Charles Jillings, CEO of Utilico, energized by strong economic momentum across Latin America. Watch the video here.
We know we are producing north of 30,000 boepd with an 85% split in favour of gas and 20% of that gas hedged at 32p a therm
With a brent premium of $75 and current spot rate of 291p a therm, $5.3m / £3.9m a day ballpark figure - easily corroborating your £100m a month estimate.
The problem for us is that we're in AIM - the SP is traded to death whenever it starts a rally - if it wasn't for the constant margin trading, I feel certain we'd be nearer £3 right now.
Sites running html almost always update the "index" pages first before removing any content it's linked to - it's easier and less labour intensive than doing it the "proper" way - in addition, you can check web cache archives like wayback to confirm that a change has been made - I use this method to verify the prices of classic & collectible cars, it's *almost* fool-proof.
http://web.archive.org/web/20210507222707/https://www.stellarlimited.com/north-sea/
above is a wayback link to two copies of the index in question - because I'm at work, I can't verify that any change has taken place vs the live one, so if a willing board member doesn't mind clicking on links from strange men on an internet bulletin board, you should be able to see if Serica was listed on 7 May 2021
D220 - if you read between the lines, 28,500 + 1/2 of 6,300 boepd from Columbus takes Serica over 30,000 boepd - comfortably exceeding where I thought they would be at January 1st. Next update in January will also have to include increased revenue share(production) that's no longer earmarked for BP. What a time to be invested.
I enjoy making a game of it I suppose - I did actually assume that Serica have paid out for all the big-ticket items already - the interim update in September showed a big cash draw related to our capex activities so my own feeling is that the bulk of the heavy lifting has already come off the bottom line vis-a-vis the £93m starting figure fom 28th September.
Anything north of £200m is as you say welcome but I have an inclination that the income statement for 2021/2022 will be pretty special
£200m> CoH is far too conservative - Assuming a worst-case scenario (period average) of 180p a therm & including all hedges - you're about £50m short on where I think they are at present. i.e. I'd estimate CoH to be around £260m to £280 today - on Jan 1st 2022 I'd say closer to £300-£330m
The sharp-shock of 2020 cannot be repeated, because that was literally a reaction to something the entire world wasn't prepared for.
The governments of the world have had 18 months since then to build resilience into their economies via vaccines and the like - even if you needed to deploy a new vaccine to counteract the myriad mutations that are inevitably going to crop up - the infrastructure is there to rapidly develop and deploy new treatments.
TL:DR - World got caught with its pants down in 2020 - that's extremely unlikely to happen again.
It's a prudent move - it will include a share of Culzean and Mariner which are two of the UK's biggest producing fields - the other non-operated stakes it will probably repackage and sell on, much like Shell did with the Central Graben assets it inherited from BG Group.
Whether Serica are in the frame for a role in such an instance I don't know -
On the one hand, the BKR deal matures in its entirety in January - meaning Serica would be free to pursue another BP acquisition with a proven history of being a reliable partner (Erksine + BKR) - BP would also benefit from the deal as it would no doubt inflate the value of the 5% holding in Serica they still retain.
On the other hand, Serica are gas-focused and their ESG reports' always use this to paint them as having a critical role in the energy transition - buying stakes in Oil facilities goes against the grain in quite a few regards.
There will be a strategy behind BP's apparent "reversal" - if that article bears out as accurate, predicting what that might be could be very lucrative.
Used a number of different metrics to try and work out what the cash-build for the full year will be and to the nearest 10m (lol) I'm sat between £330m & £340m - which ironically enough is about half of our current market-cap AGAIN.
In the absence of an acquisition or a takeover / merger approach, what are peoples thoughts on what the company should do with such a Windfall?
A special dividend of 50p would cost the company £134m while buying back the equivalent volume in shares could potentially guard against any cheap offers in the future. There's clearly still a lot of road ahead of us so I'm keen to establish what other folks thoughts are on what the boards forward strategy might be?
Sure.
20% of the gas exported by serica is hedged at 32 p per therm, to work out what that is in dollars, use the BOE$ to Pence per therm reference in the interim report.
$100 BOE = 125p per therm.
$100/125p = 0.8 (dollar to therm/pence ratio)
multiply that by the hedged price of gas, 32p
$0.8 x 32p = $25.6 boe = 32 pence a them.
Because the hedging only affects 20% of the production, we add a modifier of 0.2 to make it easier to apply to the export
$25.6 boe * 0.2 = $5.12 boe
For unhedged, we do the same, but add a modifier of 0.8
$100 BOE = 125p per therm.
$100/125p = 0.8 (dollar to therm/pence ratio)
multiply that by the spot price of gas, 125p (lol)
$0.8 x 125p = $100 boe = 125 pence a them.
