Serica Energy plc (A3P.F) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the Serica Energy plc Half Year Results Investor Presentation. [Operator Instructions]. Before we begin, we would just like to submit the following poll. I'll now turn you over to the executive management team from Serica Energy plc. Chris, good morning, sir.

Good morning, and welcome to our 2025 half year results. I'm joined, as usual, by Martin Copeland, CFO; and Andrew Benbow, our Group Investor Relations Manager. Thank you to everyone who submitted questions ahead of the call. As always, we have a lot to get through, but please feel free to post any further questions you have during the presentation. Should we not get time this morning, then please contact us directly. We are happy to respond to every question we receive. Martin and I will run through a short presentation and then answer as many questions as we can in the time available. This is our usual disclaimer, which I would encourage you all to read even though I know none of you will, don't worry, it's exactly the same as last time you can read it. Okay. So our key focus areas remain unchanged. A optimized production performance, generate cash and deliver both organic and inorganic growth. However, it's been a frustrating first half with our performance very much impacted by the unscheduled downtime at Triton. Here, you can see some of the key indicators of our performance in the half year. Despite many of the challenges we demonstrated the robustness of our underlying business. But we know what is required to improve operational performance, and we will continue our efforts to deliver to shareholders. We are aiming to optimize production, not just at Triton, but also put our BKR hub, where we are beginning to see the results of a production optimization focus coming through. All in all, we are well set for a much better second half of the year and are highly cash generative 2026. Our portfolio can generate material cash flow going forward. We are keen to reinvest the proportion of that back into the portfolio with numerous projects fighting for capital allocation. But of course, focused on those that deliver most value to shareholders. We're also looking to carry out value-accretive M&A. Perhaps surprisingly, the ore remains competitive for M&A, but we are involved in a number of discussions at the moment. We will, however, remain disciplined as demonstrated by our decision to terminate discussions within Quest earlier this year. This slide shows the impact of price being offline from the end of January through to the end of June. As we have announced, the FPSO is now back online and production is ramping up, albeit more slowly than we would have liked. As the Dana team deal with a number of teething problems associated with restarting a relatively complex multiwell system. BKR also performed a little below par in the first half of the year, but it is pleasing to see the recent work has pushed production from the hub net to Serica to nearly 22,000 barrels of oil equivalent per day in July. Our other -- assets performed well but it is the resumption of Triton that full rates and further improvement at BKR that are required to move our daily production run rate back above 50,000 barrels per day. But we are well aware that we still have work to do in order to deliver this increased performance. And a lot of work has taken place at Triton in particular, to do so. We are continuing to work very closely with operator Dana to make sure the FPSO performs as we all want it to. We have talked before about some of the repair work that was necessary before restart of the FPSO. And that was completed by the end of June. Further work has taken place in July, including taking of minor lips from pipe joints and further repairs to corrosive pipe work or in service of provided that time going forward. And in that context, where we are the operator, we want to extract the best possible performance out of our own assets at the Bruce installation. It operates reliably in the sense that it runs predictably and delivers production on most days. But as I've said before, we know it has the capacity to deliver more. We have some facilities constraints, which hindered our ability to make interventions needed in H1. But during the month of July, with these constraints fixed, we have seen the impact of interventions to reduce the back pressure on certain low-pressure wells, what we call all heading operations. which had the effect of getting us back above our planned production rate in July. As of today, production is a little ahead of that July average. The same activity has also seen consistent flow resuming from the key field for the first time since 2020. There is a lot to come in this area. But it is pleasing to see that a focus on ensuring we optimize our production every day is beginning to show results. We now have a dedicated production optimization manager. His job is to both optimize daily production and also look for long-term opportunities to enhance our maximum capacity through the sort of projects shown on this page. And we are also ensuring that we continue to stay ahead of the maintenance curve to help ensure that the long-term future we see for the Bruce installation to enable us to deliver on the exciting subsurface potential. This has seen us recently undertake a successful and intricate process to remove and replace a case on from one of the jackets, which might otherwise have caused a major issue in the long term. Equally, during the upcoming scheduled turnaround, we will be implementing the first phase of our flare gas recovery project, which will be fully implemented in the 2026 turnaround. Given the natural degree of focus on Triton and BKR before it was worth reminding you about the breadth of our portfolio and the contribution that we get from the unsung heroes. Our other producing assets, Churchill, Columbus and Orlando delivered very well during the first half of the year, and we're, in fact, above our planned levels. That meant that they delivered a very useful pretax cash flow contribution of $35 million in H1. And since these assets sit within our tax loss entities, this is a contribution that very much flows to the bottom line. When our portfolio is firing on all cylinders, it can generate material free cash flow. Unfortunately, we're not permitted to provide any actual predictions of the levels of this cash flow at present due to regulatory restrictions, given that we are -- we shortly expect to be issuing a prospectus on our move to the main market. However, we have 7 good analysts covering us, and there is, therefore, a range of forecasts in the market to which people can refer. We have a lot of options to utilize that cash and are committed to making the choices that deliver the maximum returns to our shareholders, whether that is investing in opportunities in the organic hopper or adding to the portfolio through M&A. But it is the opportunities in our organic portfolio that I want to speak about now. What we can do with reinvestment back into our portfolio can be seen from the recently completed Triton billing program. 