Serica Energy Share Discussion Threads

[kernelthread] 11/7/2024 18:39

The telegraph article doesn't seem to have had much effect on the price here, and ITH has gone up a couple of pence, so hopefully this has taken as much of a kicking as it's going to - for the moment at least.

[yasx] 11/7/2024 17:09

Stemis, It was reported in the Telegraph and as yet they have not withdrawn the article.

Perhaps Labour have realised Ed-iot is looking to go too far too fast and this may attract adverse publicity. However, sagacious chaps like myself know only too well their intentions.

[sawney] 11/7/2024 15:03

...sounds like damage limitation...

[stemis] 11/7/2024 14:21

It's now being reported by DESZN that this is fake news. According to Adam Vaughan, the Times Environment Editor, on X, DESZN has clarified

"This piece is a complete fabrication - it invents meetings and decisions that have not taken place.

As previously stated, we will not issue new licences to explore new fields.

We will also not revoke existing oil and gas licences and will manage existing fields for the entirety of their lifespan.

"We are working with the North Sea Transition Authority to ensure a fair and balanced transition in the North Sea.”

hxxps://x.com/adamvaughan_uk/status/1811385325962330193

[yasx] 11/7/2024 14:17

As I pointed out to Stemis yesterday, with Ed and Kier in charge, closing loopholes means removing every conceivable benefit.

The idiots who voted this lot deserve all they are bound to get.

[mariopeter] 11/7/2024 13:43

Post 6663

First sentence only one that makes any sense and overwhelmingly agree.

[sawney] 11/7/2024 12:46

This guy is a complete idiot....




Ed Miliband has ordered an immediate ban on new drilling in the North Sea in a decision that overrules his own officials and risks triggering a wave of legal action.

In an unusual intervention into what is typically an apolitical process, the Energy Secretary has told regulators not to approve a new round of drilling that was slated for confirmation in the coming weeks.

[mount teide] 11/7/2024 12:34

O/T - bountyhunter

Some investment research on two of the holdings mentioned in my earlier post - much more is available from the group that posts on the individual Advfn threads I set up to discuss the investment case.


AXL - The CEO has sold each of his previous 8 quoted companies for a very considerable capital gain - and has made no secret of this being the intention for Arrow once organically growing production to circa 10,000 bopd.

Arrow, doubled production last year - all self funded from cash flow and, are on schedule to repeat the achievement this year after recently achieving a spectacular result with a 'proof of concept' horizontal well on their highly prized Tapir Block, onshore Colombia asset, one of the most desirable and under-explored blocks in Colombia. Parex Resources, the largest independent in Colombia, recently secured ALL the remaining blocks surrounding Arrow's Tapir Block in a deal(some considered special treatment), announced at the same time as the results of the last Government O&G License Auction.

Every one of the circa 15 ultra low cost wells Arrow has drilled to date on the asset had a 90% CoS and proved commercial, with at least 3 different hydrocarbon pay zones. Each circa 9,500 ft well takes an average of 10 days to drill and a further week to test and put online - and has a payback period of around 2 months. The first horizontal well has a payback period of just 4 weeks, and a net drill cost to Arrow of just $2.75m for a well with a 600m lateral length.

Declaration - bought a 7 figure holding at an average of 7.1p immediately following the London IPO when the stock was hugely unloved - so much so was able to buy in 250,000 share transaction sizes without moving the s/p. Have since increased the family holding to 4.0m share at an average of 11.47p. Largely, on the strength of the CEO's previous track record and low cost growth progress made to date - I believe the share price today is probably better value than when I first invested, as it was initially made on the CEO's record. It has since been greatly enhanced by the growth delivered from proving up and monetising the assets.


Afentra - 'Angola - Block 3/05 - 'National Oil Company Sonangol assumed operatorship in 2005 and has since focused entirely on sustaining production through workovers and maintaining asset integrity. No infill drilling campaigns have taken place for 18 years on the asset. The asset currently produces from around 40 production wells and has nine active water injectors.' ....Offshore Technology

Block 3/05 - what is remarkable about the performance of its conventional, swallow water field's, is that despite not having an infill well drilled on them since 2005, it was possible last year to increase gross production by a remarkable 56% to 25,000 bopd, and P2 by a huge 4m bbls net to AET, on little more than the reintroduction of water intervention to just 15% of the target level.

The 2024/25 plan is to add in ESP, infill drilling and major workovers, and draw up a development plan for the Block's low tie-in cost, appraised satellite fields that could collectively add a further gross 10-20k bopd.

Peak production for the block was 193,000 bpd of crude oil and condensate with a combined 3.0bn bbls OIP. Angola has over 300 discovered O&G fields, but to date less than half have been developed.

This was the principal reason why the Government recently improved the Fiscal terms of the O&G industry - to attract new investment & extend existing licences to avoid the assets becoming 'stranded'. It's had some impressive early commercial success - with Exxon, who are increasingly vacating the rest of Africa, signing up to put $15bn of CAPEX into three large offshore blocks.

