Final Results

Serica Energy plc
31 March 2006

                               Serica Energy plc

                          ('Serica' or the 'Company')



                         SUMMARY 2005 FULL YEAR RESULTS

                                      AND

                               FORWARD PROGRAMME



Serica today announces its 2005 full year results.  A summary of these results
is included below, and the full 2005 Annual Report and Accounts are available at
www.serica-energy.com and www.sedar.com.



In the North Sea, the Global Santa Fe 140 drilling rig has been secured for the
Company's first exploration well on Block 23/16f in partnership with Endeavour
Energy UK Limited.  Drilling in Block 23/16f is expected to take place in the
fourth quarter of 2006 following completion of site preparations.  In Indonesia,
the Company is currently concluding arrangements for a rig to commence its 2006/
7 drilling programme in the Biliton Block.



Drilling on the Glagah Kambuna and Asahan Offshore Blocks in Indonesia awaits
the outcome of a large 3D seismic programme scheduled to commence in the third
quarter of 2006.  The Company continues to explore avenues to identify rig slots
in the currently tight rig market in order to bring forward drilling on Serica's
other exploration prospects.



2005 Highlights



Operational



  • Two operated wells completed in Indonesia were gas discoveries:
      • Kambuna-2 well tested at good flow rates, demonstrating commercial
        potential and highlighting further upside of the block
      • Togar-1A well encountered high quality gas-bearing sands

  • Awarded two new North Sea exploration blocks, Block 14/15a and Block 23/
    16f, in the UK 23rd Licensing Round

  • Appointment of Paul Ellis as Chief Executive Officer



Financial



  • Completed listing on AIM in December 2005 and raised £64 million before
    costs, through JPMorgan Cazenove

  • Serica has adopted International Financial Reporting Standards for its
    2005 results (previously Canadian GAAP)



Forward Programme



  • Kambuna Field Plan of Development submitted to the Indonesian authorities,
    targeting first production in 2008.  Discussions ongoing with third parties
    regarding gas sales agreements



  • Plan of Development for Tanjung Perling Field to be submitted during first
    half 2006


  • Drilling rigs identified for wells to be drilled in the UK and Indonesia:
      • First well on North Sea Block 23/16f to be spudded in Q4 2006
      • Concluding arrangements for a rig to commence the Indonesian drilling
        programme

  • A large 3D seismic programme covering parts of both the Glagah Kambuna and
    Asahan blocks contracted to commence in Q3 2006



Tony Craven Walker, Chairman, commented:



'As a result of the drilling success and the completion of fund raising, 2005
was an excellent year for the Company.  With the appointment of Paul Ellis as
Chief Executive Officer to complete our management team, Serica is well placed
to build upon this success through the ambitious exploration and field
development programme that is planned for this year and next.'



                                                                   31 March 2006







Background Notes



Serica is an international oil and gas exploration company with operations in
Indonesia, the UK North Sea and Spain.  The Company's ordinary shares are listed
in London on AIM and on the Canadian TSX Venture Exchange under the symbol 'SQZ
'.  The 2005 Annual Report and Accounts are available at www.serica-energy.com
and www.sedar.com.



Enquiries:


Serica Energy plc
Paul Ellis, Chief Executive Officer    [e-mail]                           [phone]
Chris Hearne, Finance Director         [e-mail]                          [phone]

Pelham Public Relations -UK
James Henderson                        [e-mail]                       [phone]
Alisdair Haythornthwaite               [e-mail]              [phone]

CHF - Canada
Jan Moir                               [e-mail]                                      [phone]
Heather Colpitts                       [e-mail]                                  [phone]



Forward Looking Statements

This disclosure contains certain forward looking statements that involve
substantial known and unknown risks and uncertainties, some of which are beyond
Serica Energy plc's control, including: the impact of general economic
conditions where Serica Energy plc operates, industry conditions, changes in
laws and regulations including the adoption of new environmental laws and
regulations and changes in how they are interpreted and enforced, increased
competition, the lack of availability of qualified personnel or management,
fluctuations in foreign exchange or interest rates, stock market volatility and
market valuations of companies with respect to announced transactions and the
final valuations thereof, and obtaining required approvals of regulatory
authorities.  Serica Energy plc's actual results, performance or achievement
could differ materially from those expressed in, or implied by, these forward
looking statements and, accordingly, no assurances can be given that any of the
events anticipated by the forward looking statements will transpire or occur, or
if any of them do so, what benefits, including the amount of proceeds, that
Serica Energy plc will derive there from.


CHAIRMAN'S STATEMENT



I am delighted to report that Serica has started 2006 in a strong operational
and financial position.  With the successful raising of £64 million of new
capital before expenses and the listing of the Company's shares in London on
AIM, to complement our existing quotation on the TSX Venture Exchange market in
Canada, the Company is now well placed to create shareholder value through its
ambitious exploration drilling and field development programmes.  I should like
to thank shareholders for their support during the recent funding and to welcome
new shareholders who joined us at the time of the AIM listing.



During the year we strengthened the management team with the appointment of Paul
Ellis as Chief Executive Officer who will work closely with Chris Atkinson, the
Chief Operating Officer and Chris Hearne, the Finance Director.  Paul has over
35 years' experience in the areas of exploration, production, development and
management of international oil and gas ventures.  He has held senior
appointments with major upstream oil and gas companies and with independent
exploration companies.



We made good progress in Indonesia, where we achieved exploration success, and
in the UK.  In Indonesia, the successful outcome of our 2005 drilling programme
has demonstrated both the commercial potential of the Kambuna Field and the
significant gas prospectivity of the adjacent Asahan Block.  The Company has
already submitted plans for the development of Kambuna to the Indonesian
authorities, with production scheduled for 2008, and is in discussions with
third parties interested in purchasing the gas.  In addition, new seismic
information has indicated that the Tanjung Perling Field, in the south of the
Asahan Block, may be commercial and a development plan is also being prepared
for this field.



We start these new developments, and our exploration drilling and seismic
programmes, at a time of high oil and gas prices but also at a time of high rig
activity. This increased rig demand worldwide has led to a very tight drilling
market.



Nevertheless, in this competitive market the Company has secured a rig for its
first well in North Sea Block 23/16f, to be spudded in the fourth quarter this
year.   In Indonesia the Company is concluding arrangements for a rig for its
2006/7 drilling programme in the Biliton Block.  We continue to review options
to bring forward exploration drilling on our other blocks but we are cautious to
avoid incurring excessive drilling costs in the current overly tight market.



In summary, 2005 was an eventful year for the Company with a positive outcome.
We have seen successes in Indonesia with our first two wells drilled as operator
and have secured the funding required to build on these early successes.  I am
immensely pleased with these achievements and optimistic for the future.





Tony Craven Walker

Chairman




CHIEF EXECUTIVE OFFICER'S REPORT



I am pleased to present this as my first report since joining the Company last
September.



It is two years now since Serica was formed and listed on the TSX Venture
Exchange and, in that time, the Company has made significant progress.  From
Serica's small starting position at the end of 2003, the Company's portfolio has
grown to include a broad spread of interests in the North Sea and Indonesia, its
two main areas of focus. Both these areas provide the basis for future growth.
An independent study commissioned by the Company at the time of its introduction
to AIM identified 22 exploration prospects in the Company's portfolio which
could be potentially commercial.



This is a considerable portfolio for a company of Serica's size to have
accumulated in such a short period of time.  Its interests in the North Sea and
Indonesia cover the technical risk spectrum, giving exposure both to lower risk
appraisal projects and to higher risk, high impact projects whilst also
providing a balance of geological and political risk.  It is an enviable
portfolio for a small company to have.



