Fourth Quarter Results

Serica Energy plc
11 March 2008

                               Serica Energy plc
                          ('Serica' or the 'Company')



                       2007 ANNUAL REPORT TO SHAREHOLDERS

London, 11 March 2008 - Serica Energy plc (TSX Venture & AIM: SQZ) today
announces its financial results for the three and twelve months ending 31
December 2007.  The results and associated Management Discussion and Analysis
are included below and copies are available at www.serica-energy.com and
www.sedar.com.



2007 Highlights


Developments

•     Successful installation of the production platform on the Kambuna Field
     offshore North Sumatra with first production and cash flow expected at the 
     end of 2008

•     15% increase in reserves:  Kambuna 2P reserves estimated by RPS Energy at
     29.7 million barrels of oil equivalent (100% basis)

•     Excellent terms offered for Kambuna gas: initial tranche of 28 million
     cubic feet per day ('mmscfd') at approximately US$5.40 per thousand cubic 
     feet ('mcf') and second tranche of 10 mmscfd at over US$6.50 per mcf with 
     a further 10 mmscfd of gas to be marketed

•     Serica's interest in Kambuna, based on the initial tranche gas sales price
     of approximately US$5.40 per mcf, valued by RPS Energy as at 31 December 
     2007 at US$145 million post tax (based on constant oil prices and costs)


Appraisal

•    Two successful appraisal wells drilled in the Columbus field in the North 
     Sea, confirming its commercial potential



Forward Drilling Programme

•    Development drilling on Kambuna underway, with two new production wells 
     currently being drilled and a recompletion of Kambuna #2

•    Two appraisal wells in the Bream oil field in Norway to be drilled in 2H 
     2008 - best estimate of gross contingent resources 59 million barrels

•    Planning to drill an exploration well off the west coast of Ireland in
     2H 2008 - four gas prospects identified on the licence, with total best 
     estimate gross prospective resources estimated at 3 tcf

•    Vietnam exploration well to be drilled in 2H 2008 following the successful 
     evaluation of new 3D Seismic data

•    A site survey is to be undertaken in the Chablis field in preparation for 
     appraisal drilling



Financial & Corporate

•    Successfully raised US$52 million in new equity from new and existing 
     shareholders

•    Completed a US$100 million debt facility with JP Morgan and Bank of
     Scotland to fund field development activities

•    Jonathan Cartwright, Finance Director of Caledonia Investments, to
     join board as a non-executive director in March 2008





Serica's Chief Executive, Paul Ellis commented:


'Serica made significant progress in 2007, increasing its proven and probable
reserves and confirming that the Columbus field is a candidate for development.'

'The Kambuna production platform in Indonesia is now installed and the
development wells are being drilled with the company targeting first production
by the end of 2008.  Gas sales terms have been agreed for 80% of the Kambuna
production at excellent prices.  Furthermore, the company is due to commence
drilling in Norway, Ireland and Vietnam in the second half of this year with all
three projects offering significant upside potential.'

'Serica is well funded for 2008 with an exciting forward drilling programme.  It
now has the opportunity to establish a growing reserve base, commence production
and to build further its underlying asset value.'



Enquiries:

Serica Energy plc
Paul Ellis,                      [e-mail]                   [phone]

Chief Executive Officer
Chris Hearne,                    [e-mail]                 [phone]

Finance Director

JPMorgan Cazenove
Steve Baldwin                    [e-mail]             [phone]

Tristone Capital Limited                                                  
Majid Shafiq                     [e-mail]                    [phone]

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

CHF - Canada
Sarah Gingerich                  [e-mail]                                [phone]



Paul Ellis MA (Oxon) Engineering and Serica's Chief Executive, who has over 35
years' experience in the upstream oil and gas industry, has reviewed and
approved the technical information contained in this announcement.



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 therefrom.



The TSX Venture Exchange has not reviewed and does not accept responsibility for
                   the adequacy or accuracy of this release.

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CHAIRMAN'S REPORT



Dear Shareholder



During 2007 much progress was achieved in the development of our reserves in
Indonesia and the appraisal of our Columbus discovery in the North Sea.

With the production platform now successfully installed on the Kambuna field
offshore North Sumatra we are expecting gas and condensate sales to commence at
the end of 2008, bringing the first significant cash flow to Serica.  As stated
in the Chief Executive's Report, the level of reserves which we carry for this
field has been increased.

In the North Sea, two successful appraisal wells drilled in late September and
October on our Columbus discovery have demonstrated the commerciality of this
gas condensate field and bring it nearer to production.  Reserves from this
field will be booked once a development plan for the field has been approved.

In addition to this growth in reserves, the Company has considerable exposure to
several significant exploration wells, some of which we hope to drill this year.
  These wells result from extensive seismic work conducted during the year over
our blocks in Indonesia, Vietnam, the UK North Sea, Spain and Ireland.

Of course we do not expect to find oil or gas with all of our wells.  At the
turn of the year we drilled our first two wells in the Biliton block in
Indonesia.  Neither of these wells encountered hydrocarbons and we have written
off the costs incurred to-date on this block, amounting to US$8.9 million.
Before drilling the wells we decided to farm-out part of our interest to an
industry partner to substantially reduce the financial risk whilst retaining a
large share of the upside potential.  As a result the wells were drilled at a
very low cost to Serica.

The farm out of certain of our interests, such as Biliton, where we perceive
Serica's exposure to be too high, is an important part of our strategy to manage
the funds available to the Company and enhance returns for shareholders.  In the
current high cost environment, therefore, we shall continue with this approach
where appropriate.

The Company is well funded to meet its forward programme.  The successful
raising of approximately US$52 million in new equity before expenses increased
our net cash balances at the start of 2008 to over US$70 million.  With access
also to a US$100 million debt facility primarily for field development, the
Company is well placed to continue with its exploration activities and add to
the growth of our oil and gas reserves.

It is clearly important that this growth is translated into growth in the
Company's share price.  The Board is conscious that the recent volatility in the
market for our shares, may not be giving a clear picture for shareholders.  It
is the Board's view that this volatility is caused partly by the limited
liquidity for our shares in the market place.  We operate in two markets,
Toronto and London.  The different nature of these markets makes inter-trading
more complex, thus reducing liquidity still further.

We shall be seeking ways to improve the market liquidity for our shares, and
hence provide a better platform for shareholders, whilst also looking for
opportunities to broaden the Company's asset base through acquisition and
divestment.  In this way we would hope to achieve a share price more in line
with the Company's underlying performance whilst also maintaining our corporate
objective to reduce risk and increase overall opportunity.

As a final note, I would like to welcome Jonathan Cartwright, who joins the
Board as a non-executive director on 27 March 2008.  Jonathan brings
considerable financial experience to the Company and we look forward to working
with him in our task of building value for shareholders.  He is Finance Director
of Caledonia Investments, one of our major shareholders, and is a member of the
board of Bristow Group who are one of the world's leading providers of
helicopter services to the offshore oil and gas industry.

With a strong and experienced Board, field developments and exploration
prospects in two distinct areas, most of which we operate, and with sound
finances Serica is ideally placed in the sector. It is our objective to build on
this position during 2008 and I have every expectation that we shall be more
than successful in these efforts.





Tony Craven Walker
Non-executive Chairman


CHIEF EXECUTIVE OFFICER'S REPORT

During the course of 2007, despite the industry-wide shortage of seismic crews
and drilling rigs, we have been able to make progress in both Western Europe and
South East Asia and, as a result, have taken significant steps towards the
development of our discoveries and the establishment of Serica as an oil and gas
producer in both regions.

Serica is the operator of the Kambuna gas-condensate field offshore North
Sumatra, Indonesia, and holds a 65% working interest.  Following the acquisition
and interpretation of a 3D seismic survey in the field, an independent Reserves
Evaluation by RPS Energy ('RPS') has estimated that the gross Proved and
Probable Reserves for the field are 29.7 million barrels of oil equivalent 
('boe').  This represents an increase of over 15% in the Proved and Probable 
Kambuna Reserves, compared to the figure of 25.7 million boe estimated by RPS at 
the end of 2006, before the 3D seismic data was available.  This new reserves 
estimate excludes any additional reserves that may ultimately be proved to exist 
in an area immediately to the north of the Kambuna field that has been 
identified on the 3D seismic data as potentially gas-bearing.

Based on these revised reserve estimates, RPS has estimated the net present
value of Serica's future revenue from the Kambuna field at 31 December 2007 at a
10% discount factor.  Based on constant oil prices and costs, an initial gas
sales price of US$4.50 per mmBtu and a fixed condensate price of US$93.51 per
bbl, RPS estimates the net present value to Serica of the proved and probable
Kambuna reserves, after all Indonesian taxes, to be US$144.7 million.  This
figure does not take into account the higher gas price that we expect to be
achieved for the uncontracted gas, as described below.

The first sales contract will be with the Indonesian State Electricity Company,
PLN, which will purchase 28 mmscfd of gas at an initial price of US$4.50 per
mmBtu (approximately US$5.40 per mcf).  Following a tender process, several
offers for a further 12 mmscfd of gas have been received at initial prices
between US$5.20 and US$5.80 per mmBtu (approximately US$6.25 to US$7.00 per
mcf).  These tenders have been subject to commercial evaluation and we expect an
award to be made shortly.  Both of these sales contracts will include take or
pay provisions and gas price escalation at a rate of 3% per annum.

