Serica Energy Plc (AIM: SQZ): Farm-in transaction boosts upside at Triton
• Serica has agreed to acquire a 40% interest in Licence P2530 from Finder Energy for an upfront consideration of US$0.65 mm. The licence contains the Wagtail discovery. Should the joint venture proceed to Phase C (commitment to drill, with a decision to be made by the end of August 2026), Serica will pay Finder an additional £0.94 mm.• Wagtail was originally discovered in 1986, encountering an 11-metre net oil column within Fulmar reservoir sandstones. Recent 3D seismic reprocessing suggests that reservoir thickness and quality improve eastward from the discovery well. Gross 2C contingent resources are estimated by the operator at 19 mmbbl (~8 mmbbl net to Serica). The discovery is a potential tie-back candidate to the Triton FPSO. The licence also includes two exploration prospects: Marsh and Bancroft.
• This low-cost transaction further enhances Serica’s organic growth optionality, with numerous attractive opportunities now fighting for capital allocation, and underscores the strategic value of existing infrastructure in the UK North Sea. The Wagtail farm-in increases Serica’s overall portfolio 2C resources by almost 10%, and illustrates its belief in the long-term future of the Triton hub.
• We maintain our target price of £3.05 per share. Despite recent share price appreciation, we forecast a FY25 dividend yield of ~7%. A confirmed acquisition of bp’s interests in Culzean—assuming TotalEnergies and NEO NEXT do not exercise pre-emption rights by 12 November 2025—would be transformational for Serica. Importantly, our valuation does not yet incorporate any contribution from this potential transaction.
Valuation
Our Core NAV and ReNAV are unchanged at ~£2.80/sh and ~£3.05/sh, respectively. Our aggregate 2026-2028 FCF forecast represents ~90% of the current market cap.
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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