Serica Energy plc announces that all of the resolutions set out in the Notice of Annual General Meeting dated 26th May 2009 were duly passed at the Annual General Meeting held today.
The following is the text of the presentation made by Tony Craven Walker, Chairman of Serica Energy plc, to shareholders at the Annual General Meeting held at 10:00am on Thursday, 25th June, 2009;
Our meeting last year was held on 19 June. In the intervening 12 months we have experienced a collapse and partial rebound of oil prices, a virtual meltdown of financial markets and the onset of a serious recession - a perfect storm. None of this was forecast by market analysts and many much larger companies have suffered severe contractions to their businesses as a result.
For a small oil and gas exploration company such as Serica steering a business through such turbulence brings excessive demands on management. That the Serica team has been able to do so and still maintain growth prospects is a testament to the skills of the management team and to shareholders and to our bankers who have been consistent in providing continuing support.
In my address to shareholders last year I said that we were cautious on the oil price which had then reached dizzying heights. In the event we were proved right to be so. I explained then that we were conducting a strategy aimed at reducing our exposure to falls in the oil price and also containing the costs resulting from the very high prices of services and equipment. I said that we would be seeking to manage these exposures through asset disposals and farm-outs.
It is pleasing to be able to report that we have been very successful at achieving both of these objectives and this has, in large part, been the reason for our healthy position today. In August we completed the sale of a 15% interest in the Kambuna field for cash proceeds of US$52.7 million and a profit of US$36.6 million. The sale implied a value for the part of the field retained by Serica of US$175 million or some 78 pence per share at current exchange rates when taken together with the cash received from the part sale.
We also raised a large part of our exploration costs through successful farm-outs, namely the Chablis appraisal well, the Bandon wildcat well in Ireland and the three well exploration programme in Vietnam. The total contribution to drilling costs through these farm-outs is expected to be over US$50 million. To achieve this contribution in addition to the US$52.7 million cash received from the Kambuna sale was no mean feat when set against the collapsing financial markets in which management has had to operate. This policy of judicious management of our assets by selective sale and farm-out is a major plank in our strategy to enhance shareholder value and is one which we plan to continue.
We need also to combine this with a strategy to expand our portfolio of exploration and production assets. The Company's business is the growth of value through the combination of technical skills and the management of risk and this can only be done against a growing and changing portfolio of properties. An added objective is to supplement our sources of income in order to reduce reliance on financial markets which are normally counter-cyclical to financial needs and to the availability of opportunity. So, in addition to a programme of asset realisation and capital raising through farm-down, we are also continually evaluating opportunities for acquisitions through which we might improve liquidity for shareholders, expand the borrowing base for banks and thereby enhance options for raising capital and reducing the cost of doing so.
In parallel we continue to build our portfolio by application for new licences over blocks where we feel our particular technical skills can generate value. At the end of last week we announced that we had been awarded two licences over 12,700 square kilometres in the Atlantic margin offshore Morocco and today we are announcing the award of North Sea Block 22/19c, close to our Columbus block, in which we see prospects analogous to Columbus. We are very pleased with these awards.
Serica is sitting on an enviable base from which to grow. We expect shortly to start production from the Kambuna field in Indonesia. I am told that we are basically putting finishing touches to all the equipment in preparation for the commissioning process. Paul and Peter will give a precise update in their presentation. In the UK, armed with the knowledge derived from BG's drilling in the block neighbouring Columbus we are now able to move the Columbus Development Plan forward and we shall be looking at ways in which we can accelerate the value which we see in the Columbus area.
In Ireland, we have made a most interesting oil discovery in an area which is largely known for its gas prospects. The significance of this discovery is that it potentially opens up the possibilities for serious oil accumulations in a basin which is very under-explored. The knowledge that Serica and its partner RWE of Germany now have as a result of this drilling is unique and is the reason why we have not released much more information. A full analysis of the drilling results and of the oil samples recovered is now underway but is very likely to result in further drilling by Serica in the area. The full extent of what we have discovered remains to be evaluated but we have already identified further prospects, both oil and gas, in the blocks that we hold and are looking to see how we can bring a drilling programme forward.
All this, of course, requires capital and the commencement of production is very important to us as we look at the financing alternatives. We can of course, continue to farm down, and we are planning to do so in relation to our 100% owned block in the East Irish Sea, where we have identified a large prosp ect to drill close to Centrica's Morecambe Bay field, and in our Kutai licence in Indonesia where we hold a 54.6% interest, but it would not be in the interest of shareholders to base our entire programme on a farm-out process. We shall therefore be seeking to balance the farm-out process with new investment in order to maintain shareholder exposure and maximise return.
Needless to say this is a complex process and leads to much debate on strategy but the industry is largely opportunity driven and, with the continuing support of shareholders and our bankers I believe that we have the management experience and knowledge to achieve these objectives.