LONDON (ShareCast) - (Sharecast News) - Upstream oil and gas company Serica Energy reported a 93% increase in operating profit and a 124% increase in profit after tax in its 2022 results on Thursday.
The AIM-traded firm said its profits were boosted by increased production volumes and higher commodity prices, with average net production of 26,200 barrels of oil equivalent per day, making for an 18% increase compared to 2021.

Its 2P reserves increased to 74.9 million equivalent barrels as at 1 January, with group 2022 production replaced more than twofold.

The board noted that the acquisition of Tailwind Energy Investments was also completed after the financial year-end, on 23 March.

Serica recommended a final dividend of 14p per share, bringing the 2022 full-year total to 22p per share, up from the 9p distribution in 2021.

The company's average realised sales price after hedging was $104 per equivalent barrel, rising from $77 per barrel in 2021, with an average operating cost of $15.70 per barrel.

Its operating profit totalled £476.2m, up from £246.1m year-on-year, however the company did record realised losses of £45.4m on 2022 gas price hedging, as well as unrealised gains of £20.9m on hedge valuations and an exploration and evaluation asset write-off of £82.7m related to North Eigg exploration well.

Serica's profit after tax was £177.8m, up from £79.3m in 2021, including current tax charges of £277.7m and non-cash deferred tax provisions of £32.7m.

The firm had a net cash inflow from operating activities of £560.1m, including a £91m net release of cash security held by gas price hedge counterparties.

Serica's closing cash as at 31 December was £432.5m, plus a further £24.3m of cash security lodged with gas price hedge counterparties.

However, following the 2022 year-end, the directors said they became aware that a filing in respect of certain dividends paid in 2022 had not been made as required under the Companies Act.

As a result, a resolution would be proposed at the next annual general meeting to resolve that.

"2022 was another year of outstanding progress for Serica - there was strong growth in production volumes, a significant upgrade to reserves and increased profitability at all levels," said chief executive officer Mitch Flegg.

"Serica's two-pronged strategy is to invest in our high-quality portfolio of UK North Sea assets to unlock value and prolong their life whilst continuing to target future acquisition opportunities.

"It is to be hoped that the government will ensure that the fiscal terms applying in the UK North Sea make the UK competitive for future energy investment."

Flegg noted that the company had now completed the acquisition of Tailwind, boosting production and reserves and providing a number of short-cycle growth opportunities.

"I'm delighted that we can recommend an increased final dividend of 14p per share.

"The continued strength of the company underpins the intention to maintain or increase the dividend in future years."

At 1354 BST, shares in Serica Energy were down 0.41% at 240p.

Reporting by Josh White for Sharecast.com.

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