative entitlement and cumulative production less stock is ‘underlift’ or
‘overlift’. Underlift and overlift are valued at market value using an observable year-end oil or gas market price and included within
debtors (‘underlift’) or creditors (‘overlift’).
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, and right-of-use assets over the period of lease.
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.
Financial instruments
Financial instruments comprise financial assets, cash and cash equivalents, financial liabilities and equity instruments. Financial
assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial
instrument.
Financial assets
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through profit or loss,
and fair value through other comprehensive income (OCI).
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and
the Group’s business model for managing them.
With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied
the practical expedient, the Group initially measures a financial asset at its fair value plus transaction costs (in the case of a financial
asset not at fair value through profit or loss). Trade receivables that do not contain a significant financing component or for which
the Group has applied the practical expedient are measured at the transaction price determined under IFRS 15.
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.
NOTES TO THE FINANCIAL STATEMENTS continued
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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.
In order for a financial asset to be classified and measured at amortised cost it needs to give rise to cash flows that are ‘solely
payments of principal and interest (SPPI)’ on the principal amount outstanding. This assessment is referred to as the SPPI test and is
performed at an instrument level. Financial assets with cash flows that are not SPPI are classified and measured at fair value through
profit or loss, irrespective of the business model.
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 of deposit.
Financial liabilities
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings,
payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group’s financial liabilities
currently include loans and borrowings, trade and other payables, BKR consideration liabilities, royalty liabilities, deferred shares in
relation to the Tailwind acquisition and derivative liabilities. All financial liabilities are recognised initially at fair value.
Royalty liabilities
The fair value of the royalty liability is estimated as at applicable reporting dates from a valuation technique using future expected
discounted cash flows and the calculations involve a range of assumptions related to oil prices, production volumes and discount
rates (see note 19).
BKR consideration
The fair value of the BKR consideration is estimated as at applicable reporting dates from a valuation technique using future
expected discounted cash flows. The methodology uses several significant unobservable inputs (see note 19).
Loans and borrowing
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.
Emissions liabilities
The Group operates in an energy intensive industry and is therefore required to partake in emission trading schemes (‘ETS’). The
Group recognises an emission liability in line with the production of emissions that give rise to the obligation. To the extent the
liability is covered by allowances held, the liability is recognised at the cost of these allowances held and if insufficient allowances
are held, the remaining uncovered portion is measured at the spot market price of allowances at the balance sheet date. The
expense is presented within ‘production costs’ under ‘cost of sales’ and the accrual is presented in ‘trade and other payables’.
Derivative financial instruments
The Group uses derivative financial instruments, such as forward commodity contracts, to hedge its commodity price risks. The
Group has elected not to apply hedge accounting to these derivatives. Such derivative financial instruments are initially recognised
at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives
are carried as financial assets when the fair value is positive and as financial liabilities when the fair value is negative. Any gains
or losses arising from changes in the fair value of derivatives are taken directly to the statement of profit or loss and other
comprehensive income and presented within operating profit.
Further details of the fair values of derivative financial instruments and how they are measured are provided in Note 16.
Equity
Equity instruments issued by the Company are recorded in equity at the proceeds received, net of direct issue costs.
Treasury/own shares
The Group’s holdings in its own equity instruments are shown as deductions from shareholders’ equity. Treasury shares represent
Serica shares repurchased and available for specific and limited purposes. For accounting purposes, shares held in Employee Benefit
Trusts to meet the future requirements of the employee share-based payment plans are treated in the same manner as treasury
shares and are, therefore, included in the consolidated financial statements as treasury/own shares. The cost of treasury shares
subsequently sold or reissued is calculated on a weighted-average basis. Consideration, if any, received for the sale of such shares
is also recognised in equity. No gain or loss is recognised in the income statement on the purchase, sale, issue or cancellation of
equity shares.
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2. Accounting policies continued
Trade and other receivables and contract assets
Trade receivables and contract assets
A receivable represents the Group’s right to an amount of consideration that is unconditional (i.e., only the passage of time is
required before payment of the consideration is due). A contract asset is the right to consideration in exchange for goods or
services transferred to the customer.
Provision for expected credit losses of trade receivables and contract assets
For trade receivables and contract assets, the Group applies a simplified approach in calculating expected credit losses ‘ECLs’.
Therefore, the Group does not track changes in credit risk, but instead, recognises a loss allowance based on lifetime ECLs at
each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted
for forward-looking factors specific to the debtors and the economic environment. A financial asset is written off when there is no
reasonable expectation of recovering the contractual cash flows. The Group’s receivables have a good credit rating and there has
been no noted change in the credit risk of receivables in the year.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that
an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
Revenue from contracts with customers
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at
an amount that reflects the consideration to which the Group expects to be entitled to in exchange for those goods or services.
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods
provided in the normal course of business, net of discounts, customs duties and sales taxes. The Group has concluded that it is the
principal in its revenue arrangements because it typically controls the goods or services before transferring them to the customer.
The sale of crude oil, gas or condensate represents a single performance obligation, being the sale of barrels equivalent on
collection of a cargo or on delivery of commodity into an infrastructure. Revenue is accordingly recognised for this performance
obligation when control over the corresponding commodity is transferred to the customer. The Group principally satisfies its
performance obligations at a point in time and the amounts of revenue recognised relating to performance obligations satisfied over
time are not significant. The normal credit term is 15 to 30 days upon collection or delivery.
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.
Share-based payment transactions
Employees (including Executive 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.
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. For equity awards cancelled by forfeiture when vesting conditions are
not met, any expense previously recognised is reversed and recognised as a credit in the income statement.
NOTES TO THE FINANCIAL STATEMENTS continued
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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 and does not give rise to equal
taxable and deductible temporary differences.
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.
Dividends
The Company recognises a liability to pay a dividend when the distribution is authorised, and the distribution is no longer at the
discretion of the Company. A corresponding amount is recognised directly in equity.
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.
Leases
As a lessee, the Group recognises a right-of-use asset and a lease liability at the lease commencement date. The lease liability is
initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using the
rate implicit in the lease, or, if that rate cannot be readily determined, the Group uses its incremental borrowing rate.
The lease liability is subsequently recorded at amortised cost, using the effective interest rate method. The liability is remeasured
when there is a change in future lease payments arising from a change in an index or rate or if the Group changes its assessment
of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a
corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying
amount of the right-of-use asset has been reduced to zero.
The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments
made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove
the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. Right-of-
use assets are depreciated over the shorter period of lease term and useful life of the underlying asset.
The Group does not currently act as a lessor.
Serica Energy plc Annual Report & Accounts 2024 l 99
2. Accounting policies continued
New and amended standards and interpretations
The Group has adopted and applied for the first time, certain new standards, amended standards or interpretations, which are
effective for annual periods beginning on or after 1 January 2024. These include the following:
• Amendments to IAS 1 – Classification of Liabilities as Current or Non-current
• Amendments to IAS 1 – Non-current Liabilities with Covenants
• Amendments to IAS 7 and IFRS 7 – Supplier Finance Arrangements
• Amendments to IFRS 16 – Lease Liability in a Sale and Leaseback
The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
Other than the changes described above, the accounting policies adopted are consistent with those of the previous financial year.
There are no new or amended standards or interpretations adopted from 1 January 2024 onwards, that have a significant impact on
the consolidated financial statements 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.
These include the following:
• IFRS 10 and IAS 28 (amendments) – Sale or Contribution of Assets between an investor and its Associate or Joint Venture
• Amendments to IAS 21 – Lack of exchangeability
• Amendments to IFRS 9 and IFRS 7 – Classification and Measurement of Financial Instruments
• Amendments to IFRS 9 and IFRS 7 – Power Purchase Agreements
• Annual Improvements to IFRS Accounting Standards-Volume 11
• IFRS 18 – Presentation and Disclosure in Financial Statements
• IFRS 19 – Subsidiaries without Public Accountability: Disclosures
The Group intends to adopt them when they become effective. The Group is reviewing the potential impacts of IFRS 18 but the
other new or amended standards not yet adopted are not expected to have a material impact on the financial statements.
3. Segment information
For the purposes of segmental reporting, the Group currently operates a single class of business being oil and gas exploration,
development and production and related activities in a single geographical area, being presently the UK North Sea.
4. Sales revenue
2024
$000
Restated*
2023
$000
Gas sales
374,719
429,987
Gas supply contract revenue
–
1,227
Total gas sales
374,719
431,214
Oil sales
317,478
332,265
NGL sales
34,981
25,441
Total revenue
727,178
788,920
*See note 2
Gas sales revenue in 2024 arose from three key customers (2023: three). Gas supply contract revenue in 2023 arose from the
unwind of gas contract liabilities initially recognised upon the restructuring of certain gas swaps to other fixed price instruments
under a gas sales contract in August 2021.
Oil sales revenue in 2024 was from three key customers (2023: three), and NGL sales in 2024 were made to eight customers
(2023: six).
The revenue from three significant customers individually comprising $441.4 million, $181.1 million and $78.2 million constitutes more
than 10% of total revenue amounting to $700.7 million (2023: three customers comprising $491.7 million, $203.7 million and $80.6
million individually comprising $776.0 million).
NOTES TO THE FINANCIAL STATEMENTS continued
100 l Serica Energy plc Annual Report & Accounts 2024
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Corporate Governance
Auditor’s Report
Financial Statements
5. Cost of sales
2024
$000
Restated*
2023
$000
Operating costs
329,820
272,686
Lifting costs
6,874
8,853
Change in decommissioning estimates expensed (note 20)
601
461
Depletion (note 13)
187,250
136,335
Movement in liquids overlift/underlift
(20,564)
(11,545)
503,981
406,790
*See note 2
6. Operating profit
General and administrative expenses
General and administrative expenses of $21,601,000 (2023: $24,486,000) included depreciation of right of use assets of $1,070,000
(2023: $216,000). Transaction costs of $12,539,000 incurred in 2023 associated with the acquisition of Tailwind Energy Investments
Ltd were disclosed separately on the face of the Income Statement and in note 29.
Depreciation and depletion expense
Depreciation of right of use assets totalled $2,114,000 (2023: $996,000) of which $1,044,000 (2023: $780,000) was allocated to
cost of sales and $1,070,000 (2023: $216,000) allocated to administrative expenses.
Depletion charges on oil and gas properties are classified within cost of sales.
Auditor’s Remuneration
2024
$000
Restated*
2023
$000
Audit of the Group accounts
960
900
Audit of the Company’s accounts
50
40
Audit of accounts of Company’s subsidiaries
120
160
Total audit fees
1,130
1,100
*See note 2
No fees were paid to Ernst & Young LLP and its associates for non-audit services in 2023 or 2024.
7.
Staff costs and Directors’ emoluments
a) Staff costs – Group
2024
$000
Restated*
2023
$000
Wages and salaries
35,641
32,233
Social security costs
7,238
8,073
Other pension costs
3,140
3,321
Share-based long-term incentives
3,735
4,942
49,754
48,569
The average number of persons employed by the Group during the year was 222 (2023: 202), with 12 in management functions
(2023: 11), 185 in technical functions (2023: 172) and 25 (2023: 19) in finance and administrative functions.
Staff costs for key management personnel:
Short-term employee benefits
3,855
3,358
Post-employment benefits
130
152
Share-based payments (note 25)
193
2,911
4,178
6,421
Serica Energy plc Annual Report & Accounts 2024 l 101
7.
Staff costs and Directors’ emoluments continued
b) Directors’ emoluments
The emoluments of the individual Directors were as follows. All amounts are paid in £ sterling. Figures in the table below are
translated into $ at a 2024 average exchange rate.
2024
Salary and
fees
$000
2024
Bonus
$000
2024
Pension
$000
2024
Benefits
in kind
$000
2024
Total
$000
Restated*
2023
Total
$000
M Flegg¹,²
239
299
31
–
569
1,272
A Bell¹,³
42
13
6
–
61
794
D Latin
651
320
–
–
971
203
C Cox1,4
383
173
42
1
599
–
M Copeland1,5
463
169
51
1
684
–
A Craven Walker6
–
–
–
–
–
305
T Garlick7
–
–
–
–
–
44
M Webb8
64
–
–
–
64
85
K Coppinger
96
–
–
–
96
85
J Schmitt
89
–
–
–
89
81
M Soeting9
89
–
–
–
89
76
R Lawson10
77
–
–
–
77
57
G Vermersch11
77
–
–
–
77
57
K Van Hecke12
89
–
–
–
89
40
S Lloyd Rees13
77
–
–
–
77
35
2,436
974
130
2
3,542
3,134
*See note 2
1
Cash in lieu of pension
2 Mitch Flegg stepped down as director on 23 April 2024 He was also paid £350,000 ($447,000) as payment in lieu of remaining notice (see
Directors’ Remuneration Report).
