Serica Energy Share Discussion Threads

[mariopeter] 09/2/2024 10:54

The thing to have done Stemis is accept and reinvest in the combined entity if it was too cheap. At least that way good acquision business men would have been around and the Tailwind assets would still be owned by Mercuria. Good luck with the organic growth cause that was not Flegg's hope at the time. I appreciate the super tax has not helped. We will never know but Tailwind was very poor and I know KIST management would not have entertained it. KIST do a Mercuria style deal at base wholesale prices and then sell everything retail.

[nigelpm] 09/2/2024 10:31

Yup - another nonsense argument I see trotted around twitter and elsewhere. It tells me most private investors are terrible with numbers.

[stemis] 09/2/2024 10:29

Two fingers to KIST (£3.82 offered)

KIST's 'offer', as of 25.7.22, was 213p cash plus 0.4 share of KIST (now 0.4 x 142.5 = 57p). However since then SQZ shareholders have received dividends of 31p, so maybe a fair comparison is 239p. More than current share price of 189p certainly but hardly a knock out premium. Of course we don't know what the share price of a combined KIST+SQZ would be; possibly less than 142.5p...

[mariopeter] 09/2/2024 10:15

Flegg leaving.

Flegg a wonderful oil and gas man but imo a bad business man. Two fingers to KIST (£3.82 offered) and welcome Mercuria (the medium sized tapeworm).

Not in KIST or SQZ ..tax (the titanic tapeworm).

[nigelpm] 09/2/2024 10:13

Further to the above. I think the biggest risk is what Labour end up doing.

Whilst retrospective tax changes are generally frowned up and probably unlikely - SQZ is hugely exposed if they do decide to mess with them - not least in the huge tailwind potential offsetting.

[stemis] 09/2/2024 10:08

Well if that’s not the case how the focaccia have we paid 290millokn in tax? Surly our barely profitable gas didn’t cause that !!!

£141m related to 2022, prior to the Tailwind acquisition

Tailwind had tax losses at end 2022 estimated at Ring Fence Corporation Tax: $1.4 billion, Supplementary Charge: $1.2 billion and Energy Profits Levy: $0.1 billion

[oilinvestoral] 08/2/2024 21:41

"Capex has 91% tax relief hence ?210m forecast for this yr (actually ?18.9m)"----Very true but they need to stump up the £210 from existing / non -existing cash ! Once the rebates start coming in they'll be in the money...

[oilinvestoral] 08/2/2024 21:39

Stemis: "My point is that they made the assurance about dividends, as part of the acquisition of Tailwind, knowing the impact on net cash of the acquisition. "And my point is that the base case assumptions they used to come up with that assurance have changed (namely gas prices, additional shutdown, worse than expected cashflow)! Stemis: "Tailwind tax losses should’ve largely been utilised I seriously doubt that's the case..."Well if that's not the case how the focaccia have we paid 290millokn in tax? Surly our barely profitable gas didn't cause that !!!

[bountyhunter] 08/2/2024 21:13

That's a shame! Your first post is still very relevant however.

[croasdalelfc] 08/2/2024 20:49

sorry that was for US not UK .... one glass too many whilst researching

[bountyhunter] 08/2/2024 20:38

Interesting, is that 50,000 boepd or specifically bopd?

[croasdalelfc] 08/2/2024 20:34

Capex has 91% tax relief hence £210m forecast for this yr (actually £18.9m)Several major tax benefits are available for oil and gas companies and investors that are found nowhere else in the tax code.Tangible costs, which pertain to the actual direct cost of the drilling equipment are 100% deductible but must be depreciated over seven years.Intangible drilling costs generally constitute 65-80% of the total cost of drilling a well and are100% deductible in the year incurred.2Lease operating costs and all administrative, legal, and accounting expenses can also be deducted over the life of the lease.

[stemis] 08/2/2024 19:58

While you raise a good point, Nobody twisted our arm to buy Tailwind and take on their debt did they Stemis?


