Member Info for sasa43

Hi Samurai - not wishing to put a dampner on your preference but I think that HOC has now suspended their Peruvian mining ops. like so many others are doing so currently.
Hope POLY and HGM, for that matter, are able to continue unaffected / still paying their divds, etc., - if they can manage that, inspite of the covid - 19 threat, they're likely to command a premium for the duration, I'd have thought... GL, anyway - sasa.

Quite so, Newk - the downside protection Serica has under the terms of the BKR deal is prescient now and valuable too, to say the least, not to mention the increasing share of that production this year and next. SQZ also sells on a lower multiple than RRE and probably prospectively, too ( I calculate that they should come in with 30p eps or so for 2019 to make for a p/e of around 2.5 x currently ) and that's really cheap!

Both seem about the best stocks to hold right now for the reasons already mentioned and when sentiment generally recovers, well, - say no more... sasa.

Just announced, the attraction of gold & silver, especially AU in being the ultimate store of value / hard currency, merely increases, to the detriment of fiat money's buying power.

Those with cash in hand having sold some holdings and have added to their funds on deposit, now face the prospect of zero interest, or even negative rates coming up on their money. Ergo, quality gold producers, like this one (paying a decent divd, too) should come into their own again and being in the FTSE 100, Insto demand for POLY looks likely, too.

Good place to be right now, imv - sasa.

Hi JAdam - nice to see you on here and contemplating taking an interest when the sp suits...
RRE and SQZ are like 'two peas in the same pod', imv - both have proactive / good management (Serica's being a bit more seasoned, co's they've been around in this game for longer) and their strong, debt free, balance sheets with huge cash accruals, marks them out to be about the best situations to invest in, especially given today's difficult conditions, that I've come across, fwiw...

Serica has less cash, pro rata, their sp whereas RRE has 3 x more in the bank than their mkt cap, with the business thrown in for nothing! - quite an exceptional anomaly in my experience.

SQZ is 80% gas / 20% oil and their op. costs are around $13 boepd whereas RRE is 60% oil / 40% gas with their op. costs being around $ 29 boepd but both are striving to get these lower... Many have speculated that the two might merge, given the obvious synergies applicable, especially in this problematic environment where a cautious approach, for now, seems sensible and there is, perhaps, merit in this argument, in lieu of pursuing their own acquisition strategies, regardless...

When they get to publishing their respective 2019 F/Y end results and, hopefully, Serica joins RRE in being a dividend payer, which they will well be able to do, I'd expect both of them to re-rate significantly from here. A resolution of the SA / Russian oil 'dumping' spat and an end to this evil coronavirus pandemic will set the stage for a dramatic upturn in their sps, I have no doubt.

Meanwhile, both afford exceptional defensive qualities in this anxious climate, augmented by considerable growth potential once things get back to normal - hence being 'over weight' in them currently and am happy to be so for the duration...

Anyway, I hope that helps your deliberations in wondering whether RRE would make a good 'sidekick' for running on with SQZ looking ahead. ATB - sasa.

I can't think of two better stocks than RRE and SQZ to be holding in this anxious mkt. They both have loads of cash (especially RRE) / no debts / good management and we're likely to see an upturn in energy prices soon. Coiled springs + major defensive qualities they offer right now, imv.

Many industrial firms would die for such characteristics at present and sadly, many will after all this attrition.... Along with these premium 'oilies', some gold producing miners and pharmas actively searching for the antidote to this evil bug seem about the best areas to be involved with currently. Just sayin' - sasa.

Thanks for the 'heads up' on this one (via the AMC bb recently) Henners - much obliged.

Have added this to my NCYT position, fwiw and both look particularly well positioned in protecting us all from this pernicious bug - that's very laudable in itself! - sasa.

Entirely agree with your post on this morning's RNS, NewK - what we've been waiting for is 'history', i.e how RRE stood at the Y/E - that's fact - nothing to do how things might be shaping up now; the preliminary nature of that is always subject to adjustment later on by it being 'preliminary' .
Suspension of such indicator statements is more understandable in these unusual circumstances.

