Serica will make an upfront cash payment of £58.7m, and issue new ordinary shares worth £367m, which represent up to 28.9% of its issued share capital, and assume Tailwind’s net debt of around £277m


Serica to acquire Tailwind for £644m. (Credit: Zbynek Burival on Unsplash)

UK-based oil and gas producer Serica Energy has signed an agreement to acquire the entire issued share capital of Tailwind Energy Investments for a total consideration of £644m.

Under the terms of the agreement, Serica will make an upfront cash payment of £58.7m, and issue up to 111,048,124 new ordinary shares, upon closing.

The consideration shares represent up to 28.9% of the company’s issued share capital and are valued at £367m, based on Serica’s closing price on 19 December 2022.

The company would also take on Tailwind’s net debt, which was around £277m.

Mercuria, the largest existing shareholder of Tailwind, will become a strategic investor in Serica with a 25.2% stake and will sign a relationship agreement with the company.

Serica CEO Mitch Flegg said: “I am excited by the announcement of this transaction and by the possibilities it brings for Serica in terms of a new phase of growth.

“The transaction achieves our strategic objective of materially increasing the scale and diversity of our UKCS portfolio of assets. The Tailwind portfolio also brings multiple organic investment opportunities for further material near-term growth in reserves and production.

“Following this Transaction, Serica will retain its competitive strengths of a strong balance sheet, positive cash flow and low decommissioning cost obligations.”

Serica said that the acquisition will increase its combined production in 2023, which is estimated to reach between 40,000boe/d and 45,000boe/d.

The addition of Mercuria as a new strategic investor will help the company to take advantage of the opportunities through the North Sea Transition Deal.

In addition, Serica will benefit from Mercuria’s financing and hedging capacity, combined with its wide geographic reach.

As part of the relationship agreement, two Mercuria-nominated non-executive directors will be appointed to the Serica board, upon closing.

Tailwind CEO Steve Edwards said: “Since inception in 2016, Tailwind has been driven by creating value for its stakeholders; acquiring and exploiting high-quality production and development opportunities on the UKCS.

“Our value growth and delivery over that period have been exceptional, resulting from smart M&A and consistent delivery of high-value organic projects.

“We have achieved this through the combination of a committed strategy, excellent people and enjoying the constant support of Mercuria.”