That different that you quite rightly point out of over £300m would’ve paid dividends for the next three and a half years (assuming the company didn’t generate a single penny of cash flow)! Now there’s a thought !

But that's a different point (and one that's been done to death on this board for the last 6 months or more). My point is that they made the assurance about dividends, as part of the acquisition of Tailwind, knowing the impact on net cash of the acquisition.

Can you tell me how they will be able to pay a full dividend knowing that the Tailwind tax losses should’ve largely been utilised

I seriously doubt that's the case...

[waterloo01] 08/2/2024 18:42

Hearing labour talk of a one off windfall tax, might actually not be a bad time to make the investments that pay in a future fy.

[oilinvestoral] 08/2/2024 17:50

Well we know that, since the proforma position at 31.12.22 of £121.1m, they've paid £280m in tax (H1 £141m + H2 £139m) and dividends of £89m----------------Thank you Stemis Now using those numbers. We know production is relatively flat this year. Can you tell me how they will be able to pay a full dividend knowing that the Tailwind tax losses should've largely been utilised and knowing that we have a significantly expanded investment programme this year !The math ain't mathing as the kids say ...

[oilinvestoral] 08/2/2024 17:42

Stemis Also re: the net cash of nearly half a billion pounds :While you raise a good point, Nobody twisted our arm to buy Tailwind and take on their debt did they Stemis? That different that you quite rightly point out of over £300m would've paid dividends for the next three and a half years (assuming the company didn't generate a single penny of cash flow)! Now there's a thought ! Queue : why don't you sell posts or we don't want to talk about the acquisition....

[stemis] 08/2/2024 17:20

But what happened to all the cashflow since acquisition was made! Everyone was expecting a much bigger cash position than we have now !

Well we know that, since the proforma position at 31.12.22 of £121.1m, they've paid £280m in tax (H1 £141m + H2 £139m) and dividends of £89m so they must be generating some cash (!!) but I agree, we need more information to understand the H2 movements.

[nigelpm] 08/2/2024 17:08

Great post Stemis - I've seen a similar argument on net cash continually being trotted out here, on LSE and twitter and it's plain and simply wrong.

[stemis] 08/2/2024 16:50

Exactly!!! but look at the date ! A lot of things have changed since then! Our NET cash has gone down from £456.8 million to around £90 million !!

A bit misleading. The £456.8m was at 31.12.22 before the acquisition of Tailwind. Tailwind was expected to involve cash payment of £58.7m plus taking on £277m of Tailwinds debt. Disclosed in same RNS as "Dividend policy to be maintained" 'promise'. So on a proforma basis, net cash of £121.1m.

Our production levels have dropped significantly since Q1 2023! We were doing 47-48k in Q1 after we completed ganett 4! The average for the year was 40k!

Same RNS - "Estimated proforma combined production in 2023 will rise significantly to between 40,000 boe/d and 45,000 boe/d". So within expectation.

Obviously the board can do what it likes with dividends, however it think it would be a little disingenous to offer a maintained dividend as a reassurance to the acquisition and then cut it little more than a year later due to a minor stumble.

[nigelpm] 08/2/2024 16:46

True bounty.

The disadvantage of having net cash and no debt is you can't reduce your CT bill - ref M&M - I would not be surprised at all if that was the clash between Mitch and Mercuria - aligned to careful cash management vs growth

[oilinvestoral] 08/2/2024 16:36

Fair point !

[oilinvestoral] 08/2/2024 16:34

I don't know the exact cash flow forecast but I do know 1) OPEX / bbl 2) G& A in 20223) estimated capex 4) approximate tax paid in past 12 months With the above and knowing the next cash last month, I can make an estimate of cashflow projections.

[bountyhunter] 08/2/2024 16:31

Mercuria won't be worried about taking on any debt if that's what it takes to pay themselves a hefty dividend given their very significant equity holding (if indeed that is necessary). That's how these takeovers of companies with a healthy cash balance work.