Following the announcement dated 20 December 2022 by Serica Energy that it had entered into an agreement to acquire the entire issued share capital of Tailwind Energy Investments Ltd from Tailwind Energy Holdings, Serica announces the publication of a Circular to shareholders on the proposed transaction which will be posted later today and which can be found on its website: www.serica-energy.com. An updated presentation can also be found on the website. This announcement contains material new information and an update on the recent operational and financial performance of the two companies.

Mitch Flegg, CEO of Serica, commented:
“We’re pleased to be publishing the Circular to Serica shareholders today setting out why we think the acquisition of Tailwind delivers exciting benefits to Serica shareholders and enables the Company to enter a new growth phase.

We are delighted by the transaction which we believe will improve cashflow and capital return predictability for shareholders and be immediately accretive on key metrics while also maintaining a strong balance sheet, providing increased resilience through the diversification of the Serica portfolio and create a platform for further growth in the future.

I look forward to working closely with our new colleagues to deliver on the range of opportunities this transaction creates for all our stakeholders.”

The Board of Serica believes the Transaction will have a number of benefits for Serica:

• Diversifies and strengthens portfolio by adding a new production hub in the Triton area, resulting in a balanced mix of gas and oil and an enlarged hopper of short cycle organic growth opportunities
• Significantly increases reserves and production, lifting Serica into the top ten UK producers; with net production expected to increase by 50-80% in 2023 and sustained until 2025 at above 40,000 boe/d, and reserves increased by 67% as at 1 January 2022 before allowing for the full impact of Tailwind’s successful 2022 work programme
• Expected to be immediately accretive to Serica’s reserves, production, cash flow and earnings per share
• Enhances financial strength, retaining a net cash position at completion with strong ongoing cashflows thereafter supporting M&A, organic investments and returns to shareholders
• Introduces Mercuria as a committed strategic investor with deep energy experience and wide geographic reach

Operational Highlights

• 2022 average net production for Serica of 26,050 boe/d
• Tailwind net production increased significantly during 2022 with completion of Orlando well workover and Evelyn tie-back - 19,500 boe/d average in Q4 and touching 24,500 boe/d during December
• Combined proforma net production forecast of 40,000 to 47,000 boe/d in 2023, 41,000 to 48,000 boe/d in 2024 and 42,000 to 49,000 boe/d in 2025
• Results from GE-04 well (Tailwind 100%) considerably better than pre-drill estimates with expected initial production rates in excess of 8,000 boe/d compared with 5,000 boe/d predrill estimate. Production tie-in planned in Q1 2023
• Addition of Tailwind 2P reserves increases combined 2P reserves as at 1 January 2022 by 67%
• Tailwind 2P reserves at end 2022 expected to show more than 100% reserves replacement through successful execution of its investment programme and recent sanction of near-term infill drilling projects in 2024 (Bittern B1z sidetrack and Gannet GE-05 well)
• Total Tailwind oil and gas resources at end 2022 expected to be at least in line with 1 January 2022 including identified projects having the potential over time to add over 30 million boe to 2P reserves at relatively low capital cost utilizing existing infrastructure
• Combined operating costs projected to remain below $20 per boe with objective of future reductions
• Combination retains low decommissioning liabilities compared to North Sea peers in line with Serica’s existing portfolio
• Tailwind holds significant ring fence tax losses carried forward for future use
• Significant net cash position on completion and highly cash generative portfolio increases capacity for future M&A, organic investments and sustained cash returns to shareholders

KeyFacts Energy: Serica Energy UK country profile   l   KeyFacts Energy: Acquisitions & Mergers news

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