Serica Energy Plc (AIM: SQZ): Another operational setback at Triton; value and distribution profile intact
• Operational issues with the flare system at the Triton FPSO have resulted in a temporary suspension of production.• Production is likely to restart shortly at very low rates until the root cause is identified and resolved.
• In the absence of further clarity, we conservatively assume that Triton production will be constrained until the scheduled Bittern pipeline shutdown in November.
• We now forecast 2025 group production of 27.5 mboe/d, revised down from 30.8 mboe/d.
• Reflecting the 2025 disruption, we have also increased our downtime assumptions for 2026, now forecasting ~45.3 mboe/d. As volumes are deferred rather than lost, we assume a shallower decline profile from 2027 onward.
• Incorporating lower output in 2025–26, we now estimate YE25 net debt of ~US$165 mm, versus ~US$105 mm previously.
• Our dividend forecast remains unchanged at ~US$85 mm in 2026, supporting a projected YE26 net cash position above US$215 mm.
• The operational issues at Triton underscores the strategic importance of Serica’s M&A efforts to diversify its asset base and reduce single-asset exposure.
• Reflecting updated production and financial assumptions, we revise our target price to £3.05 per share, in line with our updated ReNAV.
Valuation and financials
Our Core NAV and ReNAV are now £2.80 per share and £3.05 per share, respectively. Despite the revised production profile, we continue to forecast free cash flow in excess of US$350 mm in 2026, based on a Brent price of US$70/bbl and NBP of £0.82/therm.
Serica Energy is an independent oil and gas company with production, development and exploration licence interests in the U.K. Continental Shelf and exploration interests in Ireland, Morocco and Namibia. As of Dec 31 2016, Co. had proved plus probable reserves of 3.8 million barrels of oil equivalent, which consisted of 2.1 million barrels of oil and 10.40 billion cubic feet of gas.
Auctus Advisors is a specialist Equity Capital Markets and Advisory business with a focus in the Energy Sector.
The partners have complementary skill sets, with decades of experience across Equity Capital Markets, Investment Banking and the Energy industry. We have worked at Société Générale, Canaccord Capital, BMO Capital Markets and Schlumberger. Most recently we have worked together for many years at GMP FirstEnergy.
Auctus has been set up at the beginning of a new decade in which we see significant opportunities in the Energy space. Globally, demand for energy is at record levels and continues to grow. Conversely, investment in traditional energy sources has been severely constrained. We believe this imbalance creates opportunities for both companies and investors.
Auctus provides Corporate Broking, Equity Research and Investment Banking services.
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