A London-based oil and gas firm has unveiled plans to expand aggressively in the North Sea as its chairman said the crude price slump might be good news for the area.
While many firms are slashing spending in UK waters, Serica Energy said it plans to buck the gloomy trend by increasing activity across the board.
Chairman Tony Craven Walker said acquisitions are on the agenda along with increased investment in developing new fields and in exploration activity.
“We plan to follow these objectives aggressively in 2015 and beyond and to capitalise on the opportunities open to us during a period of low oil prices,” he said.
The strategy proves a notable vote of confidence in the North Sea, where spending on new assets and exploration is under particular pressure as firms look to cut costs.
Serica said it expects that oil prices will recover over the medium term.
However, Mr Craven Walker said the fall in the crude price since June last year could encourage a shake up in the North Sea that would benefit the area.
He believes it could prompt majors to sell off North Sea assets, putting fields under the control of firms that would be more inclined to invest in them.
“There’s greater reality on pricing,” said the industry veteran, who noted Serica has cash in the bank and no debt. “People’s expectations of the value of their assets has come down.”
Oil and gas entrepreneur Tom Cross, who runs the North Sea-focused Parkmead Group, has said the oil price fall has created the opportunity to make cheeky offers for assets.
Mr Craven Walker noted the costs of operating in the North Sea have fallen in recent months.
Firms have cut the price of services such as drilling support as they try to hang on to their shares of a shrinking market.
Mr Craven Walker also welcomed the new spirit of co-operation that has become apparent in the area amid tough times.
He said: “Companies are becoming much more prepared to work together instead of beating each others’ brains out.”
Serica said it is discussing possibilities with other companies where the backdrop of low oil prices is helpful.
It said the talks include resolving issues which have so far prevented the Columbus field from being developed off eastern Scotland. “We are at an advanced stage in reaching agreement with BG to this end,” said Serica.
The company wrote $17m off the value of its stake in Columbus last year, to reflect the oil price fall.
Brent crude fetched around $48 per barrel yesterday, compared with $115/bbl in June last year.
Serica acquired a stake in the producing Erskine field east of Aberdeen from BP in a cash and shares deal worth around £10m in June last year.
It said Erskine is still expected to generate good cash flow throughout 2016, even if oil prices remain at current levels. Directors expect production costs to be around $30/bbl.
Serica has amassed tax losses that could be used to offset against the profits made on North Sea production, increasing the appeal of buying such assets.
The company, which also has interests off Ireland and Africa, cut first half losses to $639,000 (£420,000) from $2.5m. It had $13.9m cash at 30 June.
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