3 Andrew Bell retired on 5 February 2024
4 Chris Cox was appointed on 1 July 2024
5 Martin Copeland was appointed on 5 February 2024
6 Antony Craven Walker retired on 30 June 2023
7 Trevor Garlick retired on 17 July 2023
8 Malcolm Webb retired on 27 June 2024
9 Michiel Soeting was appointed on 1 February 2023
10 Robert Lawson was appointed on 23 March 2023
11 Guillaume Vermersch was appointed on 23 March 2023
12 Kaat Van Hecke was appointed on 17 July 2023
13 Sian Lloyd Rees was appointed on 17 July 2023
2024
2023
Number of Directors securing benefits under defined
contribution schemes during the year
4
2
Number of Directors who exercised share options
2
3
2024
$000
Restated*
2023
$000
Aggregate gains made by Directors on the exercise of options
–
1,921
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 and those described in Note 28.
NOTES TO THE FINANCIAL STATEMENTS continued
102 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
8. Finance revenue/costs
2024
$000
Restated*
2023
$000
Bank interest receivable
13,927
16,830
Total finance revenue
13,927
16,830
*See note 2
2024
$000
Restated*
2023
$000
Loan interest payable
22,917
17,238
Loan commitment fees amortised (note 21)
2,199
4,173
Other financing fees
3,945
1,217
Other charges and interest payable
2,733
637
Unwinding of discount on provisions (note 20)
5,564
3,641
Total finance costs
37,358
26,906
9. Taxation
2024
$000
Restated*
2023
$000
a) Tax charged/(credited) in the income statement
Charge for the year
14,191
225,839
Adjustment in respect of prior years
(315)
2,349
Total current income tax charge
13,876
228,188
Deferred tax
Origination and reversal of temporary differences in the current year
61,128
24,426
Adjustment in respect of prior years
(6,935)
–
Total deferred tax charge
54,193
24,426
Tax charge in the income statement
68,069
252,614
Serica Energy plc Annual Report & Accounts 2024 l 103
9. Taxation 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 expected by applying the standard UK
corporation tax rate for the following reasons:
2024
$000
Restated*
2023
$000
Accounting profit before taxation
160,498
380,371
Statutory rate of corporation tax in the UK of 40% (2023: 40%)
64,199
152,148
Permanent differences
9,067
3,959
Movement in unrecognised deferred tax assets
811
3,284
Investment Allowance
(14,216)
(5,382)
EPL – Rate differential
11,085
(11,790)
EPL – Income taxed at different rates
28,263
127,705
EPL – Investment allowance
(25,158)
(6,635)
Income tax at different rates
1,268
3,731
Adjustment in respect of prior years
(7,250)
2,349
Non-taxable gain on acquisition
–
(16,755)
Tax charge reported in the income statement
68,069
252,614
c) Recognised and unrecognised tax losses
The Group’s Balance Sheet has a deferred tax asset amount of $576.6 million as at the 31 December 2024 (2023: $557.7 million)
arising from ring-fence losses, decommissioning liabilities, other temporary differences, derivative financial libilities, and oil revenue
contract liability. These deferred tax assets are expected to be recovered through utilisation against deferred tax liabilities, primarily
related to temporary differences on fixed assets ($521.4 million) and through future taxable profits. The decrease in net deferred
tax assets to $55.1 million as at 31 December 2024 (2023: $107.1 million) in the year is primarily due to the increased deferred tax
liabilities arising from the higher property, plant and equipment balances and reflecting the EPL rate increase from 35% to 38%, and
a reduction in the deferred tax asset recognised on the Group’s oil revenue contract liability which substantially unwound during
the year.
The Group’s deferred tax assets at 31 December 2024 are recognised to the extent that taxable profits are expected to arise in
the future against which tax losses and allowances in the UK can be utilised. In accordance with IAS 12 Income Taxes, the Group
assessed the recoverability of its deferred tax assets at 31 December 2024 with respect to ring fence losses and allowances.
The Group has recognised deferred tax assets in full on its UK ring-fence losses but has unrecognised UK mainstream corporation
tax losses and temporary differences of $147.9 million (2023: $151.1 million) for which no deferred tax asset has been recognised
at the Balance Sheet date. These tax losses and temporary differences are unrecognised because they streamed within entities
for which no profits are expected.
Unrecognised deferred tax assets
2024
$000
Restated*
2023
$000
Tax losses
140,088
126,462
Other temporary differences
7,788
24,632
Total
147,876
151,094
The above unrecognised amounts have no expiry.
NOTES TO THE FINANCIAL STATEMENTS continued
104 l Serica Energy plc Annual Report & Accounts 2024
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Corporate Governance
Auditor’s Report
Financial Statements
9. Taxation continued
d) Deferred tax
The deferred tax included in the balance sheet is as follows:
2024
$000
Restated*
2023
$000
Deferred tax liability:
Temporary differences on capital expenditure
(521,436)
(450,645)
Deferred tax liability
(521,436)
(450,645)
Deferred tax asset:
Tax losses
427,568
421,726
Decommissioning liabilities
58,264
59,337
Investment allowances
53,765
42,081
Contract liability
4,218
27,525
Other temporary differences
3,743
7,047
Derivative financial liabilities
29,017
–
Deferred tax asset
576,575
557,716
Net deferred tax asset
55,139
107,071
Reconciliation of net deferred tax assets/(liabilities)
2024
$000
Restated*
2023
$000
At 1 January
107,071
(185,329)
Acquisitions (note 29)
–
325,924
Tax charge during the year recognised in profit
(54,193)
(24,426)
Currency translation adjustment
2,261
(9,098)
At 31 December
55,139
107,071
The deferred tax in the Group income statement is as follows:
2024
$000
Restated*
2023
$000
Deferred tax in the income statement:
Temporary differences on capital expenditure
73,285
(23,542)
Tax losses
(5,842)
33,726
Other temporary differences
(13,250)
14,242
Deferred income tax charge
54,193
24,426
*See note 2
Serica Energy plc Annual Report & Accounts 2024 l 105
9. Taxation continued
e) Changes to UK corporation tax legislation
Changes to UK corporation tax legislation
Following the introduction of the Energy Profits Levy in 2022, on 24 May 2024, Finance (No.2) Act 2024, enacted the Energy
Security Investment Mechanism (ESIM). The ESIM operates to remove EPL if both average oil and gas prices fall to, or below,
$74.21 per barrel for oil and 57p per therm for gas (as adjusted for prior year CPI with effect from 1 April 2024), for two consecutive
quarters. The headline tax rate on UK oil and gas profits will then return to 40 per cent. The change as currently proposed is not
expected to have a material impact for the Group.
In October 2024, the UK government announced changes (effective from 1 November 2024) to the Energy Profits Levy including a
3% increase in the rate taking the headline rate of tax on North Sea profits to 78%, an extension to the period of application of the
Levy to 31 March 2030 and the removal of the Levy’s main investment allowance. The changes to the rate and to the investment
allowance were substantively enacted in November 2024 and have been applied in accounting for current tax and deferred tax in
the year. The government confirmed in the announcement that the Energy Security Investment Mechanism (‘ESIM’) would remain
unchanged and that there were no planned changes to the way tax relief for capital expenditure is applied in the permanent ring
fence regime.
The extension of the EPL to 31 March 2030 was substantively enacted on 3 March 2025 and is therefore not reflected in the
financial statements as at 31 December 2024. The impact will be included in the financial statements for the following period. If
the extension had been in place at the balance sheet date, an additional deferred tax expense of $65.2 million would have been
recognised in the current financial statements.
The UK has introduced legislation implementing the Organisation for Economic Co-operation and Development’s (‘OECD’) proposals
for global minimum corporation tax rate (Pillar Two) which is effective for periods beginning on or after 31 December 2023. The only
jurisdiction in which the Group operates is the UK and the Group does not expect an exposure to Pillar Two income taxes.
10. 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. The weighted average
number of shares outstanding excludes treasury shares and shares held by Employee Benefit Trusts.
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 granted under share-based payment plans (see
note 25) and deferred consideration for the Tailwind acquisition (see note 29) into ordinary shares.
The following reflects the income and share data used in the basic and diluted earnings per share computations:
2024
$000
Restated*
2023
$000
Net profit from continuing operations
92,429
127,757
Net profit attributable to equity holders of the parent
92,429
127,757
NOTES TO THE FINANCIAL STATEMENTS continued
106 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
10. Earnings per share continued
2024
’000
2023
’000
Basic weighted average number of shares
389,095
360,643
Dilutive potential of ordinary shares granted under share-based payment plans
10,110
12,054
Dilutive potential of ordinary shares under deferred consideration for acquisition
339
1,849
Diluted weighted average number of shares
399,544
374,546
2024
$
Restated*
2023
$
Basic EPS on profit for the year ($)
0.24
0.35
Diluted EPS on profit for the year ($)
0.23
0.34
*See note 2
The 2023 Basic EPS on profit for the year and Diluted EPS on profit for the year were £0.29 and £0.27 respectively before the
restatement arising from change in presentation currency.
11. Dividends proposed
Proposed dividends on ordinary shares
A final cash dividend for 2024 of 10 pence per share (2023: 14.0 pence per share) is proposed which would generate a payment
of approximately $49.0 million (2023: $68.5 million). Proposed dividends on ordinary shares are subject to approval at the annual
general meeting and are not recognised as a liability as at 31 December.
Dividends on ordinary shares paid in 2024
A final cash dividend for 2023 of 14.0 pence per share was proposed in April 2024 and approved at the annual general meeting on
27 June 2024 and $68.8 million (£54.4 million) was paid in July 2024.
An interim cash dividend for 2024 of 9.0 pence per share was announced in September 2024 and $44.6 million (£35.0 million) was
paid in November 2024.
Serica Energy plc Annual Report & Accounts 2024 l 107
12. Exploration and evaluation assets
Total
$000
Cost:
1 January 2023 (restated*)
1,210
Additions
12,027
Write-offs
(10,871)
Currency translation adjustment
91
31 December 2023 (restated*)
2,457
Acquisitions (note 30)
7,665
Additions
11,123
Write-offs
(851)
Currency translation adjustment
(27)
31 December 2024
20,367
Net book amount:
31 December 2024
20,367
31 December 2023 (restated*)
2,457
*See note 2
NOTES TO THE FINANCIAL STATEMENTS continued
108 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
13. Property, plant and equipment
Oil and gas
properties
$000
Equipment,
fixtures
and fittings
$000
Right-of-
use assets
$000
Total
$000
Cost:
1 January 2023 (restated*)
580,639
256
1,042
581,937
Acquisitions (note 29)
594,088
–
4,245
598,333
Additions
85,626
–
–
85,626
Decom asset revisions (note 20)
20,384
–
–
20,384
Currency translation adjustment
31,731
14
55
31,800
31 December 2023 (restated*)
1,312,468
270
5,342
1,318,080
Additions
264,000
–
5,069
269,069
Decom asset revisions (note 20)
9,711
–
–
9,711
Currency translation adjustment
(10,576)
(4)
(114)
(10,694)
31 December 2024
1,575,603
266
10,297
1,586,166
Depreciation and depletion:
1 January 2023 (restated*)
259,427
256
780
260,463
Charge for the year (note 5)
135,555
–
780
136,335
Charge for the year – other
–
–
216
216
Currency translation adjustment
15,247
14
45
15,306
31 December 2023 (restated*)
410,229
270
1,821
412,320
Charge for the year (note 5)
186,206
–
1,044
187,250
Charge for the year – other
–
–
1,070
1,070
Currency translation adjustment
(6,021)
(4)
(37)
(6,062)
31 December 2024
590,414
266
3,898
594,578
Net book amount:
31 December 2024
985,189
–
6,399
991,588
31 December 2023 (restated*)
902,239
–
3,521
905,760
* See Note 2.
Serica Energy plc Annual Report & Accounts 2024 l 109
13. Property, plant and equipment continued
Depreciation and depletion
Depletion charges on oil and gas properties are classified within ‘cost of sales’. $1,044,000 and $1,070,000 of right of use asset
depreciation has been charged to cost of sales and administrative expenses respectively.
Impairment of oil and gas properties
A review was performed for any indication that the value of the Group’s oil and gas assets may be impaired at the balance
sheet date of 31 December 2024 in accordance with the stated policy. The Group considers the relationship between its market
capitalisation and its book value, among other factors, when reviewing for indicators of impairment. As at 31 December 2024, the
market capitalisation of the Group was below the book value of its equity, which was assessed by management as a trigger for
potential impairment of its oil and gas assets.
In assessing whether a write-down is required in the carrying value of a potentially impaired item of property, plant and equipment,
the asset’s carrying value is compared with its recoverable amount being the higher of the asset’s fair value less costs to sell and
value in use.