The first two wells drilled by the Company on its Asahan and Glagah Kambuna
blocks in Indonesia at the end of 2005 reflect the quality of the Company's
acreage.  Serica is operator with a 55% interest in both of these blocks.  The
first well, Kambuna-2, tested gas at good flow rates and has demonstrated the
commercial potential of the Kambuna Field as well as indicating further
considerable upside to that field.  The second well, Togar-1A, a wildcat
exploration well drilled to test a direct hydrocarbon indicator on the adjacent
Asahan Block, encountered high quality gas bearing sands in line with our
expectations and proves the Company's technology, increasing significantly our
optimism for commercial discoveries to be made on the block.



Following these positive results and the successful funding, the Company
submitted a Plan of Development for the Kambuna Field to the Indonesian
authorities at the turn of the year with a targeted production date of 2008.
Discussions have already commenced with third parties who have expressed
interest in acquiring the gas. A 3D seismic survey over the Kambuna Field and
adjacent Company acreage will be acquired later this year.  More recently, the
analysis of new seismic data acquired by the Company has shown that the Tanjung
Perling gas accumulation, which lies to the south of Kambuna in our adjacent
Asahan Block, has commercial potential.  We are therefore preparing a Plan of
Development for the Tanjung Perling Field to be submitted to the Indonesian
authorities this year.



During 2005, further prospects were added to the Company's inventory with the
award of two North Sea licences in the UK 23rd Licensing Round, Block 14/15a and
Block 23/16f, both operated by Serica which has an interest of 50% in each
block.  Serica now has an interest in eight blocks and part blocks in the North
Sea, all of which it operates.  Notwithstanding a tight rig market, the Company
has put arrangements in place to drill an exploration well in Block 23/16f in
the fourth quarter of 2006, less than a year from the award of the licence.



The sharp increase in exploration drilling activity worldwide caused by high oil
and gas prices has resulted in offshore drilling rigs becoming harder to obtain
and rig owners are seeking long term contracts at very high day rates.  Serica
is adapting to these changed circumstances and will be entering into rig-sharing
agreements with other operators and favouring farm-in partners who have rigs
under contract.


In addition to the semi-submersible rig secured for the drilling of the first
exploration well in UK Block 23/16f, the Company is finalising arrangements for
a rig for its 2006/7 Indonesia drilling programme in the Biliton Block.  We
continue to explore avenues to identify rig slots to bring forward drilling on
other prospects.  A large 3D seismic programme covering parts of both the Glagah
Kambuna and Asahan blocks is planned to take place in mid year before selecting
the drilling locations in those blocks.



One of the factors that differentiates Serica from other small exploration
companies is that Serica operates all but one of its licence blocks and has
working interests of between 50% and 100% in all but one block.  This gives
Serica financial and operational flexibility and allows it, in the event of
farming-out, to retain a significant interest and exposure to the potential
upside.



Serica's strategy is the creation of significant shareholder value through high
impact exploration and near term development. To achieve this goal, the Company
aims to maintain a portfolio of prospects that will provide opportunities each
year for drilling low risk appraisal wells together with higher risk, high
impact wells.  To this end the Company will make applications for exploration
licences in existing and new areas of interest and will seek to undertake new
ventures such as farm-ins, acreage trades and corporate transactions, focusing
on those opportunities which have the potential to add significant value.  Our
focus for this year is to progress our current exploration and development
programmes whilst being open to new opportunities to create value for
shareholders.





Paul Ellis

Chief Executive Officer


REVIEW OF OPERATIONS - Overview



Serica has operations in three different areas of the world.  Two of these
areas, Indonesia and the UK North Sea, are major oil and gas producing regions
and the third, onshore northern Spain, is an area that has yet to be fully
explored using modern exploration techniques.



The Company achieved success in 2005 with new acreage awarded in the North Sea
and two gas discovery wells in Indonesia: Kambuna-2 and Togar-1A.  The Company
is currently studying the development of two offshore gas fields, the Kambuna
Field in the Glagah Kambuna TAC and the Tanjung Perling Field in the adjacent
Asahan PSC, and has commenced gas sales negotiations for both fields, in which
it holds interests of 55% and is the operator.



Indonesia



During 2005, the Company mobilised a drilling rig to drill two wells offshore
Sumatra.  Kambuna-2 was drilled in September in the Glagah Kambuna Technical
Assistance Contract ('TAC') and Togar-1A was drilled in the Asahan Offshore
Production Sharing Contract ('PSC') in October.  Kambuna-2 demonstrated the
commercial potential of the Kambuna Field and a Plan of Development to supply
gas to onshore Sumatra starting in 2008 was submitted to Pertamina in December.
Gas sales negotiations have now been initiated for gas from the Kambuna Field.



The Togar-1A well discovered gas but not in sufficient quantities to justify a
stand-alone development.  However, it may be possible to produce the Togar Field
as a satellite to other potential field developments.  A new 2D seismic survey
was completed in the Asahan Offshore PSC and locations for future exploration
wells are being established.



In the Biliton PSC further 2D seismic data was acquired and a basin modelling
study was completed to examine the likely flow of hydrocarbons from the source
rocks to the mapped prospects on the block.  Drilling locations are being
determined and a three-well exploration programme is now being planned.



United Kingdom



Serica has been actively involved in the North Sea for five years and continued
to improve its portfolio of interests with the award of two Central North Sea
licences in the UK 23rd Licensing Round: Block 23/16f and Block 14/15a.  The
Company is already preparing to drill a well in Block 23/16f to test 'Magellan',
a prospect on which drilling is expected to commence in the fourth quarter of
2006.



During the year considerable efforts were made in the technical evaluation of
our blocks in the Southern Gas Basin and we are now making preparations for the
drilling of the 'Oak' gas prospect in Block 54/1b and the 'Chablis' appraisal
well in Block 48/16b, both operated by Serica.



Spain



The Company holds a 100% interest in four exploration permits covering
approximately 1,116 square kilometres onshore northern Spain.  The permits are
located within the Autonomous Community of Aragon and lie approximately 60
kilometres southeast of the existing Serrablo Gas Field.



Geological evaluation of the permits has confirmed a functioning petroleum
system and a series of exploration leads have been mapped. It has further been
determined that additional 2D seismic data will need to be acquired in 2007 to
convert these leads into prospects for drilling.


Indonesia



Serica has been active in Indonesia for four years and has interests in three
PSCs and one TAC.  The portfolio has been assembled through acquisition and
direct negotiation and the Company continues to seek further exploration
opportunities in this highly prospective country.



During 2005, Serica contracted the semi-submersible drilling rig 'Galaxy Driller
' to drill two wells: the Kambuna-2 appraisal well in the Glagah Kambuna TAC and
the Togar-1A exploration well in the Asahan Offshore PSC.  Both wells
successfully encountered gas-bearing reservoirs.



The Company also acquired 2D seismic data in the Asahan Offshore and Biliton
PSCs and is now finalising the interpretation of both areas and selecting
drilling locations.



The following table summarises the Company's interests in Indonesia.




Contract                  Working Interest    Role       Location
Glagah Kambuna TAC        55%                 Operator   Offshore North Sumatra
Asahan Offshore PSC       55%                 Operator   Offshore North Sumatra
Biliton PSC               90%                 Operator   Offshore Java Sea
Lematang PSC              10%                 Partner    Onshore South Sumatra








Glagah Kambuna TAC



The Glagah Kambuna TAC comprises an area of approximately 380 square kilometres
and lies offshore North Sumatra immediately adjacent to the Asahan Offshore PSC.
Serica has a 55% working interest and is the operator of the block.



