Serica Energy, the North Sea company responsible for 5 per cent of UK gas production, said it was expecting to make “very significant returns” to shareholders thanks to record high prices.
The Aim-listed company which, along with other UK gas producers such as Harbour Energy and IOG, are tipped to be among the winners of the unprecedented turmoil in energy markets, on Tuesday promised to review its 2021 dividend “in light of the strong gas price trends currently unfolding”. In 2020, it paid a dividend of 3.5p per share, up from 3p from 2019.
The UK government said last week that it could look at introducing a “windfall tax” on companies profiting from high gas prices as one option to help ease the burden on consumers.
Serica said market gas prices averaged more than 56p per therm in the first half of the year — three times higher than over the same period in 2020 — and are averaging in the region of 150p per therm for September.
“Serica’s production is over 80 per cent gas and so the recent exceptional rise in wholesale gas prices has a particularly material impact,” said Mitch Flegg, the company’s chief executive, as he presented the company’s first-half results on Tuesday.
The record prices have also coincided with an increase in production by Serica. Columbus, a new predominantly gas development in waters to the east of Aberdeen that is 50 per cent owned by Serica, is expected to start up in the fourth quarter.
Work on a well that forms part of the Rhum field to the east of the Shetland Islands has since August added more than 4,000 barrels of oil equivalent/day to its share of production capacity.
Serica is choosing to maintain more than 80 per cent of projected oil and gas volumes unhedged in order to retain “material upside” in light of the “extraordinary volatility in global gas markets over the past 18 months”.
Its first-half results do not reflect the impact of the record prices. Revenues rose to £100.8m compared with £46.0m for the same period in 2020 but pre-tax profits fell to £2.2m from £20.4m because of provisions for hedging losses.
Production in the first half of the year averaged 18,900 barrels of oil equivalent per day versus 21,600 barrels/day during the same period a year earlier because the company had to carry out extended maintenance that was delayed from 2020 because of the pandemic.
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