The Angolan Government is actively seeking more oil & gas investment. With Afentra having recently built, both offshore and now onshore, a solid commercial relationship with Sonangol, the divesting National state-owned oil company, the management has positioned the company perfectly, as a respected and reliable partner/candidate for the highly material pipeline of future acquisition opportunities that Sonangol plans to bring to the market over the next 2-3 years.

If CEO McDade were to significantly veer from following a strategy other than identifying and buying attractively priced, high quality second phase O&G assets with material reinvestment and efficiency improvement potential to maximise reserves recovery, I would look to sell down my holding.

However, McDade clearly believes Afentra has an opportunity to replicate the success of Tullow, Talisman and Apache in the North Sea 20 years ago, not least because fortuitously Afentra has the tail wind of the recovery stage of a new oil market cycle, a strong post pandemic recovery in demand, and a major programme of disinvestment of high quality assets that are no longer material to oil majors and NOC's in a number of mature O&G basins around the world.

The holy grail is to find a lowly valued second phase O&G company with low producing costs, strong cash flow generating assets and highly material organic and inorganic development potential, run by an experienced management in a high growth, high energy price mature market, thinly contested for high quality assets being vacated by oil majors and NOC's, due to owners and Governments willing only to consider companies with management capable of demonstrating a previous track record of managing O&G assets to the highest operational and safety standards.

Should the company also benefit from a regional Government offering industry leading fiscal terms, long license extensions to attract new investment to maximise recovery from large mature fields, and a drilling/oil service sector still largely beaten down by the ravages of a long recession, together with a location in a region with mostly benign sea and weather conditions enabling shallow water offshore field production development and maintenance work to be carried out year round, that would be the icing on the cake.

On the balance of probabilities, over a 2-3 year view, I consider the risk/reward of an investment in Afentra today as good as any O&G company in my portfolio. Hold a 7 figure position at an average of 25.7p.

This Seeking Alpha article by Robert Whelan, an experienced, well researched investor, explains the strong fundamentals of the investment case in light of the recent Angolan acquisitions, which as I suggested in a post on the Afentra thread early in 2023, is likely to be acquired for next to nothing should, as proved the case, completion were to occur in late 2023 or early 2024, due to the enormous build-up of accrued revenue due to Afentra from the effective economic dates of the deals in 2022. The combined net price for all three working interest shareholdings in the asset, has since been confirmed at an incredible $9.7m!


Afentra Acquired Assets Worth $255m, With Only $37m Cash: Here's How:

AIMHO/DYOR

[plasybryn] 11/7/2024 09:08

Buy Serica Energy, look at the yieldBy Lucian Miers | Wednesday 10 July 2024Nice buy recommendation on ShareProphets. 15% yield.

[bountyhunter] 11/7/2024 06:50

decommissioning costs/liabilities of potential acquisitions need to be considered

[pol123] 10/7/2024 19:49

assets generated revenue of $644 million last year. All well and good, then strip out opex/capex/ NS tax = nothing left. Who wants to buy NS assets. May be able to run the assets into the ground, no capex & min opex

[yasx] 10/7/2024 16:54

Stemis,

Nor do I but my interpretation of the language from Kisr/Ed is that they will (or currently intend to) encapsulate the same u der the unbrella of loopholes.

[stemis] 10/7/2024 16:32

yasX,

I don't consider normal capital allowances as loopholes but I guess we'll have to see

[ammons] 10/7/2024 14:15

Mad Milliband has also boasted about "proper windfall tax" of Shell and BP "obscene" (overseas) profits. I am fascinated as to how Reeves is going to impose and collect it or if the threat is pure hot air as seems likely. If that is hot air, what else might be?

[yasx] 10/7/2024 13:49

Stemis,
They have referenced closing ALL loopholes - which, on sny view, was a reference to removing all allowances and capex deductions.

Ed has a remit - just look at the clowns appointed yesterday in his department - all net zero climate criis warriors, none of whom think it appropriate for themselves to buy an electric car oruse public transport.

[bountyhunter] 10/7/2024 13:26

Good post MT. Any of those three might make a good acquisition away from NS waters.

[sawney] 10/7/2024 12:27

Just being cynical... I could see a few small mid size producers bought on the very cheap with private money...then run production purely to break even... awaiting better times/common sense...although the latter is highly unlikely with Ed...

[stemis] 10/7/2024 11:02

Labour Government's proposed policy to increase the total tax take to 78% and end the deductibility of Capex...

I'm not aware they have specifically proposed ending the deductibility of capex. What they have said is that they'd end the special investment allowance that effectively raised the deduction to 91%. If they merely allowed normal capex it would be an effective deduction of 78%. That's why I said that there is a lot of detail to fill in...