5 wells were delivered 25 days ahead of time and $31 million under budget net to Serica. A great achievement from the entire Serica and Dana teams as well as our key partner contractors, COSL and Petrofac. This performance demonstrates the subsurface potential of our asset base. We are now intensely focused on ensuring the facility's performance enables us to convert this potential into value for shareholders. The production from these new wells has the potential to more than mitigate natural decline across the whole portfolio for the next couple of years. And this shows on 1 page, all the wells that were drilled, very successful wells based on great subsurface work and innovative techniques that target key areas. What's the appetite for -- what could be possible at BKR? Much larger fields that have not historically under Serica or BP ownership benefited from such exceptional and latest generation technical work. The BH well on bitten and the GE-05 well organic have both produced impressive rates. And as these wells flow strongly and bring the gas needed for patent start-up sequence. They are also amongst the first wells to be restarted in the ongoing Triton restart program. Guillemot and Evelyn will come on stream in the coming weeks and Belinda is expected to slow at the start of 2026. A lot of work has taken place on Belinda, and this work is on track for first oil at the start. It is worth remembering that Belinda is a new field, which is not currently connected to the production infrastructure around Triton. There was a lot still to do involving all of the vessels you see here to connect flow lines and control systems and get well ready for production. This work is progressing well so far, and we are looking forward to seeing what the well is capable of delivering come January. As a reminder, Serica owns 100% of Belinda and the well flowed 7,500 barrels per day on a short production test, which was restricted by the equipment on the rig. We will now turn our attention to new projects. We are keen to continue our success around Triton and Kyle is the next development project in line. Kyle is a producing field that was only shut in due to its infrastructure in the bank FPS being removed. It was producing 4,500 barrels per day just trying to be shut in and our technical work indicates that this was from a suboptimal well. We drive much better well along the lines of those we've seen in our recent program. And we anticipate that a rate of 6,000 to 10,000 barrels per day should be achievable. We believe such a well would deliver very attractive returns to shareholders. But of course, to do so, we will need the right regulatory and tax environment. This will be a new field development, so we will be watching closely how things go for others ahead of us under the new environmental statement guidance we recently issued. We hear regularly from politicians that the North Sea is in terminal decline, and that we do not need to create the conditions that would encourage further development because there's nothing more to go after. I think that what we've just done on Triton and opportunities like Kyle very clearly show how wrongheaded this narrative is exploiting this country's oil and gas resources will not limit or slow down the energy transition, but will promote U.K. economic growth, we've skilled jobs, support local communities and help deliver energy security all of which are stated government aims. It is also far better for global emissions than relying on imports and will help maintain the service sector on which both oil and gas and renewable or processes rely. Something else on which we are keen to get started is the resumption of drilling of BKR. Having seen what the subsurface team uncovered around Triton, it has been great to watch them to get going through some of the process. The same process around Bruce, which is a much larger field. To put that in perspective, this map which is just of the Bruce field i.e. not run and keep is around 100 square kilometers, which is an area roughly equivalent to the -- having previously identified 20 possible targets, we anticipate an initial high-graded program that has 5 wells at Bruce in 2 phases, only drilling those that promise the creation of most value to shareholders. The first phase is expected to be in an area that we call what the Western area development. This has existing subsea infrastructure, which means the world will be easier and quicker to tie into the Bruce platform. Phase 2 with target opportunities in the Northeast, where subsurface studies have uncovered some exciting opportunities. We are currently out in the market with a request for service for a rig to execute the drilling campaign for these first 2 phases in conjunction with the tile production well. There remains more work to do and drilling would be around the end of 2026 at the very earliest, almost likely in 2027. But at this point, I want to just share that we see a number of attractive drilling opportunities around Bruce and look forward to sharing news of a planned drilling campaign once we have completed more detailed work. Importantly, one of these wells would also be tax efficient, thanks to the capital allowances and our fully taxpaying BKR entity. And now some more on our financial position and results for the period. I will hand over to Martin.

