Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
NewKOTB.
You may well prove to be correct. I am usually too optimistic about these things. Nevertheless, I still harbour hopes of a big deal possibly involving BP where we manage at least some of their North Sea assets in a revenue sharing BKR type deal (though obviously not as generous ) that would give them the returns they need to pursue their renewables strategy without being 'tainted' by the fossil fuels label but would also allow SQZ to add assets using our cash and grow substantially. A partnership that allows both companies to fulfill their ambitions. As I say, I am ever the optimist!
Looks like they are gearing up for something. Hope its an acquisition This company has too much to offer to fall to some low ball cheeky takeover and who knows could be (to use that much over used word) transformational. Here's hoping!
Whatever the short term movements in the share price due to gas prices (which are still massively higher than they were just a few months ago), I will be sticking with my holding to see the completion of the BKR deal in January. The big imponderable for me is how much of this is already in the price. The January uplift should see something like a 50% increase in production/revenues. So, if not already in the price when we see this registering. My guess is the announcement in January will see only a modest increase of say around 10% price wise. This is a 'show me the money share' and given SQZ are slow to give earnings estimates (difficult given a very volatile gas price), I suspect we may have to wait until Sept next year before seeing the full value of the BKR uplift in the share price. Should be worth the wait though!
January, though, may also see a more fundamental shift how SQZ is viewed. I, like most, am surprised we haven't already been the subject of a bid. The only reason I can see for this (as suggested by NKOTB among others) is there may be some clause in the small print of the BKR deal that allows BP a blocking vote so long as they are sharing production revenues. Once that is no longer the case things may change rapidly. SQZ is still grossly undervalued and large volumes of shares have changed hands with an as yet undisclosed recipient. Everything is still to be played for!
Potential delays to Nord stream 2 are pushing up gas prices. But despite US sanctions NS2 will happen for one good reason - Germany needs the gas! Short term the higher gas price will have little impact on Serica as most of our production will have been hedged at lower prices. However, if R3 comes on line soon we may be able to take advantage of these higher prices by hedging the potential extra 10,000 bpd and locking in at these extremely high prices. Eventually, gas prices will come back down to more normal levels as ways are found to circumvent the NS2 obstacles. Would be a good trading opportunity were it not for the fact that other SQZ news is imminent and it would not be a good time to be caught out!
NewKOTB: Remember that r3 will represent a large proportion of SQZ's future production. Any potential acquirer will want firm information on R3 flow rates (as will SQZ) to determine a proper valuation of the company. That will likely need to be over an extended period rather than just a couple of days. It is essential for all parties that they achieve optimal and sustainable flow. Lets see what happens once the production is announced. An extra say 1k/2k bpd above the expected (hoped for) flow of 10,000 bpd will be material to any offer price.
NewKOTB: The answer to your question is 'yes'. However I do have a few caveats. First, the 2020 results are unlikely to be anything like as good as 2019. Second, the prolonged R3 intervention may have put a bit of a dent in our cash pile. So unless accompanied with good news on R3, the 15 April is unlikely to see much of an uplift in the share price.
Longer term SQZ looks a 'no brainer'. But without a bid the share price may continue to languish until the 2021 Interims. From that point I would envisage a steady re-rating prior to the January revenue uplift. I completely agree that without something to boost the share price, a bid between now and the summer looks the likeliest prospect.
Slightly disappointed that the cash levels haven't at least been maintained. But the Capex seems to be being well spent. Delighted that the Rhum 3 intervention hasn't encountered any insurmountable problems (albeit with a slight delay) and excited by the prospect of what 2021 and 2022 have to offer. Will be surprised if the share price isn't at least double where we are now by this time next year and possibly considerably more!
GRG may have chosen to facilitate a deal by selling part of their large holding to the prospective seller. Releasing 3.4% or more knowing the transaction will sweeten a deal that possibly increases the rest of the holding by > 100%, doesn't seem such a bad result! Or am I in fantasy land?
The GRG disposal may just be a routine small disposal of a large holding taking advantage of the recent price rise. But I believe it could also be part of some much bigger corporate activity that Serica are involved in. I get the feeling something is going on behind the scenes. The share price is still being micro managed with the same pattern every day and we are still seeking acquisitions. The management will not be sitting on their hands. What will emerge in time, I know not, but the bigger the deal the longer it will take. I am buying more day by day as the opportunity arises. My advice is sit tight and lets see how things develop - it could be big!!
My take on the article and trying to read between the lines is that talks have or are taking place but the parties have not YET been able to agree the terms. Serica, rightly for us, want a good deal for shareholders. I read yesterday's article as part of the negotiating stance. We are not going to be bounced into a deal and we don't necessarily need one to advance the company. The greater pressure is on the companies seeking to divest assets. They have gone on record of their intentions and have set timescales for changing their focus. So ours is a position of strength.
I suspect talks are ongoing (a bit like Brexit) and my bet is that a deal will eventually be done. Frustrating for us at times but patience will likely be rewarded.
Not sure we can say how far off a deal may be. I took some encouragement from the 'we want to do another deal soon' comment. Even if one was imminent, they couldn't give any indication or raise expectations before pen is put to paper.
In the Herald article Tony Walker talks about a "partnership between the larger companies, as they redirect their capital and refocus their strategies, and the independents, such as Serica". I am hoping the BKR deal may provide the model for a much larger and more extensive partnership between BP and Serica whereby SQZ manages a large part of BP's ageing wells in return for a modest lump sum payment but a large part of future revenues which would give BP the cash to invest in alternative energy whilst giving Serica a gradually increasing share over a period. I can envisage a deal where we would almost be acting as a subsidiary but separately quoted branch of BP. Could be absolutely massive for SQZ but would be a complicated deal and would take time to sort the detail. Patience will be required but the return could be huge