North Sea firm avoids potential Iran sanctions hitch as Joe Biden inaugurated

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British Petroleum

British Petroleum

Serica announced that it has been granted an extension to a licence that exempts it from being impacted by sanctions imposed on Iran by former US president Donald Trump.

The company bought a 50 per cent interest in the Rhum field off Shetland from BP in 2017. The Iranian oil company owns the other 50%. Serica had to win an exemption from the US authorities to ensure production from the field could continue after Mr Trump imposed fresh sanctions on Iran.

The licence awarded to London-listed Serica was due to expire on February 28.

The company said yesterday: “Serica … is delighted to announce that it has received a renewed License and secondary sanctions assurance from the US Office of Foreign Assets Control (“OFAC”) relating to the North Sea Rhum field.”

The licence was awarded on the day Joe Biden was inaugurated president, after Mr Trump’s attempts to overturn the result of the election held in November failed.

Serica’s licence will run until January 2023. This will provide Serica with time to progress plans to boost output from Rhum, although these have hit obstacles.

Serica wants to start pumping gas from a well on Rhum that was never brought into production. After facing rig and weather-related problems the company noted yesterday that it faced fresh delays due “largely to the unexpectedly poor condition of the equipment being recovered from the well”.

Operations are expected to continue into March.

However, Serica made clear it wants to maintain a push for growth in the North Sea in which acquisitions have played a big part.

Chief executive Mitch Flegg reckons the downturn in the North Sea triggered by the coronavirus crisis could create opportunities for Serica. Other firms are looking to sell North Sea assets amid the challenges posed by the downturn.

Serica has money in the bank and no debt. The company is generating cash from the production from its existing North Sea assets.

“These firm foundations and strong balance sheet allow us to continue to seek opportunities to grow our portfolio through investment and M&A activity,” said Mr Flegg.

In an update on operations, Serica noted yesterday that its production costs averaged just $14 per barrel of oil equivalent (boe) last year. It received an average $20/boe for its output, before hedging gains.

Serica produced an average 23,800 per day last year from a portfolio built up through a series of acquisitions.

Source » heraldscotland

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