Thanks, Chris. I will now cover the highlights of the results we announced today. Our production, thanks very largely to the Triton outage was materially reduced in the period, down just over 40% from the H1 2024, and revenues were therefore also sharply down. But in fact, slightly less than the production thanks to the stronger gas prices we saw in Q1, reducing from $462 million to $305 million for H1 '25. However, despite this top line impact, our financial performance was credible, still delivering a pretax profit and with cash actually increasing from the year-end. Net debt decreased from $83 million to $57 million at 30th of June, demonstrating the resilience in the portfolio but also notably flattered by the receipt of the $71 million tax rebate in respect of overpaid 2024 tax. Of course, we expect a material increase in production and also in revenues in the second half following resumption of production at Triton. It is though worth noting that our cash outflows are also weighted to the second half. As usual, both dividend payments totaling $82 million are made in the period. And we also expect cash tax payments to resume in H2, with our operating costs also slightly weighted to the second half. It is clear, though, that the underlying business has the potential to generate material cash, in fact, to frame this potential, we estimate that around $300 million in revenue has been lost while really rather deferred from Triton's production issues in the period of the main interruptions in the last 9 months. i.e., the last quarter of last year and the first half of this year. This cash generation potential is what gives us confidence in announcing the interim dividend that we have done today at a level consistent proportionally with the 2024 final dividend we announced on the first of April. We expect to be able to continue making investment in offsetting natural decline and growing the company while continuing to deliver returns to shareholders. And we still have plenty of available in our current portfolio on which to invest with the opportunities that Chris has already discussed. This year, we will spend around [ $0.25 billion [ before tax. The vast majority of which being on the highly successful Triton drilling campaign. While CapEx on a value of work done basis is slightly weighted to the spend required to move Belinda to production is the key focus of our CapEx in the remainder of the year and is progressing ahead of projected schedule. In fact, it is this acceleration of Belinda CapEx into 2025 bringing forward spend from 2026 that largely explains why our overall guidance remains unchanged despite the over $30 million savings we have realized on the well program. The other factor in this is FX. The lion's share of our expenditure remains in pound sterling. And since the pound has strengthened against the dollar relative to when our guidance was set, the sterling spend translates into a higher amount in U.S. dollars. We maintained strong liquidity of $433 million at period end and have enhanced our overall liquidity position by replacing cash collateral MLCs utilized to decommission security with security bonds. It is this liquidity position, which also allows us to be nimble and competitive taking advantage where we see M&A opportunities to deliver further value for shareholders. Turning to the next slide. While, of course, we are yet to make any commitments on the potential new spend and we continue to wait further clarity from the government on both regulatory and tax policy. It is worth emphasizing that the tax-efficient nature under the current tax regime of our current and future short-cycle spend. Since the government appropriately retained capital allowances against the EPL, our post-tax spend promises rapid payback. At Triton, where most of the recent spend has been thanks to the loss pools we have there, capital spend only receives immediate relief against the EPL. Any spend at BKR will benefit from full capital and investment allowance relief against the 3 different taxes as these fields are in subsidiaries with no loss pools. This tax release amounts to 84.25% against the full tax rate of 7%. So as well as promising and increasing production, BKR drilling also has the potential to be undertaken as a relatively limited after-tax cost. Following the completion of the Parkmead transaction and our half 1 2025 results. Our tax losses, which currently only benefit our Triton assets and our other assets amounted to $1.4 billion of corporation tax losses, $1.2 billion of supplementary corporation tax and now nearly $200 million of EPL losses at the 30th of June. These losses have a total notional value of over $600 million, although in reality, will not be that much given we will only use them over a period of years. Given this tax shelter and continued spend offers further relief against the EPL, as Triton comes back on stream, production from the hub will be materially cash generative on an after-tax basis. In general, 2026 promises to be a year of very strong free cash flow. Even with the exciting options that we're working up on the portfolio we will inevitably be between CapEx programs. Triton work will be complete, and we will be maturing opportunities at Kyle and BKR with some long lead and early spend but with the main program not likely before 2027. And it is the promise of this cash generation that gives us the confidence that our dividend is sustainable for the medium term. and should be so alongside the investment that we are keen to make. We see the dividend as an important part of our shareholder value creation strategy, a clear indicator that capital allocation decisions are made with shareholders in mind. And our announcement of a 6p interim dividend for 2025 is in line with the rebased dividend level that we announced at the time of our year-end 2024 results. Finally, a brief update on our work on moving to the main market, which we are undertaking because we are keen to expose our value creation story to as many shareholders as possible. The Serica team and advisers are continuing to work to move from the A market to the main market of the London Stock Exchange later this year, and everything is on track for the process to be completed in early Q4. We see this move as maximizing our potential pool of investors, and we are also hopeful of being included in the FTSE 250 Index, when the index inclusion review is completed in early December. If we do get this index inclusion, that would bring buying demand from tracker funds into the stock for the first time. And with that, I will hand back to Chris to wrap up.

