Serica Energy : Interim Report 2023

SERICA ENERGY PLC

INTERIM 2023 REPORT TO

SHAREHOLDERS

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INTERIM REPORT FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2023

The following Interim Report of the operations and financial results of Serica Energy plc ("Serica") and its subsidiaries (together the "Group") contains information up to and including 18 September 2023 and should be read in conjunction with the unaudited interim consolidated financial statements for the period ended 30 June 2023, which have been prepared by and are the responsibility of the Company's management.

References to the "Company" include Serica and its subsidiaries where relevant.

The results of Serica's operations detailed in the interim financial statements are presented in accordance with International Financial Reporting Standards ("IFRS").

The Company's shares are listed on AIM in London. Although the Company delisted from the TSX in March 2015, the Company is a "designated foreign issuer" as that term is defined under National Instrument 71-102 - Continuous Disclosure and Other Exemptions Relating to Foreign Issuers. The Company is subject to the regulatory requirements of the AIM market of the London Stock Exchange in the United Kingdom.

Serica is an oil and gas company with production, development and exploration activities based in the UK.

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CHIEF EXECUTIVE OFFICER'S REVIEW

The acquisition of Tailwind Energy Investments Ltd, which completed in the first half of 2023 has provided operational diversity and scale for Serica. This transaction is outlined in the section following this review.

Serica's production levels in the first half of 2023 continue to benefit from the ongoing capital investment campaign which has been in progress for the last few years. We can also see the benefit of the investment in the Tailwind portfolio over a similar period. As a result of these investment projects, the net production from the combined portfolio in the first half of 2023 was 49,350 boe/d, an increase of 30% compared to the 38,100 boe/d from the same portfolio in 1H 2022 and an increase of 85% compared to the Serica net production of 26,600 boe/d in 1H 2022.

In the first half of 2023, 55% of the production from the combined portfolio was gas compared to 91% of the Serica portfolio on the first half of 2022.

Market gas prices, though still volatile, have averaged around 108p/therm in the first half of 2023 compared to over 175p per therm in the first half of 2022. Market oil prices have averaged around US$79/bbl in the first half of 2023 compared to around US$107/bbl in the first half of 2022. These are before the impact of Serica's commodity price hedging programmes.

With lower commodity prices but markedly higher production levels, Serica's sales revenue for the six-month period to June 2023 was £340.6 million, broadly similar to the figure of £353.5 million for the corresponding period in 2022. The profit after taxation for the period was £175.5 million (1H 2022: £116.7 million) but this is significantly influenced by a one-offnon-cash accounting entry related to the Tailwind acquisition. These numbers incorporate contributions from the acquired Tailwind assets from the completion date of 23 March 2023 rather than the full six-month period.

The UK Energy Profits Levy (EPL) has a significant impact on post-tax profitability for all UK oil and gas producers. However, the substantial tax losses acquired with the Tailwind transaction have had the effect of lowering Serica's effective rate of taxation. The EPL is a wholly unwelcome burden that is already leading to the delay and cancellation of longer-term investment projects across the sector. However, allowances relating to reinvestment in short-cycle projects offer Serica the opportunity to mitigate its impact. Therefore, we will maintain our ongoing short-cycle investment plans and where possible will expand and accelerate elements of that programme.

The Company is therefore continuing with its growth strategy of investment in projects designed to enhance and extend future production profiles. Following the success of last year's Light Well Intervention Vessel ("LWIV") programme on Bruce, a second campaign has now commenced, and a third campaign is scheduled for the first half of 2024. A significant four-well drilling campaign in the Triton Area is expected to commence early in 2024. This will comprise of wells on Bittern, Gannet E, Guillemot NW and Evelyn.

The common theme amongst these capital projects is that they are all designed to quickly add production from existing fields without the requirement for substantial new infrastructure. These short-cycle investments benefit from Investment Allowances under the EPL and have the capability to add significant reserves and production. Serica has a strong record of replacing reserves through our ongoing investment commitment. At the end of 2022 the Serica net 2P reserves stood at 74.9 mmboe which is a 9% increase on the level at the time of the BKR acquisition more than four years previously despite the production of over 30 mmboe in the intervening period. The combined net 2P reserves for the Serica and Tailwind portfolios at the end of 2022 were 130.4 mmboe.

