Member Info for DennisThePennis

I think today's drop is overdone, as usual.

Trump says he's going to reopen the Strait of Hormuz but that's probably optimistic without Iran's cooperation.

Qatar Energy says 17pc of production is lost for three to five years. That alone puts a gigantic dent in global LNG supply.

Even if things improve in the next couple of weeks, there is now a structural problem with oil and gas supply which will have a lasting effect on prices.

Of course, it depends on the results.

Over the past year, the company suffered various operational problems with Triton, its main production hub in the central North Sea. Hopefully these problems are now in the past, and if so, production will ramp up significantly, resulting in lots of cashflow, higher profit and lower debt. The company doesn't have much debt anyway, and at current oil and gas prices it should be able to repay this very quickly.

Also we can look forward to production from various new wells coming online.

Then there are the recent acquisitions they've agreed which should add more production. Although tax is very high for UK O&G operators, SQZ is shielded from this to some extent due to the clever deals they have done in the past couple of years. They are able to utilise past tax losses of companies they have bought to offset some of their future tax liabilities.

The shift to the main market (when it happens) should be positive since tracker funds will need to buy SQZ shares. Based on market cap, I expect the company will make it into the FTSE250.

Then of course there's the situation with Iran driving up oil and gas prices, resulting in even more cashflow. You can already see the effect on the share price over the past 3 weeks.

Overall I hope the update will be positive... but you can never be sure! This company has a habit of surprising you.

DYOR.

Gas prices surge 35% and we're up just 3%. Probably less by the end of the day.

I suspect if O&G prices plummeted, there would be more of a direct correlation.

Is sentiment really this bad?

I'm guessing today's drop is due to profit taking. A little early in my view!

5,000 marines should be able to take Kharg island but realistically I doubt they can protect shipping in the Strait of Hormuz. I doubt shipping can be fully protected as long as the Iranian regime remains in place.

Ignoring SP movements related to Iran, Serica remains a strong buy due to cash flow forecasts and other fundamentals.

"Berenberg initiated coverage of Serica Energy PLC (LON:SQZ) with a Buy rating and set a price target of 300 pence, citing expected material free cash flow generation during 2026 and 2027.

Berenberg expects Serica’s production to roughly double by 2027 to just over 52,000 barrels of oil equivalent per day, driven by improved operational performance and new volumes from recent acquisitions."

https://uk.investing.com/news/analyst-ratings/berenberg-starts-serica-stock-at-buy-on-cash-flow-outlook-4557315

It’s being reported in the press that the UK has just two days of gas supply left in storage.

A spokesman for the Department for Energy Security and Net Zero said: “We are confident in our security of gas supply. We are working with industry to ensure the gas system is fit for the future, including maintaining security of supply.”

As far as I can see, this is the opposite of the reality. I find it very difficult to accept that our government continually gets away with lying to the people it’s representing.

To nationalise a company, the government would have to stump up a big chunk of capital to buy the majority of its shares. They could then take control, but they don't know anything about the O&G business and they would need to continue to employ the same people at the same (or higher) costs.

At present, they're taking most of the profits through tax without any of the hassle, investments or risks. Probably a better situation for them.

Indeed, after lengthy consultation the OGPM was designed as the mechanism to replace the EPL, providing much greater flexibility to increase tax revenues when prices spike while encouraging long term investment and stability.

The fact that she hasn't activated this immediately indicates she has no intention of "finding solutions".

Never trust politicians.

She'll be asking how can we increase UK production and improve energy security without increasing consumer costs or reducing tax revenue.

If she had bothered to listen, she has already been given the answer many times, including the fact that significant up-front investments and lead times are involved to develop new resources.

Her biggest obstacle will be Miliband.

Yes there's a bit of silliness.

Actually I think the SP rise has been quite modest considering what's happening. Not sure how much production is hedged at lower prices but hopefully not too much.

With rising oil and gas prices, hopefully SQZ will get a windfall to justify the tax. They've done well to mitigate the effects of the EPL, and higher prices would be a bonus.

Also maybe politicians will start taking energy security more seriously.

EPL will be dropped by 2030, one way or another.

If Labour don't drop it by 2029, Reform will when they get into government.

Miliband is ideology bound to destroying the UK oil and gas industry, regardless of economic consequences. As long as he's in place as energy minister, I doubt Labour will change anything material. Starmer and Reeves have no authority since they're not supported by hard left backbenchers.

I'd be very surprised if Miliband agrees to relax the EPL or drilling restrictions. I'd also be surprised if Starmer has the bälls or teeth to get rid of Miliband.

Meanwhile Starmer doubles down on net zero by agreeing alignment with EU targets.

This must be the deal he has agreed with Miliband for helping him to stay in power.

I think he has accepted his fate in 2029 and is now trying to sabotage the next government. Either that or he’s mentally ill.

Dumbly, I'm hoping this government won't survive until 2030.

The next general election has to happen by Aug 2029 (unless Starmer decides to change the rules due to a central government reorganisation or some such nonsense).

Agreed Upomega, I think the company has got the hang of acquiring other companies and utilising tax losses to stay in profit. With selective M&A and gradual organic expansion, they'll be in an excellent position when the EPL is finally dropped in 2029.

Not sure about lifting cost per therm but in the presentation they mentioned average production cost of USD 30 per boe, or USD 45 per boe including capex investments.

Not sure if I heard right since those figures seem extremely high.

I think the rise might be due to the comments from Kistos about GLA tie-in opportunities.

I think there are two types of acquisitions SQZ should be pursuing.

Tactical acquisitions are required to minimise tax liability for the next 4 years, while the windfall tax remains.

Strategic acquisitions are required to enhance the company’s sustainability and growth longer term.

I agree with Chris Cox that the next 12 months will be a key period for M&A since asset values are depressed. Once the end of the windfall tax is in sight, asset values will pick up and M&A will get more costly.