Serica Energy (LSE:SQZ) jumped to a record 130p this morning after confirming that it has completed all the work required to protect it against any potential impact of US/Iran sanctions on its North Sea assets.
The firm has faced concerns that the Rhum field, in which it has bought a 50pc-stake and operatorship from BP, will be impacted by sanctions because the state-backed Iranian Oil Company also owns a 50pc position. However, as revealed last month, the US Office of Foreign Assets Control (OFAC), which provides services to Rhum, has granted it a licence allowing certain US and US-owned or controlled entities to work on the field. The government body also assured Serica that non-US entities engaged in Rhum will not have exposure to the sanctions.
In today’s update, Serica said it has now met all of the conditions required for the licence to become valid. OFAC has requested that the Iranian Oil Company’s interest in Rhum is held in escrow for as long as sanctions apply. As the operator, Serica must also ensure that neither the Iranian Oil Company or any direct or indirect parent of the business derives ‘any economic benefit’ from the field over this period. The state-backed entity will also have no decision-making powers over Rhum until sanctions are lifted.
Importantly, the firm said today’s compliance with the licence conditions fulfils one of the critical terms of its purchase of BP’s interests in Rhum and two other North Sea fields called Bruce and Keith. The sale of the fields, which together produce around 5pc of the UK’s domestic gas, is now expected to complete on 30 November 2018.
What’s more, the completion of the BP sale allows Serica to further increase its stake in Bruce and Keith by signing a sale and purchase agreement with BHP Billiton, another part-owner of the fields. Following completion of the two purchases, Serica will own a 50pc interest in Rhum, 84.25pc of Bruce and 91.7pc of Keith. It will also operate all three fields. In an update today, Serica said it expects its pro-forma net 2P reserves as at 1 August 2018 to sit at around 62.7MMboe following the completion of the BP and BHP transactions.
Serica’s chief executive Mitch Flegg said: ‘Completion of the arrangements required under the OFAC License is an important step in the efforts which all interested parties have been making to ensure that the contribution these fields make to UK energy supply is safeguarded and the value of the reserves assured. I wish to take this opportunity to thank all parties for their support. Serica looks forward now to completing the transactions with BP, Total E&P and BHP and to working with suppliers and service companies to develop these reserves to their full potential.’