The board of directors of each of Serica Energy and Pharos Energy have reached agreement on the terms of a recommended offer pursuant to which Serica will acquire the entire issued and to be issued ordinary share capital of Pharos. The Acquisition is intended to be effected by means of a scheme of arrangement under Part 26 of the Companies Act.
Accordingly, the Pharos Board has decided unanimously to withdraw its recommendation of the Ratio Offer and intends to recommend unanimously the Acquisition to Pharos Shareholders. The Pharos Board therefore proposes to adjourn until further notice the Ratio Offer Shareholder Meetings which have been convened for 17 August 2026 for the purposes of considering the Ratio Offer. Pharos Shareholders are therefore urged to take no action in relation to the Ratio Offer.
Katherine Roe, Pharos' CEO, stated:
'As announced in our recent trading update, the business is benefitting from strong operational momentum. At the same time, the Board of Pharos is delighted to be recommending this offer from Serica, which delivers shareholders a material premium in cash to the Ratio Offer.'
Chris Cox, Serica's CEO, stated:
'The acquisition of Pharos is a compelling opportunity to deliver a first step in our long-standing strategic objective of adding to the diversification of our business through international expansion, on terms that are accretive on a per share basis across all key metrics, with multiple embedded growth options. Upon completion the transaction will boost our reserves, resources and add materially cash-generative production, while at the same time delivering an attractive liquidity route for Pharos shareholders.
Pharos brings a highly experienced regional team and an operating model that mirrors our own focus on cash generation funding both growth and returns. As we continue to invest in the UK North Sea, with a multi-well rapid return drilling programme set to begin in 2027, this presents a complementary platform from which to grow in South East Asia, a region with increasing energy demand that benefits from a supportive environment for upstream investment. With a robust balance sheet and material ongoing cash generation, we continue to analyse multiple opportunities to deliver further M&A and create significant value for shareholders.'
Strategic rationale for the Acquisition
- The Acquisition is consistent with Serica's long-standing strategic objective of increasing its scale and diversification by adding overseas operations with a focus on regions which benefit from a supportive regional environment for upstream investment and increasing energy demand as well as running room for further growth. The Acquisition establishes an operating platform in two new regions at a value accretive cost, and brings multiple embedded growth options - infill drilling at TGT and CNV, development drilling in Egypt on recently implemented improved fiscal terms, and the high-impact exploration acreage at Blocks 125 & 126.
- Pharos has been pursuing an analogous business model, with cash-generative production funding shareholder returns and growth, and brings a highly experienced regional team which complements Serica's position as one of the leading independents on the UK Continental Shelf.
- The Combined Group brings together the complementary operating skills of Serica and Pharos, applying Serica's proven subsurface capability to Pharos' mature producing assets, alongside Pharos' established in-country organisations and host-government relationships in Vietnam and Egypt as support to Serica's further growth optionality.
- Specifically:
- Serica believes that the Acquisition offers Pharos Shareholders a materially higher degree of certainty that completion will be achieved than under the Ratio Offer, given Serica's established record of obtaining the regulatory, licensing and government consents required to complete corporate and asset acquisitions;
- the Acquisition is expected to be immediately accretive on a per share basis to Serica's production, reserves and key financial metrics from operations;
- the Combined Group will benefit from increased scale and diversification:
- 13% increase in pro forma 2P reserves to 156.8 mmboe;
- 15% increase in pro forma 2C resources to 129.4 mmboe; and
- expected pro forma 2026 exit production rate of c.70,000 boepd;
- the Acquisition adds established, cash-generative production in Vietnam and Egypt, and a debt-free balance sheet with approximately $45 million of cash as at 30 June 2026;
- the Combined Group would benefit from a robust balance sheet, with material liquidity, with the capacity to optimise the delivery of infill opportunities in Vietnam and Egypt, while continuing to seek a farm out partner for a high-impact drill-ready prospect in Block 125 & 126, Vietnam and elimination of overlapping corporate overhead costs; and
- the Acquisition reflects Serica's disciplined approach to inorganic growth and represents an acquisition cost of $8.4 per 2P boe ($4.4/boe including 2C resources), for existing production with low decommissioning liabilities, comparing favourably with relevant precedent transactions.
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Source: Serica Energy