Prior to 2005, the Glagah Kambuna TAC contained two discovery wells: the
Glagah-1 well drilled by Caltex in 1985 and the Kambuna-1 well drilled by Bow
Valley in 1986. In September 2005, Serica drilled its first operated well, the
Kambuna-2 appraisal well. The well was drilled to a depth of 7,963 ft and tested
gas at 17.5 mmscfd and over 1,500 bpd of 55degrees API gravity condensate.  This
well demonstrated the commercial potential of the Kambuna Field and the Company
has submitted a Plan of Development to Pertamina, the Indonesian State Petroleum
Company.



As part of this development plan the Company has contracted Veritas DGC to
acquire a 3D seismic survey of up to 470 square kilometres commencing in
mid-2006.  The survey will cover not only the Kambuna Field but also a large
area covering additional prospects lying both in the Glagah Kambuna TAC and in
the Asahan Offshore PSC.  Following the interpretation of the new data and
selection of well locations, drilling will take place in 2007.



Field development, in 50 metres of water, will be straightforward and potential
markets for Kambuna gas include the PLN power plant at Belawan and the city of
Medan, one of Indonesia's largest cities.   Serica is in negotiations with
Pertamina and PT Perusahaan Gas Negara ('PGN'), the Indonesian state-owned gas
company with respect to a gas sales agreement for the Kambuna Field, with
production expected to commence in 2008.


Asahan Offshore PSC



The Asahan Offshore PSC comprises an area of approximately 2,185 square
kilometres offshore North Sumatra and lies immediately adjacent to the Glagah
Kambuna TAC. Serica has a 55% working interest and is the operator of the PSC.



The Asahan Offshore PSC contains the Tanjung Perling and Togar discovery wells.
The Tanjung Perling Field, approximately 20 kilometres offshore, was discovered
by Pertamina and Japex in 1974 but was uncommercial at that time.  New seismic
data was acquired by Serica in 2004 and 2005 that confirmed the extent of the
accumulation and Serica plans in 2006 to submit a Plan of Development for the
Tanjung Perling Field to BPMIGAS, the Indonesian government agency for upstream
oil and gas business.  The Company recently executed a Memorandum of
Understanding with PGN, relating to the delivery of gas from the Tanjung Perling
Field starting in 2008.



The Togar-1A well, drilled in October 2005, was the Company's second operated
well and was a small gas discovery.  The well successfully confirmed the use of
seismic direct hydrocarbon indicators as an effective exploration tool in the
Asahan Block, which contains a number of other prospects that are currently
being evaluated for exploratory drilling.  Togar itself may be exploited via a
future larger development on the block.



The Asahan Offshore PSC is in relatively shallow water, around 50 metres, and
the ultimate development of its gas fields will take advantage of readily
available conventional technology.



Biliton PSC



The Biliton PSC covers an area of approximately 6,575 square kilometres in the
Java Sea between the Indonesian islands of Java and Kalimantan.  The Company has
a 90% working interest in Biliton and is the operator of the PSC.



The Biliton PSC lies in a virtually unexplored Indonesian basin which has many
of the characteristics of analogous basins nearby which have to date produced
substantial volumes of oil and gas.  Only one exploration well has been drilled
in the area, the Parang-G1 well drilled by Ashland Petroleum in 1974.  Although
this well did not find reserves of oil or gas it did encounter oil shows.  In
1990, British Petroleum carried out a seabed survey that showed the presence of
nine potential oil seeps within the current block boundary. Both the shows in
the well and seep information demonstrate that hydrocarbons have been generated
within the area.



During 2004 and 2005, Serica acquired approximately 4,500 line kilometres of 2D
seismic data which is currently being interpreted.   It is expected that up to
three prospects will be selected for an exploration drilling programme in 2006/
7.  These wells will test independent features, with relatively shallow target
drilling depths and are expected to be drilled in a three well back-to-back
campaign. ---------------



Lematang PSC



The Lematang PSC, onshore South Sumatra, covers an area of approximately 407
square kilometres, divided into two separate blocks.  It lies within the
prolific South Palembang Basin where oil and gas were first discovered in the
late 19th century.  Serica has a 10% working interest in the Lematang PSC, which
is operated by PT Medco Energi E&P ('Medco').



Several exploration wells were drilled between 1987 and 1997, resulting in the
discovery of two gas fields, Harimau and Singa.  The Harimau Field has been
producing since 1991 and is now approaching the end of its life.



In 2004, Medco submitted a Plan of Development for the Singa Field to BPMIGAS.
The plan of development includes a 40 kilometre pipeline to Pagar Dewa, the
starting point for the South Sumatra to West Java gas pipeline project being
undertaken by PGN.



Serica's share of operating and development costs under the Lematang PSC is
currently being carried by other partners and it is expected that the Company's
cost carry will be sufficient to cover all costs of the development of the Singa
Field in 2006 but that an additional US$6.5 million will be required by the
Company to fund its share of development costs in 2007.



United Kingdom



Serica has been active in the North Sea for over five years and has assembled,
through its participation in the UK 22nd and 23rd Licensing Rounds as well as
through acquisitions, a portfolio of eight blocks in the North Sea's Southern
Gas Basin and Central Graben.  All of the North Sea properties held by the
Company, whether in the Southern or Central North Sea, are within 15 kilometres
of existing infrastructure that could potentially transport any discovered
hydrocarbons to shore and to the European market.



The following table summarises the Company's interests in the North Sea.


Block(s)                       Working Interest       Role              Location
Block 48/16b                   100%                   Operator          Southern Gas Basin
Blocks 48/16a, 47/20b          100%                   Operator          Southern Gas Basin
Block 54/1b                    100%                   Operator          Southern Gas Basin

Block 14/15a                   50%                    Operator          Central North Sea
Blocks 23/16e, 23/17b          50%                    Operator          Central North Sea
Block 23/16f                   50%                    Operator          Central North Sea







Block 48/16b and Blocks 48/16a, 47/20b



Block 48/16b and Blocks 48/16a, 47/20b are contiguous and cover a total of 377
square kilometres in the Southern Gas Basin.  Serica has a 100% interest in
these blocks, which contain one undeveloped discovery named Chablis and several
undrilled prospects. The Chablis Field was discovered by the 48/16b-2 well,
drilled by ConocoPhillips in 2001 but not production tested.



Serica has undertaken detailed geophysical and petrophysical studies of Chablis
in order to define an appraisal plan. The field is close to existing
infrastructure with two alternative transportation options for gas production.
Whilst well 48/16b-2 demonstrated the presence of hydrocarbons, there remains
uncertainty as to the quantity of hydrocarbons recoverable and an appraisal well
will improve Serica's understanding of the gas accumulation. Serica is planning
to drill an appraisal well up-dip from the existing discovery.



In addition to Chablis in Block 48/16b, Serica is also evaluating a number of
features in Blocks 48/16a and 47/20b, in particular the Sancerre prospect, with
the aim of identifying possible satellites to Chablis.



Block 54/1b



Block 54/1b covers 106 square kilometres in the Southern Gas Basin.  Serica is
operator and has a 100% interest in the block which it was awarded in 2004 in
the UK 22nd Licensing Round.  The Company has already fulfilled the work
obligation on the block by acquiring 3D seismic data.


The key reservoir target in this block is the Rotliegend Leman Sandstone in
which gas has been found in several locations close to Block 54/1b including the
Davy Field, approximately five kilometres to the west. Reservoir quality in the
block is expected to be good, with sand thickness anticipated to be from 400 to
750 ft.



