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22.11.2017

Acquisition of BP Interests in the Bruce, Keith and Rhum Fields in the North Sea

London, 21 November, 2017 – Serica Energy plc (AIM: SQZ) (“Serica” or “the Company”) is pleased to report that Serica UK, a wholly-owned subsidiary of the Company, has signed a Sale and Purchase Agreement to acquire BP's interests in the Bruce, Keith and Rhum fields in the North Sea and associated infrastructure (the “Acquisition”). Under the Sale and Purchase Agreement, Serica will acquire a 36% interest in Bruce, a 34.83% interest in Keith and a 50% interest in Rhum (collectively the “BKR Assets”). Subject to completion of the Acquisition, Serica will also become production operator of the BKR Assets and the Directors anticipate that approximately 110 BP staff will be transferred to Serica. The Acquisition is subject to certain regulatory, government and partner consents. The deal has an effective date of 1 January 2018 and Completion of the Acquisition is expected to take place in mid-2018.

The Initial Consideration for the Acquisition is £12.8 million, to be adjusted for working capital, with additional contingent consideration amounts of up to £39.1 million payable dependent on certain production and gas price thresholds being achieved. The Initial Consideration is expected to be exceeded by Serica's share of net cash flow from the BKR Assets between 1 January 2018 and Completion of the Acquisition. The contingent cash consideration will be financed by expected cash flows from the BKR Assets.

BP will also receive a share of pre-tax net cash flow from the BKR Assets of 60% in 2018, 50% in 2019 and 40% in each of 2020 and 2021. The net cash flow shares are calculated on a monthly basis. No amounts are payable by Serica UK unless this cash flow is positive and amounts are repayable to Serica UK in the event of negative cash flow, up to the amount of prior payments made to BP in the same year. Excess losses in a year are carried forward to be offset against future income.

BP will retain liability for all decommissioning costs relating to facilities existing at Completion, including wells, associated with the BKR Assets acquired by Serica UK. Serica UK will pay BP additional consideration equal to 30% of such costs at the time of decommissioning reduced by the tax relief that BP receives on these costs. This element of consideration is capped by the amount of net cash flow received by Serica UK as a result of the Acquisition.

As part of the Acquisition, Serica UK has entered into product sales agreements with BP to off-take Serica's share of gas and oil production from the BKR Assets on market terms. It has also agreed to 

enter sales contracts for Natural Gas Liquids production on a similar basis. BP Gas Marketing Ltd (“BPGM”) has also agreed to provide Serica UK with a Prepayment Facility of up to £16 million. This can be used to provide further financing flexibility to cover the cost of hedging instruments which have been purchased by Serica UK in conjunction with signing the Acquisition Agreement and, if required, the Initial Consideration.

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