UK-based oil and gas company Serica Energy said Thursday it had completed the acquisition of Tailwind Energy and that admission of the completion consideration shares to trading on AIM has occurred.
Serica said in December 2020 it would acquire Tailwind, with the consideration for the acquisition comprising the issue of up to 111,048,124 new ordinary shares in Serica, and a cash payment on Completion of £58.7 million.
Serica had said earlier this week the conditions precedent in relation to its proposed acquisition of Tailwind Energy from Tailwind Energy Holdings LLP had been satisfied, save for the condition precedent relating to the Admission of the Completion Consideration Shares. This condition has been fulfilled now, too.
Serica said the acquisition was expected to be immediately accretive to Serica's reserves, production, cash flow, and earnings per share. Supported by the results of the Gannet GE-04 well announced on February 20, 2023, Serica’s estimated pro-forma production of the combined portfolio is expected to be between 40,000 and 47,000 boe/d in 2023. Tailwind’s net debt at completion was £215 million.
Back in December, Serica said that the merger would put Serica in the top 10 UKCS producers and top three UKCS listed independent producers.
Mitch Flegg, Chief Executive of Serica said: "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 that 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.
"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."
Tony Craven Walker, Chairman of Serica said: "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.
Following the Acquisition, Serica said its attributes included 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 from operated fields; An ongoing program of sanctioned short cycle organic investments in 2023 and 2024 including 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; Potential ‘near infrastructure’ field developments; A strong financial position from which to deliver further business growth.
Back in December 2020, when the proposed acquisition was first announced, Serica said that, as part of the Transaction, Mercuria, the largest ultimate shareholder of Tailwind, would become a strategic investor in Serica with a 25.2 percent holding, and that two Mercuria-nominated non-executive directors will join the Serica board on completion.
Mercuria has nominated two new non-executive directors, Guillaume Vermersch and Robert Lawson, who have joined the Board upon the completion of the acquisition.
Serica and Mercuria also agreed the terms of a revised offtake and marketing agreement which has been entered into between Tailwind Energy Limited and Mercuria Energy Trading SA.
The revisions include the deferral of the expiry of the Offtake and Marketing Agreement to the cessation of production from the fields tied back to Triton FPSO in the UK North Sea. The expiry was otherwise due to occur in October 2026. The revised Offtake and Marketing Agreement will take effect once certain third-party consents are obtained.
Serica’s existing oil and gas marketing arrangements are unaffected.