These contracts account for a total of 40 mmscfd and leave a further 10 mmscfd
of gas to be contracted once the development wells have been drilled and an
updated reservoir model has been presented to the Indonesian regulator to
demonstrate the expected field production capacity of 50 mmscfd and around 5,000
bpd of condensate.

The excellent prices achieved for our gas reflect the fact that gas for the
Indonesian domestic market is in short supply, resulting in the greater use of
oil as fuel for electricity generation.  Given the present level of oil prices,
the cost of generation has risen significantly and electricity supply has been
restricted.

In January 2008 we installed the Kambuna production platform in the field and
commenced development drilling, using the GSF136 jack-up rig.  The platform will
initially support three Kambuna production wells and has the capacity to support
at least one additional well.  The existing Kambuna No.2 well, that we drilled
and suspended in 2005, is now being recompleted for production and we are
currently drilling two further development wells.  Kambuna No.3 will be a
deviated production well that will enter the reservoir on the crest of the
structure close to the original discovery well.  Kambuna No.4 will be a deviated
production well that will enter the reservoir in the southern area of the field.
  Additionally, this well will test whether the gas-water contact (not found in
the existing wells) may be significantly lower than the lowest known gas
encountered in Kambuna No.2.  If this is the case, the Kambuna field reserves
could be subject to further upward revision.

In Western Europe, Serica holds interests in two potential near-term field
developments.  We hold a 50% interest as operator of UK North Sea Block 23/16f,
in which we drilled the Columbus gas-condensate discovery in 2006 and a 20%
interest in the Bream oil field, offshore Norway. We also hold a 100% interest
in the Chablis gas field appraisal project in the UK southern North Sea.

During 2007 we drilled two Columbus appraisal wells, 23/16f-12 and 23/16f-12z,
that successfully delineated the Columbus field within Block 23/16f.
Development studies have indicated that the field could be produced via a subsea
tie-back to a host platform and we believe that production from Columbus could
start in late 2010.  We have already carried out an engineering study with BP
regarding a potential tie-back of Columbus to BP's Lomond field, which lies
immediately to the south of the Columbus field and a further engineering study
is being conducted regarding offtake via BP's ETAP gas and oil transportation
system.

It has been considered possible that the Columbus field may extend to the south
into Block 23/21, operated by BG Group.  To demonstrate whether this extension
exists, an appraisal well is required in Block 23/21, but the timing of this
well is not clear.  The 23/16f partners, having already drilled three wells in
the Columbus field, have therefore decided to prepare alternative plans to
develop the field without the involvement of the Block 23/21 group at this
stage.

It has taken some time to address the environmental, logistical and commercial
issues associated with drilling in Serica's near-shore UK Southern Gas Basin
Block 48/16b, which contains the Chablis gas discovery. We will shortly be
carrying out a site survey for the appraisal well to be drilled in the Chablis
field.

In Norway, our operator, BG Group, is planning to drill an appraisal well in the
Bream oil field in the second half of 2008, comprising a vertical well followed
by a horizontal sidetrack to demonstrate well productivity.  The gross best
estimate Contingent Resources of the Bream field have been estimated to lie in
the range of 22 to 120 million barrels of oil.  The appraisal well is designed
to narrow this range and to provide the data necessary to demonstrate field
commerciality.


In addition to our development and appraisal projects, we shall be continuing
exploration work in several areas during the coming year.

In Ireland, we are planning to carry out a site survey in preparation for
drilling an exploration well off the west coast in Licence PEL 01/06, in which
Serica holds a 100% interest.  We have identified four large gas prospects in
the licence with estimated total unrisked Prospective Resources ranging from 800
bcf to 6 tcf with a best estimate of 3 tcf.  These would be attractive prospects
anywhere in the world, but have even greater significance in Ireland because the
country imports nearly 90% of its energy supplies and oil makes up the majority
of the imports. A rig has been identified for drilling this summer and we are
currently seeking a farminee to share the costs and risks of the drilling
programme.

In Vietnam, evaluation of the new 3D seismic data has confirmed the
prospectivity of our PSC 06/94 and a well is planned in the second half of 2008.
  Serica holds a 33% interest in the PSC.

In Indonesia, in the Biliton PSC, offshore Java, we were naturally disappointed
that the two exploration wells drilled at the end of 2007 were unsuccessful, but
we had always viewed the prospects as having a high exploration risk and had
therefore sought a farminee.  We were successful in attracting a farminee to
drill both wells at little cost to Serica, and we now hold a 45% interest in the
PSC and remain the operator.  In the Kutai PSC we are interpreting the existing
3D seismic data covering an area of over 2,000 square kilometres and can already
see a large number of prospective features within the PSC, some of which should
become drilling targets.

In Spain, we farmed out a 25% interest in our Spanish exploration Permits to
Beach Petroleum, an Australian E&P company prior to undertaking a seismic
programme.  The 315 kilometre 2D seismic programme has been carried out and the
quality of the data acquired is excellent.  Interpretation of the data is
underway and it appears likely that one or more prospects will be identified on
the Permits.  We have until November 2008 to elect to drill a well and thereby
extend the life of the Permits, in which Serica is the operator and holds a 75%
interest.

Serica set out in 2007 to confirm the potential of the Columbus discovery and to
advance the development of the Kambuna field, while evaluating the prospectivity
of the new licences awarded to the Company in 2006 and early 2007.  We succeeded
in all these areas - successful appraisal of Columbus, gas sales terms agreed
for Kambuna, exploration and appraisal drilling planned in Norway, UK, Ireland
and Vietnam.  With first production expected from the Kambuna field in December
and with significant exploration and appraisal wells to be drilled, 2008
promises to be a year in which Serica further demonstrates the underlying value
of its assets.





Paul Ellis

Chief Executive Office


REVIEW OF OPERATIONS



Serica holds exploration, appraisal and development interests in some of the
major oil and gas provinces of Western Europe and South East Asia.  In Europe,
the Company has licences in the UK North Sea, the East Irish Sea, Norway,
Ireland and Spain.  In South East Asia, Serica has production sharing contracts
in Indonesia and Vietnam.


REVIEW OF OPERATIONS - WESTERN EUROPE


In Western Europe Serica holds offshore licence interests in the UK North Sea
and East Irish Sea, in Ireland and Norway and has onshore licence interests in
Spain.


The following table summarises the Company's interests in Western Europe.


Block(s)            Description              Role               %       Location

UK
14/15a              Exploration              Operator          50%      Central North Sea
23/16f              Columbus appraisal       Operator          50%      Central North Sea
23/16g              Exploration              Operator          50%      Central North Sea
48/16b              Chablis appraisal        Operator          100%     Southern Gas basin
48/17d              Chablis appraisal        Operator          100%     Southern Gas basin
54/1b               Oak discovery            Operator          50%      Southern Gas basin
113/26b             Exploration              Operator          100%     East Irish Sea
113/27b (part)      Exploration              Operator          100%     East Irish Sea

Ireland
27/4                Exploration              Operator          100%     Slyne Basin
27/5 (part)         Exploration              Operator          100%     Slyne Basin
27/9                Exploration              Operator          100%     Slyne Basin

Norway
407                 Bream appraisal          Partner           20%      Egersund Basin
406                 Exploration              Partner           20%      Egersund Basin

Spain
Abiego              Exploration              Operator          75%      Pyrenees/Ebro Basin
Barbastro           Exploration              Operator          75%      Pyrenees/Ebro Basin
Binefar             Exploration              Operator          75%      Pyrenees/Ebro Basin
Peraltilla          Exploration              Operator          75%      Pyrenees/Ebro Basin



United Kingdom



Central North Sea - Block 14/15a



This block covers an area of approximately 108 square kilometres in the Central
North Sea.  Serica is the block operator and has a 50% interest. Several leads
have been identified at Upper Jurassic, Lower Cretaceous and Paleocene levels
within this prospective part of the Outer Moray Firth Basin.  The work programme
in 2007 included the reprocessing of available 3D seismic data, which is
scheduled to complete in the first quarter of 2008 with the objective of
confirming prospects that are ready for drilling.



Columbus Discovery - Block 23/16f


This block covers an area of approximately 52 square kilometres in the Central
North Sea. Serica operates Block 23/16f and holds a 50% interest in the Licence.
In December 2007 Serica relinquished the adjacent part-blocks 23/16e and 23/17b
as no prospects of material size could be identified.

Following Serica's December 2006 Columbus discovery well 23/16f-11, appraisal
drilling commenced in the third quarter of 2007. Two Columbus appraisal wells,
23/16f-12 and 23/16f-12z, were drilled and both were successful.

Well 23/16f-12 was drilled as a vertical well approximately three kilometres
north of the Columbus discovery well and encountered gas/condensate-bearing
Paleocene sands at a higher elevation than those tested in well 23/16f-11.
Reservoir pressure measurements indicated that these sands are separate to those
discovered in well 23/16f-11 and the full extent of this new accumulation is not
yet known.  The net pay sand encountered in the well was approximately 40
vertical feet.

