Member Info for Dumbly

Computer says:

Under the UK Takeover Code (Rule 2.5), the maximum time for confirming a firm intention to make an offer is 28 days from the initial announcement. This means that from the day the intention to make an offer is announced, the offeror (the company proposing the RTO) must confirm its firm intention to proceed within 28 days.

Under Rule 2.7 of the UK Takeover Code, the company must make the formal offer within 28 days of confirming the firm intention to make the offer. This means that once the firm intention is announced, the offer document with all required details must be sent to the target company’s shareholders no later than 28 days after the confirmation of the firm intention.

Computer says:

Under the UK Takeover Code (Rule 2.5), the maximum time for confirming a firm intention to make an offer is 28 days from the initial announcement. This means that from the day the intention to make an offer is announced, the offeror (the company proposing the RTO) must confirm its firm intention to proceed within 28 days.

Under Rule 2.7 of the UK Takeover Code, the company must make the formal offer within 28 days of confirming the firm intention to make the offer. This means that once the firm intention is announced, the offer document with all required details must be sent to the target company’s shareholders no later than 28 days after the confirmation of the firm intention.

4/4/25 is the deadline when "EnQuest must declare a firm intention to put forward an offer for Serica by 5pm on 4 April or walk away". I don't know when the deadline is, if there is one, for when an actual firm offer has to be made. Maybe others know.

https://www.msn.com/en-gb/money/other/north-sea-oil-firm-to-hand-investors-a-maiden-dividend-as-it-returns-to-profit/ar-AA1BMLWh?ocid=msedgntp&pc=HCTS&cvid=eff9b22a091a430fb465e8d5f786e7dc&ei=48

So, the 4/4/25 deadline is not when the details of the deal must be communicated but when "EnQuest must declare a firm intention to put forward an offer for Serica by 5pm on 4 April or walk away".

https://www.msn.com/en-gb/money/other/north-sea-oil-firm-to-hand-investors-a-maiden-dividend-as-it-returns-to-profit/ar-AA1BMLWh?ocid=msedgntp&pc=HCTS&cvid=eff9b22a091a430fb465e8d5f786e7dc&ei=48

Zebbo, the results also stated “transaction ready liquidity increasing to c.$550 million at the end of February,” More deals, I assume in addition to the RTO/merger of Serica, for sure are on the table. This is linked with EnQuest's North Sea tax asset, its tax losses, which from early next year will be $3.266bn +/- tax losses added or utilised in the meantime, as the sooner these tax losses can be utilised the better. The assumption is that from the RTO/merger with Serica "only" around $100m of tax losses per year would be utilised. Certainly positive, but plenty more scope for M&A activity to accelerate the release of value from the tax asset.

From what I hear, it is highly likely a significant segment of Serica PIs will be left unhappy with the deal the 2 BoDs are anticipated to agree on and propose. Once/if the deal details are communicated will be the time to decide whether a disappointing deal can be accepted or not. Only week or less to go and anything else, unless it really adds materially to understanding, is pretty much background noise and, anyway, can always be shared after the deal details are known for sure, when it would also be more meaningful.

I am also pleased with today’s RNS.

I particularly liked “transaction ready liquidity increasing to c.$550 million at the end of February,” More deals, I assume in addition to the RTO of Serica, for sure are on the table, and it will be the current EnQuest doing the driving.

I want to correct a previous estimate I gave of current tax losses being around $1.6-7/bn. From today’s 2024 year end results, EnQuest’s North Sea tax asset, its tax losses, at 31/12/24 was estimated at $2.066bn (not $1.6-7 as I estimated previously ). So, with the extra $1.2bn which should come available early next year, the total NS tax asset will be $3.266bn +/- losses added or utilised this year.

Clearly there is a direct link between the previous 2 paragraphs.

Dadean, I agree, there will be a valuation model (unlikely we will get to see it tho). And I agree that MC is fair stock market value and EV is closer to fair value to buy a company.

Couerdelion, I too at times struggle to understand, but EV is typically the starting point value when looking to buy a company, and in this reverse take-over scenario the value to buy, so the EV not the MC is the more relevant.

And, of course, Tarmak’s calculation of the EV, as repeated below, is far more accurate than what “computer says”.

Serica was previously valued by the market at mc ($661m) + netdebt ($71m) = EV ($732m).

EnQuest was previously valued by the market at mc ($277m) + netdebt ($386m) = EV ($663m).

From today’s 2024 year end results, EnQuest’s North Sea tax asset, its tax losses, at 31/12/24 was estimated at $2.066bn (not $1.6 as I estimated yesterday). So, with the extra $1.2bn which should come available early next year, the total NS tax asset will be $3.266bn +/- losses added or utilised this year.

BTW, my question about what Serica could add to Veri Energy is an absolutely genuine one. Should I take the lack of comment that nothing comes immediately to mind about what Serica can directly/specifically add to Veri?