Thanks, Martin. And regardless of whether we are on adding or the main market, our strategy is unchanged as seen here. We're aiming to optimize the production we have grow the business, both organically and through M&A and deliver value to shareholders. And I will now hand over to Andrew to run the Q&A.

Thank you so much both. The questions into a number of topics because you can imagine I've had a lot coming in sort of trying to keep it focused. And the first topic enterprising is Triton. So first question is once the new wells are on production at Triton, will our share of production be greater than Dana's. Could you give a rough idea about percentage share of production when the new wells are on stream.

Yes. Well, we already produced more than Dana over the FPSO. Without new wells, it's about 70% of the production going over the FPSO is Serica's. And we would expect that range to be 70% to 80% over the coming years.

So the inertial follow-up question to that now is it wouldn't it make more sense to say to assume operator status? And have you suggested Serica becoming operators to Dana?

Would it make more sense? Yes. Would we like to operate? Yes. Have we discussed it with Dana? Yes. That doesn't mean it's going to happen. And to give a running commentary on any conversations we might have with Dana. However, I would like to say that up taking over operatorship even if that were to happen, would not be a past year and it would not change everything overnight. If we were to operate it and that's purely speculation at the moment. We would fundamentally keep most of the people that operate to take, and they're not bad people, by the way. They're working on a vessel that hasn't been maintained as it should for a number of years, and they're playing catch-up. And I think they're doing all the right things. And they're fundamentally good people trying to run a tricky asset. And it's very complex. You have to remember, there's production from a number of different fields, different pressures with different fluids. Going over a single vessel that wasn't designed to handle all of that. And it's not straightforward. So I have -- with Dana, and we support everything that they're doing. Having said all of that, I think it could run more efficiently. I think that kind of answers the next question, but are you comfortable that the changes Dana has made will mean it stays on top of maintenance going forward and how much influence you have to ensure this. I mean obviously, we have some influence. We're paying the majority of the costs to run the same, and we've got the majority of the production and they listen to us and we support them. And through all of the problems in the first half of the year, we've provided technical support and facilities and vessels and equipment to help Dana. So look, I think -- I think they're doing what's necessary that in but quite a difficult hand by a lack of maintenance over the years, and we support what they're doing at the moment.

Now what lessons have you learned from the unexpected downtime that you think could usually be applied elsewhere to avoid other unexpected events?

