Serica Energy (SQZ) Trading update summary

Operational performance and production outlook

• 2024 production averaged 34,600 boepd, below expectations due to extended outages at Triton and Bruce, mainly from compressor and pump failures, but most issues have now been resolved and operational changes implemented to prevent recurrence.

• Stable production from Erskine and deferred Columbus maintenance supported output in late 2024.

• 2025 production guidance is set at around 40,000 boepd, a 16–20% increase, supported by new high-performing wells, improved asset uptime, and robust maintenance planning.

• New wells, such as GE-05, have exceeded pre-drill expectations, with GE-05 testing at 9,000 boepd and now producing over 6,000 boepd.

• Investments in resilience, including a second compressor at Triton and a flare gas recovery project at Bruce, are underway to enhance reliability and reduce emissions.

Financial performance and capital allocation

• 2024 revenue was $726 million, with lower revenue due to Q4 production shortfalls and Triton downtime, resulting in a neutral free cash flow and a year-end net debt of $71 million.

• Liquidity remains robust at $442 million, with a net debt-to-EBITDAX ratio of 0.2x, the lowest among North Sea peers.

• Over $200 million has been returned to shareholders via dividends and a 2024 share buyback, with continued commitment to material shareholder returns.

• 2025 CapEx is guided at $220–250 million, with 70% allocated to drilling and new wells, expected to deliver rapid payback and high IRRs.

• Opex for 2024 was $330 million, expected to remain at this level in 2025.

Tax, regulatory, and M&A strategy

• Effective tax rate for 2024 was about 40%, aided by $1 billion in tax losses and capital allowances; Parkmead E&P acquisition will add $250 million in additional tax losses.

• Material investment in large projects like Buchan Horst is on hold pending clarity on the UK’s long-term tax and regulatory regime, with ongoing industry consultations expected to provide direction by spring.

• M&A focus is currently on UK assets, leveraging local expertise and counter-cyclical opportunities, but international expansion, including Asia, remains under consideration.

• The company continues to lobby for a sensible replacement to the EPL and is actively engaged in government consultations on tax and licensing.

• Portfolio diversification through value-accretive M&A remains a focus.