London-listed Serica Energy (LON: SQZ) has formally completed the previously announced takeover of Tailwind Energy.
The £367 million deal, first unveiled at the back end of 2022, moves Serica into the top 10 club of North Sea producers, alongside the likes of Harbour Energy (LON: HBR) and BP (LON: BP).
Shareholders approved the acquisition of Tailwind in January, despite opposition from around a quarter of backers, one of which made his views on the subject very clear.
This deal follows a period of steady North Sea growth for Tailwind, which was backed by Mercuria – the commodities and energy group is now a “strategic investor” in Serica with a 25.2% holding.
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.
© Supplied by DCT Media“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.”
A new look Serica
Following the acquisition, Serica says its portfolio includes 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 now comes from operated fields, with a pipeline of sanctioned short cycle organic investments in 2023 and 2024.
That includes 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.
There is also potential for ‘near infrastructure’ field developments.
Serica expects the deal to immediately boost its reserves, cash flow, earnings per share and production, which is forecast to be between 40,000 and 47,000 boe/d in 2023.
Tailwind’s net debt at completion of the transaction was £215 million.
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 (both Mercuria nominees) 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.”
Unhappiness in the ranks
Despite the buoyancy of the company’s board, some Serica shareholders were less than enamoured by the proposed takeover of Tailwind.
In a letter to Mr Craven Walker, published in January, Jeremy Raper of Raper Capital, which held about 0.5% of the operator, said he could not “recall a transaction so completely irredeemable” or one “so totally at odds with the wishes of its shareholders”.
There were also claims the true cost of the Tailwind deal was far higher, maybe even £644m, due to the transfer of debt.
© Supplied by Raper Capital/SericaRecommended for you
