Serica Energy reports $403m in post-tax cashflow as drilling gains offset Triton disruption

Serica Energy plc has reported a resilient financial performance for the year ending 31 December 2024, despite facing a turbulent operational backdrop due to prolonged disruptions at the Triton Floating Production Storage and Offloading (FPSO) facility. The London-listed independent oil and gas company achieved adjusted post-tax cashflow from operations of $403 million, a substantial increase from $250 million in 2023. This growth was largely attributed to a lower effective tax burden and strategic capital allocation, which softened the impact of reduced production and weaker realised gas prices.

The company’s revenue dropped to $727 million from $917 million in 2023, reflecting a decline in average daily production to 34,600 barrels of oil equivalent per day (boepd), down from 40,100 boepd on a pro forma basis post-Tailwind acquisition. Notably, gas continued to dominate the production mix, comprising 64% of output. The drop in revenue and production, however, was offset by lower operating costs and a $71 million tax rebate anticipated in 2025, stemming from overpayments under UK tax instalment regulations.

CEO Chris Cox acknowledged that production and cashflow gains from recent drilling success at Triton had not yet materialised due to ongoing FPSO issues. However, he noted the joint venture’s decision to advance maintenance originally scheduled for the summer would minimise further downtime, with production expected to resume by June 2025 without a second shutdown.

What is the outlook for Serica’s Triton FPSO operations and future production?

The Triton FPSO has remained a focal point of Serica Energy’s short-term production challenges. While the facility experienced instability in 2024, particularly following Storm Éowyn in January 2025, efforts to stabilise operations have been undertaken in collaboration with Dana Petroleum, the field operator. The FPSO was offline through February and March, reducing Q1 2025 production to approximately 27,600 boepd.

The decision to incorporate summer maintenance activities during the current downtime is expected to reduce future disruptions, with Serica projecting significantly improved uptime once production resumes. Notably, the availability of a second compressor upon restart is expected to mitigate key causes of past instability.

When fully operational, the Triton area alone has the capacity to deliver up to 30,000 boepd net to Serica. The company has highlighted that production from wells already drilled—such as Bittern B6 and Gannet GE05, which helped boost output to 25,000 boepd on 23 January—has confirmed the strong potential of the reservoir.

How is Serica leveraging its drilling programme to drive long-term growth?

Serica Energy was among the most active North Sea operators in 2024, executing a five-well drilling campaign designed to expand production capacity and reserves. In addition to Bittern B6 and Gannet GE05, the company has completed two more wells—W7Z on the Guillemot North West field and EV02 on the Evelyn field. Early results from both wells have been described as encouraging, with tie-ins scheduled for shortly after the Triton restart.

The COSL Innovator rig has now moved on to drill the campaign’s final well, BE01, on the Belinda field. This 100%-owned asset is expected to commence production in early 2026. Serica’s approach to field development remains strategically focused, balancing near-term tie-ins with mid-term development of resource-rich prospects.

What changes has Serica made to reserves and resources, and what does that imply?

Serica’s end-2024 reserves and resource assessment revealed a nuanced shift. While 2P (proved and probable) reserves declined to 117.5 million barrels of oil equivalent (mmboe) from 140 mmboe in 2023—largely due to production drawdown and some technical adjustments—the company reported a substantial increase in its 2C (contingent) resources, which grew nearly threefold to 88.7 mmboe.

The rise in contingent resources points to the effectiveness of Serica’s geological and subsurface reassessment across its portfolio. The company believes these resources have clear conversion potential into 2P reserves, particularly at redevelopment opportunities such as the Kyle field and in-fill drilling targets around the Bruce Hub.

These developments position Serica well for future reserve replacement and organic production growth, particularly as the company continues to refine its geological models and align capital spending with high-return projects.

How is Serica balancing shareholder returns with capital investment?

Amid the challenges of 2024, Serica has reaffirmed its commitment to shareholder value through disciplined capital allocation. Although free cash flow for the year turned marginally negative at -$1 million due to high capital expenditure of $260 million and reduced Triton production, the company still declared a final dividend of 10 pence per share. Combined with the interim dividend and share buybacks, total 2024 shareholder returns stood at $114 million—broadly on par with the $112 million returned in 2023.

The dividend reduction from 14 pence in 2023 is part of what Serica describes as a prudent rebalancing of its capital mix. This approach is designed to enhance strategic flexibility, enabling the company to fund drilling and development while retaining capacity for opportunistic mergers and acquisitions. The board has confirmed that share buyback authority remains in place and will be renewed at the upcoming annual general meeting.

What is Serica’s M&A strategy and how does the Parkmead deal fit in?

In December 2024, Serica Energy announced the acquisition of Parkmead (E&P) Limited, a move that will increase the company’s tax loss position by approximately 25% and offer optionality for future development. Regulatory approval from the UK’s North Sea Transition Authority (NSTA) has been received, bringing the transaction closer to completion.

The deal is consistent with Serica’s stated strategy to pursue value-accretive, cash-generative opportunities. While the company remains focused on its North Sea stronghold, it continues to evaluate assets beyond the UK continental shelf. However, management has repeatedly emphasised that all deals must meet a rigorous investment case and support long-term shareholder returns.

What does Serica’s recent stock performance reveal about market sentiment?

Serica Energy plc (LON: SQZ) experienced a sharp rally following the publication of its 2024 full-year results. On April 1, 2025, shares surged 8.4% to close at GBX 145.20, up from a low of GBX 134 earlier in the session. Investors appeared to react positively to the company’s strong cashflow generation, increased 2C resources, and transparent communication regarding Triton’s operational plan.

However, by April 4, shares had declined by 7.45% to GBX 124.20, erasing much of the earlier gain. The retracement reflected continued investor caution around the near-term production outlook, especially given Triton’s ongoing downtime.

Despite this volatility, sentiment among analysts remains constructive. Both Berenberg Bank and Canaccord Genuity reiterated ‘Buy’ ratings, each with a target price of GBX 200. These bullish assessments suggest continued confidence in Serica’s drilling-led growth model, capital discipline, and balance sheet strength.

For retail and institutional investors alike, the current pullback may present a tactical buying opportunity, especially with production expected to normalise mid-year. However, as with all energy equities, exposure to oil and gas prices, regulatory changes, and operational delays remains a risk.

What are Serica’s expectations and strategic priorities for 2025?

Despite the production challenges encountered in Q1 2025, Serica has updated its full-year output guidance to a range of 33,000–37,000 boepd. With Triton maintenance expected to complete in June and no further shutdowns planned for the year, management anticipates a strong second half that could surpass the midpoint of this range.

Capital expenditure for 2025 remains unchanged at $220–250 million, with operating costs forecast at approximately $330 million. These investments are expected to support continued drilling, infrastructure upgrades, and strategic flexibility.

Looking ahead, Serica is evaluating a potential transition from London’s AIM market to the Main Market of the London Stock Exchange. Such a move could enhance the company’s visibility, broaden its investor base, and support its long-term growth ambitions, particularly as the company expands its footprint and asset base.

With analyst backing, strong underlying fundamentals, and strategic operational plans underway, Serica appears poised for recovery and long-term shareholder value creation—provided it can successfully bring its Triton production back online and maintain capital discipline in a volatile energy environment.