The recoverable amount of the Group’s CGUs , which represent individual oil and gas fields or a group of fields within a production
area, has been determined based on a fair value less costs to sell (‘FVLCS’) calculation on an income approach using a discounted
cash flow model. The projected cash flows are adjusted for risks specific to the assets and are discounted using a post-tax discount
rate of 9%. The future recoverable amounts of the Group’s oil and gas assets were assessed against their carrying amounts and no
impairment was identified.
The calculation of FVLCS is most sensitive to the following assumptions: reserve estimates, oil and gas commodity prices, discount
rates and growth rates used to extrapolate cash flows during the forecast period.
The Group considers a 10% change in the oil and gas prices and a 1% increase in the post-tax discount rate to be reasonable
possibilities for the purpose of sensitivity analysis. Based on sensitivities performed, there is no risk of a material adjustment to the
carrying value of the CGUs, because a reasonable change in key assumptions used to determine the recoverable amount would not
result in an impairment.
14. Inventories
2024
$000
Restated*
2023
$000
Materials and spare parts
7,365
6,340
Hydrocarbons
7,519
7,520
14,884
13,860
*See note 2
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. Inventories are recorded net of an obsolescence provision of $3.8
million (2023: $3.9 million).
NOTES TO THE FINANCIAL STATEMENTS continued
110 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
15. Trade and other receivables
2024
$000
Restated*
2023
$000
Due within one year:
Trade receivables
56,847
106,182
Amounts recoverable from JV partners
2,733
2,190
Other receivables
7,436
5,663
BKR advance payments
27,989
19,981
Prepayments
9,572
13,740
VAT recoverable
6,923
3,214
Liquids underlift
46,617
25,485
158,117
176,455
*See note 2
Trade receivables at 31 December 2024 arose from seven (2023: seven) customers. They are non-interest bearing and are generally
on 15 to 30-day terms.
None of the Group’s receivables are considered impaired and there are no financial assets past due but not impaired at the year end.
The Directors consider the carrying amount of trade and other receivables approximates to their fair value. Management considers
that there are no other significant concentrations of credit risk within the Group.
16. Derivative financial assets/(liabilities)
2024
$000
Restated*
2023
$000
Financial assets
Derivative financial instruments
5,185
–
Financial liabilities
Derivative financial instruments (<1year)
(31,185)
(5,564)
Derivative financial instruments (>1 year)
(11,201)
–
Derivative financial instruments
(42,386)
(5,564)
*See note 2
Fair value hierarchy
All financial instruments for which fair value is recognised or disclosed are categorised within the fair value hierarchy, based on the
lowest level input that is significant to the fair value measurement as a whole, as follows: Level 1: Quoted (unadjusted) market prices
in active markets for identical assets or liabilities; Level 2: Valuation techniques for which the lowest level input that is significant to
the fair value measurement is directly (i.e. as prices) or indirectly (i.e. derived from prices) observable; Level 3: Valuation techniques
for which the lowest level input that is significant to the fair value measurement is unobservable. The valuation methodology for
derivative financial instruments is detailed below and for contingent consideration is disclosed in note 19. A table summarising the
Group’s liabilities measured at fair value is included in note 22.
Derivative financial instruments
The Group enters into derivative financial instruments with various counterparties. Commodity and foreign currency derivative
contracts are designated as at fair value through profit and loss (FVTPL), and gains and losses on these contracts are recognised in
the income statement. Derivative financial instruments held at 31 December 2024 comprised oil and gas swaps and collars and at
31 December 2023 solely comprised UKA ETS swaps. These were valued by counterparties, with the valuations reviewed internally
and corroborated with readily available market data of forward pricing (level 2). Details of the Group’s derivative financial instruments
held as at 31 December 2024 are provided in note 22. The mark-to-market of the Group’s open contracts as at 31 December 2024
was a net liability of $37.2 million (2023: net liability of $5.6 million).
Serica Energy plc Annual Report & Accounts 2024 l 111
16 Derivative financial assets/(liabilities) continued
The following gains and losses were recognised in the income statement:
Commodity contracts designated as FVTPL
2024
$000
Restated*
2023
$000
Mark-to-market unrealised (losses)/gains
(31,814)
30,573
Other unrealised (losses)
–
(5,256)
Unrealised hedging (expense)/income
(31,814)
25,317
Swaps matured during the year
(3,392)
(15,062)
Other contracts matured during the year
(8,268)
(4,407)
Realised hedging expense
(11,660)
(19,469)
Hedging (expense)/income
(43,474)
5,848
*See note 2
Unrealised hedging losses in 2024 comprise losses on gas swaps partially offset by unrealised gains on the UKA ETS swap
instruments held (2023: gains on gas swaps). Unrealised hedging losses on gas and other swaps comprise unrealised charges on
the movement during the year in the calculated fair value liability of outstanding gas price or other derivative contracts measured at
the respective Balance Sheet dates.
Realised hedging losses measured at fair value through profit or loss for 2024 comprise losses realised on oil, gas and UKA ETS
swaps. For 2023 losses were realised on gas swaps and UKA ETS swaps.
Contract liabilities
2024
$000
Restated*
2023
$000
Contract liabilities
5,408
36,700
5,408
36,700
*See note 2
On acquisition of Tailwind Energy Investments Ltd (see note 29) a pre-existing oil revenue contract was fair valued, resulting in
contract liabilities of $66.7 million (£54.2 million) being recognised. The contract liabilities represent the differential in contract
pricing and market price and are realised as performance obligations are considered met in the underlying revenue contract. To the
extent the contract liability represents the fair value differential between contract price and market price, it is unwound through
‘contract revenue – other’ upon satisfaction of the performance obligation. $31.3 million has been released to the Income Statement
in 2024 (2023: $30.0 million).
The gas contract liability of $1,193,000 as at 1 January 2023 represented a separate contract liability which had arisen upon the
restructuring of certain hedging arrangements in 2021, and was fully released to the Income Statement in 2023.
NOTES TO THE FINANCIAL STATEMENTS continued
112 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
17. Cash and cash equivalents
2024
$000
Restated*
2023
$000
Cash at bank and in hand
123,390
231,904
Short-term deposits
25,070
103,529
148,460
335,433
*See note 2
As at 31 December 2024, the cash balance of $148.5 million (2023: $335.4 million) contained amounts of $31.0 million held in
separate bank accounts for the purpose of providing security against letters of credit issued in respect of certain decommissioning
liabilities (2023: $23.3 million). The use of cash is restricted by virtue of contractual restrictions with a 3rd party.
Decommissioning security agreement (‘DSA’) cash advances
DSA cash advances of $35.1 million at 31 December 2023 represented cash security temporarily lodged in respect of
decommissioning obligations. These were not included in the cash and cash equivalents balance of $335.4 million above but were
released to Serica in 2024 when security was provided under the new financing facility.
Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods
with original maturities of between one day and three months at the date acquired. They are considered to be readily convertible
into cash and subject to an insignificant risk of changes in value. The placing of deposits depends on the immediate cash
requirements of the Group and they 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:
S&P/
Moody’s
credit
rating
2024
$000
Restated*
2023
$000
Barclays Bank plc
A-1
59,472
37,077
Lloyds Bank plc
A-1
55,980
163,449
DNB Bank ASA
P-1
32,945
83,223
Investec Bank plc
P-1
–
51,614
*See note 2
Serica Energy plc Annual Report & Accounts 2024 l 113
18. Trade and other payables
2024
$000
Restated*
2023
$000
Current:
Trade payables
40,884
21,704
Other payables
2,112
1,593
Deferred revenue
22,357
7,830
Accrued expenses
87,485
75,394
Liquids overlift
15,449
15,131
168,287
121,652
*See note 2
Trade payables are non-interest bearing and are generally on 15 to 30 day terms.
Accrued expenses include accruals for operating and capital expenditure in relation to the oil and gas assets. The Directors consider
the carrying amount of trade and other payables approximates to their fair value.
Deferred revenue includes $22.4 million (2023: $7.8 million) relating to oil not yet delivered. $7.8 million from FY 2023 has been
moved to revenue in 2024, reflecting the completion of the performance obligation.
19. Financial liabilities
BKR
consideration
$000
Royalty
liability
$000
Other
consideration
$000
Total
$000
At 31 December 2023 (restated*)
44,923
37,828
4,627
87,378
Change in fair value liability
5,627
(2,279)
(810)
2,538
Payments and settlements
–
–
(3,858)
(3,858)
Transfer to accruals
–
(3,380)
–
(3,380)
Currency translation adjustment
(796)
–
41
(755)
At 31 December 2024
49,754
32,169
–
81,923
Classified as:
Current
–
–
–
–
Non-current
49,754
32,169
–
81,923
At 31 December 2024
49,754
32,169
–
81,923
Classified as:
Current
–
–
4,627
4,627
Non-current
44,923
37,828
–
82,751
At 31 December 2023
44,923
37,828
4,627
87,378
NOTES TO THE FINANCIAL STATEMENTS continued
114 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
19. Financial liabilities continued
BKR consideration
On 30 November 2018 Serica completed the four BKR acquisitions. The following elements of consideration were outstanding at
31 December 2023 and 2024:
• BP, Total E&P and BHP retain liability, in respect of the field interests Serica acquired from each of them, for all the costs of
decommissioning those facilities that existed at the date of completion. Serica will pay deferred consideration equal to 30% of
actual future decommissioning costs, reduced by the tax relief that each of BP, Total E&P and BHP receives on such costs.
• Serica will pay to each of BP, Total E&P and BHP, deferred consideration equal to 90% of their respective shares of the realised
value of oil in the Bruce pipeline at the end of field life (see note 20).
Fair value measurement of BKR contingent consideration
The fair value of the contingent consideration is estimated as at applicable reporting dates from a valuation technique using future
expected discounted cash flows. This methodology uses several significant unobservable inputs which are categorised within Level
3 of the fair value hierarchy.
The calculations are complex and involve a range of projections and assumptions related to estimates of future decommissioning
expenditure, taxation, future operating and development costs, production volumes, oil and gas sales prices and discount rates.
The underlying assumptions have been updated from 2023. Estimated contingent consideration payments have been calculated at a
discount rate of 10% (2023: 10%).
Given the multiple input variables and judgements used in the calculations, and the inter relationships between changes in these
variables, an estimate of a reasonable range of possible outcomes of undiscounted value of the contingent consideration has not
been considered feasible. In isolation, the calculations are most sensitive to assumed oil and gas reserves, production profiles,
estimated decommissioning costs and future commodity prices.
A sensitivity analysis to the discount rate used shows a decrease in the discount rate used from 10% to 9% would result in an
increase in the fair value of the contingent consideration by $4.3 million, and an increase from 10% to 11% would result in a decrease
in the fair value of the contingent consideration by $3.8 million.
Royalty liability
Royalty represents amounts payable under a pre-existing Tailwind sale and purchase agreement subject to future production
volumes and commodity prices over the life of certain assets in the Triton Cluster.
The fair value of the royalty liability is estimated as at applicable reporting dates from a valuation technique using future expected
discounted cash flows. This methodology uses several significant unobservable inputs which are categorised within Level 3 of the
fair value hierarchy. The calculations involve a range of assumptions related to oil prices, production volumes and discount rates.
Estimated payments have been calculated at a discount rate of 9.0% (2023: 8.5%).
Given the multiple input variables and judgements used in the calculations, and the inter relationships between changes in these
variables, an estimate of a reasonable range of possible outcomes of undiscounted value of the contingent consideration has not
been considered feasible. In isolation, the calculations are most sensitive to assumed oil and gas reserves, production profiles,
estimated decommissioning costs and future commodity prices.
A sensitivity analysis to the oil price assumption used shows a 10% increase in the oil price assumed would result in an increase in
the fair value of the royalty liability by $8.8 million (2023: $11.3 million).
Other consideration
Other consideration reflected the remaining deferred consideration payable under the Tailwind acquisition. This was settled in March
2024 (see note 29).
Serica Energy plc Annual Report & Accounts 2024 l 115
20. Provisions
Decommissioning
provision
$000
Other
provision
$000
Total
$000
At 1 January 2023 (restated*)
30,465
–
30,465
Acquisitions (note 29)
92,886
493
93,379
Change in estimate (note 13)
20,384
–
20,384
Change in estimate expensed (note 5)
461
–
461
Unwinding of discount (note 8)
3,641
–
3,641
Payments
(1,112)
(81)
(1,193)
Currency translation adjustment
1,621
–
1,621
At 31 December 2023 (restated*)
148,346
412
148,758
Change in estimate (note 13)
9,711
–
9,711
Change in estimate expensed (note 5)
601
–
601
Unwinding of discount (note 8)
5,564
–
5,564
Payments
(18,142)
(97)
(18,239)
Currency translation adjustment
(421)
–
(421)
At 31 December 2024
145,659
315
145,974
Classified as:
Current
–
–
–
Non-current
145,659
315
145,974
At 31 December 2024
145,659
315
145,974
Classified as:
Current
16,467
–
16,467
Non-current
131,879
412
132,291
At 31 December 2023
148,346
412
148,758
*See note 2
Decommissioning provision
The decommissioning provision represents the present value of decommissioning costs relating to oil and gas interests in the UK
which are expected to be incurred up to 2036.
