Serica Energy Completion of the Acquisition of Tailwind Energy Investments

Source: 3/23/2023, Location: Europe

Further to the announcement on 21 March 2023, Serica Energy plc (SQZ) is pleased to confirm that it has successfully completed the acquisition of Tailwind Energy Investments Ltd ("Tailwind") from Tailwind Energy Holdings LLP (the "Acquisition") and that Admission of the Completion Consideration Shares to trading on AIM has occurred.

Unless otherwise defined herein, capitalised terms used in this announcement shall have the same meanings as defined in the announcements regarding the Acquisition made by the Company on 20 December 2022 and 21 March 2023.

Mitch Flegg, Chief Executive of Serica commented:
"We are delighted to have completed the acquisition of Tailwind and welcome the new members of the Serica team. This is an important and exciting moment for Serica. The transaction creates a portfolio of assets which provides both greater resilience and an increase in the range of organic growth opportunities. Moreover, this has been achieved while preserving the Company’s financial capacity to invest in its existing assets, execute further acquisitions and make sustained cash returns to shareholders.

We look forward to providing more information in the coming weeks on the progress made in exploiting the existing producing fields in recent months and the plans for future investments in the enlarged portfolio."

Tony Craven Walker, Chairman of Serica commented:
"As a result of this transaction, Serica has a broader asset spread with interests in two North Sea hubs, one of which it operates, and better exposure to an oil/gas mix. The combined entity is uniquely placed to prosper as an important contributor to the UK’s energy security in support of energy transition. However, this does require a more considered approach from Government to revisit the counter-productive tax levels imposed on the UK oil and gas industry and to structure a predictable and far less damaging tax regime to support the innovation and investment required, particularly in view of currently much reduced oil and gas prices. We look forward to the opportunity and the challenge.

Today I am delighted to welcome Guillaume Vermersch and Rob Lawson to the Serica Board. Their presence adds to the breadth, depth and diversity of the expertise represented by the Board which has grown with the business during the last few years.”

Following the Acquisition, the attributes of Serica include:
- A balance of gas and oil production focused around the Bruce and Triton hubs in the UK North Sea.
- More than 80% of its production from operated fields.
- An ongoing programme of sanctioned short cycle organic investments in 2023 and 2024 including a second Light Well Intervention Vessel campaign on the Bruce field and infill wells on the Bittern, Gannet E, Guillemot North West and Evelyn fields.
- Potential ‘near infrastructure’ field developments.
- A strong financial position from which to deliver further business growth. The Company expects to announce its 2022 results, which will include detailed financial information, on 13 April 2023.

The Acquisition is expected to be immediately accretive to Serica's reserves, production, cash flow and earnings per share. Supported by the results of the Gannet GE-04 well announced on 20 February 2023, as previously advised, Serica’s estimated pro-forma production of the combined portfolio is expected to be between 40,000 and 47,000 boe/d in 2023. Tailwind’s net debt at completion was £215 million.

As announced on 20 December 2022 and in accordance with the SPA, Serica and Mercuria Holdings (UK) Limited (“Mercuria”) have entered into the Relationship Agreement. Under the terms of the Relationship Agreement, Mercuria have nominated two new non-executive directors, Guillaume Vermersch and Robert Lawson, who have joined the Board upon completion of the Acquisition. Associated regulatory information is provided below.

Further to the intention stated in the announcement of the Acquisition on 20 December 2022, on 22 March Serica and Mercuria agreed the terms of a revised offtake and marketing agreement which has been entered into between Tailwind Energy Limited and Mercuria Energy Trading SA (the “Offtake and Marketing Agreement”). The revisions include the deferral of the expiry of the Offtake and Marketing Agreement to the cessation of production from the fields tied back to Triton FPSO. The expiry was otherwise due to occur in October 2026. The revised Offtake and Marketing Agreement will take effect once certain third-party consents are obtained.

Although entered into prior to Admission, the directors of the Board of Serica have considered the revised Offtake and Marketing Agreement as if it was a related party transaction under the AIM Rules for Companies (“AIM Rules”) due to Mercuria becoming a Substantial Shareholder (as defined by the AIM Rules) of the Company following Admission. As is customary, the Company engaged a third-party expert to advise on the terms. The directors consider, having consulted with the Company’s Nominated Adviser, Peel Hunt, that the terms of the revised Offtake and Marketing Agreement are fair and reasonable insofar as the Company’s shareholders are concerned.

As also stated on 20 December 2022, Serica’s existing oil and gas marketing arrangements are unaffected.

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