After a nervous wait investors in oil and gas play Serica Energy (SQZ) are breathing a sigh of relief on news that the Rhum natural gas field in the North Sea will be exempt from US sanctions despite Iran’s state oil firm owning half of the project.
The shares rise 34.6% to 103.66p, wiping out the losses endured in recent days. This is because today's news should mean Serica can now complete the long-awaited acquisition of BP’s (BP.) stake in Rhum along with the Bruce and Keith fields (also in the North Sea).
The company is also picking up French major Total’s stakes in Bruce and Keith too.
The deal was being held up amid concern that renewed sanctions, targeting anyone doing business with Iran, would apply to Rhum.
Profit from the field linked to the Iranian Oil Company's 50% stake will have to be placed in an escrow account for as long as the sanctions are in place. A similar arrangement for Rhum was in force when the US previously imposed sanctions on Iran.
TRANSFORMATION ONGOING
The transactions, which will result in it holding a 50% interest in the Rhum field, a 78.25% interest in the Bruce field and a 59.83% interest in the Keith field and be operator of all three fields, will transform Serica, making the company among the largest independent North Sea oil firms by output.
Serica’s production is projected to increase by several multiples to more than 21,000 barrels of oil equivalent per day, 85% of which will be natural gas.
Both deals are structured so most of the cost is being met by future cash flow. Total and BP will also meet the lion’s share of decommissioning costs.