Bruce, Keith and Rhum fields
The Group makes full provision for the future costs of decommissioning its production facilities and pipelines on a discounted basis.
With respect to the Bruce, Keith and Rhum fields, the decommissioning provision is based on the Group’s contractual obligations
of 3.75%, 8.33334% and 0% respectively of the decommissioning liabilities rather than the Group’s equity interests acquired.
The Group’s provision represents the present value of decommissioning costs which are expected to be incurred up to 2036 and
assumes no further development of the Group’s assets. The liability is discounted at a rate of 4.5% (2023: 3.75%) and the unwinding
of the discount is classified as a finance cost (see note 8).
NOTES TO THE FINANCIAL STATEMENTS continued
116 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
20. Provisions continued
Triton area
The Triton area decommissioning provision is based on Serica group’s obligations which are in excess of certain agreed
decommissioning liability caps with the previous owners of Tailwind’s equity interests in Triton. The Group’s provision represents
the present value of decommissioning costs which are expected to be incurred up to 2036 and assumes no further development
of the Group’s assets. These provisions have been created based on the Group’s internal estimates and, where available, operator
estimates and third-party reports. These estimates are reviewed regularly to take into account any material changes to the
assumptions. The liability is discounted at a rate of 4.5% (2023: 3.75%) and the unwinding of the discount is classified as a finance
cost (see note 8).
Orlando, Arthur and Columbus fields
The Group makes full provision for the decommissioning liabilities for these fields on its respective equity interests. Decommissioning
work on the Arthur field was completed in 2024 and the Group’s provision, as at 31 December 2024, represents the present value
of decommissioning costs which are expected to be incurred between 2027 and up to 2030 and assumes no further development
of the Group’s assets. The liability is discounted at a rate of 4.5% (2023: 3.75%) and the unwinding of the discount is classified as a
finance cost (see note 8).
Erskine field
No provision for decommissioning liabilities for the Erskine field is recorded as at 31 December 2023 or 2024 as the Group’s current
estimate for such costs is under the agreed capped level to be funded by BP. This has been fixed at a gross £174.0 million (£31.32
million net to Serica) with this figure adjusted for inflation.
Other
The estimation of costs, inflation and discount rates are considered to be judgemental and actual decommissioning costs will
ultimately depend upon future market prices for the necessary decommissioning works required, which will reflect market conditions
at the relevant time. Furthermore, the timing of decommissioning is likely to depend on when the fields cease to produce at
economically viable rates. This in turn will depend upon future oil and gas prices, which are inherently uncertain.
If the cost estimates were increased by 10% and the discount rate reduced by 1%, the value of the provisions could increase by
c.$30.9 million (2023: c. $29.4 million).
The Group considers the impact of climate change and Net Zero targets, including action that may impose further requirements and
costs on companies in the future, on decommissioning provisions, specifically the timing of future cash flows, and has concluded
that it does not currently represent a key source of estimation uncertainty. As all of the Group’s currently producing assets are
projected to cease production by 2036 it is believed that any such future changes would have limited impact compared to assets
with longer durations.
21. Interest bearing loans and borrowings
The Group’s loan is carried at amortised cost as follows:
2024
$000
Restated*
2023
$000
Reserve based lending – at 1 January
271,200
–
Acquisitions (note 29)
–
325,827
Repayments of borrowings – original facility
(271,200)
(102,000)
Proceeds from borrowings
283,500
43,200
Repayments of borrowings – new facility
(52,500)
–
RBL commitment fees on entering loan
(14,069)
–
Amortisation of fees (note 8)
2,199
4,173
Reserve based lending – at 31 December
219,130
271,200
Due within one year
–
–
Due after more than one year
219,130
271,200
219,130
271,200
Serica Energy plc Annual Report & Accounts 2024 l 117
21. Interest bearing loans and borrowings continued
New Reserve Based Lending (‘RBL’) facility arrangements effective January 2024
In December 2023 Serica announced the signing of a new $525 million secured RBL facility. Following the satisfaction of conditions
precedent, this completed in January 2024 and refinanced the Group’s previous financing arrangements of an RBL facility of
$425 million of which $271.2 million was drawn at 31 December 2023.
The RBL facility is a revolving credit facility available in multiple currencies, it provides significantly increased liquidity to support
future acquisitions and investments and has established new relationships with a syndicate of leading international banks. The
maximum facility amount amortises on a six-monthly basis starting on 1 July 2027 to final maturity on 31 December 2029. The
interest rate for loan drawings is SOFR plus a margin of 3.90% per annum and the Borrowing Base Assets comprise all of Serica’s
interests in producing fields with the exception of Serica’s largest single producing field the Rhum field, and the available amount
under the facility is subject to semi-annual redeterminations. The RBL includes a financial covenant to maintain net debt/EBITDAX
cover ratio below 3.5x and other terms and conditions are consistent with Loan Market Association terms for comparable syndicated
RBL financings. The financial covenant is tested on a biannual basis. As at 31 December 2024 Serica is fully compliant with the
financial covenant and all other terms of the facility. The new facility also includes a separate $100 million sub limit which can be
utilised to issue Letters of Credit without the need for cash security.
The facility agreement also has an uncommitted accordion feature which provides an option for an additional financing of up to
$525 million, amounting to facilities of up to $1,050 million. The accordion facility can be exercised within thirty-six months of the
facility signing date, subject to certain conditions.
An amount of $283.5 million was drawn down from the new RBL facility in January 2024 to repay the previous RBL balance
of $271.2 million as well as previous RBL interest and fees ($1.7 million) and the main portion of new RBL commitment fees
($10.6 million). These payments were made directly by the new RBL banks to the relevant parties on Serica’s instructions. In
February 2024, the Group made a voluntary repayment of $52.5 million.
In December 2024, Serica completed the semi-annual redetermination under its RBL facility. Following that redetermination, the
borrowing was reconfirmed at a level in excess of the facility size and as a result was capped at the full amount of the committed
facility of $525 million.
22. Financial instruments
The Group’s financial instruments comprise cash and cash equivalents, bank loans and borrowings, accounts payable and accounts
receivable, derivative financial instruments and contingent consideration. It is management’s opinion that the Group is not exposed
to significant interest, credit or currency risks arising from its financial instruments other than as discussed below:
Serica has exposure to interest rate fluctuations on its cash deposits and given the level of expenditure plans over 2025/26 this is
managed in the short-term through selecting treasury deposit periods of one to three months. Cash and treasury credit risks are
mitigated through spreading the placement of funds over a range of institutions each carrying acceptable published credit ratings to
minimise concentration and counterparty risk.
Serica sells oil, gas and related products only to recognised international oil and gas companies and has no previous history of
default or non-payment of trade receivables. Where Serica operates joint ventures on behalf of partners it seeks to recover the
appropriate share of costs from these third parties. The majority of partners in these ventures are well established oil and gas
companies. In the event of non-payment, operating agreements typically provide recourse through increased venture shares.
Serica retains certain non-$ cash holdings and other financial instruments relating to its operations. The $ 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.
NOTES TO THE FINANCIAL STATEMENTS continued
118 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
22. Financial Instruments continued
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 2024
Within 1
year
$000
1-2 years
$000
2-5 years
$000
Total
$000
Fixed rate
Short-term deposits
25,070
–
–
25,070
25,070
Floating rate
Cash
123,390
–
–
123,390
Loans and borrowings
–
–
(231,000)
(231,000)
(107,610)
Year ended 31 December 2023
Fixed rate Short-term deposits
103,529
–
–
103,529
103,529
Floating rate
Cash
231,904
–
–
231,904
Loans and borrowings
–
–
(271,200)
(271,200)
(39,296)
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 profit before tax (through the impact on fixed rate short-term deposits
and applicable bank loans).
Increase/decrease in interest rate
Effect on
profit
before tax
2024
$000
Effect on
profit
before tax
2023
$000
+0.75%
319
1,705
-0.75%
(319)
(1,705)
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.
Credit risk
The Group’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. 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.
In addition, there are credit risks of commercial counterparties including exposures in respect of outstanding receivables. The
Group’s oil and gas sales are all contracted with well-established oil and gas or energy companies. Also, where Serica operates joint
ventures on behalf of partners it seeks to recover the appropriate share of costs from the third-party counterparties. 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. Receivable balances are monitored on an ongoing basis with appropriate follow-
up action taken where necessary.
Serica Energy plc Annual Report & Accounts 2024 l 119
22. Financial instruments continued
Foreign currency risk
The Group enters into transactions denominated in currencies other than its US dollar reporting currency. The Group's non-US dollar
denominated balances, subject to exchange rate fluctuations, at year-end were as follows:
2024
$000
2023
$000
Cash and cash equivalents:
Pounds Sterling
121,618
188,333
Norwegian kroner
–
7
Euros
269
150
Accounts receivable:
Pounds Sterling
78,306
104,504
Euros
369
340
Trade and other payables:
Pounds Sterling
113,081
109,568
Norwegian kroner
259
–
Euros
224
–
The following table demonstrates the Group’s sensitivity to a 10% increase or decrease in the Pounds Sterling against the US Dollar.
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
Effect on
profit
before tax
2024
$000
Effect on
profit
before tax
2023
$000
10% strengthening of US$ against Pounds Sterling
31,300
18,327
10% weakening of US$ against Pounds Sterling
(31,300)
(18,327)
Liquidity risk
The table below summarises the maturity profile of the Group and Company’s financial assets and liabilities at 31 December 2024
based on contractual undiscounted payments. The Group monitors its risk to a potential shortage of funds by monitoring the
maturity dates of existing debt.
As at 31 December 2024
Within 1
year
$000
1-2 years
$000
2-5 years
$000
>5 years
$000
Total
$000
Assets
Derivative financial assets
5,185
–
–
–
5,185
Liabilities
Trade and other payables*
130,481
–
–
–
130,481
Leases
1,418
1,301
2,468
–
5,187
Loans and borrowings
–
–
231,000
231,000
Derivative financial liabilities
31,185
11,201
–
–
42,386
Royalty liability
–
9,123
21,725
13,870
44,718
NOTES TO THE FINANCIAL STATEMENTS continued
120 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
22. Financial instruments continued
As at 31 December 2023
Within 1
year
$000
1-2 years
$000
2-5 years
$000
>5 years
$000
Total
$000
Liabilities
Trade and other payables*
98,691
–
–
–
98,691
Leases
709
662
989
–
2,360
Loans and borrowings
–
–
271,200
–
271,200
Derivative financial liabilities
5,564
–
–
–
5,564
Royalty liability
6,906
8,797
18,377
20,829
54,909
*excludes overlift balances and deferred revenue
Amounts payable as BKR contingent consideration are explained in detail in note 19.
Commodity price risk
The Group is exposed to commodity price risk due to the fluctuations in prevailing market commodity prices. Where and when
appropriate the Group will put in place suitable hedging arrangements to mitigate the risk of a fall in commodity prices as per the
Group’s hedging policy. This will also meet any hedging requirements under the RBL. All gas production is currently sold at prices
linked to the spot market and the significant majority NGL production is sold at prices linked to the spot market. Oil production for
2025 will be sold at spot market linked pricing other than 0.4 million barrels at an average fixed price of $61 sold in January 2025.
At 31 December 2024 Serica held the following hedging arrangements in place.
Oil hedges
2025
2026
Weighted average
Units
Q1–25
Q2–25
Q3–25
Q4–25
Q1–26
Q2–26
Q3–26
Q4–26
Swap price
$/bbl
68
75
75
75
75
–
–
–
Collar floor net
$/bbl
68
69
68
68
69
–
–
–
Total weighted average
$/bbl
68
69
69
69
70
–
–
–
Collar ceiling
$/bbl
96
88
88
86
86
–
–
–
Hedged Volume
Kboe/d
10
6
6
5
4
–
–
–
Gas hedges
2025
2026
Weighted average
Units
Q1-25
Q2-25
Q3-25
Q4-25
Q1-26
Q2-26
Q3-26
Q4-26
Swap price
p/therm
84
87
86
89.6
94
–
–
–
Collar floor net
p/therm
80
70
70
82
82
64
64
–
Total weighted average
p/therm
81
82
81
85
85
64
64
–
Collar ceiling
p/therm
125
121
121
135
135
99
99
–
Hedged Volume
Kboe/d
4
6
5
7
6
5
5
–
Serica held no fixed price swaps for UKA ETS products at 31 December 2024 (31 December 2023: 132,000 MT at £79.24/MT).
The following table summarises the impact on the Group’s pre-tax profit and equity from a reasonably foreseeable movement in
commodity prices on the fair value of commodity based derivative instruments held by the Group at the Balance Sheet date.
