Serica Energy Plc (AIM: SQZ): UK budget neutral for Serica
• Average 3Q25 production was 27.5 mboe/d, comprising 15.4 mboe/d from Bruce, 7.7 mboe/d from Triton, and 4.4 mboe/d from other assets. This performance is in line with expectations, given issues at Triton, that are now solved, were previously flagged.• Production at the Bruce hub is above 20 mboe/d, though output was temporarily curtailed to ~16 mboe/d in October.
• Portfolio production had rebounded to once again be over 50,000 boe/d, of which Triton was 25.3 mboe/d ahead of planned subsea work that commenced on 23 November. As previously guided, production will be minimal during this work, which is expected to conclude by mid‑December.
• November’s Triton output was achieved using a single compressor, limiting throughput to 25–30 mboe/d. Testing of the second compressor is underway, and once operational will provide redundancy and potential uplift. Additional upside exists from the Belinda development, though for now we assume ~19 mboe/d average net production from Triton in 1H26.
• At end‑September, Serica held ~US$41 mm in cash and had borrowings of US$231 mm.
• The company guides for 27–28 mboe/d of production in 2025, with capex of ~US$250 mm. Our FY25 projections are broadly unchanged, with net debt expected at ~US$175 mm at year‑end.
• While the UK budget has no direct impact on forecasts, it could create incremental M&A opportunities for Serica. With Triton production normalizing and Prax assets contributing from late 2025, Serica is positioned to return to growth in 2026. We reiterate our target price of £3.05 per share.
Reflections of the UK budget
The sunset date for the EPL remains 2030. Beyond that point, or earlier if commodity prices fall below the EPL threshold, the EPL will be replaced by the Oil and Gas Price Mechanism (OGPM). The OGPM will tax the proportion of revenue earned above the inflation‑adjusted thresholds of US$90/bbl and £0.90/therm, at a tax rate of 35%. For 2030, this equates to ~US$97.6/bbl for Brent and ~£0.98/therm. These thresholds are well above our assumptions (US$70/bbl Brent and £0.84/therm NBP), meaning the OGPM has no impact on our valuation. With regards to licensing, the new regime will have no effect on Serica’s existing portfolio, planned developments, or its growth strategy, which remains centered on near‑field appraisal and development around established hubs.
Valuation and financials
Our Core NAV and ReNAV are £2.74 and £3.02 per share respectively.
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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