$100 boe * 0.8 = $80 boe
The assumptions are that these prices remain static for the next 95 days - otherwise, everything else is referenced off the interim report
Of course - there's broad assumptions throughout those figures but the reality is that even if you drop down to the 100 p/therm you mention, it's still going to rake us in over half a billion in revenue. Significant.
I originally wrote a version of this over on ADVFN but I'll put here here as well - First off - a very rough estimate of revenue as of yesterday (90 days after June 30th)
June 30th to 28th Sept (90 days)
Estimated total production: 25000 boepd, 20000 boepd Gas & 5000 boepd oil
$5.12 / boe hedged gas exposure (20%) = $102k per day (based on 32p per therm as per interims)
$80 / boe unhedged gas exposure (80%) = $1.6m per day (based on 125p per therm as per market average)
$71 per bbl = $355k per day
for 90 days production, $185m or £142m - after tax and opex probably looking at around £85m cash build
28th Sept to January 1st (95 days)
Estimated total production: 25000 boepd, 20000 boepd Gas & 5000 boepd oil (not including Columbus)
$5.12 / boe hedged gas exposure (20%) = $102k per day (based on 32p per therm as per interims)
$118.4 / boe unhedged gas exposure (80%) = $2.36m per day (based on 185p per therm as per spot rates / averages)
$77 per bbl = $355k per day (as per market rates today)
for 95 days production, $271m or £208m - after tax and opex maybe around £125m cash build
This is where it gets interesting;
January 22 onward...
Estimated total production: 34000 boepd, 27200 boepd Gas & 6800 boepd oil (including Columbus, 100% BKR)
$7.20 / boe hedged gas exposure (20%) = $191k per day (based on 44p ave per therm as per interims)
$131.2 / boe unhedged gas exposure (80%) = $3.56m per day (based on 205p per therm as per spot rates / averages)
$77 per bbl = $355k per day (as per market rates today)
Those translate to revenues of around £3.3m a day or £1.2bn for the full year. Be interested to know if anyone else has come up with any estimates that are wildly different to mine?
In fairness, the results only encompass production and revenue up to the end of June - a period in time where;
1. R3 was not producing yet
2. Gas Prices had only just reached 87p per therm
Both of these factors are massive catalysts for the SP - but the interims simply cannot account for these even though we know they are having a material effect on our business.
Chalk the Interims up as what they are - a benchmark of performance prior to the new order we find ourselves in.
The gas flow from R3 will be constrained by technical aspects of the topsides & most definitely not on the premise of well depletion &/or exhaustion. No Oil or gas Major in the north sea has ever tried to balance how much oil or gas they extract - it's always been balls-to-the-wall and TFA (touch F**k-All)
In general, the gas conditioning system (removal of water & other impurities) will be the greatest physical limitation on how much gas it can process & export but since R3 is now almost 15 years late to the party, any reduction in R1 & R2 since 2005 would indicate that R3 has a lot more capability to use up, if it indeed can make up the capability.
The second limiting aspect is the compression train - if Bruce has mothballed a compressor (because R3 was hydrated-up for 15 years) then that will introduce another limitation on how much can be exported - I would assume they would have sorted this out prior to bringing R3 on, however.
The 3rd limiting factor is the turndown ratio of the metering equipment and how many streams are available. If you run 3 x 50% systems - you will always have a spare stream to allow pipeline & govt mandated maintenance to take place (fiscal grade calibration & verification) if gas-throughput exceeds the maximum range of each flowing meter, the measurement uncertainty will be too high and you are effectively giving gas away without getting paid for it.
Many the time a new development has come online with exceptional rates only to be hindered by the turndown ratio of the meters used. It's also extremely common for large fields commissioned decades ago to have rates drop so low that they fall outside the uncertainty of the meters that were initially installed.
GRG are still selling down so it's no surprise that it's gapping down after last weeks news. Dividend week as well, so it's always a choppy time.
There will be another rally once Serica RNS's the R3 well test results proper. They went out of their way to point out that the well test performed at the template back in June was constrained by the drilling rigs surface equipment.
Fully expect to see this tick a good bit higher in the next month or two.
I can't see the board agreeing to sell unless it's a ridiculously rich offer on the table.
My view is that we should see:
£2 a share by January 22 - for obvious reasons (interim 2021 financials in September & BKR-100% retention in January)
£2.50 a share by August 22 (Full year financials for 2021 with high commodity & puts, 6M Columbus production and reduced carbon intensity per boe - increased dividend)
£3 a share by May-23 - (first full year of R3, 100% BKR, Columbus & possibly a large one-off special dividend to cap off the end of the BKR journey)
Might work out this way - might not, but I'm still fully invested to find out if it does or not.