(Alliance News) - Serica Energy PLC on Monday said it achieved average net production of 26,050 barrels of oil equivalent per day in 2022, and forecast a net production of between 40,000 and 47,000 barrels in 2023, after it completes its acquisition of Tailwind Energy Investments Ltd.

The company estimates a 50% to 80% production increase in 2023 and that this will be sustained at above 40,000 barrels of oil equivalent per day until 2025.

The London-based independent oil and gas exploration and production company proposed the acquisition of Tailwind Energy Investments back in late December. The transaction will see Serica pay GBP58.7 million in cash and issue up to 111.0 million new shares in Serica - 29% of the company's issued capital - to the seller Tailwind Energy Holdings LLP.

Combined, the total value of the transaction is GBP367 million, based on Serica's closing price of 278 pence per share on December 19, the day before the proposition, the company said.

Shares in Serica were up 5.2% trading at 273.55p per share on Monday morning in London, making the new shares to be issued worth GBP303.6 million.

Serica said Tailwind's net production increased significantly in 2022, at 19,500 boepd in the fourth Quarter, and reaching a peak daily production of 24,500 boepd in December.

Reserves have increased by 67% at January 1, before allowing for the full impact of Tailwind's 2022 work programme, Serica added.

Serica said the acquisition will strengthen its portfolio by adding a new production hub in the Triton area, "resulting in a balanced mix of gas and oil and an enlarged hopper of short cycle organic growth opportunities".

The company noted that the increase in reserves and production following the acquisition will bring Serica into the top ten UK producers.

As part of the transaction, Tailwind's largest shareholder, Mercuria, will become a strategic investor in Serica, with a 25% holding. Serica said Mercuria has "deep energy experience and wide geographic reach".

Serica has also agreed to take on Tailwind's net debt, which was about GBP277 million at November 30.

Chief Executive Officer Mitch Flegg said: "We are delighted by the transaction which we believe will improve cashflow and capital return predictability for shareholders and be immediately accretive on key metrics while also maintaining a strong balance sheet, providing increased resilience through the diversification of the Serica portfolio and create a platform for further growth in the future."

Serica has scheduled a general meeting to approve the allotment of the consideration shares for January 27.

By Harvey Dorset, Alliance News reporter

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