“Computer says”:

As of March 27, 2025, Serica Energy plc's enterprise value is approximately £385 million.

As of March 27, 2025, EnQuest PLC's enterprise value is approximately £765 million.

I asked ChatGBT, and “computer said”:

Conclusion:

For oil and gas exploration and production companies, enterprise value (EV) is generally the better method for valuation, as it provides a more holistic view of the company by factoring in its debt, cash, and overall capital structure. Market cap, while useful for certain purposes, is less effective in capturing the complexities of an E&P company’s financial situation.

I declare an EnQuest bias. I also declare that the impact us PI‘s on this and EnQuests BB have on negotiations is half of diddly squat. We need to be as well informed as we can be now in preparation for when we are fully informed, and then… decide to accept or oppose.

In addition to the MC v EV aspect, 2 other things need to be considered. The first is EnQuest’s tax asset, its tax losses, currently around $1.6bn (the amount could be confirmed tomorrow) with $1.2bn more coming available early next year. The estimate is that Serica’s profits could utilise around $0.5bn of these losses in the first 5 years following a deal. That still leaves around $2.3bn of tax losses to be utilised. If a deal allows other deals to utilise further and sooner these losses, then it is right the benefit accrues to both S and E. However, something like a 50/50 split of the potential value of this remaining $2.3bn of losses would seem to be unfair towards EnQuest and I would therefore expect this to be accounted for in the negotiations.

The second is Veri Energy. It’s current value is nigh on impossible to calculate. My preference is that it would be separated out with appropriate cooperation agreements made with a potential combined entity and the equity split to be 80/20 or so for current EnQuest shareholders. I would be interested to hear from the Serica side what they could add to the party concerning Veri.

“Enterprise value is a more accurate measure of a company's real worth because it takes into consideration its debt obligations. To calculate enterprise value, add the company's market capitalization to its outstanding preferred stock and all debt obligations, then subtract all of its cash and cash equivalents.”

https://www.investopedia.com/ask/answers/111414/whats-difference-between-enterprise-value-and-market-capitalization.asp#:~:text=Enterprise%20value%20is%20a%20more,its%20cash%20and%20cash%20equivalents.

Same point from different angle. What could Serica bring to a potential Veri party that EnQuest does not already provide now?

Veri’s treasure is currently hidden under and within EnQuest’s bushel. Having an independent company with appropriate agreements with the combined E/S would also serve to better externalise and communicate the potential value of Veri.

The potential/value of Veri Energy must be nigh on impossible to calculate. Therefore, it would seem to make sense to separate it out from the deal with Serica but putting in place agreements with the combined entity such that it can continue to work with it as if it was still part of the company. EnQuest shareholders would have a one share in EnQuest for one share in a separate Veri. Or something like a 75/25% split between EnQuest and Serica, so Serica shareholders also benefit from the resources/support the combined entity would provide to Veri. Possible? Thoughts?

More than 50% of the voting shareholders of EnQuest would need to approve an offer, but if the respective boards agree terms EnQuest shareholders’ approving the offer would be a formality. Serica shareholders rejecting an offer approved by their board, whilst certainly possible, would be a vote of no confidence in the board, something the market would not like. My point remains, if terms are agreed and an offer made it is higher probable both sets of shareholders will approve.

It is not really EnQuest making an offer for Serica, but a "friendly" reverse-takeover where EnQuest and Serica will try to agree on what terms they could combine. Only if the two companies can agree terms will a proposal be put to the respective shareholders. Naturally, if terms are agreed it is implicit that the two boards would also recommend to accept the deal. At least, that's the way things are at the moment.

As long as a buyer was considered secure to cover its decom responsibilities, why would Harbour not be interested to sell UK producing assets they intend to decom anyway from around 2030 if the result was expected to be a better economic outcome than holding onto the assets?

Tarmak, the idea of Harbour wanting to offload UK assets, especially thise which will end production anyway around 2030, makes sense, but they need to be comfortable a buyer can cover the decom responsibilities without them bouncing back to Harbour should the buyer become insolvent. A combined EnQuest/Serica with plenty of tax losses could indeed fit the bill.

Megla, Also, to further accelerate the utilisation and value-release of EnQuest’s tax losses (of around $1.7b now, plus a further $1.2b from next year), and continue not paying CT/ST for the full period until the EPL ends in March 2030, a combined company should have the scope to acquire more existing UK production. Depending, of course, on baseline production levels, prices, and what would be acquired.

Not sure it will work like that, Pete640. Have you considered how many shares now each company has issued? 1 share for EnQuest for 5 for Serica in the combined entity would mean a percentage shareholding of 16% for E and 84% for S, and that is not going to happen. And, there would not necessarily be a Newco if E does the (mutually agreed) takeover.