Stay on top of your maintenance. I've said this before, I draw the analogy to your car and skipping an annual maintenance service on your car and you get away with it the first year, typically, and nothing bad happens. And then in year 2, if you try again, there -- have a problem. And if you skip it for a third year, you're almost certain to have a problem, and it's probably going to be expensive, and you'll be off the road for a while. Same to these pieces of kit the Triton FPSO has been out there longer than it was ever originally designed to be there. And when you got a vessel that's complicated is there and as old as that, just need to maintain it properly. It's quite simple and don't cut corners.

Last question I'll try. Is it technically viable to replace the FPSO with, for example, the Western Isles FPSO, what is possibly to shareholders?

You can replace an FPSO. So it doesn't happen very often for a good reason. Normally, these things are bespoke. It's not like you can take any old FPSO and stick it on a new field. They tend to be designed for a particular purpose. So they have -- they can handle a particular amount of fluids, this FPSO has gas-lift facilities on it, others don't. Needs to handle water, needs gas compression. So I have no idea, to be honest, whether the Western Isles FPSO, good work here if it could I'm convinced it would require major modifications to get less or be a big capital expenditure associated with that. I suspect it's too small. And the other thing you need to keep in mind is you'd probably shut in, my guess would be 12 to 18 months. while you removed 1 FPSO and put another 1 in today. So I wouldn't rule it out forever, but I think it's hardly...

Moving on to politics. And Chris, your voice is holding up very well, but I think you can save it for a bit as somebody is directly asking Martin a question here. Martin, how do you view Rachel recent comments on the WFT, which seems less than the long way around, but I think it means the windfall tax. Do you feel the progress that you've recently made in consultations hits a wall with the chancellor?

Look, it was disappointing frankly, to read those comments reported yesterday. The transfer was up visiting, I think, the acorn carbon capturing storage project and this I guess, terminal, which is see where our gas rands into mainland. Obviously, first and foremost, that is its reception terminal multi-cabin capturing project at the moment. unproduction project is not even really been started. So as questions and it was, feel like 1 step forward, 2 steps back with the government. However, that being said, I do think -- I mean the consultation has been sensible all of the interactions that we've had have been quite sensible, and we still expect to see the answer to that come with the autumn budget. But exactly where we end up a sort of timing of when they introduce -- that remains an open question is saying that we and our colleagues in the industry and our trade bodies will be continuing to meet the case for. But I think it remains an open question as to where we'll end up on that. But as I said in some of the remarks in the original overview, we will navigate whatever we're dealt with in terms of the tax environment and kind of short-cycle investments that we've been rate can see a potential to continue to make can still work in this kind of a tax environment. So we'll navigate with the hands were dealt. We'll continue to lobby for better. But yes, I guess that's the comment I've made.

Yes. I think it's the question that is coming next, which was any indication by the government on the timing of the outcomes and the various consultations on important budget for that.

Actually also budget, the other one is licensing. That one could come sometime when back from recess, I don't know, we'll see.

It's interesting. So questions that have come in kind of -- you have some people asking if we're disappointed or right away these comments and others asking if we have sense of loosening of investment on the oil and gas picture and following what product sales, which in time to some ways speaks to the die cost you see between the media coverage, where everyone sees unanimously say that using our homegrown Northern Gas, good thing and then some of the comments from from the chancellor. I mean, the one thing I would probably just add quickly is it's worth noting that rates the first new has been consistently saying that [ Gatan Rosebank ] will go ahead, for example, do consultations hit a wall with the chancellor, but I think the chance tends to be focused on growth. So we will see where we end up.

Yes. And those elements don't know, Andrew, that she's going to carry on saying the party line until such time as they decide to change it, right? So is the chancellor. She's going to be very careful with our words, one would expect.

I think a more factual question in someone's asked now is how much of an impact to future performance with unfavorable political decisions regarding Kyle half. So I mean, I think I'll let you both talk about now because obviously half production, but not going to headwind would save on CapEx. So over to you guys.

