North Sea gas producer reports 8,700pc surge in profits

Sunrise at the Eider platform, 60 miles northeast of Shetland, North Sea, November 2013
Sunrise at the Eider platform, 60 miles northeast of Shetland, North Sea, November 2013

One of the UK’s biggest gas producers has reported an 8,700pc rise in profits amid surging prices and higher production.

AIM-listed Serica Energy made pre-tax profits of £194.5m for the first half of 2022, compared to only £2.2m for the first half of 2021.

The company sold its gas at almost three times the price it achieved last year, amid global shortages triggered by Russia’s war on Ukraine.

It has also increased its production by 41pc following investments last year, while it no longer shares cash flow with former owners of its assets.

Serica is the latest oil and gas producer to report soaring profits amid the high prices in the wake of Russia’s invasion, with FTSE 100 giant BP posting profits of $8.45bn [£6.9bn] between April and June.

North Sea drillers were hit with a windfall tax in May to try and help fund support for households and businesses with their energy bills.

Liz Truss, the Prime Minister, has indicated she is not in favour of further windfall taxes, but there are calls for her to go further after she set out energy bill support expected to cost the exchequer an estimated £60bn over the next six months.

Mitch Flegg, chief executive, said Serica and the industry were investing heavily in the North Sea, with Serica spending around £50m last year.

He said: “I think it’s difficult to take only one set of profits in isolation.

“The investment we’ve been making is really significant. This set of results shows profits that are significant; we will pay a huge amount of tax. But we plough our profits back into new investment so that we can increase our production.”

Serica produces from the Bruce, Keith, Rhum, Columbus fields in the North Sea, and also has an interest in the Erskine field. Around 85pc of its output is gas. It accounts for about 5pc of North Sea’s production.

It produced an average 26,600 barrels of oil equivalent per day (boepd) during the half year, compared to 18,855 boepd for the first half of 2021.

It sold gas for an average price of 136 pence per therm, compared to an average 50 pence per therm during the first half of 2021, after system entry fees and including fixed price volumes.

Shares climbed 4.68pc on Tuesday, reaching 358p by 4.30pm.