Serica has completed a detailed analysis of the block using 3D seismic and
regional well data, from which it has identified the Oak prospect, a Rotliegend
Sandstone feature with a direct hydrocarbon indicator that appears to delineate
a potential gas accumulation immediately up-dip from well 54/1b-2.  Serica
intends to drill the Oak prospect in late 2006, depending on the availability of
a suitable drilling unit.



Block 14/15a



Block 14/15a covers 108 square kilometres in the Central North Sea.  Serica is
operator and has a 50% interest in the block. Serica and its partner, Paladin
Expro Limited (now part of Talisman Energy Inc), were awarded the block in 2005
in the UK 23rd Licensing Round.



Block 14/15a lies in the Outer Moray Firth area of the Central North Sea,
immediately north of the established Piper, Claymore, Tartan, Highlander and
Lowlander oil fields. The current 3D seismic data has been used to identify
several leads on the block and, in order to refine the interpretation, Serica
will undertake a seismic reprocessing project involving pre-stack depth
migration of the existing 3D data.



Leads have been defined at upper Jurassic, lower Cretaceous and Paleocene levels
and the reprocessing project aims to mature some of the leads into drillable
prospects.



Blocks 23/16e, 23/17b and Block 23/16f



Blocks 23/16e, 23/17b and Block 23/16f are contiguous and cover 76 square
kilometres in the Central Graben area of the North Sea.  Serica is operator and
has 50% interests in Blocks 23/16e and 23/17b, which Serica and its partners,
Endeavour Energy and Wham Energy, were awarded in the UK 22nd Licensing Round.
Serica is also operator and has a 50% interest in Block 23/16f, which it and its
partner, Endeavour Energy, were awarded in the UK 23rd Licensing Round.



An exploration well, 23/16a-2, drilled by Britoil in 1988 and lying in the area
now covered by Block 23/16f, produced light crude oil on test at a rate of 96
bpd from Tertiary sands of the Forties and Andrew formations.  This discovery is
now called 'Henry' and the most likely reason for poor flow in the Henry
discovery well is believed to be formation damage and the reservoir quality in
the vicinity of the well.



In areas of the block outside the 23/16a-2 well location, there are character
changes on the seismic data that can be inferred to indicate the presence of
thicker channel sands with improved reservoir characteristics. Serica has mapped
the Henry discovery and the Columbus prospect in the Forties Sandstone and a
prospect called Magellan in the underlying Andrew Sandstone. A deeper lead,
Shackleton, has also been identified in the Lower Cretaceous.



Serica has secured a drilling rig to drill a well in Block 23/16f in the fourth
quarter of 2006 to test the Magellan prospect.












MANAGEMENT'S DISCUSSION AND ANALYSIS



The following management's discussion and analysis ('MD&A') of the financial and
operational results of Serica Energy plc and its subsidiaries (the 'Group')
should be read in conjunction with Serica's consolidated financial statements
for the year ended 31 December 2005.



References to the 'Company' include Serica and its subsidiaries where relevant.
All figures are reported in US dollars ('US$') unless otherwise stated.



Overall Performance



Serica's activities are centred on Indonesia, the UK and Spain. The Group has
limited current oil and gas production with the main emphasis placed upon
exploration and its future drilling programmes. During 2005, work has continued
on building the Group's financial position and adding to its properties.



Two operated wells were completed in Indonesia and both were gas discoveries.
The Kambuna-2 well tested at good flow rates, demonstrating commercial potential
and highlighting further upside of the block and the Togar-1A well encountered
high quality gas-bearing sands.  In the UK Serica was awarded two new North Sea
exploration blocks, Block 14/15a and Block 23/16f, in the UK 23rd Licensing
Round.



During the year Serica acquired an additional 15% interest in the Asahan
Offshore PSC from PT Medco Energi International TBK subject to the necessary
government approvals. The consideration of US$1,000,000 was payable in cash. In
addition Serica farmed out 25% working interests in the Glagah Kambuna TAC and
the Asahan Offshore PSC to Duinord Petroleum Inc. in return for a 50% cost carry
on the 2005 two-well programme plus some US$1,000,000 in back costs.



Following completion of a reorganisation on 1 September 2005 (the '
Reorganisation'), whereby the common shares of Serica Energy Corporation were
automatically exchanged on a one-for-one basis for ordinary shares of the
Company, the ordinary shares were successfully admitted to the London
Alternative Investment Market ('AIM') on 13 December 2005.



The $112 million before costs, raised in conjunction with the AIM listing, has
enabled Serica to end the year with a robust balance sheet with net assets of
$131 million, and sufficient funding to progress with its forward programme.
This includes the Kambuna Field Plan of Development submitted to the Indonesian
authorities, targeting first production in 2008, and the Plan of Development for
the Tanjung Perling Field to be submitted during first half 2006.  In addition a
drilling rig has been contracted for a first well on North Sea Block 23/16f to
be spudded in the fourth quarter 2006 and the Company is concluding arrangements
for a rig for its 2006/7 Indonesian drilling programme.



The results of Serica's operations are detailed below, and Serica has chosen to
adopt International Financial Reporting Standards ('IFRS') and henceforth the
results presented in this MD&A and the financial statements will be presented in
accordance with IFRS. The transition date is 1 January 2004 and the first year
reported under IFRS is the year ended 31 December 2005. Accordingly,
comparatives have been restated from Canadian GAAP to comply with IFRS. The
reconciliations to IFRS from the previously published Canadian GAAP financial
statements are provided in note 30 to the audited financial statements. Under
IFRS the Reorganisation was considered to be a reverse takeover by Serica Energy
Corporation and as such the financial statements of the Group represent a
continuation of Serica Energy Corporation.




Results of Operations



Serica generated a loss of US$4.1 million for 2005 compared to US$7.7 million
for 2004.


                                                                                             2005                  2004
                                                                                           US$000                US$000
Sales revenue                                                                                124                   156

Expenses:

     Administrative expenses                                                              (5,340)               (4,735)
     Reverse acquisition and listing expenses                                                  -                (1,290)
     Pre-licence costs                                                                      (695)                  (61)
     Share-based payments                                                                 (1,013)                 (167)
     Depletion, depreciation & amortisation                                                 (30)                  (14)
     Release of decommissioning provision                                                      -                   122
     Gain on disposal of shareholding                                                          -                   141
     Finance revenue                                                                         526                   170
Loss before taxation                                                                      (6,428)               (5,678)

     Taxation credit/(charge)                                                              2,309               (2,064)

Loss for the year                                                                         (4,119)               (7,742)



Revenues from oil and gas production are recognised on the basis of the
Company's net working interest in its properties.  Revenues throughout each
period were generated from Serica's 10% interest in the Harimau producing gas
and gas condensate field.  Whilst steady during 2005, the decrease in sales
revenues from US$0.16 million for 2004 to US$0.12 million for 2005 reflected the
gradual decline in production levels partly offset by higher sales prices.
Direct operating costs for the field during these periods were carried by Medco
Energi Limited.



Administrative expenses of US$5.3 million for 2005 increased from US$4.7 million
for 2004.  The increase reflects the expansion of the Company and its resources.



Share-based payment costs of US$1.0 million reflects share option grants made
during the course of 2004 and 2005 and compares with a cost of US$0.17 million
for 2004.  Negligible depletion, depreciation and amortisation charges for 2005
represent office equipment only.  The costs of petroleum and natural gas
properties are not currently subject to such charges pending further evaluation.




Net interest income of US$0.53 million for 2005 compares with US$0.17 million
for 2004.  The increase from last year was due to higher cash balances.  There
have been no gains on disposals this year whilst a gain of US$0.14 million arose
during the equivalent period of last year on the sale of shares in a company
listed on the TSXV.