Well, we think it adds a lot of value. So obviously, you want to go ahead and develop it if we possibly can. I mean it's great because it's value that we can create, we pick up as a license round in the last license round that happened. And of course, that means we access those barrels for free in inverted commerce, right, because we pick them up in a license round. So developing that and using the same technology and the same team as we've just done very successfully with the last 5 wells feels like a very logical thing to do. But it is a new field. So it will need a new license, and that means we're going to have to go through the new regime.

And that's the difference between the net and the potential drilling out that we're planning. The wells are drilling into an existing producing field, it's difficult to envisage situation where we're prevented from doing that. It's not completely out of the question, but I think that's highly unlikely. Something like Kyle, we think it would be mad not to allow a short time back to a system product.

We've already got the license and the government has said that they will allow developments on existing licenses.

And hopefully, they stick by that. And it's a field that has produced in the past. So it's not even like it's a totally new feel. I would say Kyle is possibly the best investment we have in our portfolio based on what we know today, it's about 11 million barrels, probably $25 a barrel development cost and really quick payback. And so we're hopeful that we can crack on and sanction that and get it on stream and 2028, I think, is the schedule that we're looking at, at the moment.

Moving on to M&A then. As you say, it's a sizing that North Sea M&A remains active. Why do you think that is the case given the backdrop?

Maybe I can -- yes, I mean, there's a couple of reasons, I think. Firstly, it's always been quite an active market, right? There's always been a fairly liquid market in the U.K. North Sea. So there are a lot of people out there with knowledge with capital. And despite what we might say about the tax regime I mean it is still a place where broadly the rule of law applies. And therefore, you know that when you buy things, you're going to own them, and that's not always the case in some other jurisdictions where -- exist. So it does have some things going for it in that respect. And then the other very important point is that there are a number of players out there who can do transactions, which are ever synergies, so where they do something that is actually -- yes, industrially logical and makes a good sense for their company, but it also brings a tax advantage, for instance, and that ability to have maybe different tax positions between a buyer and a seller has always created value opportunities that allow transactions to happen. So I think that will be my reason. I mean, yes, the reality is there may be a huge number of new entrants coming in but unfortunately, when it comes to M&A, you don't need -- you only need 2 companies for them to be competition, right? So you don't need that many.

So I'd say there's 2 things. One, if you're in a regime where you pay a 78% tax rate, people are going to look for ways to minimize the amount of tax they pay and a lot of the transactions that have happened frankly, outside looking in, it looks like that was one of the drivers, right. And the second thing is, I guess, there are companies that take a similar view to us that things can't get much worse. And while we can't be certain that things will get better, I don't think we're going to get the tax rate that's higher than the 78% in the future. And therefore, as long as we're not paying on the basis that you assume things get better, you ought to be able to do deals at an upside to them. And hence, there are a number of companies looking at everything that we look at, at the moment.

We're going to let one of our usual or I think I can comment on a specific situation because all the entered was public or the attempt to do the interest merger. Very different questions on it and various different stands, I think, which reflects people's views on the merits of the company. But we'll go with why did the proposed NPS merger not happen given the obvious attractions might it be revisited?

I kick off on that. So we, firstly, just to be clear, I mean, the way these things go, never completely clear that we -- the transaction late so we ended up in those. That's why it became public, and we went through the circled 2 PC periods, which is set by the rules to takeover code. And on the seventh of May, we, our Board decided that it was -- we wanted to withdrawal from the transaction at that time. It is worth being aware that over the 2 PC periods so from kind of March through to May, One of the things that happened in the period was the circle duration day and the actions have done of Trump and the oil price falling by $10 to $12 a barrel. And that was so it was a factor for us in terms of looking at the transaction. And ultimately, we absolutely saw the industrial logic, and we still see that there's a lot of strategic merit in a transaction like that, which is why we spent, frankly, a very large number of months, really focused on seeing if we pick something worth. But at the end of the day, our decision to step back was driven purely on the deal as I put it, we just concluded that it would not be possible to get a deal done on terms that were right for Serica shareholders. And so despite the fact that we've put a huge amount of effort and energy in, we still felt that it was the best thing to do to withdraw because we were not able to conclude a deal on terms that were right for our shareholders. And we will always have that level of discipline in what we do and be willing to step back if we just don't think we can deliver in terms that are right for our shareholders.