Serica Energy plc Annual Report & Accounts 2024 l 121
22. Financial Instruments continued
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.
The table below details the Group’s fair value measurement hierarchy for liabilities and assets as at 31 December:
Note
Fair value measurement using
Quoted
prices in
active
markets
Level 1
$000
Significant
observable
inputs
Level 2
$000
Significant
unobservable
inputs
Level 3
$000
Assets/(liabilities) measured at fair value
Year ended 31 December 2024
Derivative financial assets
16
–
5,185
–
Derivative financial liabilities
16
–
(42,386)
–
Contingent consideration liability
19
–
–
(49,754)
Royalty liability
19
–
–
(32,169)
Year ended 31 December 2023
Derivative financial liabilities
16
–
(5,564)
–
Contingent consideration liability
19
–
–
(44,923)
Royalty liability
19
–
–
(37,828)
There were no transfers between Level 1 and Level 2 during 2023 or 2024.
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, production and development expenditure, and to safeguard the entity’s ability to continue as
a going concern and create shareholder value. At 31 December 2024, capital employed of the Group amounted to $1,015.6 million
(comprised of $796.5 million of equity shareholders’ funds and $219.1 million of borrowings), compared to $1,105.4 million at 31
December 2023 (comprised of $834.2 million of equity shareholders’ funds and $271.2 million of borrowings).
The Board regularly reassesses the appropriate dividend payments proposed within the capital structure of the Group. Any future
payment of dividends is expected to depend on the earnings and financial condition of the Company and such other factors as the
Board considers appropriate.
NOTES TO THE FINANCIAL STATEMENTS continued
122 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
23. Equity share capital
As at 31 December 2024, the share capital of the Company comprised one ‘A’ share of GB£50,000 and 393,468,407 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’s equity share capital, comprising US$0.10 ordinary shares and one ‘A’ share.
Allotted, issued and fully paid:
Group
Number
‘000
Share
capital
$000
Share
premium
$000
Total Share
capital
$000
Merger
reserve
$000
As at 1 January 2023 (restated*)
272,953
27,295
205,965
233,260
–
Shares issued
118,368
11,837
160
11,997
283,367
As at 1 January 2024 (restated*)
391,321
39,132
206,125
245,257
283,367
Shares issued
2,147
215
65
280
3,223
As at 31 December 2024
393,468
39,347
206,190
245,537
286,590
*see note 2
During 2024, 708,505 ordinary shares were issued to satisfy awards under the Company’s share-based incentive schemes and a
final tranche of 1,438,849 ordinary shares were issued in March 2024 as part of the acquisition of Tailwind Energy Investments Ltd
in March 2023.
As at 28 March 2025 the issued voting share capital of the Company was 393,568,407 ordinary shares and one ‘A’ share.
Group merger reserve
Merger relief was applied by the Group’s parent entity Serica Energy plc upon the respective issues of 108,170,426 ordinary shares in
March 2023 and 1,438,849 ordinary shares in September 2023, for the acquisition of Tailwind Energy Investments Ltd. The valuation
of the shares issued was based on the fair value at the date of issue, with the nominal value of the shares issued credited to share
capital and the excess value of $286.6 million (£230.3 million) above nominal share capital credited to a merger reserve in the
consolidated Group accounts.
Treasury/own shares reserve
Treasury represent Serica shares repurchased and available for specific and limited purposes. In Q2 2024 the Company acquired
8,437,478 shares for $18.8 million (£15.0 million) at an average price of $2.22 (£1.78 per share). 4,430,193 of the shares in held
in treasury were then used to satisfy share option awards in 2024 and a balance of 4,007,285 shares included in the reserve of
$8,931,000 is held at 31 December 2024.
Serica Energy plc Annual Report & Accounts 2024 l 123
24. Additional cash flow information
Net cash flows from operating activities consist of:
For the year ended 31 December 2024
Note
2024
$000
Restated*
2023
$000
Operating activities:
Profit for the year
92,429
127,757
Adjustments to reconcile profit for the year
to net cash flow from operating activities:
Taxation charge
68,069
252,614
Change in fair value liabilities
2,538
9,446
Change in provisions
601
461
Gain on acquisition
–
(41,889)
Net finance costs
23,431
10,076
Depletion and depreciation
188,320
136,551
Oil and NGL over/underlift
(20,564)
(11,545)
E&E asset write-offs
851
10,871
Unrealised hedging losses/(gains)
31,814
(25,317)
Movement in gas contract revenue
–
(1,227)
Contract revenue – other
(31,292)
(29,951)
Share-based payments
3,735
4,942
Other non-cash movements
(81)
3,859
Decrease in hedging security advances
–
29,402
Decrease/(increase) in DSA cash advances
35,055
(35,055)
Decrease in trade and other receivables
36,170
87,056
(Increase) in inventories
(1,140)
(1,222)
Increase/(decrease) in trade and other payables
22,286
(56,807)
Cash inflow from operations
452,222
470,022
Taxation paid
(152,517)
(347,588)
Decommissioning spend
(18,142)
(1,115)
Net cash inflow from operating activities
281,563
121,319
NOTES TO THE FINANCIAL STATEMENTS continued
124 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
24. Additional cash flow information continued
Reconciliation of movement in net cash flow to movement in net cash/(borrowings)
2024
$000
Restated*
2023
$000
Loans assumed upon acquisition – net (note 29)
–
(325,827)
Repayment of borrowings
323,700
102,000
Proceeds from borrowings
(283,500)
(43,200)
Interest and other loan finance costs paid in year
26,862
18,455
Arrangement fees
14,069
–
Amortisation of fees
(2,199)
(4,173)
Interest and other loan finance costs payable in year
(26,862)
(18,455)
Movement in total borrowings (net)
52,070
(271,200)
Movement in cash and cash equivalents
(184,517)
(206,257)
(Decrease) in net cash in the year
(132,447)
(477,457)
Opening net cash
64,233
522,914
Currency translation adjustments
(2,456)
18,776
Closing net (debt)/cash
(70,670)
64,233
Analysis of Group net (debt)/cash
2024
$000
Restated*
2023
$000
Cash
123,390
231,904
Short-term deposits
25,070
103,529
Loans (net)
(219,130)
(271,200)
Closing net (debt)/cash
(70,670)
64,233
*See note 2
Changes in lease liabilities arising from financing activities
2024
$000
Restated*
2023
$000
Lease liability at beginning of the year
2,360
271
Acquisition during the year
–
2,682
Additions during the year
5,069
–
Lease payments
(2,697)
(777)
Lease interest expense
524
189
Currency translation adjustment
(69)
(5)
Lease liability at end of the year
5,187
2,360
*See note 2
Serica Energy plc Annual Report & Accounts 2024 l 125
25. Share-based payments
Share option plans
The Company operates three discretionary incentive share option plans: the Serica Energy plc Long-Term Incentive Plan (the ‘LTIP’),
which was adopted by the Board on 20 November 2017 which permits the grant of share-based awards, the 2017 Serica Energy
plc Company Share Option Plan (‘2017 CSOP’), which was adopted by the Board on 20 November 2017, and the Serica 2005 Option
Plan, which was adopted by the Board on 14 November 2005. Awards can no longer be made under the Serica 2005 Option Plan.
However, options remain outstanding under the Serica 2005 Option Plan. The LTIP and the 2017 CSOP together are known as the
‘Discretionary Plans’.
The Discretionary Plans will govern all future grants of options by the Company to Directors, officers, key employees and certain
consultants of the Group. The Directors intend that the maximum number of ordinary shares which may be utilised pursuant
to the Discretionary Plans 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.
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 2005 option plan
As at 31 December 2024, 300,000 options granted by the Company under the Serica 2005 Option Plan were outstanding. All options
awarded under the Serica 2005 Option Plan since November 2009 have a three-year vesting period. No options were granted in
2023 or 2024 under the Serica 2005 Option Plan.
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share options during
the year:
2024
Number
2024
WAEP
£
2023
Number
2023
WAEP
£
Outstanding as at 1 January
800,000
0.07
3,900,000
0.14
Exercised during the year
(500,000)
0.07
(3,100,000)
0.16
Outstanding as at 31 December
300,000
0.07
800,000
0.07
Exercisable as at 31 December
300,000
0.07
800,000
0.07
The weighted average remaining contractual life of options outstanding as at 31 December 2024 is 0.5 years (2023: 1.5 years).
The weighted average share price during 2024 across the period that options were exercised in was $2.39 (2023: $2.93).
For the Serica 2005 option plan, the exercise price for all outstanding options at the 2024 year-end is $0.09 (2023: $0.09).
Long-term incentive plan
The following awards granted to certain Directors and employees under the LTIP are outstanding as at 31 December 2024.
NOTES TO THE FINANCIAL STATEMENTS continued
126 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
25. Share-based payments continued
Performance share awards
Performance Share Awards have a three-year vesting period and are subject to performance conditions based on average share
price growth targets to be measured by reference to dealing days in the period of 90 days ending immediately prior to expiry of a
three-year performance starting on the date of grant of a Performance Share Award. Performance Share Awards are structured as
nil-cost options and may be exercised up until the tenth anniversary of the date of grant.
Performance and retention share awards
2024
Number
2023
Number
Outstanding as at 1 January
9,917,330
13,326,567
Granted during the year
2,546,134
1,075,668
Expired or cancelled during the year
(1,297,830)
(267,827)
Exercised during the year
(3,023,117)
(4,217,078)
Outstanding as at 31 December
8,142,517
9,917,330
Exercisable as at 31 December
4,604,881
5,718,825
The weighted average remaining contractual life of options outstanding as at 31 December 2024 is 6.7 years (2023: 5.6 years).
The weighted average share price during 2024 across the period that options were exercised in was $1.93 (2023: $2.93).
LTIP awards in 2023
In May 2023, the Company granted nil-cost Performance Share Awards over 1,075,668 ordinary shares under the LTIP. The award
was made to members of the Group’s executive team and senior management.
The vesting criteria are based on absolute share price performance over a three-year period and specific performance targets
related to carbon emissions from operations over the same period. For the awards to vest in full, the highest average share price
must be at least equal to 500p during the 180 day period terminating on the end of the performance period together with a
significant decrease in carbon emissions per barrel of oil equivalent produced. 745,934 of the total awards were outstanding and are
not exercisable at 31 December 2024.
LTIP awards in 2024
In May 2024, the Company granted nil-cost Performance Share Awards over 1,785,363 ordinary shares under the LTIP. The award
was made to members of the Group’s executive team and senior management.
The vesting criteria include sliding scale measures of share price performance (35% weighting) and of relative total shareholder
return performance (35% weighting), in each case, in respect of a three year period ending at the end of April 2027; together with
annual emissions intensity targets (30% weighting) in respect of 2024, 2025 and 2026. For the awards to vest in full, the 90 day end
average share price must be at least equal to 400p, the Company's relative total shareholder return performance must be at least
upper quartile relative performance (relative to a comparator group of companies) and an emissions intensity target (relating to CO2e
per barrel of oil equivalent from the Group's entire producing portfolio of assets) met in respect of each of 2024, 2025 and 2026.
1,518,983 of the total awards were outstanding and are not exercisable at 31 December 2024.
In November 2024, the Company granted nil-cost Retention Share Awards over 760,771 ordinary shares under the LTIP. The award
was made to members of the Group’s senior management. These awards are not subject to market conditions and vest after three
years of service by the individual. All of the total awards were outstanding and are not exercisable at 31 December 2024.
Share-based compensation
The Company calculates the value of share-based compensation using a Black-Scholes option pricing model (or other appropriate
model for those 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 options granted in 2023 and 2024 were consistently valued in line with the Company’s
valuation policy. For the options subject to market conditions, assumptions made included a weighted average risk-free interest rate
of 2%, a weighted average expected life of 5 years, and a volatility factor of expected market price of in a range from 55-70%. The
expected volatility reflects the assumption that the historical volatility is indicative of future trends, which may not necessarily be
the actual outcome. The weighted fair value of options granted during the year was $1.68 (2023: $2.10). The estimated fair value of
options is amortised to expense over the options' vesting period.
$3,735,000 has been charged to the income statement for the year ended 31 December 2024 (2023: $4,942,000) and a similar
amount credited to the share-based payments reserve, classified as ‘Other reserve’ in the Balance Sheet. The ‘Other reserve’ was
comprised solely of the share-based payment reserve which totaled $37,540,000 as at 31 December 2024 (2023: $37,650,000). A
charge of $193,000 (2023: $2,911,000) of the total charge was in respect of key management personnel (defined in note 7).
Serica Energy plc Annual Report & Accounts 2024 l 127
26. Leases
A right of use asset for oil and gas operations (note 13) and its related lease liability were acquired as part of the Tailwind acquisition
(note 29). This lease is secured by the assets leased and bears interest at a fixed rate with repayments due over a 5-year period.
