Report
Stephane Foucaud

Serica Energy Plc (AIM: SQZ): Robust 1H25 cashflow ahead of production boost in 2H25. Dividend in line.

• While 1H25 production was only 24.7 mboe/d with BKR producing 16.7 mboe/d, Serica’s FY25 production guidance of 33-35 mboe/d implies a significant 2H25 uplift to 41.3–45.3 mboe/d, as Triton ramps up to full production and BKR rebounds. We continue to forecast 4Q25 production of ~48 mboe/d, supported by expected contributions of 21–22 mboe/d from BKR and ~25 mboe/d from Triton.
• Production in 2H25 will benefit from new wells coming onstream as a result of Triton drilling, with five successful well delivered nearly a month ahead of schedule and ~US$31 mm under budget. We maintain our 2026 production forecast of ~43 mboe/d, as the Belinda field comes online, now expected at the start of 2026.
• FY25 capex is now expected to be at the upper end of the US$220–250 mm guidance range, partly driven by £ strength against the US$ and the acceleration of early FY26 Belinda-related spend into the 2025 budget.
• Net debt declined to US$57 mm at end-June, representing a reduction of US$26 mm since YE24. While this improvement was boosted by a US$71 mm cash tax refund received in June 2025 (attributable to 2024 group relief), it is an encouraging outcome given elevated capex and the prolonged production outage at Triton since January.
• Despite anticipated dividend payments exceeding US$80 mm in 2H25, and a return to tax payments, we forecast YE25 net debt to remain broadly in line with end-June levels. We forecast FY25 free cash flow in excess of US$120 mm.
• We reiterate our target price of £2.70 per share. The total 2025 dividends to be paid in 2025 is £0.16 per share (implying a ~10% yield). With lower capex and higher production volumes anticipated in 2026, Serica could generate free cash flow in excess of US$300 mm.

Reflections on operations
In addition to reduced production at Rhum in January and unscheduled downtime in May due to maintenance on the export pipeline, BKR production was also constrained due to the main oil line booster pump being offline for the majority of the period. The booster pump was replaced in June, and BKR production averaged 21.6 mboe/d in July. 1H25 production of 2.1 mboe/d at Erskine was very high, offsetting lower volumes at Orlando (1.9 mboe/d). No surprise, the Mansell licence will be relinquished (we did not carry any value for Mansell). Development activities at BKR and Kyle are expected to start in late 2026/early 2027 (in line).

Valuation
Our forecasts are broadly unchanged. Our Core NAV and ReNAV are £2.41 per share and £2.71 per share respectively.
Underlying
Serica Energy

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.

Provider
Auctus Advisors
Auctus Advisors

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. 

Analysts
Stephane Foucaud

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