Sept 10 (Askume) – Serica Energy ‘s (SQZ.L) oil and gas production assets can still generate cash despite “unreasonably punitive” taxes in the UK, its new chief executive said on Tuesday.
Britain’s new Labour government said last month it would raise the energy gains tax (EPL) imposed in 2022 by 3% from November 1 to 38%, taking the total tax rate on oil and gas activities to 78%, the highest rate on the list.
Serica chief executive Christopher Cox said: “Serica has spent over £1 billion on its UK supply chain over the last five years and similar spending will be lost in the future if the tax system makes future investment uneconomic.
“We haven’t given up on influencing the government’s budget outcome,” said Cox, who became chief executive in May.
Serica said it would remain very active in screening cash-generating M&A opportunities domestically and in the wider North Sea region, and increasingly in other regions.
“SQZ is on track to generate over $500 million in revenue by 2027,” said Panmure Liberum analyst Ashley Kelty.
Kelty added: “Whether the conditions are right to invest back into the UK Continental Shelf portfolio is up to the Government, but otherwise it could be used to fund overseas growth or returned to shareholders.”
Serica’s first-half profit and production fell, sending its shares down 4.5% to 111.8p by 0742 GMT.
The company produced 43,700 barrels of oil equivalent per day (boepd) during the period, down from 49,350 boepd last year, Serica said.
Serica said it expected its full-year average output to be below the previous range of 41,000-46,000 bpd due to the unexpected shutdown of its Triton hub in the North Sea.
“We are currently underutilizing the good capacity we have and that will be my main focus in the coming months,” Cox said during a post-earnings call.
Serica reported a post-tax profit of $82.5 million for the six months ended June 30, down from $98.5 million a year earlier. The company said full-year pre-tax capital expenditure could be about $260 million, in line with expectations.
