Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
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Broker note -
The Company announced an inaugural £15m share buyback in addition to the final FY23 dividend of 14p/sh, which combines for a total implied annual shareholder return of ~13%.
Cash resources more likely to be redeployed out of the UK.
We think Serica’s strategy has changed following the merger with Tailwindnd and the new management team are more comfortable investing in larger more long-term development projects to make use of EPL offsets for new investments.
A reasonable update but a disappointing market response. Glad that the dividend has been maintained but I guess the SP isn't going to shift much without a step change in UK taxation or overseas diversification (which should now be the priority).
Agree with this apart from the last sentence re Politicians! :-)
Agree with that, Maverick, after a cursory read; it seems the best from Serica is now historic with just about every outcome lower than before and ahead of Labour's intentions which they seem oblivious to, if they get in, the divd prop will likely decline, too.
'Twas good while it lasted... sasa.
Kist sp down 49 percent last 52 weeks
Sqz sp down 22 perc ent in last 52 weeks
I own both and currenly SQZ has the more optimistic outlook, provides a very healthy dividend (14p final), Kist no divi, share buybacks starting that will improve eps and SQZ exploring opportunities beyond the UK tax grab whilst they can also use tax losses and their short term business model to maximise existing North Sea assets. A new CEO expected to be announced shortly, a new direction in addition to UK and importantly SQZ has oil. It provides an optimistic outlook imo and SQZ metrics look very attractive too.....we all have different takes, it's what makes a market, however, despite the negativity noise by some and forecasts of doom, SQZ finds itself in a decent position providing very decent divis with the prospect of an increasing sp moving forward. Cash in the bank is handy, generating cash and providing returns with plans for growth is also attractive.
I thought I read somewhere that they are expecting a tax rebate this year!!
Fwiw. I bought some back today. My view is that even with Labours fret of over eighty percent tax we will still be profitable. Manly due to utilising tax losses. We then have the heightened possibly of a merger/acquisition involving overseas assets. Also the way politicians are they may even do an about turn and reduce the levy due to national security etc.
Does this RNS and share buy back get me to buy back into SQZ - nope, net cash is way lower than expected, i would of expected the combined group to have higher production, is a progressive dividend really safe, debt laden, not enough net cash to make any meaningful acquisition and Labour gunning for more cash from oil and gas.
It will be interesting to see how KIST end of year results stack up with SQZ, where they have lower production - i bet they have a lot more cash
NQM,
I see your point and agree, however as you and I know, PE like to extract as much cash as possible and load up debt. I fully expect dividends to continue to be maxed out whilst our drawdown on the RBL jumps significantly this year.
Mitch's last day today as CEO, new M&A on horizon that comes with new CEO, AA maybe !
ps Mr Market this morning certainly likes our direction of travel.
aimo & dyor
NKOTB,
Over £200m of that is owed in debt.
I should have been clearer, net cash in excess of £100m is where I would like us to be.
NQM,
Cash "of £291.0 million at 31 December 2023..." so still plenty of opportunity for cash deals.
aimo & dyor
Results, cash position, dividend increase, share buy backs started, tax loss from Tailwind a bonus as was Oil addition and the forward look with opportunities outside UK being explored are far better than many suggested and the business is ideally placed to grow again with both Uk and outside opportunities going forward. 😉
I agree with your sentiment regarding Mercuria's influence NKOTB.
Due to EPL we are simply not generating enough profit to justify a 23p dividend.
A more sensible split of the £103m profit would have been £40m divi, £20m buyback, £43m retained as cash.
Cash in excess of £100m would give us adequate breathing space to consider an acquisition from cash only.
aimo
The new financing facility brings increased capacity with duration extended to end 2029, strengthening Serica's capability to pursue further growth.
The acquisition of Tailwind Energy Investments Ltd, was completed in March 2023 and has provided operational diversity and scale for Serica. The net proforma production from the combined portfolio for 2023 was 40,121 boe/d, which was split 56% gas and 44% oil. This split between oil and gas is far more balanced than in 2022 when Serica's production was 91% gas
The Tailwind assets have therefore provided Serica with substantial protection against the significant fall in gas prices. 86% of Serica's production is operated and the Bruce, Keith and Rhum contribution is now around 50% of net production rather than 80% prior to the Tailwind transaction.
Serica has maintained its record of more than replacing reserves since 2018 with net Proved plus Probable ("2P") reserves on 31 December 2023 of 140 million boe, up 10 million boe from 130 million boe at 31 December 2022 despite producing 14.6 million boe in 2023 on a proforma combined Serica and Tailwind basis. This addition of 24 million boe during 2023 represents a reserves replacement ratio of 179% with over 90% of the 2P reserves in fields that are already in production.
The Company is therefore continuing with its growth strategy of investment in projects designed to enhance and extend future production profiles. The Tailwind portfolio came with several short-cycle, highly value-adding opportunities which were matured in 2023 and will be exploited by our ongoing four well drilling programme which is also being undertaken with the benefit of the current capital allowances and with the resultant production sheltered by the ring-fence tax losses we acquired with Tailwind
Sorry about spelling error on earlier post, just woken up, no glasses and on phone whilst still in bed !!!
More so, interesting that we have started a share buyback when hopefully cash is needed for any M&A to reduce our reliance on our US$1,050m RBL drawdown facility. Call me cynical but has this TINY £15m BB been engineered to aid letting out the TW founders ! Also, as I have feared, for me this RNS and distribution of cash is fully aligned with how PE firms work and in-keeping with TW handling of cash rather than SQZ historically cautious approach. Mercuria's influence strikes again !
aimo & dyor
''If good opportunities for increased value should arise in the UK of course we will not ignore them, but in the current circumstances we must consider other alternatives. Hence the Board has now refocused and increased its search for projects outside the UK where we believe we can deploy our skillsets to deliver increased shareholder value. We are currently focussed on identifying attractive opportunities in the broader North Sea region beyond the UK. However, we will remain disciplined and will only invest in projects or make acquisitions where we are confident that they will deliver increased value and returns for shareholders.''....
A lot to like, divi increased, buy backs announced and a new CEO to be appointed shortly who is very likley to start to aim SQZ's business away from UK tax 👍
Final dividend of 14p per share increasing total dividend for 2023 to 23p & start a £15m share buyback
https://twitter.com/surprised_trade/status/1783018560522014853
£103m profit after tax was what I was expecting, give or take. £92m of that will go in dividends and another £15m on the share buyback will eat the lot, and a nibble of our cash.
aimo
Divided held and share buyback …
“ The resilience of Serica's financial position allows the Company to maintain the final dividend at 14p per share meaning an increase in the total dividend for 2023 to 23p per share compared to 22p per share in respect of 2022. Furthermore, the £15 million share buyback initiated today is a demonstration of the Board's confidence in 2024 cash flows and the longer-term value of the Company's assets.”