To further evaluate the Columbus discovery, the 23/16f-12 well was then
sidetracked to a bottom-hole location approximately 2.2 kilometres north of the
Columbus discovery well and encountered gas/condensate-bearing Paleocene sands
similar to those found in 23/16f-11.  Evaluation of down-hole pressure data
indicated that the sands encountered in the sidetrack are in pressure
communication with those in the discovery well.  The net pay sand in the
sidetrack was approximately 70 vertical feet, compared with 56 vertical feet in
23/16f-11.  The sidetrack well 23/16f-12z has been suspended for potential use
in the development of the Columbus field.

The successful outcome of the two new wells supports the commercial development
of Columbus and data from these wells is being used to advance field development
studies. The Columbus field lies in close proximity to existing production
infrastructure, providing the potential to commence production as soon as
throughput agreements have been reached and the development wells can be
tied-in.

It is likely that initial field development will be based around horizontal or
high-angle production wells, tied back to a host production platform.  Serica is
currently studying options including a possible tie-back to the producing Lomond
field, which lies about six kilometres from the Columbus discovery well.  At the
host platform, the gas and condensate will be separated and processed to export
pipeline specifications.

Last year, we reported best estimate Columbus Contingent Resources net to Serica
of 8.4 million boe, on the basis of our expected interests of 25% in Block 23/
16f and 25% in part of Block 23/21, subject to completion of an acreage exchange
with BG Group.  This agreement was not completed and, as a result, Serica
retained its original 50% interest in 23/16f and expects that its net Contingent
Resources in Columbus will be greater than those reported last year, although
the studies to integrate data from the three wells in the field with a newly
acquired 3D seismic survey have not yet been completed.



Central North Sea - Block 23/16g



Serica has a 50% interest in this 7.4 square kilometre Central North Sea block
and is the operator.  The block contains a Paleocene sand prospect called
Livingstone, similar to and on trend with the Columbus discovery in Serica's
adjacent Block 23/16f to the south.

A new 3D seismic data set has recently been acquired covering both blocks and
this data is being integrated with the new Columbus well data in order to select
the best location in which to test this gas-condensate prospect.  If successful,
a Livingstone discovery well could potentially be used for production and tied
in to the Columbus development.



Chablis Discovery Area - Blocks 48/16b and 48/17d


These contiguous blocks cover a total area of 88 square kilometres in the
Southern North Sea.  Serica is the operator and holds an interest of 100% in
both blocks.  Block 48/16b contains the undeveloped Chablis discovery, drilled
in 2001 by ConocoPhillips.  Block 48/17b was awarded to Serica in the UK 24th
Offshore Licensing Round and may potentially contain part of the Chablis
accumulation.

The issues concerned with drilling in the shallow water near-shore Chablis field
area have mostly been resolved and Serica will shortly carry out a site survey
in preparation for drilling a potential appraisal well later in the year.



Oak Discovery - Block 54/1b


Block 54/1b covers an area of 106 square kilometres in the Southern Gas Basin.
Serica is operator of the block and holds a 50% interest.

Well 54/1b-6 was drilled in the fourth quarter 2006 and encountered a
gas-bearing Leman sandstone reservoir that produced at a stabilized flow rate of
approximately 10 mmscfd during a drill-stem test.  However, subsequent
laboratory analysis of gas samples taken during the test indicated that a
significant proportion of the gas is made up of inert components - just over 50%
of the gas was found to be carbon dioxide and nitrogen.

There are several fields to the north and east of the Oak field with similar gas
compositions, several of them in Dutch waters where a new operator is studying
the exploitation of such fields by installing offshore gas treatment to remove
the inert gases and then transport the hydrocarbons for sale in the Netherlands
through the existing extensive offshore pipeline system.  The potential is
speculative but, during 2008, Serica plans to participate in these studies in
order to determine whether commercial development of Oak may ultimately be
feasible.



East Irish Sea - Blocks 113/26b and 113/27b (part)


These blocks cover an area of 145 square kilometres and lie immediately to the
north of the Millom and Morecambe gas fields.  The prospective reservoir is the
Sherwood Sandstone of Triassic age that is also the producing reservoir in the
Millom and Morecambe fields.  Serica has identified a number of leads on these
blocks and is carrying out a 3D seismic reprocessing project in order to confirm
future exploration well locations.

Serica is the operator and has a 100% interest in the licence.

Ireland



Slyne Basin - Blocks 27/4, 27/5 (west) and 27/9


Serica is the operator and holds a 100% interest in these blocks, which cover an
area of 611 square kilometres in the Slyne Basin off the west coast of Ireland
and lie 42 kilometres south of the Corrib gas field, currently being developed
by Shell.

The blocks are covered by existing 3D seismic data that has now been reprocessed
and has confirmed the presence of four significant gas prospects.  An
independent report by RPS Energy has estimated unrisked Prospective Resources
net to Serica in the range of 800 bcf to 6 tcf with a best estimate of 3 tcf for
the four prospects in total.  Serica expects to drill the first of these
prospects in the summer of 2008 and will soon be carrying out a site survey over
the identified drilling targets.




Norway



Egersund Basin - Licences PL406 and PL407


Serica was awarded a 20% interest in both of these offshore licences in February
2007.  The licences are contiguous and lie in the Egersund Basin, about 120
kilometres southwest of the port of Stavanger, Norway's fourth largest city.

Licence PL406 covers an area of approximately 900 square kilometres and includes
the 18/10-1 oil discovery well drilled in 1980, which was tested at 1,800 bopd.
The licence contains exploration prospects that appear analogous to the
undeveloped Bream oil field in Serica's Licence PL407, immediately to the north.

Licence PL407, covers an area of approximately 725 square kilometres.  It
includes the 1972 Bream oil discovery and the 1973 Brisling oil discovery, which
were tested at rates up to 1,000 bopd and 2,200 bopd respectively.

In the early seventies oil prices were around $3/bbl and this, combined with the
technology available at the time, did not allow commercial development.  The
three discoveries remained undeveloped for over thirty years, since the
Norwegian authorities did not make the area available for licensing again until
2006.

On the basis of the modern 3D seismic data now available covering the Bream and
18/10-1 discoveries, an independent report by RPS Energy has estimated that,
using modern drilling and completion technology, including horizontal production
wells, the gross Contingent Resources of the Bream field may lie within a range
of 22 to 120 mm bbl, with a best estimate of 59 mm bbl.  The 18/10-1 discovery
is estimated to have gross Contingent Resources of 5 to 41 mm bbl, with a best
estimate of 18 mm bbl.  Serica's 20% share of these best estimate Contingent
Resources would amount to a total of 15 mm bbl.


The operator of Licence PL407, BG Norge AS, is planning to drill vertical and
horizontal appraisal wells in the Bream field in 2008, with a view to submitting
a Plan of Development early in 2009. The operator of PL406, Premier Oil Norge
AS, is planning to acquire a 500 km2 3D seismic survey early in 2008 to identify
the best locations for exploration drilling in 2009.  Any discovery made in
PL406 could potentially be produced through facilities designed for the
development of the Bream field.



Spain



The Company holds a 75% interest in the Abiego, Barbastro, Binefar and
Peraltilla exploration Permits onshore northern Spain. The Permits cover an area
of approximately 1,100 square kilometres between the Ebro Basin and the Pyrenees
and could potentially contain significant quantities of gas, which would find a
ready market in Spain.

In early 2007, Serica entered into a farm out agreement with Beach Petroleum
Limited, under which Beach has earned a 25% interest in the Permits, with Serica
retaining a 75% interest and operatorship. A 315 kilometre 2D seismic survey
commenced in late 2007 and was completed in January 2008.  The data is of
excellent quality, revealing deep features that can now be mapped with far more
confidence than was possible previously and prospects are being identified.  Due
to the comprehensive nature of the environmental assessments required before
drilling in this area, these have already been commissioned although a decision
on drilling is not required until later this year.




REVIEW OF OPERATIONS - SOUTH EAST ASIA



In South East Asia, Serica holds interests in Indonesia and in Vietnam.

The following table summarises the Company's interests in South East Asia.  The
interests shown may assume the completion of agreements which await final
government approval.



Block(s)                     Description          Role             %      Location

Indonesia
Glagah Kambuna TAC           Kambuna              Operator        65%     Offshore

                             development                                  North Sumatra
Biliton PSC                  Exploration          Operator        45%     Offshore Java Sea
Kutai PSC                    Exploration          Operator        78%     Kutai basin

Vietnam
Block 06/94                  Exploration          Partner        33.3%    Nam Con Son Basin



Indonesia



Glagah Kambuna TAC


The Glagah Kambuna Technical Assistance Contract ('TAC') covers an area of
approximately 380 square kilometres and lies offshore North Sumatra. Serica has
a 65% working interest and operates the TAC.

The TAC contains the undeveloped Glagah No.1 and Kambuna No.1 discovery wells
and a successful appraisal well drilled by Serica in 2005, Kambuna No.2.  Serica
is progressing the development of the gas-condensate bearing Upper Belumai Sand
reservoir of the Kambuna field and the first Plan of Development was approved by
the state oil and gas company Pertamina in 2006.