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We continue to focus on emissions reduction whilst maximising production. In the first half of the year carbon intensity (emissions divided by production) from the Bruce hub was 15.1kg CO2/boe, a 9% reduction on the same period last year. On Triton, the 1H 2023 carbon intensity was 17.7kg CO2/boe, a 33% reduction on 1H 2022. As new production from Serica's forthcoming drilling campaign will be tied back to existing offtake facilities, such additions add reserves without adding significant carbon emissions.

The Serica portfolio remains cash generative following the Tailwind transaction. At the start of the year cash and deposits totalled £433 million and during the first half of the year this has risen to £444 million despite final 2022 tax payments of £141 million, £62 million of cash consideration paid for the Tailwind transaction and £48 million of debt repayment. The mid-year debt level stood at £210 million leaving a net cash balance of £234 million.

Against this background the Company is steadily increasing its return to shareholders. Following combined dividend payments of 22 pence per share for full year 2022, the Company is today announcing an interim dividend of 9 pence per share (2022: 8 pence per share) which will be paid in November 2023.

Mitch Flegg

Chief Executive Officer

18 September 2023

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ACQUISITION OF TAILWIND ENERGY INVESTMENTS LTD

On 23 March 2023 Serica Energy completed the acquisition of Tailwind Energy Investments Ltd, a privately owned independent oil and gas company with assets in the UK North Sea. As part of the transaction, Mercuria - an investor in Tailwind - became a strategic investor in Serica.

Tailwind was formed in 2016. Through a combination of acquisitions, production enhancements and development of new fields, executed by a small and expert team of oil and gas professionals, it built a portfolio of upstream assets situated in the UK North Sea. At the end of 2022 this portfolio had 2P reserves of 55.5 million boe, with a rising production profile that reached an average 23,300 boe/d in December 2022.

The assets acquired by Serica with the Tailwind transaction comprise primarily a mix of operated and non-operated producing fields tied-back to the Triton FPSO in the UK Central North Sea. Tailwind's interests in producing fields also include 100% in the Orlando field located in the UK Northern North Sea and a non-operated 25% in the Columbus field in the UK Central North Sea (operated by Serica).

The acquisition of Tailwind was aimed at achieving Serica's longstanding objective to have a more diverse and broadly based UKCS portfolio of producing fields, with material reserves and value upside potential, coupled with a more balanced exposure to commodity price risk. The transaction represents substantial progress towards this objective with the number of producing fields increased from five to eleven, mainly centred around two hubs (Bruce and Triton), a substantial increase in 2P reserves (combined 130.4 million boe as at 31 December 2022) and a balance of gas and oil production.

The acquisition has also added considerably to the organic investment opportunities in Serica's portfolio. Rig slots have been reserved in order to drill infill wells on the Bittern, Gannet E, Guillemot North West and Evelyn fields in 2024; all of which are existing tie- backs to the Triton FPSO. The potential developments of the Belinda field as a tie-back to the Triton FPSO and the Mansell field, situated in the UK Northern North Sea, are being evaluated. All these activities will continue under the ownership of Serica, whose team has been supplemented by the addition of Tailwind staff.

These substantial enhancements to Serica's portfolio of upstream assets have been achieved while maintaining the Company's financial strength. Moreover, Serica retains a relatively low level of decommissioning liabilities largely as a result of foundational transactions by both Serica and Tailwind in the past involving the sellers retaining such obligations. Serica's strong balance sheet, allied with expected net cash inflows from the enlarged portfolio, provides a basis for continued dividends to shareholders, investment in the existing portfolio and further acquisitions. Very few UKCS-focused independent oil and gas companies share this same combination of attributes.

As described in the Annual Report and ESG Report, making a positive contribution to the North Sea Transition Deal is a key objective. Serica is using its operating experience to support the infrastructure operators of the Tailwind assets to reduce emissions. The longer-term outlook depends in part on investments to reduce emissions from the Bruce and Triton hubs. As operator of the Bruce hub and co-owner of the Triton FPSO, Serica is engaged in the development and implementation of GHG Emissions Reduction Action Plans for both facilities.

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