Shares in Serica Energy Plc (LON:SQZ) jumped over 30% in Tuesday’s early deals as access to the Rhum field operations was secured for another year, thus allowing the growing North Sea oiler to complete its transaction with BP.
Rhum was somewhat uniquely impacted by US sanctions on Iran. The project is located in UK waters, but, relies upon certain American owned services providers whilst at the same time the field is part-owned by a division of Iran’s state oil firm.
Amid stricter sanctioning there was increased risk to the viability of Rhum, though recently a temporary extension to an exception agreement had been secured.
Today, it was confirmed that the US Office of Foreign Assets Control (OFAC) has granted a conditional license and given assurance for the asset.
"The receipt of the License and assurance from OFAC is an important step towards ensuring the integrity of ongoing operations from this important North Sea field which makes a significant contribution to UK indigenous gas production,” said Mitch Flegg, Serica chief executive.
“We welcome the constructive approach taken by all parties.
“This outcome protects a valuable British asset which, together with the Bruce and Keith fields, produces about 5% of UK offshore gas production.”
OFAC has given its consent through to 31 October 2019, and this may be renewed via a new application so long as conditions continue to be met.
A key condition is that benefits accruing to the Iranian Oil Company (IOC)are escrowed whilst US sanctions are in place, and, no direct or indirect payments can be made to IOC during the period.
IOC is not allowed to exercise decision-making powers during the period either.
Importantly, the latest agreement with OFAC now allows Serica to complete the acquisition of its stake in Rhum (and other North Sea assets) from BP, plus a further acquisition of interest in the fields from Total.
Serica noted that the completion date of the transaction is now anticipated as 30 November 2018.