A 3D seismic survey covering the Kambuna field was acquired in late 2006 and
detailed processing and interpretation were carried out during 2007.

Using the results of the new 3D seismic data, consultants RPS Energy have
carried out a new reserves report of the Kambuna field.  This report estimates
that the gross Proved plus Probable Reserves of the field are 119 bcf of sales
gas and 9.9 mm bbl of condensate, a total of 29.7 mm boe, with an upside gross
Proved plus Probable plus Possible Reserves of 45.6 mm boe.  The present
estimate of Proved plus Probable Reserves is 15% higher than the estimate
prepared by RPS Energy last year, before the 3D survey results were available.

During 2007, the first phase of the development programme for the Kambuna gas/
condensate field commenced: the field production platform was built and in the
first quarter 2008 was positioned over the Kambuna No. 2 well and piled to the
seabed.  The GSF136 jack-up drilling rig is now drilling the Kambuna development
wells No. 3 and No. 4 and will then complete all three wells for production.
Onshore and offshore facilities and a 14-inch offshore pipeline will be
installed later this year, with production targeted to commence by the end of
2008.

Following the agreement of terms for the sale of 28 mmscfd of gas to the
Indonesian State electricity generation company Perusahan Listrik Negara
('PLN'), at an initial price of US$4.50 per million Btu (approximately US$5.40
per million cubic feet), offers for a further 12 mmscfd of gas have been
received at prices between US$5.20 and US$5.80 per million Btu (approximately
US$6.25 to US$7 per million cubic feet) escalating at 3% per annum for both
agreements.

The sale of a further 10 mmscfd of gas is expected to be agreed later this year
after a revised reservoir model is submitted to the authorities following the
completion of the new Kambuna development wells currently being drilled.  The
Kambuna development wells are expected to produce at a total rate of 50 mmscfd,
delivered at Pangkalan Brandan, about eight kilometres onshore and the site of a
Pertamina gas plant and refinery. In addition to the gas, Serica will initially
be marketing 4,000-5,000 barrels per day of condensate at a price close to that
of crude oil.

Gas demand is strong in North Sumatra but supply from existing gas sources is
insufficient and the main power station near Medan is reported to be burning
around 25,000 barrels of fuel oil and diesel per day.  Medan is the third
largest city in Indonesia and the Kambuna production will go a long way to
relieve the lack of gas-fuelled power in the area.



Biliton PSC


The Biliton PSC covers an area of approximately 3,940 square kilometres in the
Java Sea between the Indonesian islands of Java and Kalimantan.  Serica is the
operator of the PSC and originally held a 90% interest in the block.

In March 2007, Serica entered into a farm-out agreement under the terms of which
Nations Petroleum has earned a 45% interest in the Biliton PSC by paying a
contribution to Serica's back costs and bearing the majority of the costs of
drilling the first two wells in the PSC.  Serica now holds a 45% interest in the
PSC and retains the operatorship.

Between November 2007 and January 2008, using the GSF136 drilling rig, wildcat
exploration wells Batara Ismaya No. 1 and Batara Indra North No. 1 were drilled,
but neither well contained hydrocarbons and both were therefore plugged and
abandoned.

Serica had always recognised that the high potential of Biliton came with a
significant exploration risk, since the block is around 200 kilometres away from
the established oil and gas fields of East Java.  However, there is still an
undrilled prospect on the block and Serica will be considering approaches to
farm-in to the Biliton PSC.



Kutai PSC

The Kutai PSC in East Kalimantan was awarded to Serica in January 2007 and
covers an area of around 4,700 square kilometres in the Mahakam Delta, mainly
offshore.  Serica originally held an interest of 52.5% in the PSC and is the
operator.  In January 2008 Serica announced that it had acquired an additional
25.5% working interest and now holds a 78% interest in the PSC.

The PSC is divided into several blocks, the majority of which are first phase
relinquishments by the current main operators in the basin, Total, Chevron and
VICO.  The PSC lies in and around several giant fields, including Tunu (1,600
million boe) and Attaka (800 million boe), in the prolific Mahakam River delta
both onshore and offshore.  The PSC is adjacent to the Mahakam PSC operated by
Total and which contains some of Indonesia's largest gas and condensate fields,
with total daily production of around 2.5 billion cubic feet of gas and 90,000
barrels of oil and condensate.  Total has an active exploration programme and in
October 2007 announced two new discoveries in the southern part of the Mahakam
block, a few kilometres from the Kutai PSC.  In 2007, an airborne elevation
survey was carried out as part of the planning for a 2D seismic survey to be
carried out in the onshore part of the PSC.

Over 2,000 square kilometers of existing modern 3D seismic data is now being
interpreted by Serica in order to identify prospects and determine drilling
locations for our first exploration campaign in the Mahakam Delta.  On the basis
of the early interpretation of this large volume of 3D data it appears that
several potentially commercial prospects are likely to be identified.  A new
offshore 3D seismic survey is also being planned and drilling in the Kutai PSC
will commence in 2009.



Vietnam


Block 06/94 PSC

Serica has a 33.33% interest in the Block 06/94 PSC, which is operated by Pearl
Energy and lies in the Nam Con Son Basin about 350 kilometres offshore South
Vietnam.  The block covers an area of approximately 4,100 square kilometres and
is the part of Block 06/1 which British Petroleum was contractually obliged to
relinquish in 1994 at the end of its contractual exploration period, after
discovering the major Lan Tay and Lan Do gas fields. These fields commenced
production in 2002, following the construction of a new gas and liquids pipeline
to the Vietnamese mainland.

During 2007 a 730 square kilometre 3D seismic survey was carried out and, based
on the interpretation of this data, a rig has been contracted and a well is
planned to be drilled in 2H08 in the south-western part of the block.  A further
1,000 square kilometre 3D seismic survey is expected to be acquired in May 2008
and a 2D seismic survey is also planned.

The operator of the adjacent Block 12/E, Premier Oil, has announced that it is
seeking bids for an FPSO for the development of its Blackbird and Dua oil
fields.  Serica expects to be able to identify both oil and gas prospects within
Block 06/94.



GLOSSARY


bbl             barrel of 42 US gallons
bcf             billion standard cubic feet
boe             barrels of oil equivalent (barrels of oil, condensate and LPG plus the heating equivalent of gas
                converted into barrels at a rate of 6,000 standard cubic feet per barrel)
bopd or bpd     barrels of oil or condensate per day
FPSO            Floating Production, Storage and Offtake vessel (often a converted oil tanker)
LNG             Liquefied Natural Gas (mainly methane and ethane)
LPG             Liquefied Petroleum Gas (mainly butane and propane)
mcf             thousand cubic feet
mm bbl          million barrels
mmBtu           million British Thermal Units
mmscfd          million standard cubic feet per day
PSC             Production Sharing Contract
Reserves        Estimates of discovered recoverable commercial hydrocarbon reserves calculated in accordance with the
                Canadian National Instrument 51-101
Contingent      Estimates of discovered recoverable hydrocarbon resources for which commercial production is not yet
Resources       assured, calculated in accordance with the Canadian National Instrument 51-101
Prospective     Estimates of the potential recoverable hydrocarbon resources attributable to undrilled prospects,
Resources       calculated in accordance with the Canadian National Instrument 51-101
TAC             Technical Assistance Contract
tcf             trillion standard cubic feet






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 2007.

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 based in Western Europe and South East Asia, with
interests in the UK, Norway, Spain, Ireland, Indonesia and Vietnam. The Group
has no current oil and gas production, with the main emphasis placed upon its
near term developments and future exploration drilling programmes. In the year,
work has continued on managing its portfolio of interests, advancing its
Indonesian development towards first production, and completing a successful
drilling programme in the UK North Sea.

At a Group Board level, Ian Vann and Steven Theede joined as non-executive
directors in the summer, and in October, Serica confirmed the retirement of
James Steel as a non-executive director of the Company. Ian and Steve bring a
wealth of valuable experience in the international oil and gas business to the
Board of Serica.

Western Europe:  United Kingdom, Ireland, Norway and Spain


Early in the year, the formal award of new licences in both the UK and Norway
was completed.

In the UK, Serica was awarded Block 23/16g in the Central North Sea, Block 48/
17d in the Southern North Sea and Blocks 113/26b and 113/27b (part) in the East
Irish Sea.  Serica is the operator of all four blocks and has a 100% interest in
each block except 23/16g, where it has a 50% interest.

In Norway, Serica was awarded a 20% interest in two large licences in the 2006
Awards in Predefined Areas ('APA') Licence Round.  The licences are contiguous
and cover a total area of approximately 1,625 square kilometres in the Egersund
Basin, about 120 kilometres southwest of Stavanger.  The licences contain the
undeveloped Bream, Brisling and 18/10-1 oil discoveries.  In Licence 407, an
appraisal well is planned to be drilled in the Bream field in the second half of
2008 and, in Licence 406, a 3D seismic survey will be acquired early in 2008.
Serica has a 20% interest in both of these licences.