[stemis] 10/7/2024 10:54

Zero chance Labour reverses course on increasing the windfall energy tax. Taxing "greedy" energy companies is about the lowest hanging fruit they can possibly pick from the tax raising tree.

It may or may not be low hanging but it's not really that juicy. According to the OBR forecast tax receipts from Oil & Gas in 2024/5 are only £3.8bn gradually falling over the next 3 years...

[mount teide] 10/7/2024 10:54

O/T

The impact of the Tory's usury windfall tax on the UK O&G industry and threat, since realised, of an incoming socialist Labour Government's proposed policy to increase the total tax take to 78% and end the deductibility of Capex, is very likely to lead to the complete collapse of exploration activity and most production development.

Beware of unintended consequences - The financial distress of most small/mid cap UK focused E&P companies is a near certainty, with many likely to fail(who would want to buy their 'assets'?), thereby increasing the risk of a sizeable proportion of the North Sea O&G sector's decommissioning costs becoming the responsibility of the taxpayer.

What a contrast to the forward thinking governments of Angola and Malaysia - who this decade have made their O&G industries some of the most competitive in the world to attract foreign investment - with predictable results: a tsunami of new investment to enable the natural divestment of mid/late stage assets from NOC's and the Majors to second phase small/mid cap's with a proven track record of safely operating these type of assets.


Shareprice performance since Arrow Exploration's London listing in October 2021

Production entirely outside UK Tax Regime:
+ 855% - Valeura Energy
+ 365% - Afentra
+ 364% - Arrow Exploration

Material Production within UK O&G Tax Regime
-23% - Harbour Energy
-41% - Serica Energy
-48% - Enquest
-66% - Kistos

Top three are focused on regions of world where government objectives include maximising O&G output at producing fields, by granting license extensions and favourable fiscal terms to investors, enabling cost recovery regardless of infill well results.

With respect to O&G equity investment it's certainly helpful to have this downside protection of a 'Flood Tide'(highly competitive fiscal and operational terms, and long license extensions for mature assets), and the upside potential of a 'Strong Tail Wind'(high quality mid/late life assets being divested by IOC's and NOC's at very competitive prices) behind you!

Essential if you wish to attract high quality second phase operators looking to minimise shareholder risk and maximise investment return.

Infuriatingly, the UK's third rate political and institutional class seem determined to destroy what is left of our once world leading offshore O&G industry. It is a policy that is economically naive in the extreme and putting our energy security during the transition phase to clean energy at huge risk, as New Zealand and Australia are already finding out.


You get a helluva lot for your money when buying large mid life O&G assets in the maturing O&G basins of the world like Angola and Malaysia, with a backdated effective economic date in a rising oil price environment!

UK - Rosebank Field - First Oil expected 2026 - (Gross Figures)
336m - P2 Reserves
69,000 bopd - Estimated Peak Production
$8.2 bn - Project Cost (Source: Energy Voice)

Equinor has a $1.5bn price tag for a farm out of 20% of the asset - the buyer would then have a further outlay of over US$2 billion before first oil.

At least a 75% UK tax rate until 2029.


Angola - Block 3/05 + 3/05A (Gross Figures)

Block Licence End Date: December 2040
108m bbls - 3/05 - P2 Reserves
43m bbls - 3/05 - 2C Resources
62m bbls - 3/05A - 2C Resources

23,000 bopd - Current production
40,000 bopd - 2028 production target

3.5bn bbls - STOIIP 3/05 + 3/05A
1.3bn bbls - Produced from 3/05 to date / 42% recovery rate (target >50%/+250m bbls)
2.5m bbls - Produced from 3/05A to date / 1% recovery rate(target > 30%/+90m bbls)

Afentra will have likely paid a net circa $9.7m (after sale of oil inventory but before modest outstanding contingencies) for 30% of Block 3/05 and 21.33% of Block 3/05A.

3/05 - Updated Fiscal Terms from 1/1/2024 improve contractors’ cost oil limit from 65% to 75%, and the contractors’ profit oil share from 30% to 40%. As a result Afentra's net NPV at a 10% discount rate increased from US$214.5 MM to US$254.9 MM.

3/05A - Fiscal Terms for Marginal Field



In addition to that already announced, the Angolan O&G regulator is planning new legislation in H2/2024, with respect to further contract and fiscal incentives to encourage the reactivation of production and drive operational efficiency in assets previously suspended due to low oil prices.

'Marginal Projects: Many oil and gas activities in development areas were suspended when deemed not economically viable. The Government's intent is to encourage the reactivation of these activities within development areas.

Legislation will enhance the oil and gas business environment, providing new guidance on oil and gas operations and processes that include streamlining of work programs.

The Government also plans to implement contract and fiscal incentives that will promote operational efficiency in mature and marginal fields.'

[atmysignal] 10/7/2024 10:38

Wrong board

[atmysignal] 10/7/2024 10:38

I spoke to the nomad this morning Very upbeatHe wouldn't rule out 80s Dyor