The taxation credit for the year arose from a reduction in the deferred tax
liability following the redemption of the ENI Loan Note, with no reciprocal
increase in current tax. Expenditures during 2005 have reduced any potential
current income tax expense arising for the year to US$ nil.



The net loss per share fell from US$0.16 to US$0.05 due to the substantial
increase in the number of shares in issue, and the decrease in the net loss for
the year compared to 2004.



Summary of Quarterly Results


Quarter ended:                                                 31 Mar          30 Jun          30 Sep          31 Dec
                                                               US$000          US$000          US$000          US$000
2005
Sales revenue                                                      31              32              36              25
Loss for the quarter                                            1,455           1,486             775             403
Basic and diluted loss per share US$                             0.02            0.02            0.01            0.01


2004
Sales revenue                                                      38              44              41              33
Loss for the quarter                                            2,123           1,570           3,276             773
Basic and diluted loss per share US$                             0.05            0.03            0.07            0.01






Working Capital, Liquidity and Capital Resources



Current Assets and Liabilities



An extract of the balance sheet detailing current assets and liabilities is
provided below:


                                                                           31 December                 31 December 2004

                                                                                  2005
                                                                                US$000                           US$000
Current assets:
    Inventories                                                                    878                             259
    Financial assets                                                                 -                           7,204
    Trade and other receivables                                                  2,106                           1,920
    Cash and cash equivalents                                                  109,750                           1,729
Total Current assets                                                           112,734                         11,112

Less Current liabilities:
   Trade and other payables                                                    (7,136)                          (1,315)


Net Current assets                                                             105,598                           9,797



At 31 December 2005, the Company had net current assets of US$105.6 million
which comprised current assets of US$112.7 million less current liabilities of
US$7.1 million, giving an overall increase in working capital of US$95.8 million
in the year.  The Company raised additional substantial new funds through the
exercise of warrants and the raising of £64 million (US$112 million) before
costs through a placing on AIM in 2005.  Net outgoings in 2005 covered
operational expenses and exploration work.  This is mostly reflected in an
increase in trade and other payables, the bulk of which related to drilling on
the Glagah Kambuna TAC and on the Asahan Offshore PSC.




Long-Term Assets and Liabilities



An extract of the balance sheet detailing long-term assets and liabilities is
provided below:


                                                                                31 December                 31 December
                                                                                       2005                        2004
                                                                                     US$000                      US$000

Intangible exploration assets                                                       23,591                      10,589
Goodwill                                                                              2,382                      2,382
Property, plant and equipment                                                            26                          6
Long-term other receivables                                                           1,758                        302

Long-term other payables                                                              (151)                       (155)
Deferred income tax liabilities                                                     (2,137)                     (4,446)



During 2005, total investments in petroleum and natural gas properties,
represented by intangible exploration assets, increased to US$23.6 million.  Of
the 2005 investments, US$12.5 million was spent in Indonesia principally on
drilling activity on the Asahan and Glagah Kambuna concessions, US$0.4 million
in the UK on exploration work and a further US$0.1 million in Spain.



Goodwill, representing the difference between the price paid on acquisitions and
the fair value applied to individual assets, remained unchanged at US$2.4
million.



Long-term other receivables of US$1.8 million represent value added tax ('VAT')
on Indonesian capital spend, which is expected to be recovered once the fields
commence production.



Long-term other payables comprise mainly VAT payable in Indonesia. The deferred
income tax liability was reduced following the redemption of the ENI Loan Note.



Shareholders' Equity



An extract of the balance sheet detailing shareholders' equity is provided
below:


                                                                             31 December                   31  December
                                                                                    2005                           2004
                                                                                  US$000                         US$000
Total share capital                                                              148,745                        33,047
Other reserves                                                                     1,269                           256
Accumulated deficit                                                             (18,947)                       (14,828)



Total share capital represents shares at nominal value and share premium.  Total
share capital includes the total net proceeds (both nominal value and any
premium on the issue of equity capital).



Issued share capital during 2005 was increased by the exercise of 12,494,400
warrants and share options of the Company at prices ranging from Cdn$0.50 to
Cdn$1.20. In addition 67,368,421 ordinary shares at £0.95 per ordinary share
were issued upon admission to trading on AIM.




Capital Resources



At 31 December 2005, Serica had US$105.6 million of net working capital and no
significant long-term debt.  At that date the Company had commitments to future
minimum payments under operating leases in respect of rental office premises,
office equipment and motor vehicles for each of the following years as follows:


                                                                     US$000
31 December 2006                                                        275
31 December 2007                                                        198
31 December 2008                                                        183
31 December 2009                                                        177
31 December 2010                                                         36



The Company had no long-term debt, capital lease obligations, purchase
obligations or other long-term obligations.



In view of the limited revenues currently generated from oil and gas production,
Serica will utilise existing financial resources as required to fund its
investment programme and ongoing operations.



Off-balance Sheet Arrangements



The Company has not entered into any off-balance sheet transactions or
arrangements.



Critical Accounting Estimates



The Company's significant accounting policies are detailed in note 2 to the
attached audited 2005 financial statements.  International Financial Reporting
Standards have been adopted for 2005 and for 2004 comparatives.  Details are
provided in note 30 in the audited 2005 financial statements. The cost of
exploring for and developing petroleum and natural gas reserves are capitalised.
Unproved properties are subject to periodic impairment tests whilst the costs
of proved properties are depleted over the life of such producing fields.  In
each case, calculations are based upon management assumptions about future
outcomes, product prices and performance.



Financial Instruments



The Group's financial instruments comprise cash and cash equivalents, accounts
payable and accounts receivable. It is the management's opinion that the Group
is not exposed to significant currency, interest or credit risks arising from
its financial instruments other than as discussed below:



Cash and cash equivalents, which comprise short-term cash deposits, are
generally held within the currency of likely future expenditures to minimise the
impact of currency fluctuations. The majority of funds are currently held in US
dollars to match the Group's exploration and appraisal commitments. The holding
of £11.1 million at year-end reflected a proportion of UK licence commitments
and administrative expenditures expected in £ sterling.



Following the recent fund-raising, Serica is holding significant net cash.
Whilst this does leave exposure to interest rate fluctuations, given the level
of expenditure plans over 2006/7 this is managed in the short-term through
selecting treasury deposit periods of one to six months.



The low levels of sales revenue leave little customer credit risk. Cash and
treasury credit risks are mitigated through spreading the placement of funds
over a range of institutions each carrying acceptable published credit ratings
to minimise counterparty risk.



It is the management's opinion that the fair value of its financial instruments
approximate to their carrying values, unless otherwise noted.



Warrants and Share Options



As at 31 December 2005, the following warrants and options were outstanding: -


                                                              Expiry Date                Amount              Value Cdn$
Warrants                                                       6 Aug 2006             6,427,500              7, 713,000
                                                              28 Jul 2006             1,521,876               1,826,251

Share options                                                    Aug 2009               500,000                 555,000
                                                                 Feb 2009               947,500               1,895,000
                                                                 May 2009               100,000                 200,000
                                                                 Dec 2009               365,000                 365,000
                                                                 Jan 2010               600,000                 600,000
                                                                 Jun 2010             1,700,000               3,060,000

                                                                                                                Value £
                                                                 Nov 2010               696,000                 675,120



Business Risk and Uncertainties



Serica, like all exploration companies in the oil and gas industry, operates in
an environment subject to inherent risks.  Many of these risks are beyond the
ability of a company to control, particularly those associated with the
exploring for and developing of economic quantities of hydrocarbons: volatile
commodity prices; governmental regulations; and environmental matters.



