Serica Energy Plc (AIM: SQZ): Over US$300 mm FCF in 2026. Potential to reach 65 mboe/d during 2H26
• 4Q25 production averaged 33.5 mboe/d, including 1.4 mbbl/d from Lancaster, slightly ahead of our 32.7 mboe/d forecast.• The balance sheet at the end of 2025 was in line with expectations, taking into account the timing of liftings from Triton.
• January‑to‑date production has averaged ~43 mboe/d, with current rates of ~50 mboe/d comprising 20 mboe/d at Bruce, 21 mboe/d at Triton, and 6 mbbl/d at Lancaster. The second Triton compressor has been commissioned, and with Evelyn EV‑02 and Belinda available, Triton output should continue to rise. We forecast ~45 mboe/d net production in 1Q26.
• Serica guides to “well in excess of 40 mboe/d” for 2026. Our forecast is ~47 mboe/d, assuming completion of the GLA acquisition in early 1Q26, of the ONE‑Dyas’ assets in early 3Q26, and of the Southern North Sea package in early 4Q26. On this basis, net production could exceed 65 mboe/d by year‑end. We forecast ~54 mboe/d for 2027.
• The 2026 capex budget is US$175–195 mm, including ~US$120 mm at Bruce and US$50 mm at Triton. This is above our prior ~US$115 mm assumption, reflecting US$50 mm of growth capex at Bruce and ~US$30 mm for replacement of the WAD umbilical. Serica also expects to spend ~US$20 mm on decommissioning, primarily at Lancaster in 2H26.
• Even at US$65/bbl for Brent, we forecast that Serica will generate ~US$330 mm of free cash flow in 2026. After deducting ~US$83 mm to be paid in 2026 (~8% dividend yield), we estimate the company will hold ~US$45 mm in net cash at YE26.
• We re-iterate our target price of £3.15 per share.
Growth opportunities
Serica has numerous growth opportunities in its portfolio including the redevelopment of Kyle, drilling at Bruce and Glendronach (following completion of the acquisition). The 2026 capex plan includes US$50 mm for long‑lead items tied to a potential high‑impact 2027 infill programme at Bruce. With details yet to be confirmed, we have notionally incorporated a modest ~12 mmcfe/d increase.
Valuation
With the FY26 capex programme incorporated, our Core NAV is £2.86/sh and our ReNAV is £3.15/sh. We currently assume US$112 mm of development capex in 2027 (plus decommissioning), though this could increase meaningfully if the Bruce infill campaign proceeds. Under these assumptions, we expect Serica to exit 2027 with ~US$450 mm of net cash, after an US$83 mm dividend in 2027 —over 40% of today’s market capitalisation.
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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