Member Info for Megla

Agreed, it’s just one of the factors impacting the current price action.

In terms of the price action, there’s some obvious front running of the inclusion to the main market

Tracker funds and ETF’s won’t be forced to buy until we’re officially included in the index, but hedge funds and traders will front run that in the hope of making a few quid.

Triton news should be due in the next few weeks, so that will be adding to the momentum.

We’ll also have some dividend buying. At the current share price the company will return around 10% over the next 6 months (including the interim).

Lastly, we’ve got the potential for a positive surprise from yet another review of the tax regime. I don’t have high hopes, but even splitting O&G so that the EPL falls away when the floor price is triggered for each commodity would be a big win, especially with oil trading in the $60’s.

No movement as yet on the declared short position, that must be starting to get painful, especially with the dividend approaching.

Yup, still a great company if they can sort Triton out, even with the UK government doing their best to destroy the sector.

I am disappointed with end of June start date (if its hit), I'm no maintenance expert but I did hope the excellent start to spring with very little wind had provided an opportunity to get ahead of schedule. Should have known better given the constant string of disappointments.

Jack, what exactly is ‘green’ about destroying the UK O&G sector, only to end up importing higher-emission barrels, delivered on diesel-powered ships, from countries with worse environmental records?

Also, what’s ‘green’ about offshoring manufacturing, jobs, and tax revenue so we can pat ourselves on the back for cutting emissions, when all we’ve really done is cause higher emissions elsewhere (likely China).

Why do Labour keep lying to the electorate about how cheap renewables are?! If you want to do some research, check out the index-linked strike price for the now cancelled Hornsea 4 offshore wind project (because it can’t make money) and compare that to last year’s gas generation prices.

Labour’s energy policy is incoherent. I’ve got no problem with wind and solar. But trying to run a national grid without reliable baseload like gas or nuclear is fantasy. Basically, it’s a total clown show.

More bad news for Ed……250 jobs to go at harbour energy (just announced). Noted the punitive fiscal regime and regulatory concerns.

Labour are a total clown show.

Using the midpoint of guidance is the prudent thing to do, but it is there to be beaten.

The excellent spring weather will be providing a tailwind in terms of repairs/maintenance so anything other than an early June restart date would be a disappointment.

If Auctus are right and the company performs to expectations, we’ll end the year with a tiny amount of debt, whilst having paid a 12% divi. Not bad in a year where oil prices have collapsed and Triton has been offline for half of it.

Disappointed to see the Enquest talks collapse, but reaching a deal with Triton offline and oil prices in freefall was always going to be challenging.

Imagine trying to sell this deal to Serica holders: we know our market cap is twice as high, but we think EnQuest should be valued the same, so we’re only going to take 50% of the combined equity.

It’s pure fantasy.

With the prospect of a payout to Serica holders now reduced by the commodity price rout, the reality is that, absent a payout, the deal gets done around current valuations (+/- 5%), or it doesn’t get done at all.

Of course, the percentage split could shift if there’s a payout to Serica holders, but that would obviously weaken the balance sheet of the combined group so should arguably be avoided.

More than happy to eat humble pie later this week if Serica have lost their senses and agree to something different.

Really solid presentation. Sounds like they’ve fully understand the issues with the FPSO and are doing what’s required to return to safe and stable operations.

Midpoint of production guidance was explained really well and is there to be beaten.

The tax rebate is big news, the company would have ended the year in net debt neutral position if the payment hadn’t been made.

Obviously they still need to prove they’ve got to grips with the current issues, but that was a really confident performance.

Enquest deal offers value for both sets of shareholders, but whether an agreement can be reached remains to be seen. Any hopes of 50/50 split from certain posters just got blown out of the water.

Decent update, guidance is okay considering the issues with Triton. Bringing the summer maintenance period forward was the right thing do so H2 production and cash flows should be very strong.

Reduction in 2p reserves not great, but plenty of 2C to replace them.

Tax rebate of $71m will massively help 2025 FCF. Assume this just nets of this years tax than being an actual payment?!

Divided cut was prudent in my view, the plan going forwards looks fine, but they still have to execute against it.

Stevo,

Agree with your first point, the payout to Serica holders should be capped at $100m, if not zero. With the issues with Triton and oil prices constraining FCF at Enquest, the combined group would be much more attractive to investors if an equity split was agreed without increasing debt levels.

Your second point, I don’t understand. Maybe you’re saying it’s the pence per share dividend that can’t be maintained rather than the yield? The yield is certainly achievable.

Combined market cap of £750m, so a dividend of £115m ($150m) would provide a yield of 15%, which is comparable to Serica’s current yield and more than affordable for the group.

Ithaca this morning are showing the value of combining UK production and tax losses. Serica and Enquest need to crack on and do the same.

Word on the street is the split is 78% Serica, 22% Enquest.

