Serica Energy Plc (AIM: SQZ): Start up at Triton in line with expectations
• Repairs and scheduled maintenance work on the Triton FPSO have been completed, and the restart process for production operations is now underway.• This is consistent with the management’s indicated timing of “around end of June” as stated in the AGM update.
• Production is expected to ramp up progressively, reaching steady-state levels later in July.
• No further shutdowns are planned for Triton in 2025. We continue to anticipate 2H25 production in the range of 41–47 mboe/d. Before shutdown, Triton was producing ~25 mboe/d. Upon restart in mid-2025, adding the W7z and EV02 wells could increase Triton’s output to 30 mboe/d, with the tie-in of BE01 in early 2026 also boosting production.
• With extensive inspection and maintenance completed, and both compressors coming on line, we believe Triton is well positioned to put the troubles behind it and deliver more stable and resilient performance than in the last year.
• The share price could benefit from a progressively more supportive business environment in the North Sea. We maintain our expectation for total 2025 dividends of £0.16 per share (implying a ~10.5% yield), and we re-iterate our target price of £2.70 per share.
Operating and regulatory environment potentially improving
New Environmental Impact Assessment (EIA) rules published on 19 June now require the inclusion of Scope 3 emissions. The significance of these emissions must be evaluated in the context of global climate goals. This is particularly relevant as UK-produced oil and gas is likely to be associated with lower lifecycle emissions than equivalent imports—Norway being a potential exception. The upcoming development approvals for Jackdaw and Rosebank could serve as a key sentiment gauge for the sector. Meanwhile, the UK government has indicated that reforms to the oil and gas tax framework may be necessary. Currently, profits are taxed at an effective rate of 78%, including a 38% windfall levy. A reduction in the windfall tax to 28% would increase our valuation for Serica to £3.04 per share.
Valuation
Our forecasts are unchanged. Our Core NAV and ReNAV are £2.38 per share and £2.68 per share respectively. We continue to forecast that the aggregate FCF from 2025 to mid 2028 will be equal to 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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