I completely agree, Martin. And I think the word discipline is important here. We were very disciplined. We've spent a lot of time on that deal. A lot of effort by a lot of people, but we were prepared to make the right decision for shareholders, which for us at the time was to not go ahead with it because -- stand up in front of shareholders and explain how this was adding value for them. And we just felt that it wasn't compelling enough. You asked the question, could it come back in the future? Of course, even possible. There were things about the deal that we like, otherwise, we wouldn't have been in the conversation in the first place. And many of those things have not gone away. So I would never rule it out coming back on the table, but something in the market would have to change before that happened.

Yes. And I think that the comments about discipline and for shareholder value should cover off any of the other questions we've had. I don't have a couple of questions about specific situations, which we are not going to comment on individually, but I think you've heard Martin refers to deal very clearly that we'll look to do things at shareholder value, where shareholder value can be created. And I think that will hopefully cover off any other questions you may have about the options. Moving on to questions for Martin about capital allocation and shareholder returns. Our share buybacks the possibility.

Well, there are possibility in the sense that we renewed our mandate with the AGM, so we have technically the ability to do buybacks. But you will have probably noticed in my remarks earlier, we talked about dividends. And I think our view is that central to our shareholder return approach will be dividends. We keep alive the option of buybacks but it will be more a case of a top-up, I guess, in relation to the dividend. We see the maintenance of a dividend at a sustainable level over the medium term that we believe we've now rebalance to as being the core of our shareholder return strategy.

Yes. And I think the sustainability of returns is the key when looking at the next question, which is, do you expect to increase the dividends in line with the expected increased free cash generation going forward?

It's a complete balance. I mean you will have noticed that, yes, we expect to see 2026 as being pretty strong from a cash flow generation perspective. But equally, we've got a lot of exciting investment to make in the program that Chris outlined around BKR and Kyle, et cetera. And so we've always got a balance the amount we pay out with making sure that we keep the balance sheet in good shape and can still invest in our portfolio. So we may end up going to a place where we have -- we built up some composition, but that's because we're anticipating a high investment phase thereafter.

So yes, I think that's how we're going to look at it. question now on tax losses. Can you provide clarity as to why the tailwind tax losses haven't been fully utilized as yet? Are they only able to offset profits against barrels producing tailwinds fields and not the wider -- assets and into any form of restructuring that could help accelerate the utilization of these losses?

One is, yes, losses belong to particular companies, so particular subsidiaries of the Serica group that own those losses. So -- and therefore, the way it was [ Gen Z ] sort of ring fenced to itself. And therefore, broadly speaking, those losses can only be used against the production or the assets that sit within those companies. So that's certainly true for all the carryforward losses to the historic loss balances that I outlined in the presentation. So why have they not been used so far? Well, ultimately, that's a factor of not having produced as much or the prices of the oil not having been as high over the period since we've owned those assets. So the -- I guess, the negative is we haven't used them as much, but the positive is we've got a lot left still. So it's kind of they've not gone away, and it's a bit like the reserves happen go away from trade neither, right? So they will be used in the future. In terms of the -- it's the only corporate reorganization have been done, absolutely, those kinds of things can be done. So we're going to look at it in the balance of whether it makes industrial sense to do that and also think about if we, for instance, going to make -- where we pay -- where we don't have losses, which is against BKR, but if we're going to make significant investment in the Bruce field we'll get quite good capital relief against tax from that investment. So we'll factor that into whether it makes sense to go through will inevitably be quite a lengthy and slight complicated process to move assets around. So we're always going to factor that in as well as making sure that we completely follow all of the relatively complicated corporate and tax rules around how you do these things.

We're moving towards the final couple of questions now. So I'd just like to say what I do every time, which is that if we don't answer your question today, if you feel we haven't answered your question fully, then please do just e-mail me or call me. I'm always available time for shareholder questions. Back to emanate briefly, are we currently evaluating other jurisdictions beyond the North Sea.