In UK Block 23/16f, appraisal of the Company's Columbus discovery commenced in
the third quarter of 2007. Two Columbus appraisal wells, 23/16f-12 and 23/
16f-12z, were drilled and both were successful. Well 23/16f-12 was drilled as a
vertical well approximately three kilometres north of the Columbus discovery
well and encountered gas/condensate-bearing Paleocene sands at a higher
elevation than those tested in well 23/16f-11.  To further evaluate the Columbus
discovery, the 23/16f-12 well was then sidetracked to a bottom-hole location
approximately 2.2 kilometres north of the Columbus discovery well and
encountered gas/condensate-bearing Paleocene sands similar to those found in 23/
16f-11.  The successful outcome of the two new wells supports the commercial
development of Columbus and data from these wells will be used to advance field
development studies. The Columbus field lies in close proximity to existing
production infrastructure, providing the potential to commence production as
soon as throughput agreements have been reached and the development wells can be
tied-in. Serica is currently studying development options for the Columbus
field.

In June 2007, Serica agreed with BG International Limited not to complete a
previously announced acreage exchange, as a result of which Serica retained its
50% interest in Block 23/16f.

In Ireland, Serica is the operator and holds a 100% interest in Blocks 27/4, 27/
5 (west) and 27/9, which cover an area of 611 square kilometres in the Slyne
Basin off the west coast of Ireland and lie 42km south of the Corrib gas field
currently being developed by Shell. The blocks are covered by existing 3D
seismic data that has now been reprocessed and has confirmed the presence of
four significant prospects.  Serica will shortly carry out a site survey and
expects to drill the first of these prospects in the summer of 2008.

In Spain, prior to carrying out a seismic survey, Serica entered into an
agreement with Beach Petroleum Limited, under which the Company farmed out a 25%
interest in its four exploration Permits onshore northern Spain, retaining a 75%
interest and operatorship. The 315 kilometre 2D seismic survey, which commenced
in the third quarter 2007, has recently been completed and the data is currently
being evaluated.



South East Asia:  Indonesia and Vietnam

In the Glagah Kambuna TAC, the first phase of the development programme for the
Kambuna gas/condensate field commenced. The field production platform was built
and in the first quarter of 2008 was positioned over the Kambuna No. 2 well and
piled to the seabed. The GSF136 jack-up drilling rig is now drilling the Kambuna
development wells No. 3 and No. 4 and will then complete all three wells for
production. Onshore and offshore facilities and a 14-inch offshore pipeline will
then be installed, with production targeted to commence by the end of 2008. The
transfer of Serica's book costs of US$19.2 million in respect of Kambuna, from
exploration and evaluation assets to development assets, classified under
property, plant and equipment, occurred effective 31 December 2007.

Following the agreement of terms for the sale of gas to the Indonesian State
electricity generation company Perusahan Listrik Negara ('PLN'), at an initial
price of US$4.50 per million Btu (approximately $5.40 per million cubic feet)
escalating at 3% per annum, tenders for a further quantity of gas have now been
received at considerably higher prices. In addition to the gas, Serica will
initially be marketing 4,000-5,000 barrels per day of condensate at a price
close to that of crude oil. The Company anticipates that production from the
field will commence in December 2008.

In the Biliton PSC, in March 2007, Serica entered into a farm-out agreement
under the terms of which Nations Petroleum earned a 45% interest by paying a
contribution to Serica's back costs and bearing the majority of the costs of
drilling two wells in the PSC.   Serica retains a 45% interest and operates the
PSC.

Two exploration wells were drilled in the Biliton PSC in December 2007 and
January 2008 using the GSF 136 drilling rig.  Neither well contained
hydrocarbons and each was therefore plugged and abandoned.  Serica had always
recognised that the high potential of Biliton came with a significant
exploration risk, since the block is around 200 kilometres away from the
established oil and gas fields of East Java.  Costs associated with the Biliton
PSC have been written off in these financial statements.

In Vietnam, a 730 kilometre 3D seismic survey was carried out and, based on the
interpretation of this data, a well is planned to be drilled in 2H08 in the
south-western part of the block. The operator of the adjacent Block 12/E,
Premier Oil, has announced that it is seeking bids for an FPSO for the
development of its Blackbird and Dua oil fields.  Serica expects to be able to
identify both oil and gas prospects within Block 06/94.


Debt facility

In November 2007 the Company entered into a US$100 million senior secured debt
facility with JPMorgan Chase Bank, N.A. and The Governor and Company of the Bank
of Scotland.  The facility, which has an initial term of twelve months, with the
Company having an option to extend for a further six months, will be used to
fund appraisal and development expenditures for the Kambuna field in Indonesia
and the Columbus field in the UK North Sea as well as for Norwegian appraisal
expenditure and general corporate purposes.


Post year end

In January 2008 the Company announced the completion of a placing of 24,770,354
new ordinary shares to the AIM Market and the TSX-V in Canada. The total funds
raised for the Company was approximately US$49 million after expenses.  The
funding available from the loan facility, in conjunction with the finance raised
in the recent January 2008 placing will provide sufficient resources to progress
with the Company's forward programme.

In February 2008 Serica announced that it had acquired an additional 25.5%
working interest in the Kutai PSC in East Kalimantan, Indonesia.  Serica, the
operator of the Kutai PSC, now holds a 78% interest.  The PSC was awarded to
Serica in January 2007 and covers an area of around 4700 square kilometres in
the Mahakam Delta, mainly offshore. There is a large amount of existing modern
3D seismic data on the block that Serica is currently analysing and interpreting
in order to determine drilling locations for 2009.

Serica remains very focused on creating shareholder value through its field
development and exploration drilling programmes.  As the Company continues to
build on the exploration success that it has seen in the North Sea and
Indonesia, its objectives are to bring the benefits of that success back to
shareholders and to lay the foundations for future growth.

The results of Serica's operations detailed below in the MD&A, and in the
financial statements, are presented in accordance with International Financial
Reporting Standards ('IFRS').




Results of Operations

Serica generated a loss of US$13.6 million for 2007 compared to a loss of
US$14.4 million for 2006.


                                                                                           2007                   2006
                                                                                         US$000                 US$000

Sales revenue                                                                                 -                     61

Expenses:

Administrative expenses                                                                 (7,897)                (6,641)
Foreign exchange gain                                                                       394                  1,715
Pre-licence costs                                                                         (375)                (4,205)
Asset write offs                                                                        (9,282)               (12,870)
Share-based payments                                                                    (1,962)                (1,918)
Change in fair value of share warrants                                                        -                  1,154
Depreciation and depletion                                                                (149)                   (95)

Operating loss before net finance revenue and tax                                      (19,271)               (22,799)

Profit on disposal                                                                            -                 2,311
Finance revenue                                                                           2,814                 4,931
Finance costs                                                                             (321)                      -

Loss before taxation                                                                   (16,778)               (15,557)

Taxation credit for the year                                                              3,149                 1,182

Loss for the year                                                                      (13,629)               (14,375)

Basic and diluted loss per share (US$)                                                   (0.09)                 (0.10)



Revenues from oil and gas production are recognised on the basis of the
Company's net working interest in its properties. In 2007 the Company had no
revenue. Revenue in 2006 was generated from Serica's 10% interest in the
Lematang PSC which contained the Harimau field. These revenues are from
discontinued operations following the disposal of the Lematang PSC interest in
2006. Direct operating costs for the field during that period were carried by
Medco Energi Limited.

Administrative expenses of US$7.9 million for 2007 increased from US$6.6 million
for 2006. The general increase from 2006 reflects the growing scale of the
Company's activities, including further recruitment, over the past twelve
months.

No significant foreign exchange movements impacted 2007 results. The significant
foreign exchange gain of US$1.7 million earned in 2006 chiefly arose from the
increase in US$ equivalent value of pounds sterling cash deposits held, as the
pound continued to strengthen against the dollar during the year.

Pre-licence costs include direct cost and allocated general administrative cost
incurred on oil and gas interests prior to the award of licences, concessions or
exploration rights. The Company did not incur significant pre-licence expense in
2007, and the decrease in the charge from US$4.2 million in 2006 to US$0.4
million in 2007 is largely caused by data acquisition costs specific to the 2006
Norway licence applications (US$2.7 million) and Vietnam pre-licence activity,
absent in 2007.

Asset write offs of US$9.3 million comprise US$9.0 million of largely
pre-drilling costs in regard to the Biliton PSC and the Q4 2007 US$0.3 million
charge against relinquished UK North Sea licences P1180 23/16e and 23/17b. The
Q4 Biliton PSC asset write offs include charges against exploration and
evaluation assets (US$7.7 million), goodwill (US$0.4 million), inventory (US$0.6
million) and related long term other receivables (US$0.3 million). 2006 asset
write offs of US$12.9 million comprised US$12.7 million in regard to the Asahan
Offshore PSC and the Q3 2006 US$0.2 million charge against relinquished UK North
Sea licence P1180, Blocks 48/16a and 47/20b.

Share-based payment costs of US$2.0 million reflect allocations of charges
related to share option grants made during the course of 2005, 2006 and 2007 and
compare with costs of US$1.9 million for 2006.

In 2006 a fair value gain was recorded, as the fair value liability of warrants
outstanding as at 31 December 2005 fell prior to their exercise in 2006. This
had no impact in 2007 and no cash impact on any reported results.