Nature and Continuance of Operations



The principal activity of the Company is to identify, acquire and subsequently
exploit oil and gas reserves primarily in Asia and Europe.



The Company's financial statements have been prepared with the assumption that
the Company will be able to realise its assets and discharge its liabilities in
the normal course of business rather than through a process of forced
liquidation.  The Company currently has relatively minor operating revenues and,
during the period ended 31 December 2005 the Company incurred losses of US$4.1
million from continuing operations.  At 31 December 2005 the Company held cash
and cash equivalents of US$109.8 million.



Outstanding Share Capital



As at 23 March 2006, the Company had 142,669,829 ordinary shares issued and
outstanding.



Additional Information



Additional information relating to Serica can be found on the Company's website
at www.serica-energy.com and on SEDAR at www.sedar.com



Approved on Behalf of the Board




Paul Ellis                                         Christopher Hearne
Chief Executive Officer                            Finance Director

31 March 2006

Forward Looking Statements

This disclosure contains certain forward looking statements that involve
substantial known and unknown risks and uncertainties, some of which are beyond
Serica Energy plc's control, including: the impact of general economic
conditions where Serica Energy plc operates, industry conditions, changes in
laws and regulations including the adoption of new environmental laws and
regulations and changes in how they are interpreted and enforced, increased
competition, the lack of availability of qualified personnel or management,
fluctuations in foreign exchange or interest rates, stock market volatility and
market valuations of companies with respect to announced transactions and the
final valuations thereof, and obtaining required approvals of regulatory
authorities.  Serica Energy plc's actual results, performance or achievement
could differ materially from those expressed in, or implied by, these forward
looking statements and, accordingly, no assurances can be given that any of the
events anticipated by the forward looking statements will transpire or occur, or
if any of them do so, what benefits, including the amount of proceeds, that
Serica Energy plc will derive there from.


Serica Energy plc

Group Income Statement

for the year ended 31 December 2005



                                                                                                   2005            2004
                                                                                  Notes          US$000          US$000
Sales revenue                                                                         3             124             156

Cost of sales                                                                                         -               -

Gross profit                                                                                        124             156

Administrative expenses                                                                         (5,340)         (4,735)
Reverse acquisition and listing expenses                                                              -         (1,290)
Pre-licence costs                                                                                 (695)            (61)
Share-based payments                                                                            (1,013)           (167)
Depreciation, depletion and amortisation                                              5            (30)            (14)
Release of decommissioning provision                                                                  -             122
Gain on disposal of shareholding                                                     15               -             141

Operating loss before finance revenue and tax                                                   (6,954)         (5,848)

Finance revenue                                                                       8             526            170
Loss before taxation                                                                            (6,428)         (5,678)

Taxation credit/(charge) for the year                                              9 a)          2,309          (2,064)
Loss for the year                                                                               (4,119)         (7,742)

Loss per ordinary share (US$)
Basic and diluted LPS                                                                10          (0.05)          (0.16)


Serica Energy plc

Balance Sheet

As at 31 December 2005


                                                                            Group                             Company
                                                                             2005              2004              2005
                                                   Notes                   US$000            US$000            US$000

Intangible exploration assets                      11                     23,591            10,589                 -
Goodwill                                           12                      2,382             2,382                 -
Property, plant and equipment                      13                         26                 6                 -
Investments in subsidiaries                        14                          -                 -           119,649
Other receivables                                  16                      1,758               302                 -
                                                                          27,757            13,279           119,649
Inventories                                        17                        878               259                 -
Financial assets                                   18                          -             7,204                 -
Trade and other receivables                        19                      2,106             1,920               957
Cash and cash equivalents                          20                    109,750             1,729           107,080
                                                                         112,734            11,112           108,037

TOTAL ASSETS                                                             140,491            24,391           227,686

Current liabilities
Trade and other payables                           21                     (7,136)           (1,315)           (2,003)

Non-current liabilities
Other payables                                                              (151)             (155)                -
Deferred income tax liabilities                    9                      (2,137)           (4,446)                -

TOTAL LIABILITIES                                                         (9,424)           (5,916)           (2,003)

NET ASSETS                                                               131,067            18,475           225,683

Share capital                                      23                     148,745           33,047           113,473
Merger reserve                                     14                           -                 -          112,174
Other reserves                                                              1,269              256             1,269
Accumulated deficit                                                      (18,947)          (14,828)           (1,233)

TOTAL EQUITY                                                             131,067            18,475           225,683








Approved by the Board on 31 March 2006







Paul Ellis                            Chris Hearne
Chief Executive Officer               Finance Director
________________________________      _____________________________________


Serica Energy plc
Statement of Changes in Equity
For the year ended 31 December 2005


Group                                Share capital        Special Other reserves       Deficit         Total
                                                         warrants
                                            US$000         US$000         US$000        US$000        US$000
At 1 January 2004                          13,000          5,327             99        (7,086)       11,340

Issue of shares                             13,714             -              -             -        13,714
Conversion of warrants                       6,245        (5,327)             -             -           918
Exercise/(forfeiture) of options                88             -            (10)            -            78
Share-based payments                             -             -            167             -           167
Loss for the year                                -             -              -        (7,742)       (7,742)

At 1 January 2005                           33,047             -            256       (14,828)       18,475

Conversion of warrants                      10,190             -              -             -        10,190
Issue of 'A' share                              90             -              -             -            90
Issue of shares (net)                      105,418             -              -             -       105,418
Share-based payments                             -             -          1,013             -         1,013
Loss for the year                                -             -              -        (4,119)       (4,119)

At 31 December 2005                        148,745             -          1,269       (18,947)      131,067



Company                              Share capital        Merger         Other       Deficit     Total
                                                                      reserves
                                                         reserve
                                            US$000        US$000        US$000        US$000        US$000

At incorporation                                 -             -             -             -             -
Share reorganisation                         7,475       112,174           886         (886)       119,649
Issue of 'A' share                              90             -             -             -            90
Issue of shares (net)                      105,418             -             -             -       105,418
Conversion of warrants                         490             -             -             -           490
Share-based payments                             -             -           383             -           383
Loss for the period                              -             -             -         (347)         (347)

At 31 December 2005                        113,473       112,174         1,269       (1,233)       225,683





Serica Energy plc

Cash Flow Statement

For the year ended 31 December 2005
                                                                                   Group                        Company
                                                                                    2005          2004             2005
                                                              Notes               US$000        US$000           US$000

Cash flows from operating activities:
Operating loss                                                                   (6,954)       (5,848)            (579)

Adjustments for:
Depreciation, depletion and amortisation                                              30           14                -
Gain on disposal of shareholding                                                       -         (141)               -
Share-based payments                                                               1,013          167              383
Release of decommissioning provision                                                   -         (122)               -
Foreign exchange loss/(gain) on investment                                           417         (288)               -
Changes in working capital                                                         2,184           78              326
Cash generated from operations                                                   (3,310)       (6,140)             130

Taxes received                                                                      179           168                 -

Net cash flow from operations                                                    (3,131)       (5,972)             130

Cash flows from investing activities:
Interest received                                                                    292           30                -
Purchases of property, plant and equipment                                          (50)           (3)               -
Purchase of intangible exploration assets                                       (14,048)       (2,559)              -
Disposals of intangible exploration assets                                         1,046           -                -
Acquisitions, net of cash acquired                                                    -        (3,746)               -
Proceeds from disposal of investment                                               6,772          410                -

Net cash used in investing activities                                            (5,988)       (5,868)               -

Cash proceeds from financing activities:
Net proceeds from issue of shares                                                106,950           78          106,950
Proceeds on exercise of warrants                                                  10,190        9,239                -

Net cash from financing activities                                               117,140        9,317          106,950


Net increase/(decrease) in cash and cash equivalents                             108,021       (2,523)         107,080
Cash and cash equivalents at 1 January                                             1,729        4,252                -

Cash and cash equivalents at 31 December                      20 & 24            109,750        1,729          107,780






Serica Energy plc



Notes to the Financial Statements



1.     Authorisation of the Financial Statements and Statement of Compliance
with IFRS



The Group's and Company's financial statements for the year ended 31 December
2005 were authorized for issue by the Board of Directors on 31 March 2006 and
the balance sheets were signed on the Board's behalf by Paul Ellis and Chris
Hearne. Serica Energy plc is a public limited company incorporated and domiciled
in England & Wales. The Company's ordinary shares are traded on AIM and the
TSXV.



