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Kist down nearly 12% today on fears of a EU windfall tax. Be interesting to see what level they pitch it at. Could see a scramble to get into SQZ if it is more than our 25%

Note results due on the 27th not the 20th as mentioned in your earlier post

UK natural gas futures fell sharply to below the 500-pence-a-them mark after a long weekend, down from their March peak of nearly 650, and tracking the European benchmark on prospects that gas stores in Germany will be 85% full next month, ahead the October target. Still, Russia's Gazprom said it would cut flows through the Nord Stream pipeline to Germany for three days of maintenance at the end of August, exacerbating concerns about supplies and raising the risk of a recession in Europe if Russia's natural gas squeeze widens. The state-owned energy company Gazprom has already reduced flows through the Nord Stream pipeline to roughly 20% of its capacity, citing issues with turbines. At the same time, outages at Norwegian and UK gas fields continue to weigh.

UK natural gas futures skyrocketed to above the 280-pence-a-therm mark, the highest in five months, as a strike this week by Norwegian energy sector workers demanding wage hikes is expected to cut the country's gas output by 292,000 barrels of oil equivalent per day. Norway is the world's third-largest exporter of natural gas and the UK's primary gas supplier, exacerbating concerns about disrupted shipments in an already highly tight market.

Personally, I see the current situation presents SQZ with a huge opportunity. Fortunately the cash is still in the bank and not spent on a asset that would now be worth significantly less. Surely the WT means buying any producing asset will be considerably cheaper than it would just a couple of months ago. If we can buy a producing asset at bargain basement prices, especially one with development opportunities which will enable us to use the tax allowances to the full, it seems like a no brainer. We could get a lot more bang for our buck than we would otherwise and if the WT tax is lifted in 2025 we would be quid's in. So my preferred option is "go big" - if the price is right (there must be majors who have had enough of the North Sea and desperately want out). I don't think we will ever see a better opportunity to boost production massively.

I don't see what's not to like with this stock. As with any stock there is downside risk. It's possible but unlikely that gas and oil prices do an early dramatic reversal (unlikely). It is also not beyond the bounds of possibility that the government could take another swipe at the sector, especially if gas prices are near 300p/therm going into winter. A few weeks ago I would have said that was extremely unlikely. But after the madness of the windfall tax - anything is possible - and it could look like an easy target for a desperately cash strapped government. the main risk, which can never be ruled out would be some catastrophic interruption to Rhum production or damage to the rig platform. However, all stocks carry risk and most of the risks to Serica look unlikely. Generally it is a very safe haven with outstanding prospects.

With £400m+ in the bank and growing all the time SQZ is a raging buy and I am surprised more people and institutions can't see that. What is more, with the windfall tax, we now get almost a free hit at N Eigg. In terms of what to do with the cash pile, I am happy that they are in no rush to blow it. Unless the mother of all deals appears, I would prefer they hold off until the N Eigg result is known. If successful, they could then afford to do a big special dividend (and I do mean big!

Just glad SQZ hasn't squandered the hard earned cash on a new investment in producing assets before this tax change was announced. I suspect North Sea assets will have halved in value over the last week and we could have saddled ourselves with a lot of debt (with no relief on the cost of that from the new 25% levy) that we then struggle to finance. Bargains may now be available. Those big oil companies seeking to exit the North Sea may be even more keen to get rid. In fact all oil companies may now be more inclined to look at opportunities outside the UK waters with more favourable tax regimes. But for buyers looking for producing fields with development opportunities bargains may be to had.

Everything about the BP share sale looked odd. It came out of the blue in a seemingly hurried way and was carried out in a bit of an inept fashion.
Trying to think positively about why this happened in the way it did, the only thing I can come up with is if BP was given advance notice of an imminent deal between Serica and one of BP's competitors that would be inconsistent with BP remaining a major SQZ shareholder. I always try to see the positives in any situation but am usually wearing rose tinted glasses, so don't hold your breath!

Yes, the weakness over the last couple of days is inexplicable. But it looks like something is going on. Could just be a drop to accommodate institutional buyers or there may be other explanations. Serica is leaky, so could be a problem somewhere that we are not yet aware of. Alternatively, it could be a prelude to a long awaited bid! Have seen it a number of times where the share price of a stock is dropped just days before a takeover is announced. We will find out soon enough.

So Alexander Stahel is suggesting Serica is currently worth £6 per share and if the North Eigg drill is successful intrinsic value rises to Between £10 and £12. Music to my ears. The big unanswered question is will his gas price projections hold up to the test of time!

Interesting article in the Guardian suggesting gas prices could remain twice as high as normal until 2025 and we could see a return to the December peaks if Russia invades Ukraine:

https://www.theguardian.com/business/2022/jan/24/how-vulnerable-is-uk-energy-system-as-tensions-rise-between-russia-and-ukraine

A major re-rate for Serica is inevitable if the current high prices prove to be anything more than a temporary blip!

This is a quote from that piece about Angus:

"I have been very positive on the oil price since the bounce in mid 2020 and last year the price was up over 50%, this was at a time that oil companies cut costs to the bone, sometimes way too much, leading to the price rises that are already coming through. But do not forget the natural gas price which for different reasons has increased by even more than oil since then and has also left a vast panoply of undervalued assets.

Speaking to a leading fund manager recently on how this is panning out for investment in the hydrocarbon sector this year he put it very succinctly. When huge cash flow meets significant capex and opex reductions, the profitability and the inevitable cash flow of the sector is going to result in growth in earnings, asset values and shareholder returns. With WTI at $80 today the scope is incredible and by that I mean downside, after all most companies are doing their sums at say, $50 but most work down to $30, just what are the returns on that basis?

So, Angus has fired the starting gun but as I said it could be anyone, in the US last year it won’t surprise you to know that Devon Energy was top pick with Chevron not far behind, other E&P’s and majors are available. Right now the asset hunters have raised the flag, if you own an asset or your company is a collection of them then someone is coming for you make no mistake…

So, in the vernacular of the property sector these oil and gas companies are in the right postcode, mostly have kerb appeal and gazumping is going to be rife, buy now while the very best properties remain, everyone else retain your defence teams…"

https://www.malcysblog.com/2022/01/oil-price-angus-advance-sdx-and-finally/

NKOTB: Thanks for taking the time and trouble to post the off book trades. It's something I don't have access to but certainly creates the impression that stock is being accumulated by someone. May be all perfectly normal but for a long time now large amounts of stock have changed hands without any accompanying holding RNS'.

Invaluable information. Thanks

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!

A bid of £700m would give a price per share of £2.60. Your kidding me, right! Stuff that it has to be minimum £3 but £3.5 would be fairer value after the recent cash build.

What short memories we have got. It was the start of the pandemic in 2020 that saw energy prices plummet and Serica visit lows of 62p. Not saying that will be repeated but ignore it at your peril!

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!

A shorting attack is quite often the prelude to a bid. So you never know, someone may making a move sooner rather than later.

Thanks Jokickass. For some reason I thought our hedging proportion was much higher than that. So we can make hay while the sun shines!