The total lease liability at 31 December 2024 amounts to $1,675,000 of which $683,000 is due for settlement within 12 months and
$992,000 due after 12 months. A depreciation charge of $1,044,000 (2023: $780,000) was expensed within cost of sales.
The Group entered into a five-year lease at its new registered office, 72 Welbeck Street, following the expiry of its previous London
office lease at 52 George Street. The total lease liability at 31 December 2024 amounts to $3,512,000 of which $735,000 is due for
settlement within 12 months and $2,777,000 after 12 months. A depreciation charge of $1,070,000 (2023: $216,000) was expensed
within administrative expenses in respect of office leases.
$2,697,000 (2023: $777,000) of cash payments made against the lease liabilities during 2024 are reflected in the 2024 Group cash
flow statement as a cash outflow in financing activities.
27. Capital commitments and contingencies
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.
Serica’s planned 2025 investment programme includes two remaining wells from the 2024-25 drilling campaign in the Triton
Area (Evelyn Phase 2 (EV02) and Belinda) and further capital work on the Bruce facilities. At 31 December 2024, the Group had
commitments for future capital expenditure relating to its oil and gas properties amounting to $249 million, with the majority relating
to the Triton Area drilling programmes on EV-02 and Belinda wells.
The Group’s only significant exploration commitment is the drilling of a commitment well on Licence P2400 (Skerryvore – Serica
20%) to be drilled before October 2025. Given the lack of clarity regarding the future fiscal and licencing regime, Serica expects an
extension to the licencing period to be granted.
Serica has posted cash collateral of approximately $31.0 million under decommissioning security arrangements, in support to the
issue of letters of credit required. This secured amount is within the Group’s cash balances of $148.5 million as at 31 December
2024. The funds are freely transferable but alternative collateral would need to be put in place to replace the cash security.
Other
The Group occasionally has to provide security for a proportion of its future obligations to defined work programmes or other
commitments.
28. Related party transactions and transactions with Directors
The Group financial statements include the financial statements of Serica Energy plc and its subsidiaries listed in note 30. Balances
and transactions between the Company and its subsidiary, which are related parties, have been eliminated on consolidation and are
not disclosed in this note. The related party balances have no fixed repayment terms and bore no interest.
The Group’s main related parties comprise the Directors and Mercuria Group entities, the latter being related parties due to
the significant shareholding of a Mercuria Group subsidiary, Mercuria Holdings (UK) Limited, in Serica Energy plc. Balances and
transactions with Mercuria Energy Trading S.A., a subsidiary of the Mercuria Group are disclosed below.
Balances with related party at year end
2024
$000
2023
$000
Mercuria Energy Trading S.A.
Accrued receivables
–
26,130
Other financial liabilities
–
(5,564)
Trade and other payables
(4,336)
(1,815)
Accruals
(8,398)
(1,258)
On 24 September 2019, the Tailwind sub-group entered in a Junior Facility agreement with Mercuria Energy Trading S.A. for a facility
of US$50.0 million with a maturity of 24 September 2026. There were no drawdowns on this facility as at 31 December 2023. This
facility was terminated in January 2024 following the refinancing of the Group's reserve-based lending facility (note 21).
NOTES TO THE FINANCIAL STATEMENTS continued
128 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
28. Related party transactions and transactions with Directors continued
Transactions in income statement with Mercuria Energy Trading S.A.
Year
ended 31
December
2024
$000
Year
ended 31
December
2023
$000
Revenue
181,124
203,699
Cost of sales
(6,874)
(9,493)
Loss on commodity derivative contracts
(1,155)
(8,610)
Gain on currency derivative contracts
–
928
Finance costs
(24)
(281)
The above transactions were conducted under contracts already in place when Serica acquired Tailwind Energy Investments Ltd
on 23 March 2023, principally the Offtake and Marketing Agreement covering oil offtake from Serica’s share in the Triton area and
part of Serica’s share in Columbus. These contracts were set on prevailing market terms.
Transactions with North Sea Midstream Partners Limited ('NSMP') are also considered related party transactions with effect from
1 July 2024, when a director assumed a key management personnel position within Serica Energy plc and a close member of his
family held a key management position within NSMP during 2024. The Group incurred pipeline tariff costs of $13.0 million recorded
within cost of sales in 2024 and had a trade payable of $2.0 million owed to NSMP at 31 December 2024.
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 7 above. These disclosures include the compensation of key management personnel.
29. Acquisition of Tailwind Energy Investments Ltd
As reported previously in the 2023 Financial Statements, on 23 March 2023, the Company acquired 100% of the shares of
Tailwind Energy Investments Ltd (renamed Serica Energy Investments Ltd) for an initial purchase consideration of $373.7 million
(£297.4 million). This comprised cash of $75.8 million (£61.6 million) and the fair value of 108,170,426 ordinary shares in Serica
Energy plc issued in exchange for all Tailwind shares. The fair value of the shares issued was calculated using the market price of
the Company’s shares of £2.18 on the AIM Market of the London Stock Exchange at its opening of business on 23 March 2023.
A further 2,877,698 ordinary shares were issued to the sellers in two equal tranches of 1,438,849 ordinary shares in September
2023 and March 2024 respectively. These formed part of the aggregate 111,048,124 ordinary shares issued as part of the
purchase consideration and were issued after periods of no successful warranty claims.
The activities acquired comprised development and production oil & gas assets in the UK North Sea held in interests in joint
operations and as they constituted a business as defined in IFRS 3 Business Combinations, the acquisitions were accounted for
as a business combination. The consolidated 2023 financial statements included the fair values of the identifiable assets and
liabilities as at the date of acquisition 23 March 2023, and the results of the combined transaction assets for the nine-month
period from the acquisition date. In accordance with IFRS 3 Business Combinations, the fair values of the assets and liabilities in
the acquisition table below (restated from GBP to US$ – see note 2) were final.
Serica Energy plc Annual Report & Accounts 2024 l 129
29. Acquisition of Tailwind Energy Investments Ltd continued
Assets acquired and liabilities assumed at date of acquisition
Fair value recognised
on acquisition
$000
*Restated
Assets
Property, plant and equipment (note 13)
598,333
Net deferred tax asset (note 9)
325,924
Debtors and other assets
83,937
Inventory
7,520
Cash and cash equivalents
21,654
1,037,368
Liabilities
Trade and other payables
(88,331)
Contract liabilities (note 16)
(66,651)
Financial liabilities
(4,724)
Royalty liabilities (note 19)
(42,899)
Provisions (note 20)
(93,379)
Interest bearing loans (note 21)
(325,827)
(621,811)
Total identifiable net assets at fair value
415,557
Cash consideration
75,831
Initial consideration shares issued
290,119
Deferred consideration shares
7,718
Purchase consideration
373,668
Gain arising on acquisition
41,889
*See note 2
Fair value of consideration
The combined purchase consideration of the transaction was $373.7 million (£303.7 million), which comprised cash of $75.8 million
(£61.6 million), the fair value of 108,170,426 ordinary shares in Serica Energy plc issued in exchange for all Tailwind shares, and the
fair value of a further 2,877,698 ordinary shares which were issued to the sellers subsequent to the acquisition after the conclusion
of periods with no successful warranty claims. The fair value of the initial consideration shares issued was calculated using the
market price of the Company’s shares of £2.18 on the AIM Market of the London Stock Exchange at its opening of business on
23 March 2023. The deferred consideration share consideration was also valued using the share price on acquisition and this value
was considered approximate to the fair value.
The excess of fair value of the net assets acquired over the purchase consideration was recognised as a gain on acquisition in the
2023 income statement. Transaction costs of $12.5 million were incurred in 2023 and expensed in the Income Statement.
NOTES TO THE FINANCIAL STATEMENTS continued
130 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
30. Acquisition of interest in Greater Buchan Area
In February 2024, Serica Energy (UK) Limited acquired JOG Fox Limited (renamed Serica GBA Limited during 2024), an entity
holding 30% non-operated interests in the P2498 and P2170 licences (together the Greater Buchan Area from Jersey Oil & Gas
('JOG'). The interests were subsequently transferred to Serica Energy (UK) Limited in October 2024. The partners in the GBA are
Serica Energy (UK) Limited (30%), NEO Energy (50% and operator) and JOG (20%). This transaction gives Serica the option of
participating in the re-development of the Buchan field and other potential developments in the GBA. The transaction was treated
as an asset acquisition as it did not include relevant supplementary and other substantive activities beyond the assets acquired to
be considered a business combination.
The transaction is structured as a farm-in, with modest up-front and contingent consideration payments, and a carry of pre-
Financial Investment Decision (‘FID’) and development costs.
In return for a 30% working interest in the GBA licences, on completion Serica made a cash payment to JOG of $7.7 million
(£6 million) which reflected adjustments between buyer and seller to reflect an economic date for the transaction of 1 April 2023.
This amount is recorded as an Exploration and Evaluation asset acquisition cost (see note 12). Serica is not committed under the
terms of the transaction to participate in the GBA developments. In the event of participation at each relevant stage, Serica will
make further payments to JOG as follows:
• $7.5 million on approval of the Buchan Horst FDP by the NSTA
• A 7.5% carry of the Buchan Horst field pre-FID and development costs (paying 37.5% for a 30% working interest). The
development cost carry is capped at 7.5% of the budget approved by the Buchan Joint Venture for the development of the
Buchan Horst field at the time of the FDP. Subject to the cap, the development cost carry equates to a 1.25 carry ratio for
development costs; the same as an arrangement previously agreed between JOG and NEO Energy
• $3 million on approval by the NSTA of a J2 FDP
• $3 million on approval by the NSTA of a Verbier FDP.Serica’s accounting policy (see note 2) in respect of this asset acquisition
is that the cost of asset on initial recognition excludes any variable or contingent payments. Accordingly, no liability is currently
recognised for those contingent amounts
31. Subsidiaries
The Group and the Company (unless indicated) had investments in the following subsidiaries as follows:
Name of company:
Holding
Nature of
business
% voting
rights and
shares held
2024
% voting
rights and
shares held
2023
Serica Holdings UK Ltd (ii)
Ordinary
Holding
100
100
Serica Energy Investments Limited (ii)
Ordinary
Holding
100
100
Serica Energy Holdings BV (i & iii)
Ordinary
Holding
100
100
Serica Energy (UK) Ltd (i & ii)
Ordinary
E&P
100
100
NSV Energy Limited (i & ii)
Ordinary
Holding
100
100
Serica Energy Meltemi Limited (i & ii)
Ordinary
E&P
100
100
Serica Energy Sirocco Limited (i & ii)
Ordinary
Holding
100
100
Serica Energy Chinook Limited (i & ii)
Ordinary
E&P
100
100
Serica Energy Mistral Limited (i & ii)
Ordinary
E&P
100
100
Serica Energy Bora Limited (i & ii)
Ordinary
E&P
100
100
Serica Energy Corporation (i & iv)
Ordinary
Dormant
100
100
APD Ltd (i & iv)
Ordinary
Dormant
100
100
PDA Asia Ltd (i & iv)
Ordinary
Dormant
100
100
Serica UK Exploration Limited (i & ii)
Ordinary
Dormant
100
100
PDA (Lematang) Ltd (i, ii & v)
Ordinary
Dormant
–
100
Serica GBA Limited (i & ii) (note 30)
Ordinary
Dormant
100
–
(i) Held by a subsidiary undertaking
(ii) Incorporated in the UK
(iii) Incorporated in the Netherlands
(iv) Incorporated in the British Virgin Islands
(v) Entity struck off in year
Serica Energy plc Annual Report & Accounts 2024 l 131
31. Subsidiaries continued
The registered office of Serica Holdings UK Limited, Serica Energy (UK) Limited, Serica Energy Investments Limited , Serica Energy
Meltemi Limited , Serica Energy Mistral Limited , Serica Energy Sirocco Ltd, Serica Energy Chinook Limited, Serica Energy Bora
Limited, Serica UK Exploration Limited and Serica GBA Limited is 4th Floor, 72 Welbeck Street, London, W1G 0AY.
The registered office of Serica Energy Chinook Ltd is H1 Building, Hill of Rubislaw, Anderson Drive, Aberdeen, AB15 6BY.
The registered office of the Company’s subsidiaries incorporated in the Netherlands is Hoogoorddreef 15, 1101 BA Amsterdam,
The Netherlands.
The registered office of APD Ltd and PDA Asia Ltd is P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola, British Virgin
Islands. The registered office of Serica Energy Corporation is P.O. Box 71, Road Town, Tortola, British Virgin Islands.
32. Events since balance sheet date
There have been no events since the balance sheet date that require disclosure.