The Group's financial statements have been prepared in accordance with
International Financial Reporting Standards ('IFRS') as adopted by the EU as
they apply to the financial statements of the Group for the year ended 31
December 2005. The Company's financial statements have been prepared in
accordance with IFRS as adopted by the EU as they apply to the financial
statements of the Company for the period ended 31 December 2005 and as applied
in accordance with the provisions of the Companies Act 1985. The Group and
Company's financial statements are also consistent with IFRS as issued by the
IASB. The principal accounting policies adopted by the Group and by the Company
are set out in note 2.



The Company has taken advantage of the exemption provided under section 230 of
the Companies Act 1985 not to publish its individual income statement and
related notes. The loss dealt with in the financial statements of the parent
Company was US$347,000.



On 1 September 2005, the Company completed a reorganisation (the 'Reorganisation
').  whereby the common shares of Serica Energy Corporation were automatically
exchanged on a one-for-one basis for ordinary shares of Serica Energy plc, a
newly formed company incorporated under the laws of the United Kingdom. In
addition, each shareholder of the Corporation received beneficial ownership of
part of the 'A' share of Serica Energy plc issued to meet the requirements of
public companies under the United Kingdom jurisdiction. Under IFRS this
reorganisation was considered to be a reverse takeover by Serica Energy
Corporation and as such the financial statements of the Group represent a
continuation of Serica Energy Corporation.



2. Accounting Policies



Basis of Preparation



Following the formation of Serica Energy Corporation through a merger of
Petroleum Development Associates (Oil & Gas) Limited ('PDA') and Kyrgoil Holding
Corporation ('KGO') on 29 January 2004, the Group's financial statements for the
year ended 31 December 2004 were prepared in accordance with Canadian Generally
Accepted Accounting Principles ('Canadian GAAP').



The adoption of IFRS by companies listed on AIM is mandatory for periods
beginning after 1 January 2007, with comparative information for the previous
year. However earlier adoption of IFRS has been encouraged. The Group and the
Company have chosen to adopt IFRS to coincide with the listing on AIM in London
and henceforth their financial statements will be presented in accordance with
IFRS. The transition date is 1 January 2004 and the first year reported under
IFRS is the year ended 31 December 2005.



This is the first year in which the Group has prepared its financial statements
under IFRS and the comparatives have been restated from Canadian GAAP to comply
with IFRS. The reconciliations to IFRS from the previously published Canadian
GAAP financial statements are summarised in note 30.

The Company was incorporated on 12 May 2005, and did not commence its activities
until after the Reorganisation on 1 September 2005. No comparatives, therefore,
have been presented for the balance sheet, cash flow statement and statement of
changes in equity in the 2005 financial statements of the stand alone Company.



The accounting policies which follow set out those policies which apply in
preparing the financial statements for the year ended 31 December 2005.



The Group and Company financial statements are presented in US dollars and all
values are rounded to the nearest thousand dollars (US$000) except when
otherwise indicated.



New standards and interpretations



During the year the IASB and IFRIC have issued certain standards and
interpretations with an effective date after the date of these financial
statements. The Directors do not anticipate that the adoption of these
statements and interpretations will have a material impact on the Group's
financial statements in the period of initial application.



The Group has adopted early IFRS 6 'Exploration for and Evaluation of Mineral
Resources' in its current financial statements. The impact of this adoption has
resulted in pre-licence and relinquished costs being expensed in the income
statement and is covered in note 30 of the financial statements.



Basis of Consolidation



The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries Serica Energy Corporation, Asia Petroleum
Development Limited, Petroleum Development Associates (Asia) Limited, Serica
Energia Iberica S.L., Firstearl Limited, Serica Energy (UK) Limited, PDA
Lematang Limited, APD (Asahan) Limited, APD (Biliton) Limited, APD (Glagah
Kambuna) Limited and Serica Energy Pte Limited. Together these comprise the
'Group'.



All significant inter-company balances and transactions have been eliminated
upon consolidation.



Foreign Currency Translation



The functional and presentational currency of Serica Energy plc and all its
subsidiaries is US dollars.



Transactions in foreign currencies are initially recorded at the functional
currency rate ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are retranslated at the foreign
currency rate of exchange ruling at the balance sheet date and differences are
taken to the income statement. Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using the exchange rate as
at the date of initial transaction. Non-monetary items measured at fair value in
a foreign currency are translated using the exchange rate at the date when the
fair value was determined. Exchange gains and losses arising from translation
are charged to the income statement as an operating item.



Business Combinations and Goodwill



Business combinations are accounted for using the purchase method of accounting.
The purchase price of an acquisition is measured as the cash paid plus the fair
value of other assets given, equity instruments issued and liabilities incurred
or assumed at the date of exchange, plus costs directly attributable to the
acquisition.



Goodwill on acquisition is initially measured at cost being the excess of
purchase price over the fair market value of identifiable assets, liabilities
and contingent liabilities acquired. Following initial acquisition it is
measured at cost less any accumulated impairment losses. Goodwill is not
amortised but is subject to an impairment test at least annually and more
frequently if events or changes in circumstances indicate that the carrying
value may be impaired.



At the acquisition date, any goodwill acquired is allocated to each of the
cash-generating units (business segments) expected to benefit from the
combination's synergies. Impairment is determined by assessing the recoverable
amount of the cash-generating unit to which the goodwill relates. Where the
recoverable amount of the cash-generating unit is less than the carrying amount,
an impairment loss is recognised.

Reverse takeovers

Certain acquisitions whereby the substance of the acquisition is that the
acquirer is the entity whose equity interests have been acquired, and the
issuing entity is the acquiree, are considered to represent a reverse takeover.
The legal subsidiary being acquired is the acquirer if it has the power to
govern the financial and operating policies of the legal parent so as to obtain
benefits from its activities.

Reverse takeovers are treated as a business combination whereby the consolidated
financial statements prepared following the takeover represent a continuation of
the financial statements of the legal subsidiary acquired.

Joint Venture Activities



The Group conducts petroleum and natural gas exploration and production
activities jointly with other venturers who each have direct ownership in and
jointly control the assets of the ventures. These are classified as jointly
controlled assets and consequently, these financial statements reflect only the
Group's proportionate interest in such activities.



In accordance with industry practice, the Group does not record its share of
costs that are 'carried' by third parties in relation to its farm-in agreements.
Similarly, while the Group has agreed to carry the costs of another party to a
Joint Operating Agreement ('JOA') in order to earn additional equity, it records
its paying interest that incorporates the additional contribution over its
equity share.



Serica currently has a 10% working interest in the Lematang PSC, 55% working
interests in both the Asahan Offshore PSC and the Glagah Kambuna TAC and a 90%
working interest in the Biliton PSC.