Depletion and depreciation charges for 2006 and 2007 represent office equipment
only and are negligible. Those costs of petroleum and natural gas properties
classified as exploration and evaluation assets are not currently subject to
such charges pending further evaluation. The Kambuna asset costs now classified
as development costs and held within plant, property and equipment as at 31
December 2007, will be depleted once production commences.

The profit on disposal of US$2.3 million in 2006 was generated on the sale of
the 10% interest in the Lematang PSC to Lundin Petroleum AB for US$5 million.

Finance revenue, comprising interest income of US$2.8 million for 2007, compares
with US$4.9 million for 2006. The decrease from last year is due to the reduced
cash deposit balances held following expenditure on various drilling programmes.

The first drawdown on the senior secured debt facility occurred soon after the
facility was arranged in Q4 2007. Finance costs consist of interest payable and
issue costs spread over the term of the bank loan facility.

The taxation credit of US$3.1 million in 2007 represents the following; a
current tax credit from actual and expected tax recoveries on Norwegian
expenditure to date (US$6.1 million); a US$0.4 million credit from the release
of the deferred tax liabilities attached to Biliton; a partial offset of the
current tax credit in respect of Norwegian expenditure by a deferred income tax
charge of US$3.4 million from the timing differences arising from capitalised
exploration expenditure. The taxation credit of US$1.2 million in 2006 arose
from the release of the deferred tax liabilities attached to the Lematang PSC
(US$0.5 million) and Asahan (US$0.7 million).

Expenditures during 2005, 2006 and 2007 have reduced any potential current
income tax expense arising for 2007 and 2006 to US$ nil.

The net loss per share decreased from US$0.10 to US$0.09 in 2007.



Summary of Quarterly Results

Quarter ended:                                                  31 Mar          30 Jun          30 Sep           31 Dec
                                                                US$000          US$000          US$000           US$000
2007
Sales revenue                                                        -               -               -                -
(Loss)/profit for the quarter                                  (1,595)         (1,587)           1,237         (11,684)
Basic and diluted loss per share US$                            (0.01)          (0.01)               -           (0.08)
Basic earnings per share US$                                         -               -            0.01                -
Diluted earnings per share US$                                       -               -            0.01                -


2006
Sales revenue                                                       25              36               -                -
Profit/(loss) for the quarter                                    1,037           1,839         (3,795)         (13,456)
Basic and diluted loss per share US$                                 -               -          (0.03)           (0.09)
Basic earnings per share US$                                      0.01            0.01               -                -
Diluted earnings per share US$                                    0.01            0.01               -                -



The fourth quarter 2007 loss includes asset write offs of US$9.0 million in
regard to the Biliton PSC.

The fourth quarter 2006 loss includes asset write offs of US$12.7 million in
regard to the Asahan Offshore PSC.



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 2006
                                                                                   2007
                                                                                 US$000                          US$000
Current assets:
    Inventories                                                                   6,991                           6,785
    Trade and other receivables                                                  21,906                          30,872
    Tax receivable                                                                3,387                              31
    Cash and cash equivalents                                                    22,638                          77,306
Total Current assets                                                             54,922                         114,994

Less Current liabilities:
   Trade and other payables                                                    (23,604)                        (30,619)


Net Current assets                                                               31,318                          84,375



At 31 December 2007, the Company had net current assets of US$31.3 million which
comprised current assets of US$54.9 million less current liabilities of US$23.6
million, giving an overall decrease in working capital of US$53.1 million in the
year.


Inventories increased from US$6.8 million to US$7.0 million over the period.

Trade and other receivables at 31 December 2007 included a US$9.4 million
upfront deposit payment for the Global Santa Fe drilling rig for Indonesian
operations, and significant recoverable amounts from partners in Joint Venture
operations in the UK, Indonesia and Spain. Other smaller items included
prepayments and sundry UK and Indonesia working capital balances.

Cash and cash equivalents fell from US$77.3 million to US$22.6 million. The
Company received US$5.0 million proceeds from the 2006 Lematang asset disposal,
raised additional new funds of US$1.6 million through the exercise of share
options and earned interest income of US$2.8 million, but incurred significant
costs in 2007 from exploration work (principally the Q4 UK drilling programme on
the Columbus discovery, preparation and start up costs of the Indonesian
drilling programme, spend in Vietnam, Norway, Spain and Kutai) together with
ongoing administrative costs.

Trade and other payables chiefly include significant trade creditors and
accruals from the Indonesian drilling programme and amounts due to the
sub-contractor operating the Q4 Columbus drilling programme. Other smaller items
include sundry creditors and accruals for administrative expenses and other
corporate costs.



Long-Term Assets and Liabilities


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

                                                                                31 December                 31 December
                                                                                       2007                        2006
                                                                                     US$000                      US$000

Exploration and evaluation assets                                                    71,874                     40,681
Property, plant and equipment                                                        19,543                         342
Goodwill                                                                                768                       1,200
Financial assets                                                                      4,680                           -

Long-term other receivables                                                           1,224                         351

Financial liabilities                                                               (9,582)                           -
Deferred income tax liabilities                                                     (3,910)                       (955)



During 2007, total investments in petroleum and natural gas properties,
excluding property, plant and equipment and represented by exploration and
evaluation assets, increased from US$40.7 million to US$71.9 million. The net
US$31.2 million increase consists of US$58.3 million of additions, less US$7.7
million of Biliton asset write offs and US$0.3 million of relinquished licence
costs and the transfer of US$19.2 million of Kambuna costs from exploration and
evaluation assets to property, plant and equipment which occurred effective 31
December 2007.


The US$58.3 million of additions were incurred on the following assets:

In South East Asia, US$9.7 million was spent in Indonesia on; drilling activity
preparation, G&A on the Glagah Kambuna TAC (US$5.6 million), signature bonuses
and seismic on the Kutai concessions (US$3.1 million), and US$1.0 million (net
of US$1.0 million of back costs received in Q1) on Serica's share of Biliton
drilling costs incurred on the two Biliton wells that exceeded the agreed carry
by Nations Petroleum. US$6.7 million was spent in Vietnam on entry costs and
seismic data acquisition.

In the UK & Western Europe, significant expenditure was incurred on Columbus
2007 drilling and other Block 23/16f cost (US$23.6 million), US$3.6 million in
Spain (chiefly on a 2D seismic survey), US$4.4 million in Norway (on seismic
data acquisition and other exploration) and US$2.0 million in the UK and Ireland
on exploration work and other G&A.

The 2007 additions in UK & Western Europe also include costs capitalised when
the anticipated recovery previously credited against exploration and evaluation
assets as at 31 December 2006, was reversed in Q2 2007 following the
announcement in June of the agreement between Serica and BG not to complete the
BG/Serica cross assignment deal announced in 2006. Serica's capitalised cost now
reflects its 50% share of costs incurred on the Block 23/16f in 2006, rather
than the 25% previous interest.

The US$19.2 million increase in property, plant and equipment from US$0.3
million in 2006 results from the reclassification of Kambuna from exploration
and evaluation assets to development assets effective 31 December 2007.
Property, plant and equipment also includes immaterial balances of US$0.4
million for office fixtures and fittings and computer equipment.

Goodwill, representing the difference between the price paid on acquisitions and
the fair value applied to individual assets, fell by US$0.4 million from US$1.2
million to US$0.8 million following the write off of costs allocated to Biliton.


Financial assets include US$4.7 million of restricted cash deposits.

Long-term other receivables of US$1.2 million are represented by value added tax
('VAT') on Indonesian capital spend, which would be recovered from future
production.

Financial liabilities are represented by the first drawdown under the senior
secured debt facility, which occurred in Q4 2007. This includes accrued interest
payable and is disclosed net of the unamortised portion of allocated issue
costs.

The deferred income tax liability increase of US$3.0 million from US$0.9 million
to US$3.9 million, occurred from timing differences arising following the
recognition of the Norwegian tax recovery asset. An increase of US$3.4 million
was partially offset by a US$0.4 million liability decrease in relation to
Biliton, which was released following the write off of Biliton costs.



Shareholders' Equity

An extract of the balance sheet detailing shareholders' equity is provided
below:
                                                                             31 December                    31  December
                                                                                    2007                            2006
                                                                                  US$000                          US$000

Total share capital                                                              158,871                         157,283
Other reserves                                                                    13,729                          11,767
Accumulated deficit                                                             (56,685)                        (43,056)



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

Issued share capital during 2007 was increased by the exercise of 1,110,001
share options of the Company at prices ranging from Cdn$1.00 to Cdn$2.00.

Other reserves include those equity amounts in respect of the movement in
cumulative expense of share-based payment charges, and the element of the fair
value liability of share purchase warrants eliminated upon exercise of those
warrants.




Capital Resources

At 31 December 2007, Serica had US$31.3 million of net working capital, US$9.6
million of long term debt and no capital lease obligations. 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 2008                                                                 381
31 December 2009                                                                 389
31 December 2010                                                                  83



During the year the Company contracted the Sedco 704 drilling rig for 96 days
during 2007 and 2008 for UK & NW Europe operations. As at 31 December 2007 the
Company has a commitment for a remaining 40 days at a gross cost of US$13.5
million.  The operations currently identified for use of the rig are ventures
where joint venture partners are expected to pay a share of the costs.

