Sharecast - The AIM-traded firm said the transaction, subject to regulatory, partner, and interested party approvals, was expected to be completed early next year.
After completion, the GBA partnership would consist of Serica Energy UK (LON:SQZ) at 30%, NEO Energy at 50% and the operator and JOG at 20%.
The acquisition would grant Serica the option to participate in the redevelopment of the Buchan field and other potential developments within the GBA.
The board said the Greater Buchan Area, situated 150 kilometres northeast of Aberdeen in the Outer Moray Firth, encompasses various oil and gas accumulations, with the Buchan field being the largest.
Production at the Buchan field ceased in 2017 due to the end of the usable life of the floating production facility.
The redevelopment plan for Buchan involved establishing a new production hub at the field, using a floating production, storage, and offloading (FPSO) vessel currently operating on the UK Western Isles fields.
Serica said the FPSO was planned to come off-station in the second half of 2024 and was recently acquired by NEO Energy on behalf of the Buchan joint venture.
The redevelopment would be carried out in phases, beginning with the Buchan field in the first phase and potentially including the J2 and Verbier discoveries in the second phase.
It said the Buchan field alone was estimated to hold around 70 million barrels of oil equivalent in mid-case contingent resources, making it one of the UK Continental Shelf’s largest pre-development fields.
Nearby discoveries and prospects could offer additional tie-back opportunities to the FPSO.
The National System for the Technical Assessment of Offshore Activities (NSTA) issued a no-objection letter after submitting the concept select report supporting the Buchan redevelopment programme.
A proposed field development plan (FDP) for Buchan was expected to be submitted to the NSTA soon, with potential approval in the second half of 2024.
The FPSO would undergo limited modifications in preparation for redeployment, including installing water injection booster pumps, producing water injection modifications, and preparing for future electrification.
Furthermore, the possibility of third-party floating wind power developments near the GBA could lead to the FPSO’s connection to such projects.
Oil export was planned to be carried out via shuttle tankers.
Pending project sanction and regulatory approval, the target for the first production was late 2026, with peak production rates expected to reach around 35,000 barrels per day.
The gross development costs were estimated to be in the range of £850m to £950m, with the current fiscal terms potentially qualifying for tax relief at about 91%.
Serica said the transaction with JOG was being structured as a farm-in, with Serica making a cash payment of $6.8m on completion, subject to adjustments reflecting an economic date of 1 April 2023.
The company was not obliged to participate in GBA developments under the transaction terms.
However, if it chose to participate, Serica would make additional payments to JOG at various stages of development, including approval of the Buchan FDP and the FDPs for J2 and Verbier.
“We are delighted with this transaction which gives Serica a significant interest in the proposed Greater Buchan Area project, potentially adding a third production hub and further resilience to Serica’s North Sea portfolio,” said chief executive officer Mitch Flegg.
“In common with our other hubs, the GBA plan involves utilising existing infrastructure - in this case, an FPSO - with the possibility of exploiting multiple accumulations in the area.
“Moreover, the development has been designed to deliver an industry-leading low level of carbon emissions, consistent with Serica’s objective of reducing the overall carbon intensity of its activities.”
Flegg said the transaction demonstrated the benefits of Serica’s strong balance sheet.
“Our financial strength enables us to take advantage of suitable opportunities to expand the portfolio, and we will continue to take a very proactive approach to business development while also investing in our existing portfolio and paying dividends to shareholders.
“The transaction is structured such that most of the consideration payable by Serica is contingent and linked to making progress in the project.
“Our participation will also be financially efficient with Serica benefiting from tax reliefs on its investment.”
At 1156 GMT, shares in Serica Energy were up 1.55% at 210p.
Reporting by Josh White for Sharecast.com.