UK oil & gas duo mulling over potential merger

Two UK-headquartered oil and gas players, Serica Energy and EnQuest, have taken steps to engage in talks over a potential business combination that has the opportunity to create a bigger combined company with a total market capitalization of nearly $1 billion.

While addressing the media speculation over merger rumors, Serica, with a market capitalization of £496.65 million (over $642.53 million), has confirmed its ongoing participation in discussions with EnQuest, which has a market capitalization of £221.60 million (more than $286.74), regarding a possible consolidation move to combine the pair’s assets, establishing a larger combined entity with a market capitalization of £718.25 million (approximately $929.27 million).

The company claims that its board believes there are substantial benefits to the potential merger, including increasing scale and diversification, unlocking significant synergies, and providing a stronger platform for further growth. Even though discussions are still ongoing, Serica highlights that the business combination is currently envisaged to be structured as an all-share offer by EnQuest by way of a reverse takeover of Serica under the UK Listing Rules.

According to the British firm, the possible transaction is expected to involve a return of capital to existing Serica shareholders, conditional upon the completion of the merger, and the company’s shareholders are anticipated to hold a majority of the shares in the enlarged company with shares listed on the ESCC market of the London Stock Exchange.

“There can be no certainty either that an offer will be made, nor as to the terms on which such offer will be made,” emphasized Serica while underling that the announcement, made with the consent of EnQuest, was arranged by Chris Cox, Serica’s CEO.

The British player is perceived to be the offeree company and EnQuest is required, by April 4, 2025, to either disclose a firm intention to make an offer for Serica or announce that it does not intend to make such an offer. This deadline can be extended with the consent of the panel under Rule 2.6(c) of the takeover code.

“EnQuest will reduce the terms of the possible transaction to take account of the value of any dividend or any other distribution or return of value to shareholders which is paid, or becomes payable, by Serica after the date of this announcement, with exception of the expected return of capital,” emphasized the latter.

EnQuest’s operations are currently focused on maturing and underdeveloped assets in the UK and Malaysia, which are perceived to offer organic growth opportunities, helping to deliver energy security and maximizing economic recovery. The UK production assets include the Magnus, Kraken, Golden Eagle, Greater Kittiwake Area, Scolty/Crathes, and Alba assets.

While Kraken and Magnus contain material reserves and resources, the Bentley and Bressay projects provide future production opportunities. The firm’s Malaysian operations include its PM8 extension production sharing contract, consisting of the PM8 and Seligi fields. EnQuest also recently made a play for Harbour Energy’s business in Vietnam, which will boost its portfolio of producing oil and gas assets in Southeast Asia.

On the other hand, Serica is delivering hydrocarbon production from 11 fields with over 80% coming from its operated portfolio of oil and gas-producing assets, focused on the UK’s North Sea. The firm aims to achieve stable production from two main hubs, encapsulating its operated Bruce asset and the Dana Petroleum-operated FPSO Triton.

In addition, the company operates the Columbus and Orlando fields and is a partner in the Erskine field in the UK Central North Sea. Serica is also one of the partners in the Buchan Horst development project, which is currently awaiting clarity on the fiscal and regulatory uncertainties facing the UK’s oil and gas industry after the operator, NEO Energy, slowed down work on the project.