The Company also has obligations to carry out defined work programmes on its oil
and gas properties, under the terms of the award of rights to these properties,
over the next twelve months as follows:



Year ending 31 December 2008 US$43,442,000

These obligations reflect the Company's share of interests in the defined work
programmes and are not formally contracted at 31 December 2007. The Company is
not obliged to meet other joint venture partner shares of these programmes.

In the absence of revenues generated from oil and gas production Serica will
utilise its existing cash balances, together with the US$100 million senior
secured debt facility, to fund the immediate needs of its investment programme
and ongoing operations. After the year end the cash balances existing at 31
December 2007 were supplemented by a net US$49 million raised from the share
placing announced in January 2008.


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 2007 financial statements.  International Financial Reporting
Standards have been adopted. The cost of exploring for and developing petroleum
and natural gas reserves are capitalised.  Unproved properties are subject to
periodic review for impairment 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, bank loans
and borrowings, accounts payable and accounts receivable. It is 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:

Serica has exposure to interest rate fluctuations; given the level of
expenditure plans over 2008/9 this is managed in the short-term through
selecting treasury deposit periods of one to six months. 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.

Where Serica operates joint ventures on behalf of partners it seeks to recover
the appropriate share of costs from these third parties. The majority of
partners in these ventures are well established oil and gas companies. In the
event of non payment, operating agreements typically provide recourse through
increased venture shares.

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



Share Options

As at 31 December 2007, the following employee share options were outstanding: -


                                                              Expiry Date                Number      Exercise cost Cdn$
Share options                                                    Jun 2008               400,000                 720,000
                                                                 Feb 2009               247,499                 494,998
                                                                 May 2009               100,000                 200,000
                                                                 Dec 2009               275,000                 275,000
                                                                 Jan 2010               600,000                 600,000
                                                                 Jun 2010             1,100,000               1,980,000


                                                                                                        Exercise cost £
                                                                 Nov 2010               561,000                 544,170
                                                                 Jan 2011             1,275,000               1,319,625
                                                                 May 2011               180,000                 172,800
                                                                June 2011               270,000                 259,200
                                                                 Nov 2011               120,000                 134,400
                                                                 Jan 2012             1,056,000               1,077,120
                                                                 May 2012               405,000                 421,200
                                                                 Aug 2012             1,200,000               1,182,000






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.

Disclosure Controls and Procedures and Internal Controls over Financial
Reporting

Serica's management, including the Chief Executive Officer and Chief Financial
Officer, has reviewed and evaluated the effectiveness of the Company's
disclosure controls and procedures (as defined in Multilateral Instrument 52-109
of the Canadian Securities Administrators) as of 31 December 2007. Management
has concluded that, as of 31 December 2007, the disclosure controls and
procedures were effective to provide reasonable assurance that material
information relating to the Company and its consolidated subsidiaries would be
made known to them by others within those entities, particularly during the
period in which this report was being prepared.

Management has designed internal controls over financial reporting to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
IFRS. There have been no changes in the Company's internal controls over
financial reporting during the year that have materially affected, or are
reasonably likely to materially affect, the Company's internal controls over
financial reporting.



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 no operating revenues and, during the
period ended 31 December 2007 the Company incurred losses of US$13.6 million
from continuing operations.  At 31 December 2007 the Company held cash and cash
equivalents of US$22.6 million and a financial asset of restricted cash of
US$4.7 million. Following the year end the Company raised an additional US$49
million net of expenses as the result of a Placing of 24,770,354 ordinary shares
in the Company.



Outstanding Share Capital

As at 7 March 2008, the Company had 176,418,310 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

11 March 2008

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 therefrom.


Serica Energy plc
Group Income Statement
for the year ended 31 December 2007



                                                                                             2007                  2006
                                                                       Notes               US$000                US$000

Sales revenue                                                              3                    -                    61

Cost of sales                                                                                   -                     -



Gross profit                                                                                    -                    61

Administrative expenses                                                    5              (7,897)               (6,641)
Foreign exchange gain                                                                         394                 1,715
Pre-licence costs                                                                           (375)               (4,205)
Asset write offs                                                       13,15              (9,282)              (12,870)
Share-based payments                                                                      (1,962)               (1,918)
Change in fair value of share warrants                                                          -                 1,154
Depreciation and depletion                                                 6                (149)                  (95)

Operating loss before net finance revenue and tax                                        (19,271)              (22,799)

Profit on disposal                                                        17                    -                 2,311
Finance revenue                                                            9                2,814                 4,931
Finance costs                                                             10                (321)                     -

Loss before taxation                                                                     (16,778)              (15,557)


Taxation credit for the year                                      11 a)                     3,149                1,182



Loss for the year                                                                        (13,629)              (14,375)
Loss per ordinary share (US$)
Basic and diluted LPS                                                     12               (0.09)                (0.10)




Serica Energy plc
Balance Sheet
As at 31 December 2007


                                                               Group                           Company
                                                                2007            2006              2007            2006
                                            Notes             US$000          US$000            US$000          US$000
Non-current assets
Exploration & evaluation assets             13                71,874          40,681                 -              -
Property, plant and equipment               14                19,543             342                 -              -
Goodwill                                    15                   768           1,200                 -              -
Investments in subsidiaries                 16                     -               -           130,684        119,682
Financial assets                            18                 4,680               -             4,680               -
Other receivables                           18                 1,224             351                 -              -
                                                              98,089          42,574           135,364        119,682
Current assets
Inventories                                 19                 6,991           6,785                 -              -
Trade and other receivables                 20                21,906          30,872           117,373         76,120
Tax receivable                              20                 3,387              31                 -               -
Cash and cash equivalents                   21                22,638          77,306             7,172         49,098
                                                              54,922         114,994           124,545        125,218

TOTAL ASSETS                                                 153,011         157,568           259,909         244,900

Current liabilities
Trade and other payables                    22              (23,604)        (30,619)           (6,376)         (1,045)

Non-current liabilities
Financial liabilities                       23               (9,582)               -           (9,582)              -
Deferred income tax liabilities             11               (3,910)           (955)                 -              -

TOTAL LIABILITIES                                           (37,096)        (31,574)          (15,958)         (1,045)

NET ASSETS                                                   115,915         125,994           243,951         243,855


Share capital                               25               158,871         157,283           123,599        122,011
Merger reserve                              16                     -               -           112,174        112,174
Other reserves                                                13,729          11,767            13,729         11,767
Accumulated deficit                                         (56,685)        (43,056)           (5,551)         (2,097)

TOTAL EQUITY                                                 115,915         125,994           243,951        243,855






Approved by the Board on 11 March 2008

Paul Ellis                                              Chris Hearne
Chief Executive Officer                                 Finance Director

________________________________      _____________________________________

Serica Energy plc
Statement of Changes in Equity
For the year ended 31 December 2007


Group                                                Share capital         Other       Accum'd         Total
                                                                        reserves       deficit
                                                            US$000        US$000        US$000        US$000

At 1 January 2006                                          148,745        4,153       (28,681)       124,217
Conversion of warrants                                       8,530            -             -          8,530
Conversion of options                                           35            -             -             35
Issue of shares (net)                                         (27)            -             -           (27)
Share-based payments                                             -         1,918            -          1,918
Loss for the year                                                -            -       (14,375)      (14,375)
Fair value of warrants converted                                 -         5,696             -         5,696
At 31 December 2006                                        157,283        11,767      (43,056)       125,994

Conversion of options                                        1,588            -             -          1,588
Share-based payments                                             -         1,962             -         1,962
Loss for the year                                                -            -       (13,629)      (13,629)

At 31 December 2007                                        158,871        13,729      (56,685)       115,915





                                                  Share                      Other      Accum'd     Total
                                                capital                   reserves      deficit
Company                                                       Merger
                                                             reserve
                                                 US$000       US$000        US$000       US$000        US$000

At 1 January 2006                               113,473      112,174         4,153      (4,433)       225,367
Conversion of warrants                            8,530            -             -            -         8,530
Conversion of options                                35            -             -            -            35
Issue of shares (net)                              (27)            -             -            -          (27)
Share-based payments                                  -            -         1,918            -         1,918
Profit for the year                                   -            -             -        2,336         2,336
Fair value of warrants converted                      -            -         5,696            -         5,696

At 31 December 2006                             122,011      112,174        11,767      (2,097)       243,855

Conversion of options                             1,588            -             -                      1,588
Share-based payments                                  -            -         1,962                      1,962
Loss for the year                                     -            -             -      (3,454)       (3,454)

At 31 December 2007                             123,599      112,174        13,729      (5,551)       243,951



Serica Energy plc
Cash Flow Statement
For the year ended 31 December 2007

                                                                  Group             2006      Company         2006
                                                                   2007           US$000         2007       US$000
                                                                 US$000                        US$000
Cash flows from operating activities:
Operating loss                                                 (19,271)         (22,799)      (5,011)      (1,376)

