Serica Energy says its offshore assets remain "cash generative" despite an "unjustifiably punitive fiscal regime".
CEO Chris Cox added that the Energy Profits Levy, and future changed to the tax regime, "may make future investment on the UKCS challenging".
The energy company's EBITDAX (earnings before interest, taxes, depreciation, amortisation and exploration expense) slipped from £222m in the first six months of 2023 to £213m in the first half of 2024.
Oil production also fell from 49,350 barrels of oil equivalent per day (boepd) to 43,700 boepd, while it's full year average production is expected to be at the bottom end of the 41,000-46,000 boepd it had forecast due to unplanned downtime at the Triton Hub.
Speaking to the markets on Tuesday morning, Mr Cox said: "Despite an unjustifiably punitive fiscal regime that may make future investment on the UKCS challenging – and with the level of capital allowances remaining uncertain until the Autumn Budget on 30 October – what is clear is that, thanks to our investment in our assets and our lean operating model, our producing assets remain cash generative, even after paying taxes at a rate of 75% today and due to rise to 78% from 1 November."
Autumn budget 'vital' for future projects
Mr Cox, who was appointed as CEO in May, also noted that maintaining full allowances for capital investment (something Labour has previously said will be removed) is "crucial for the future of investment into the domestic oil and gas sector".
He said: "Having worked in this industry, and the North Sea, for over 40 years I am no stranger to managing uncertainty – primarily as a result of fluctuations in commodity prices and surprises thrown at us by geology – but in the UK we have had the additional challenge of successive governments amending the fiscal regime.
"As we present these results, the uncertainty around the level, duration and availability of investment allowances related to the Energy Profits Levy (‘EPL’) is at least finally close to being removed. The maintenance of full allowances for capital investment and confidence in the cessation of the EPL and its replacement by a long-term sustainable fiscal regime at the latest by 2030 are crucial for the future of investment into the domestic oil and gas sector.
"These investments are needed not only for new fields, but to extend the life of current operations and are the lifeblood for companies in our supply chain across the UK. Serica has spent over a billion Pounds in the UK supply chain over the last five years, and similar expenditures will be lost going forward should the tax regime make future investment uneconomic.
"Investment sustains production and ultimately increases Government tax revenues, supports the ability of companies in the North Sea ecosystem to play their part in the UK’s energy transition, and limits global emissions by lessening the need for higher-carbon imports. Our industry’s expenditure also supports highly-skilled jobs in an already established domestic supply chain across the UK. The skills which these companies have developed can largely be transferred and will be required during the energy transition.
"Although where we land on capital allowances in the Autumn Budget is of course vital for future projects in our portfolio (such as Buchan Horst project and a range of infill wells), whatever happens on capital relief does not materially impact our existing operations. Our producing fields are profitable today and will remain so for many years, and are set to generate over half a billion Dollars over the next several years assuming commodity prices at current levels and after taking into account our existing capital commitments. We also benefit from our low exposure to decommissioning expenditure. This is a strong base from which to pursue growth both domestically and internationally."
Read the full report here.