I'll let Martin comment. So we've said before, we would like to grow in the U.K. North Sea, but we'd also like to be in at least one other jurisdiction. And I think that makes sense in terms of diversification and steady risk we're most actively looking in the U.K. at the moment, and we're screening other parts of the world and looking at areas where we could expand strategy, which to remind folks is to take mid- to late life assets, largely those that have been owned by majors in the past, and do more with them and extend the life of the cut the costs and do additional drilling and add value. And we see other parts of the world where they're getting into that kind of scenario right now where we might be able to replicate what we've done in the U.K. Martin, I don't know whether you want to get any more specific on that.

The only thing I'd add is because people might -- the question might be coming from while hang on, it's still pretty tough in terms of the political backdrop in the U.K. So why not just get out of the U.K., which is obviously a question does come up. And that would be part of the reason why we would like to look at outside of the U.K., at least have some balance against that. But we always have to factor that against the place where we have a competitive advantage is in the U.K. because we're an operator in the U.K., our main production operator, which itself is quite a high bar. That's a bar that's potentially even getting higher because -- there's a lot of regulatory steps to go through, and that's something that's kind of unique for us, it's not unique for us, but it gives us a competitive advantage in the U.K. relative to a number of companies. And of course, tax and the way tax is used is unique to the U.K., we can't -- there's no ability to use losses against another country's production, right? So -- which is, of course, part of the reason we got into the mass we did because the government got politically into putting together a windfall tax when half the companies that they were trying to tax make all their money outside of the U.K., so they couldn't tax it there anyway. So there's always that we need to factor in.

We'll take this one as the final question. I think it's a nice way to end. Chris, you said your review earlier today. Having now been at Serica for just over a year, there remains a lot of hard work ahead to position the company where I want to be. So if you could tell us what those goals are and how they will be achieved.

Yes. I mean, look, we make quite a bit of progress. And I've said this before, I'm very happy with the kind of opportunities we have in the subsurface and the way we're evaluating those. And I think we've got a lot of great projects ahead of us. I would still like to do more M&A, and I would like us to grow in the U.K. And I think there are synergies to be had. So that's still work in progress. The business isn't working as I would like at the moment is our operations. And hopefully, it came across in the presentation. That's not just Triton, right? Triton's still the biggest issue this year, but Bruce has not been running the way we would want it to until really probably around about the beginning of July, and I said when I came into the role that fixing those kind of operations for me is typically about a 2-year project. to get from poor performance to good performance. And I think we're on that journey, and I think we're roughly halfway through, and there's more to do. Our uptime on Bruce isn't where I would want it to be. And as we said during the presentation, on any given day, we don't produce quite enough barrels. We've just had an uptick. We we've grown production around BKR about 10% in July because of some of that stuff that we're doing around production optimization. But we still got a way to go. We still have some maintenance to catch up on both at Bruce and at Triton. And we need to get better at some of the fundamental around production efficiency. And that's things like apart from staying on top of your maintenance, having critical spares in stock so that when something breaks and it's really critical you can replace it quickly, getting back online quickly when you do have a trip. The whole process of looking at your daily losses, how many barrels did not produce yesterday that I want to produce today and what's going to make that difference, just that kind of market and the limitless focus on delivery every day, I think it's still something we need to work on. I think historically, we haven't had that performance focus in Serica and that's part of the cultural shift that we're trying to make, I mean, we started that, but we're not quite there yet. So for me, that represents an upside. We know there's upside in the subsystem. We've identified some of that and we quantitate -- we're going to go and drill those wells. The other -- get the upside is if we get really good and slick production operations, there's huge upside in that as well.

Thanks very much, Chris. So with that, I would just like to say that please do reach out to me if everybody has any questions, they don't think we've answered. Or just in general, I don't have any questions at any time. I always think it's preferable to ask the company rather than speculate on message boards if we would like to get in touch. So unless Martin on have any final comments, then we can hand back over to operator.

Thank you very much.

Perfect. I'll just jump back in there. Thank you very much indeed for updating investors this morning. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback in order the management team can better understand your views and expectations. This will take a few moments to complete, but I'm sure it will be greatly valued by the company. On behalf of management team with Serica Energy plc, we would like to thank you for attending today's presentation. That now concludes today's session. Good morning to you all.