The incoming head of North Sea gas producer Serica Energy has said the halcyon days of high-price windfalls are behind the oil and gas sector.
David Latin, who will take the top job in the coming weeks, issued the statement alongside the group’s 2023 full-year results, which showed a 22 per cent year-on-year slide in revenue to £632.6m and a profit drop of 37 per cent to £305m.
Latin added that the government’s tax war on North Sea oil producers is coming at a cost.
“The high tax situation is ill-suited to a mature oil and gas basin such as the UK North Sea and its continuation will not benefit people in the UK either financially or environmentally,” he said.
Cash flow from the company’s operations, including a deduction of 2023 current tax, came to £195m, a 53 per cent drop from the £427m registered in 2022, while capital expenditure ticked down slightly to £79.2m from £98.3m the year prior.
Net cash at the end of 2023 stood at £78m versus £432.5m the year prior.
Despite the lower returns, Serica Energy paid out almost double the amount of cash dividends, totalling £88m against £46.3m in 2022.
Additionally, in a separate announcement this morning, Serica announced its first-ever share buyback programme, totalling £15m made up of ordinary shares of $0.10 (£0.08) each.
Furthermore, Latin said that the company retains the confidence of major financial institutions for its strategy moving forward and confirmed the successful raise of a new $525m (£421m) reserve-based loan facility completed in January 2024.
This loan will, in part, be used to bolster the company while it prospects for new projects outside the UK, Latin added, including the North Sea region beyond British waters.
From a production standpoint, the firm lowered its guidance range to 41,000 – 46,000 barrels of oil equivalent per day (boe/d) from the upper end of 48,000 previously announced.
This is due to the later-than-planned start of its Triton area drilling programme and the forthcoming 40-day maintenance period on the site later this year.
“I am very pleased that Serica has delivered a strong set of results for 2023 despite significantly lower sales prices compared to 2022 and a full year of the UK marginal tax rate being at 75 per cent,” David Latin said.
The resilience of Serica’s financial position allows the company to maintain the final dividend at 14p per share meaning an increase in the total dividend for 2023 to 23p per share compared to 22p per share in respect of 2022.”
Mitch Flegg, the company’s outgoing chief executive, added: “My term as chief executive ends with these results.
“More than the metrics of the last six years, it is the quality of the team we have built at Serica that gives me the most satisfaction and pride and clearly, the BKR and Tailwind transactions represented the most significant organisational changes.”