NOTES TO THE FINANCIAL STATEMENTS continued
132 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
DIRECTORS’ RESPONSIBILITIES STATEMENT in relation to the Company financial statements
The Directors are responsible for preparing the Company financial statements in accordance with applicable United Kingdom law
and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under United Kingdom company law the
Directors have elected to prepare the parent company financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice including FRS 101 ’Reduced Disclosure Framework’ (United Kingdom Accounting Standards and applicable law).
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 Company and the profit or loss of the Company for that period.
In preparing the Company financial statements the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and
explained in the financial statements;
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue
in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure
that the Company financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets
of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Serica Energy plc Annual Report & Accounts 2024 l 133
COMPANY BALANCE SHEET as at 31 December 2024
Serica Energy plc
Registered Number: 5450950
Note
2024
$000
(Restated*)
2023
$000
Non-current assets
Property, plant and equipment
3,977
55
Investments in subsidiaries
3
525,803
534,808
529,780
534,863
Current assets
Trade and other receivables
4
123,456
23,531
Cash and cash equivalents
5
85,870
153,678
209,326
177,209
TOTAL ASSETS
739,106
712,072
Current liabilities
Trade and other payables
6
11,147
3,276
Leases
3,512
55
Financial liabilities
7
–
4,627
TOTAL LIABILITIES
14,659
7,958
NET ASSETS
724,447
704,114
Share capital
8
210,266
209,986
Merger reserve
8
398,762
395,539
Other reserve
8
37,540
37,650
Treasury/own shares
8
(8,931)
–
Accumulated funds
89,325
51,473
Currency translation reserve
(2,515)
9,466
TOTAL EQUITY
724,447
704,114
The profit for the Company was $157.2 million for the year ended 31 December 2024 (2023: $160.4 million).
Approved by the Board on 31 March 2025
Chris Cox
Martin Copeland
Chief Executive Officer
Chief Financial Officer
134 l Serica Energy plc Annual Report & Accounts 2024
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Corporate Governance
Auditor’s Report
Financial Statements
COMPANY STATEMENT OF CHANGES IN EQUITY for the year ended 31 December 2024
Company
Share
capital
$000
Merger
reserve
$000
Other
reserve
$000
Treasury/
own
shares
$000
Currency
translation
$000
Accum’d
funds
$000
Total
$000
At 1 January 2023 (Restated*)
197,989
112,172
32,708
–
(19,582)
1,645
324,932
Profit for the year (Restated*)
–
–
–
–
–
160,452
160,452
Total comprehensive income
(Restated*)
–
–
–
–
–
160,452
160,452
Share-based payments
(Restated*)
–
–
4,942
–
–
–
4,942
Issue of share capital (Restated*)
11,997
283,367
–
–
–
–
295,364
Dividend paid (Restated*)
–
–
–
–
–
(110,624)
(110,624)
Foreign exchange (Restated*)
–
–
–
–
29,047
–
29,047
At 31 December 2023 (Restated*)
209,986
395,539
37,650
–
9,465
51,473
704,113
Profit for the year
–
–
–
–
–
157,236
157,236
Total comprehensive income
–
–
–
–
–
157,236
157,236
Share-based payments
–
–
3,735
–
–
–
3,735
Issue of share capital (note 8)
280
3,223
–
–
–
–
3,503
Treasury shares
–
–
–
(18,775)
–
–
(18,775)
Share payments
–
–
(3,845)
–
–
3,845
–
Release of shares
–
–
–
9,844
–
(9,844)
–
Dividend paid
–
–
–
–
–
(113,385)
(113,385)
Foreign exchange
–
–
–
–
(11,980)
–
(11,980)
At 31 December 2024
210,266
398,762
37,540
(8,931)
(2,515)
89,325
724,447
Serica Energy plc Annual Report & Accounts 2024 l 135
1.
Corporate information
The Company’s financial statements for the year ended 31 December 2024 were authorised for issue by the Board of Directors on
31 March 2025 and the balance sheet was signed on the Board’s behalf by Chris Cox and Martin Copeland. Serica Energy plc is a
public limited company incorporated and domiciled in England & Wales with its registered office at 4th Floor, 72 Welbeck Street,
London, W1G 0AY. The principal activity of the Company and its subsidiaries (together the ‘Group’) is to identify, acquire and
subsequently exploit oil and gas reserves.
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 2024.
The Company financial statements have been prepared on a historical cost basis and presented in US dollars. The Company’s
functional currency remains as Pounds Sterling. All values are rounded to the nearest thousand US dollars ($000) except when
otherwise indicated.
These separate financial statements have been prepared in accordance with Financial Reporting Standard 101, ‘Reduced Disclosure
Framework’ (‘FRS 101’) and the Companies Act 2006. The Company meets the definition of a qualifying entity under FRS 100,
‘Application of Financial Reporting Requirements’ as issued by the Financial Reporting Council. The Company has undergone a
transition to FRS 101 for the year ended 31 December 2023 and, as permitted by FRS 101, has taken advantage of the disclosure
exemptions available under that standard in relation to share-based payments, financial instruments, fair value measurement, capital
management, presentation of comparative information in respect of certain assets, presentation of a cash flow statement, standards
not yet effective, impairment of assets and related party transactions. Where relevant, equivalent disclosures have been given in the
Group accounts.
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 profit of the parent Company was $157,236,000 (2023: $160,452,000).
Change in presentation currency
On 1 January 2024, the Company changed its reporting currency from Pounds Sterling to US Dollars as the Company believes that
the presentation currency change will give investors and other stakeholders a clearer understanding of Serica’s performance over
time and align with the presentation currency of its peers.
In accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors, this change in presentation currency
was applied retrospectively and accordingly, prior year comparatives have been restated.
Financial information included in the financial statements for the years ended 31 December 2022 and 31 December 2023 has been
restated in US Dollars as follows:
• Assets and liabilities were translated into US Dollars at the rate of exchange ruling at the relevant balance sheet date;
• Income statements and cash flows were translated into US Dollars at average rates of exchange for the relevant period; and
• Share capital, merger reserve, and all other equity items were translated using the rates that were used in 2018 when the
Company had changed its presentation currency from US Dollars to Pounds Sterling, or the subsequent rates prevailing on the
date of each relevant transaction since.
In preparing these financial statements, the exchange rates used in respect of the US Dollars ($) and Pounds Sterling (£) are:
Pounds Sterling to US Dollar.
Year
ended 31
December
2024
Year
ended 31
December
2023
Year
ended 31
December
2022
Average for the period
1.278
1.243
N/A
At the end of the period
1.253
1.273
1.209
Going concern
The Directors’ assessment of going concern concludes that the use of the going concern basis is appropriate and the Directors
have a reasonable expectation that the Group, and therefore the Company, will be able to continue in operation and meet its
commitments as they fall due over the going concern period. See note 2 of the Group financial statements for further details.
NOTES TO THE COMPANY FINANCIAL STATEMENTS
136 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
2. Accounting policies continued
Critical accounting estimates and judgements
The management of the Company has to make estimates and judgements when preparing the financial statements of the Company.
Uncertainties in the estimates and judgements could have an impact on the carrying amount of assets and liabilities and the
Company’s results.
The most important judgements and estimates in relation thereto are:
Impairment of investments in subsidiaries
Management is required to assess the carrying value of investments in subsidiaries in the parent company balance sheet for
impairment. This requires a judgement whether impairment triggers exist that might lead to the impairment of investments in
subsidiaries. If a trigger is identified then the assessment for impairment requires an estimate of amounts recoverable from oil and
gas assets within the underlying subsidiaries.
Investments
In its separate financial statements the Company recognises its investments in subsidiaries at cost less any provision for impairment.
Trade and other receivables and contract assets
Provision for expected credit losses of trade receivables and contract assets
The Company holds inter-company loans with subsidiary undertakings with repayment dates being repayable on demand. These
inter-company loans are disclosed on the face of the balance sheet. None are past due nor impaired. The carrying value of these
loans approximates their fair value. The expected credit loss on these loans with subsidiary undertakings is expected to be
immaterial, both on initial recognition and subsequently.
Financial instruments
Equity
Equity instruments issued by the Company are recorded in equity at the proceeds received, net of direct issue costs.
Treasury/own shares
The Company’s holdings in its own equity instruments are shown as deductions from shareholders’ equity. Treasury shares represent
Serica shares repurchased and available for specific and limited purposes. For accounting purposes, shares held in Employee Benefit
Trusts to meet the future requirements of the employee share-based payment plans are treated in the same manner as treasury
shares and are, therefore, included in the consolidated financial statements as treasury/own shares. The cost of treasury shares
subsequently sold or reissued is calculated on a weighted-average basis. Consideration, if any, received for the sale of such shares
is also recognised in equity. No gain or loss is recognised in the income statement on the purchase, sale, issue or cancellation of
equity shares.
Foreign currencies
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 are charged to the income statement.
Serica Energy plc Annual Report & Accounts 2024 l 137
3. Investments
Company – Investment in subsidiaries
Total
$000
Cost:
At 1 January 2023 (Restated*)
127,251
Acquisitions (Restated*)
387,360
Foreign exchange (Restated*)
20,197
At 31 December 2023 (Restated*)
534,808
Revisions
(811)
Foreign exchange
(8,194)
At 31 December 2024
525,803
Provision for impairment:
At 1 January 2023, 31 December 2023 and 31 December 2024
–
Net book amount:
At 31 December 2024
525,803
At 1 January and 31 December 2023
534,808
At 1 January 2023
127,251
*see note 2
Historic reorganisation
In the Company financial statements, the cost of the investment acquired on an historic reorganisation in 2005 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 £88,088,000 over the nominal value of shares issued (US$7,475,000) was credited to a merger reserve. The
merger reserve is adjusted for any write-down in the value of the investment in subsidiary.
2023 acquisition of Tailwind Energy Investments Ltd
Merger relief was applied by the Company upon the issue of ordinary shares in 2023 for the acquisition of Tailwind Energy
Investments Ltd. The valuation of the shares issued was based on the fair value at the date of issue, with the nominal value of
the shares issued credited to share capital and the excess value above nominal share capital credited to a merger reserve in the
Company accounts (see note 8).
Details of the investments in which the Company’s subsidiaries are provided in note 30 of the Group financial statements.
Impairment of investments in subsidiaries
A review was performed for any indication that the value of the Company’s investments in subsidiaries may be impaired at the
balance sheet date of 31 December 2024 in accordance with the stated policy. The Company considers the relationship between its
market capitalisation and its book value, among other factors, when reviewing for indicators of impairment. As at 31 December 2024,
the market capitalisation of the Group was below the book value of the Company’s equity, which was assessed by management as a
trigger for potential impairment of its investments in subsidiaries.
Management has assessed the carrying value of investments in subsidiaries in the parent company balance sheet for impairment by
reference to the recoverable amount. In assessing whether a write-down is required in the carrying value of a potentially impaired
investment, the investment carrying value is compared with its recoverable amount being the higher of the asset’s fair value less
costs to sell and value in use.
NOTES TO THE COMPANY FINANCIAL STATEMENTS continued
138 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
3. Investments continued
Underpinning the Company’s assessment of value in its investments in subsidiaries is the recoverable amount of the Group’s CGUs,
which represent individual oil and gas fields or a group of fields within a production area. These were determined based on a
fair value less costs to sell (‘FVLCS’) calculation on an income approach using a discounted cash flow model. The projected cash
flows are adjusted for risks specific to the assets and are discounted using a post-tax discount rate of 9%. Further appropriate
adjustments were then applied as necessary to determine the recoverable amount of each investment held by the Company. The
future recoverable amounts of the Company’s investments in subsidiaries were assessed against their carrying amounts and no
impairment was identified.
The calculation of FVLCS is most sensitive to the following assumptions: reserve estimates, oil and gas commodity prices, discount
rates and growth rates used to extrapolate cash flows during the forecast period.
The Company considers a 10% change in the oil and gas prices and a 1% increase in the post-tax discount rate to be reasonable
possibilities for the purpose of sensitivity analysis. Based on sensitivities performed, there is no risk of a material adjustment to the
carrying value of the Company’s investments in subsidiaries, because a reasonable change in key assumptions used to determine
the recoverable amount would not result in an impairment.
4. Trade and other receivables
2024
$000
2023
$000
Due within one year:
Amounts owed by Group undertakings
121,776
20,564
Other receivables
1,680
2,948
Prepayments and accrued income
–
19
123,456
23,531
At the reporting date the amounts owed by Group undertakings to the Company are disclosed net of an impairment of $nil (2023:
$nil). Amounts previously impaired were written-off in the prior year as there was no reasonable expectation of recovery. These
amounts have not been secured, have no maturity and bear no interest.
The Company holds inter-company loans with subsidiary undertakings being repayable on demand. The carrying value of these
loans approximates their fair value. The expected credit loss on these loans with subsidiary undertakings is expected to be
immaterial, both on initial recognition and subsequently.