In the Lematang PSC, the Group is being carried by Medco International Ventures
Limited for its share of all costs arising under the PSC up to a maximum of
US$2.8 million.



The Group currently has paying interests of 61.2% in the Asahan PSC, 61.4% in
the Glagah Kambuna TAC and 100% in the Biliton PSC.



Upon the successful development of an oil or gas field in a contract area, the
cumulative excess of paying interest over working interest in that contract is
generally repaid out of the field production revenue attributable to the carried
interest holder.



Oil and Gas Properties



The Group's entire capitalised oil and gas costs relate to properties that are
in the exploration and evaluation stage. This includes the Kambuna Field for
which a Plan of Development has been submitted including plans for appraisal
during 2006.



As allowed under IFRS 6 and in accordance with recent clarification issued by
the International Financial Reporting Interpretations Committee, the Group has
continued to apply its existing accounting policy to exploration and evaluation
activity, subject to the specific requirements of IFRS 6. The Group will
continue to monitor the application of these policies in light of expected
future guidance on accounting for oil and gas activities.



Pre-licence Award Costs



Costs incurred prior to the award of oil and gas licences, concessions and other
exploration rights are expensed in the income statement.



Exploration and Evaluation



The costs of exploring for and evaluating oil and gas properties, including the
costs of acquiring rights to explore, geographical and geophysical studies,
exploratory drilling and directly related overheads, are capitalised and
classified as intangible exploration assets (E&E assets). These costs are
allocated to cost pools based upon three geographical segments; Indonesia, UK
and Spain.



E&E assets are not amortised prior to the conclusion of appraisal activities but
are assessed for impairment in cash-generating units defined on a geographical
segment basis when facts and circumstances suggest that the carrying amount of a
cash-generating unit may exceed its recoverable amount.  Recoverable amounts are
determined based upon risked potential, or where relevant, discovered oil and
gas reserves. When an impairment test indicates an excess of carrying value
compared to the recoverable amount, the carrying value of the cost pool is
written down to the recoverable amount in accordance with IAS 36. Such excess is
expensed in the income statement.



Costs of relinquished licences are expensed in the income statement.



The E&E phase is completed when either the technical feasibility and commercial
viability of extracting a mineral resource are demonstrable or no further
prospectivity is recognised. At that point, if commercial reserves have been
discovered, the carrying value of the relevant assets, net of any impairment
write-down, is classified as a development asset and tested for impairment. If
commercial reserves have not been discovered then the costs of such assets will
be expensed in the income statement.



Costs to-date in respect of the Singa Field have been carried by a third party
and consequently no costs are held within fixed assets.



Development Costs



Serica has no costs classified as development costs.



Decommissioning



Liabilities for decommissioning costs are recognised when the Group has an
obligation to dismantle and remove a production, transportation or processing
facility and to restore the site on which it is located. Liabilities may arise
upon construction of such facilities, upon acquisition or through a subsequent
change in legislation or regulations. The amount recognised is the estimated
value of future expenditure determined in accordance with local conditions and
requirements. A corresponding tangible item of property, plant and equipment
equivalent to the provision is also created. The Group did not carry any
provision for decommissioning costs during 2005.



Any changes in the present value of the estimated expenditure is added to or
deducted from the cost of the assets to which it relates. The adjusted
depreciable amount of the asset is then depreciated prospectively over its
remaining useful life.



Property, Plant and Equipment



Computer equipment and fixtures, fittings and equipment are recorded at cost as
tangible assets. The straight-line method of depreciation is used to depreciate
the cost of these assets over their estimated useful lives. Computer equipment
is depreciated over three years and fixtures, fittings and equipment over four
years.



Inventories



Inventories are valued at the lower of cost and net realisable value. Cost is
determined by the first-in first-out method and comprises direct purchase costs
and transportation expenses.



Investments



In its separate financial statements the Company recognises its investments in
subsidiaries at cost.



Financial instruments



Financial instruments comprise financial assets, financial liabilities and
equity instruments.



Trade and other receivables, which generally have 30-90 day terms, are
recognised and carried at original invoice amount less an allowance for any
uncollectible amounts. Bad debts are written off when identified.



Financial assets comprise investments and are initially recognised at cost,
being the fair value of the consideration given and including acquisition
charges associated with the investment. Investments that are intended to be
held-to-maturity, such as bonds, are subsequently measured at amortised cost
using the effective interest method. Amortised cost is calculated by taking into
account any discount or premium on acquisition, over the year to maturity.



For investments carried at amortised cost, gains and losses are recognised in
income when the investments are derecognised or impaired, as well as through the
amortisation process.



Cash and cash equivalents include balances with banks and short-term investments
with maturities of three months or less at the date acquired.



Revenue Recognition



Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the Group and the revenue can be reliably measured.
Revenue from oil and natural gas production is recognised on an entitlement
basis for the Group's net working interest.



Share-Based Payment Transactions



The Company operates equity settled schemes under which employees may be awarded
share options from time-to-time. The fair value of each option at the date of
the grant is estimated using the Black-Scholes option-pricing model based upon
the option price, the share price at the date of issue, volatility and the life
of the option. The estimated fair value of the option is amortised to expense
over the option's vesting period on a straight-line basis with a corresponding
increase to equity.  It is assumed that all performance criteria are met.
Estimated associated national insurance charges are expensed in the income
statement.



No expense is recognised for awards that do not ultimately vest, except for
awards where vesting is conditional on a market condition.  In which case such
awards are treated as vesting provided that all other performance conditions are
satisfied.



Where an option is forfeited without meeting the vesting conditions, the
associated prior charges are credited to the income statement with an equivalent
reduction to equity.


Equity



Equity instruments issued by the Company are recorded at the proceeds received,
net of direct issue costs.



Income Taxes



Deferred tax is provided using the liability method and tax rates and laws that
have been enacted or substantially enacted at the balance sheet date. Provision
is made for temporary differences at the balance sheet date between the tax
bases of the assets and liabilities and their carrying amounts for financial
reporting purposes. Deferred tax is provided on all temporary differences except
for:



•         temporary differences associated with investments in subsidiaries,
where the timing of the reversal of the temporary differences can be controlled
by the Group and it is probable that the temporary differences will not reverse
in the foreseeable future; and



•         temporary differences arising from the initial recognition of an asset
or liability in a transaction that is not a business combination and, at the
time of the transaction, affects neither the income statement nor taxable profit
or loss.



Deferred tax assets are recognised for all deductible temporary differences, to
the extent that it is probable that taxable profits will be available against
which the deductible temporary differences can be utilised. Deferred tax asset
and liabilities are presented net only if there is a legally enforceable right
to set off current tax assets against current tax liabilities and if the
deferred tax assets and liabilities relate to income taxes levied by the same
taxation authority.



Earnings Per Share



Earnings per share is calculated using the weighted average number of ordinary
shares outstanding during the period. Diluted earnings per share is calculated
based on the weighted average number of ordinary shares outstanding during the
period plus the weighted average number of shares that would be issued on the
conversion of all potentially dilutive shares to ordinary shares. It is assumed
that any proceeds obtained on the exercise of any options and warrants would be
used to purchase ordinary shares at the average price during the period. Where
the impact of converted shares would be anti- dilutive, these are excluded from
the calculation of diluted earnings.



Use of Estimates



The preparation of financial statements in conformity with generally accepted
accounting practice requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities as well as the disclosure
of contingent assets and liabilities at the balance sheet date and the reported
amounts of revenues and expenses during the reporting period. Actual outcomes
could differ from those estimates.








                      This information is provided by RNS
            The company news service from the London Stock Exchange