Enquest are only getting so much due to the £750m payout to Serica holders.

This debate is nuts.

Serica is not overvalued, once Triton is back up and running it’ll take less than 3yrs to return the current EV in cash, at which point it would still have 100m barrels left to produce.

Enquest has a cash flow problem at low oil prices due to the high cost of production. They’ve done a great job of staying afloat over the years, but the cult like following for a stock that hasn’t returned anything to shareholders in a decade is quite perplexing.

The deal needs to be fair for both sets of shareholders, but anywhere near parity without a significant payout to Serica holders is just fantasy.

Tarmak,

Any deal should have something in it for both sets of shareholders. Maybe they can make it work, who knows.

I have no issues pivoting to Enquest if I believe the deal is in there favour, but my current thinking was that I’d take the capital return as a Serica holder and recycle into the combined company’s equity if the price was right. Obviously that payout is now at risk given the dreadful performance of the Triton FPSO.

Anyway, let’s see what happens, only a couple of weeks to find out.

Best,

David

Tarmak,

I understand what you’re saying, I just think you’re wrong to dismiss current valuations. It’s not just about what an asset is worth on paper, but what the market is pricing in today, and how that shapes negotiations. Especially when the end result is a deal that needs to be recommended to shareholders.

What you think about Serica is irrelevant, if EnQuest walk away, the share price might fall back temporarily, but it will likely recover once the issues with Triton are resolved.

Maybe now isn’t the best time for either company to be negotiating a deal (Triton issues for Serica & perceived valuation issues for Enquest) I still hope one can be reached, but if they do, it certainly won’t be 50/50.

Tarmak,

Current market caps will have a big influence on the deal. Serica’s BOD aren’t going to recommend a deal that gives Enquest holders a significantly higher proportion of the combined equity relative to current valuations. Yes there’s some wiggle room with that, but 50/50 is pure fantasy.

Imagine it as Serica holder, day one, assuming no uplift from the market, you’re down 25%. Day one for Enquest, you gain 50%.

I’d like a fair deal for both sets of shareholders, the synergies and diversification is needed for both companies. However, I can’t see Enquest looking past the current issues with Triton without Serica bending over a barrel, which isn’t going to happen. So I agree with you in that I don’t think they’ll be a deal.

As for who’s better off, no deal is certainly better than a bad one.

Tarmak, a 50/50 split is not a fair desk unless there’s a significant payout to Serica holders (£300m), which the group simply can’t afford.

In the absence of a payout a 50/50 split would undoubtedly result in Serica holders taking a reduction in the value of their equity, whilst Enquest holders would get a sizeable gain.

We all know Serica has its problems, but we’re not at a stage where holders would need to accept a devaluation of their equity to make a deal happen.

Yes, if Enquest walk away, the dividend will need to be cut or put on hold, but soon as the issues are resolved the company is back to producing 40k a day, with half of it virtually tax free. The company would still have limited debt and next to nothing in decomp liabilities, which isn’t quite the bleak picture that you’re painting.

If Enquest walk away the dividend is done in its current form. At least for now.

Triton might only be around 50% of the business, but because of the tax loss position it’s responsible for a much higher share of FCF.

Paying the same level of dividend would be totally irresponsible given the lack of cash flows over Q1 and now probably Q2 as well.

On the bright side, the oil is still there and the barrels will be close to tax free when production resumes (rolling of capital allowances against the EPL). When that is, who knows following the garbage that was released yesterday.

It’s the open ended repair date that’s annoyed me most. I’m not sure you can get much more vague than saying the restart won’t happen before May. It doesn’t exactly inspire confidence that anyone has a firm grasp of the issues and what needs to be done.

I just don’t see how a deal with Enquest is now possible. We know the oil is still there, but Enquest will understandably want to factor in the dreadful operational performance into the deal. How do you get terms in that scenario?!

The deal with Enquest just got significantly more difficult to close on terms that would be acceptable for both sets of shareholders.

Dividend in its current form is now toast should Enquest walk away.

The RNS is appalling, no expected restart date and no details on what the issues and why it’s taking so long. Totally unacceptable.

DTP,

That’s my understanding. Serica ultimately get the benefit of shielding the gas assets from CT and SCT. Other posters have noted there’s a 50% limit to this (for losses incurred post 2017) so the benefit might only be partial depending on when the losses were incurred.

This would still provide a significant boost to group FCF, especially when coupled together with other operational and back office synergies.

The group would also benefit from scale and diversification, which should allow it to replace Enquest’s expensive debt.

In my view the deal will go ahead, they’ll be a decent payout to Serica holders, but Enquest will get a bigger slice of the pie relative to current valuations. The group will guide to a very attractive dividend policy, which will be comparable with what Serica investors are currently getting.

Just my thoughts, and obviously not everyone will be happy, but that should be enough to get the institutional investors on-board.