5. Cash and cash equivalents
2024
$000
2023
$000
Cash at bank and in hand
60,800
112,717
Short-term deposits
25,070
40,961
Cash and cash equivalents
85,870
153,678
6. Trade and other payables
2024
$000
2023
$000
Current:
Amounts owed to Group undertakings
8,205
–
Trade payables
1,262
1,766
Other payables
1,358
176
Accrued expenses
322
1,334
11,147
3,276
Serica Energy plc Annual Report & Accounts 2024 l 139
7.
Financial liabilities
2024
$000
2023
$000
Current:
Consideration payable
–
4,627
–
4,627
Other consideration reflected the final tranche of deferred consideration payable under the Tailwind acquisition. This was settled in
March 2024 (note 29 of Group accounts).
8. Equity share capital and reserves
As at 31 December 2024, the share capital of the Company comprised one ‘A’ share of GB£50,000 and 393,468,407 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
Company’s equity share capital, comprising US$0.10 ordinary shares and one ‘A’ share.
Allotted, issued and fully paid:
Company
Number
‘000
Share
capital
$000
Share
premium
$000
Total
Share
capital
$000
As at 1 January 2023
272,953
27,295
170,694
197,989
Shares issued
118,368
11,837
160
11,997
As at 1 January 2024
391,321
39,132
170,854
209,986
Shares issued
2,147
215
65
280
As at 31 December 2024
393,468
39,347
170,919
210,266
Company merger reserve
Merger relief was applied by the Company upon the issue of ordinary shares for the acquisition of Tailwind Energy Investments Ltd
in 2023. The valuation of the shares issued was based on the fair value at the date of issue, with the nominal value of the shares
issued credited to share capital and the excess value above nominal share capital credited to a merger reserve in the Company
accounts.
Treasury/own shares reserve
Treasury represent Serica shares repurchased and available for specific and limited purposes. In Q2 2024 the Company acquired
8,437,478 shares for $18.8 million (£15.0 million) at an average price of $2.22 (£1.78 per share). 4,430,193 of the shares in held
in treasury were then used to satisfy share option awards in 2024 and a balance of 4,007,285 shares included in the reserve of
$8,931,000 is held at 31 December 2024.
Other reserve
The ‘Other reserve’ was comprised solely of the share-based payment reserve which totaled $37,540,000 as at 31 December 2024
(2023: $37,650,000).
9. Auditor’s remuneration
Fees payable to the Company’s auditor for the audit of the Company and Group financial statements are disclosed in note 6 of the
Group financial statements.
NOTES TO THE COMPANY FINANCIAL STATEMENTS continued
140 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
The directors do not believe it is practicable to apportion these amounts between their services as directors of the Company and
their services as directors of the operating group subsidiary entities.
Reconciliation of non-IFRS measures
Serica uses certain measures of performance that are not specifically defined under IFRS or other generally accepted accounting
principles (‘GAAP’). These non-IFRS measures, which are presented within the financial review, are defined below:
EBITDAX: Earnings before interest, tax, depreciation and amortisation, impairments, transaction costs, unrealised hedging expenses,
FX translation effects, asset revaluation effects, other noncash gains or expenses and exploration expenditure. This is a useful
indicator of underlying business performance and the definition adopted by Serica is consistent with that stipulated in the Group’s
reserve based lending (‘RBL’) facility. A reconciliation from Operating Profit to EBITDAX is provided below:
2024
$000
Restated*
2023
$000
Operating profit
186,467
399,893
Add back transaction costs
–
12,539
Add back DD&A
187,250
136,335
Add back depreciation in G&A
1,070
216
Add back E&E expenses and licence costs
2,446
13,493
Deduct contract revenue – other
(31,292)
(29,951)
Add back/(deduct) unrealised hedging
31,814
(25,317)
(Deduct)/add back FX effects/remeasurements
(2,633)
4,926
Add back share based payments
3,735
4,942
Deduct gain on acquisition
–
(41,889)
EBITDAX
378,857
475,187
* See note 2
Capital expenditure (Capex and Abex): Comprises the cash spend (prior to tax allowances) on the acquisition of PP&E assets, the
purchase of exploration and appraisal assets and decommissioning spend. Depicts how much the Group has spent, on a cash
basis, on purchasing fixed assets in order to further its business goals and objectives. It is a useful indicator of the Group’s organic
expenditure on oil and gas assets, and exploration and appraisal assets, incurred during a period on a pre-tax basis.
2024
$000
Restated*
2023
$000
Purchase of PP&E assets
249,050
85,626
Purchase of E&E assets
11,123
12,027
Decommissioning spend
18,142
1,112
Capital expenditure
278,315
98,765
* See note 2
Adjusted CFFO less current tax: comprises cash inflow from operations adjusted by the current tax charge for the year as reflected
in Note 9 and also excludes cash movement arising from the return or posting of security deposits for decommissioning and
hedging. Serica considers that this is a useful measure of the cash generation of the business after tax charge more directly related
to the activity of the period, prior to the decisions made by the Group in relation to capital allocation.
RECONCILIATION OF NON-IFRS MEASURES
Serica Energy plc Annual Report & Accounts 2024 l 141
2024
$000
Restated*
2023
$000
Cash inflow from operations
452,222
470,022
Less current tax (excluding prior year adjustments)
(14,191)
(225,839)
Changes in DSA advances
(35,055)
35,055
Changes in hedging security advances
–
(29,402)
Adjusted CFFO less tax
402,976
249,836
* See note 2
Free cash flow: net cash flow from operating activities less cash used in investing activities (excluding acquisition costs) and
financing activities. This measure is considered a useful indicator of the Group’s ability to invest, repay the Group’s debt and meet
other payment obligations. Group free cash flow reconciles to net cash flow from operating activities as follows:
2024
$000
Restated*
2023
$000
Net cash flow from operating activities
281,563
121,319
Net cash flow from investing activities
(253,911)
(135,000)
Net cash flow from financing activities
(213,278)
(192,576)
Adjusted by:
Repayment of loans and borrowings (net)
40,200
58,800
Facility fees and interest
12,300
–
Proceeds from issue of shares (net of costs)
(280)
(996)
Payment of dividends/share buyback
132,160
110,391
Acquisition costs
–
54,177
Free cash flow
(1,246)
16,115
Adjusted Net cash/(debt): Total cash and cash equivalents plus the balance of amounts of cash security temporarily lodged in
respect of DSAs prior to the finalisation of the RBL recognised on the consolidated balance sheet less the drawn balance under RBL.
This is an indicator of the Group’s indebtedness and contribution to capital structure.
2024
$000
Restated*
2023
$000
Interest bearing loans
(219,130)
(271,200)
Add back unamortised fees
(11,870)
–
Cash and cash equivalents
148,460
335,433
DSA cash
–
35,055
Adjusted net (debt)/cash
(82,540)
99,288
* See note 2
RECONCILIATION OF NON-IFRS MEASURES continued
142 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
GLOSSARY
AIM
Alternative Investment Market
bbl
barrel of 42 US gallons
bcf
billion standard cubic feet
boe
barrels of oil equivalent (barrels of oil, condensate and LPG plus the heating equivalent of gas converted into
barrels at the appropriate rate)
BKR
Bruce, Keith and Rhum fields
CGU
Cash generating unit
CPR
Competent Persons Report
CSOP
DD&A
DTA
DSA
EBITDAX
ESG
EPL
Company Share Options Plan
Depreciation, Depletion and Amortisation
Deferred tax Asset
Decommissioning Security Agreement
Earnings Before Interest Depreciation Amortisation and Exploration
Environmental, Social and Governance
Energy Profits Levy
ETS
FID
FDP
Emissions Trading Scheme
Final Investment Decision
Field Development Plan
GBA
Greater Buchan Area
IFRS
International Financial Reporting Standards
JOA
Joint Operating Agreement
LTIP
LongTerm Incentive Plan
LWIV
Light Weight Intervention Vessel
mmbbl
million barrels
mmboe
million barrels of oil equivalent
NBP
National Balancing Point
NGLs
Natural gas liquids extracted from gas streams
NSTA
North Sea Transition Authority
NTS
National Transmission System
Overlift
Volumes of oil or NGLs sold in excess of volumes produced
Underlift
Volumes of oil or NGLs produced but not yet sold
P50
A best estimate that there should be at least a 50% probability that the quantities recovered will actually equal
or exceed the estimate
P90
A low estimate that there should be at least a 90% probability that the quantities recovered will actually equal
or exceed the estimate
PPA
Purchase Price Allocation
Proved Reserves
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
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
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
RBL
Reserves Based Loan
Reserves
Estimates of discovered recoverable commercial hydrocarbon reserves calculated in accordance with the
revised June 2018 Petroleum Resources Management System (PRMS) version 1.01
Tcf
trillion standard cubic feet
TCFD
Taskforce on Climate-related Financial Disclosures
UKCS
United Kingdom Continental Shelf
Serica Energy plc Annual Report & Accounts 2024 l 143
LICENCE HOLDINGS
The following table summarises the Group's licences as at 31 December 2024.
Licence
Block(s)
Description
Role
%
Location
UK
P090
9/9a Bruce
Bruce Field Production
Operator
99%
Northern North Sea
P090
9/9a Rest of Block Excluding
Bruce (REST)
Development
Operator
98%
Northern North Sea
P198
3/29a (ALL)
Rhum Field Production
Operator
50%
Northern North Sea
P209
9/8a Bruce
Bruce Field Production
Operator
98%
Northern North Sea
P209
9/8a Keith
Keith Field Production
Operator
100%
Northern North Sea
P209
9/8a Rest of Block Excluding
Bruce and Keith (REST)
Development
Operator
98%
Northern North Sea
P276
9/9b BRUCE
Bruce Field Production
Operator
98%
Northern North Sea
P276
9/9c (ALL)
Bruce Field Production
Operator
98%
Northern North Sea
P276
9/9b Rest of Block Excluding
Bruce Unit (REST)
Development
Operator
98%
Northern North Sea
P566
3/29b (ALL)
Rhum Field non-unitised production
Operator
100%
Northern North Sea
P975
3/24b (ALL)
Rhum non-unitised production
Operator
100%
Northern North Sea
P975
3/29d (ALL)
Rhum non-unitised production
Operator
100%
Northern North Sea
P101
23/21a Columbus
Columbus Development Area
Operator
75%
Central North Sea
P1314
23/16f
Columbus Development Area
Operator
75%
Central North Sea
P57
23/26a Area A
Erskine Field – Production
Non-operator
18%
Central North Sea
P264
23/26b Area B
Erskine Field – Production
Non-operator
18%
Central North Sea
P264
23/26b Area C
Erskine Field – Production
Non-operator
40%
Central North Sea
P2400
30/12c, 30/13c, 30/17h,
30/18c
Exploration
Non-operator
20%
Central North Sea
P215
21/29b
Guillemot W
Non-Operator
50%
Central North Sea
P233
29/1a Bittern
Bittern
Operator
100%
Central North Sea
P361
29/1b
Bittern
Non-Operator
29.26%
Central North Sea
P13
21/30c A
Gannet E
Operator
100%
Central North Sea
P13
21/25a UPPER, 21/30a
UPPER
Gannet E
Non-operator
50%
Central North Sea
P1606
3/3b
Orlando
Operator
100%
Northern North Sea
P1792
21/30f
Evelyn/Belinda
Operator
100%
Central North Sea
P2170
20/5b, 21/1d
Greater Buchan Area
Non-operator
30%
Central North Sea
P2448
3/8g
Mansell/Staffa
Operator
100%
Central North Sea
P2498
20/5a, 20/5e, 21/1a
Greater Buchan Area
Non-operator
30%
Central North Sea
P2616
29/2c
Kyle
Operator
100%
Central North Sea
P2634
21/30g
Triton
Non-operator
46%
Central North Sea
144 l Serica Energy plc Annual Report & Accounts 2024
Strategic Report
Corporate Governance
Auditor’s Report
Financial Statements
Registered and Main Office
72 Welbeck Street
London W1G 0AY
Operational Headquarters
H1 Building
Hill of Rubislaw
Anderson Drive
Aberdeen AB15 6BY
Nominated Advisor & UK Broker
Peel Hunt LLP
100 Liverpool Street
London EC2M 2AT
UK Broker
Jefferies International Limited
100 Bishopsgate
London EC2N 4JL
Auditor
Ernst & Young LLP
1 More London Place
London SE1 2AF
Company Secretary
AMBA Secretaries Limited
UK Registrar
Link Asset Services
10th Floor, Central Square
29 Wellington Street
Leeds LS1 4DL
Listing
AIM, London
Symbol: SQZ
Website
www.serica-energy.com
Company Number
5450950
CORPORATE INFORMATION
Produced by Communiqué Associates Limited, Edinburgh +44 7802 349934
Serica Energy plc Annual Report & Accounts 2024 l 145
www.serica-energy.com