Serica Energy (SQZ) M&A announcement summary

Deal rationale and strategic fit

• Acquisition diversifies the portfolio, increases reserves and resources, and enhances near-term cash flow at an attractive valuation.

• Expands presence with new operated hubs and assets in the UK North Sea, including operatorship of the Shetland Gas Plant.

• Supports strategy of value creation from mid- to late-life assets and provides both growth and returns for shareholders.

• Adds significant upside in the West of Shetland Basin and other producing assets, with organic growth opportunities such as infill drilling and exploration licenses.

• Enhances growth potential in the most prospective basin on the UK Continental Shelf.

Financial terms and conditions

• Aggregate upfront consideration totals $25.6 million for the acquisition, equating to $2.3 per 2P barrel for 11.0 mmboe of 2P reserves.

• Estimated payments of around $100 million to be received on completion, reflecting interim post-tax cashflows.

• Additional free cash flow of approximately $50 million expected from acquired assets in 2026.

• No DCU obligations or liabilities from Hurricane Energy or Prax's parent company are being assumed.

• Decommissioning liabilities remain among the lowest in the UK North Sea, with near-term costs mainly for Lancaster well abandonment (~$60 million).

Synergies and expected cost savings

• Significant value from material tax loss pools: $2.14 billion Ring Fence Corporation Tax, $1.83 billion Supplementary Charge, and $518 million Energy Profits Levy.

• Net operating costs for Greater Laggan Area expected to decrease with the start-up of the Victory Field and third-party throughput; 2026 opex forecast at $16 million.

• Decommissioning costs offset by tax relief and optimization opportunities.

• Enhanced cash flows through utilization of tax losses and further M&A opportunities.

• Scope to extend productive life of facilities by increasing production and securing third-party throughput at the Shetland Gas Plant.