Serica Energy PLC (AIM: SQZ), a North Sea success story, announced today that it is now exploring growth opportunities abroad.
“We are rightly proud of our track record of growth and value creation, and we aim to replicate that success in the future,” said interim chief executive and chair David Latin in a statement. “However, recent and potential future increases in UK oil and gas taxes make that increasingly difficult.”
“Consequently, while we remain vigilant for attractive opportunities in the UK despite the increasingly challenging context, we are actively seeking prospects overseas.”
In a statement ahead of today’s AGM, interim chief executive and chair David Latin highlighted Serica’s transformation over recent years. Initially a small international exploration-focused company, Serica has grown to become one of the top 10 producers in the UK North Sea.
Latin emphasized that Serica, which produces over 40,000 barrels of oil equivalent per day, generating approximately £600 million in revenue, £305 million in profit, and paying £183 million in taxes last year, is a UK success story. This achievement was built by acquiring undervalued assets discarded by major companies that have largely exited the North Sea.
“Through diligent attention, investment, and a good dose of skill, we have supplied much-needed energy, created substantial value, paid significant taxes, generated jobs, and reduced emissions,” he said. “We are proud of our track record and confident in our ability to replicate these successes where government policies and regulations are supportive.”
Latin added, “With over 30 years of experience in this industry, working globally, I have never faced a situation as challenging as the current investment and planning climate in the UK, except when managing assets in a war zone.”
David Latin detailed the political and fiscal challenges currently faced by companies in the North Sea.
“We often hear terms like ‘proper windfall tax,’ ‘oil and gas giants,’ and ‘closing loopholes’ in the UK political debate. These phrases reflect fundamental misconceptions.
“UK oil and gas producers already pay an overall tax rate of 75%, which is three times higher than the tax rate for UK companies in other sectors. This is despite the period of so-called ‘windfall’ conditions for UK producers having long passed, with oil and gas prices returning to historically normal levels.
“Yet in the current General Election, no reduction to match the circumstances is proposed by the Conservative Party, and the Labour Party proposes another increase in the tax rate to 78%.
“As for the claim that the tax is being paid by the ‘oil and gas giants,’ it is independent companies like Serica that are most affected. The ‘Majors’ account for only around a third of UK production, and the vast majority of their profits are made overseas, unaffected by increasing tax rates on UK production.”
He added, “’ Closing loopholes’ in UK oil and gas tax seems to mean different things to different people. Whatever is meant, I want to be clear that reducing tax relief for capital expenditure below the rate at which tax is payable would make investment in most UK North Sea projects unprofitable. This means that these projects, along with the jobs and tax revenues they would generate, simply will not happen.
“Oil and gas continue to flow only when the mains supply of investment stays open. Without it, the flow dries up.”
The Serica chair’s full comments can be read in the statement here.