Adjustments for:
Depreciation and depletion                                          149               95            -            -
Asset write offs                                                  9,282           12,870            -            -
Share-based payments                                              1,962            1,918        1,962        1,918
Change in fair value of share warrants                                -          (1,154)            -      (1,154)
Changes in working capital                                      (5,008)         (10,813)      (1,899)        (122)
Cash generated from operations                                 (12,886)         (19,883)      (4,948)        (734)

Taxes received                                                    2,717               35            -            -

Net cash outflow from operations                               (10,169)         (19,848)      (4,948)        (734)

Cash flows from investing activities
Interest received                                                 2,873            4,999        1,497        3,872
Purchase of property, plant and equipment                         (185)            (411)            -            -



Purchase of intangible exploration assets                    (58,766)         (24,190)            -            -
Funding provided to group subsidiaries                              -                -     (45,054)     (68,126)
Funding provided for work programmes                          (4,680)                -      (4,680)            -
Disposals of intangible exploration assets                      5,000                -            -            -

Net cash used in investing activities                        (55,758)         (19,602)     (48,237)     (64,254)

Cash proceeds from financing activities:
Net loan financing                                              9,671                -        9,671            -
Net proceeds from issue of shares                                   -          (1,559)            -      (1,559)
Proceeds on exercise of warrants/options                        1,588            8,565        1,588        8,565

Net cash from financing activities                             11,259            7,006       11,259        7,006

Net decrease in cash and cash equivalents

                                                             (54,668)         (32,444)     (41,926)     (57,982)
Cash and cash equivalents at 1 January                         77,306          109,750       49,098      107,080
Cash and cash equivalents at 31 December                       22,638           77,306        7,172       49,098






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
2007 were authorised for issue by the Board of Directors on 11 March 2008 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 principal activity of the Company and the Group is to
identify, acquire and subsequently exploit oil and gas reserves primarily in
Asia and Europe. 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 2007. 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 2007 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 deficit dealt with in the financial statements of the parent
Company was US$3,454,000 (2006: profit US$2,336,000).

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

The accounting policies which follow set out those policies which apply in
preparing the financial statements for the year ended 31 December 2007.

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.


Use of Estimates and key sources of estimation uncertainty

The preparation of financial statements in conformity with IFRS 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.

The key sources of estimation uncertainty that has a significant risk of causing
material adjustment to the carrying amounts of assets and liabilities within the
next financial year are the estimation of share-based payment costs and the
impairment of intangible exploration assets (E&E assets). The estimation of
share-based payment costs requires the selection of an appropriate valuation
model, consideration as to the inputs necessary for the valuation model chosen
and the estimation of the number of awards that will ultimately vest, inputs for
which arise from judgements relating to the continuing participation of
employees (see note 27).

The Group determines whether E&E assets are impaired in cost pools when facts
and circumstances suggest that the carrying amount of a cost pool may exceed its
recoverable amount. As recoverable amounts are determined based upon risked
potential, or where relevant, discovered oil and gas reserves, this involves
estimations and the selection of a suitable discount rate. The capitalisation
and any write off of E&E assets necessarily involve certain judgements with
regard to whether the asset will ultimately prove to be recoverable.



Basis of Consolidation

The consolidated financial statements include the accounts of Serica Energy plc
(the 'Company') and its wholly owned subsidiaries Serica Energy Corporation,
Serica Energy Holdings B.V., Asia Petroleum Development Limited, Petroleum
Development Associates (Asia) Limited, Serica Energia Iberica S.L., Serica
Holdings UK Limited, Serica Energy (UK) Limited, PDA Lematang Limited, APD
(Asahan) Limited, APD (Biliton) Limited, APD (Glagah Kambuna) Limited, Serica
Energy Pte Limited, Serica Kutei B.V. ,Serica Nam Con Son B.V. and Serica Energy
Norge AS. 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, or groups of cash generating units expected to benefit
from the combination's synergies. Impairment is determined by assessing the
recoverable amount of the cash-generating unit, or groups of cash generating
units 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.

Full details of Serica's working interests in those petroleum and natural gas
exploration and production activities classified as jointly controlled assets
are included in the Review of Operations.

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.



Exploration and Evaluation Assets

As allowed under IFRS 6 and in accordance with 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, geological 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; Indonesia, Vietnam, UK & North West Europe and Spain.

E&E assets are not amortised prior to the conclusion of appraisal activities but
are assessed for impairment in cost pools when facts and circumstances suggest
that the carrying amount of a cost pool may exceed its recoverable amount.
Recoverable amounts are determined based upon risked potential, and 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 licences are expensed in the income statement if licences are
relinquished, or if management do not expect to fund significant future
expenditure in relation to the licence.

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 within property, plant and
equipment, and tested for impairment. If commercial reserves have not been
discovered then the costs of such assets will be retained within the relevant
geographical E&E segment until subject to impairment or relinquishment.


Asset Purchases and Disposals

When a commercial transaction involves the exchange of E&E assets of similar
size and characteristics, no fair value calculation is performed. The
capitalised costs of the asset being sold are transferred to the asset being
acquired.


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 2006 or 2007.

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 - Development Assets


Capitalisation

Development and production assets are accumulated into single field cost centres
and represent the cost of developing the commercial reserves and bringing them
into production together with the E&E expenditures incurred in finding
commercial reserves previously transferred from E&E assets as outlined in the
policy above.


Depreciation

Development assets are not depreciated until production commences. Costs
relating to each single field cost centre are depleted on a unit of production
method based on the commercial proven and probable reserves for that cost
centre. The depletion calculation takes account of the estimated future costs of
development of recognised proven and probable reserves, based on current price
levels. Changes in reserve quantities and cost estimates are recognised
prospectively from the last reporting date.


Impairment

A review is performed for any indication that the value of the Group's
development and production assets may be impaired.

For development assets when there are such indications, an impairment test is
carried out on the cash generating unit. Each cash generating unit is identified
in accordance with IAS 36. Serica's cash generating units are those assets which
generate largely independent cash flows and are normally, but not always, single
development or production areas. If necessary, additional depletion is charged
through the income statement if the capitalised costs of the cash generating
unit exceed the associated estimated future discounted cash flows of the related
commercial oil and gas reserves.


Property, Plant and Equipment - Other

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, cash and cash equivalents,
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

Financial assets are initially recognised at fair value plus transaction costs
that are directly attributable to the acquisition or issue of the financial
asset. Amortised cost is calculated by taking into account any discount or
premium on acquisition over the period to maturity.

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


Cash and cash equivalents

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


Financial liabilities

Financial liabilities include interest bearing loans and borrowings, and
outstanding share warrants which are carried at fair value.  Changes in fair
value are recognised in the income statement for the period.

Obligations for loans and borrowings are recognised when the Group becomes party
to the related contracts and are measured initially at the fair value of
consideration received less directly attributable transaction costs.

After initial recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the effective interest method.

Gains and losses arising on the repurchase, settlement or otherwise cancellation
of liabilities are recognised respectively in finance revenue and finance cost.


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.


Finance Revenue

Finance revenue chiefly comprises interest income from cash deposits on the
basis of the effective interest rate method and is disclosed separately on the
face of the income statement.


Finance Costs

Finance costs of debt are allocated to periods over the term of the related debt
at a constant rate on the carrying amount. Arrangement fees and issue costs are
amortised and charged to the income statement as finance costs over the term of
the debt.


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 an appropriate pricing model based upon the option
price, the share price at the date of issue, volatility and the life of the
option. It is assumed that all performance criteria are met.

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

At each balance sheet date before vesting, the cumulative expense is calculated,
representing the extent to which the vesting period has expired and management's
best estimate of the achievement or otherwise of non-market conditions and of
the number of equity instruments that will ultimately vest or, in the case of an
instrument subject to a market condition, be treated as vesting as described
above. The movement in cumulative expense since the previous balance sheet date
is recognised in the income statement, with a corresponding entry in equity.
Estimated associated national insurance charges are expensed in the income
statement on an accruals basis.


Share Warrants

The fair value of each outstanding warrant is estimated using a Black Scholes
pricing model based upon the warrant exercise price, the share price, volatility
and the life of the warrant.


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.


New standards and interpretations not applied

IASB and IFRIC have issued the following standards and interpretations with an
effective date after the date of these financial statements:


International Accounting Standards (IAS/IFRSs)

IFRS 2 'Amendment to IFRS 2 - Vesting Conditions and Cancellations' - Effective
date 1 January 2009

IFRS 3 'Business Combinations (revised January 2008)' - Effective date 1 July
2009

IFRS 8 'Operating Segments' - Effective date 1 January 2009

IAS 1 'Presentation of Financial Statements (revised September 2007)' -
Effective date 1 January 2009

IAS 23 'Borrowing Costs (revised March 2007) - Effective date 1 January 2009

IAS 27 Consolidated and Separate Financial Statements (revised January 2008) -
Effective date 1 July 2009



International Financial Reporting Interpretations Committee (IFRIC)



IFRIC 11 'IFRS2 - Group and Treasury Share Transactions' - Effective for periods
starting 1 March 2007

IFRIC 12 'Service Concession Arrangements' - Effective date 1 January 2008

IFRIC 13 'Customer Loyalty Programmes' - Effective date 1 July 2008

IFRIC 14 'IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding
Requirements and their Interaction' - Effective date 1 January 2008



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.






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