Surprised that AA won't be releasing that statutory requirement - Serica will probably do the same; not helpful, as it could, unwittingly, lead to a false mkt in the shs and that's ironic, coming from the FCA, to say the least! - sasa.

Hi NewK - I think that the Japanese outfit was already the operator 'in situ' and took umbrage when RRE acquired that asset and assumed operator ship of it. This might well be another 'tempter' for AA, given Serica's already licensed in this regard - if anything does transpire between them, I guess that the operator's licence would automatically be transferred to RRE rather than go back to the OGA again... Not sure, tbh - sasa.

Good overview there, dick with which I generally agree, fwiw...
Any merger with RRE , T/O or with another outfit would have to reasonably reflect SQZ's current value (given its defensive characteristics in this climate) and the potential it affords. Ergo, a starting sp of 200p + would be required in this mkt mayhem but well north of that, imv, when calmer conditions resume. I tried to imply that in my recent post on the topic but probably failed...

As for the Saudi / Putin spat, Trump merely needs to 'lean on' MBS and bring him to heel by reminding him that without US support, primarily the military prop, SA would be toast before too long - no guesses which way the oil price would go then! - sasa.

HUR's got too much debt there I guess, olda; neither TCW nor AA like that...sasa.

Yep, I picked up on that, too, NewK, which was certainly interesting, I thought but trying not to read too much into it at this stage...

Looking forward to Mondays RNS and hope everything's on track - sasa.

Hi NewK - just a thought on the possible mechanics of a merger if that's agreed.

Bearing in mind that RRE is the smaller undertaking, (yet on the main mkt whilst Serica is on AIM) I guess Rockrose would need to alter its capital structure first in any amalgamation plans leading to a 'NewCo' coming into being, bearing in mind that SQZ wouldn't come cheap in their management's view, either.

This might be even more relevant if anything 'hostile' proved to be on the cards - unless RRE intended to use all its cash which it would need to do and then some immediate borrowing to buy SQZ (looking to replace that initial leverage from Serica's own cash pile, if successful) without using its own equity or a cash raise to do it - a reverse T/O will necessitate a suspension, of course, as would a merger, as you say...

If an RRE equity element was to be used to preserve part of their cash balance, they might well have to change their very tight share structure to facilitate such a combination - like, maybe, 20 RRE new shs for every 1 old share held hitherto - that would make agreeing terms in either case a bit easier, I'd say.

Just idle conjecture at this stage, anyway - sasa.

"Why is the mkt cap lower than the cash in the bank?" you ask, Ammu - good question.
It's probably down to peeps selling anything with a profit on it to offset big losses elsewhere in this carnage of late, i.e getting out of the mkt and into cash, regardless...

As bandit right says; either the mkt knows something us LTHs of RRE don't know about or the results will demonstrate that everything is on course and building nicely as we all hope.

We'll know on Monday where we stand on that one - sasa.

Monday - sasa.

Hi NewK - have been musing about this possibility, too, like many of us on here.

That the two combined would be a good fit, especially in this climate, is a 'given', imv. AA prefers a higher gas content (60% oil / 40% gas) for RRE today, whereas Serica needs more oil producing assets to level things up a bit for them (80% gas / 20% oil right now) so a combination would result in a 40% / 60% split in favour of gas which AA would, therefore, favour.

He also prefers to be an operator (having recently lost out to Taka post that court decision which takes effect in July, I think) and SQZ is already an operator in its own right, of course (BKR) and both want to nail down their op. costs further - another mutual benefit from getting together.

The obvious synergies aside, I've always thought that a clash of management styles might preclude such a 'get together', e.g who would run the combo? Serica has the greater experience of BoD members and longevity in the business but RRE has the larger cash hoard with AA having substantially more 'skin in the game' than anyone else (30% of RRE) so, arguably, he gets the major shout in any negotiating.

Your suggestion of the roles that might be played by the incumbents in such a 'tie - up' (young guns in charge but with the more seasoned Serica stalwarts behind them in an advisory capacity assisting them, seems a very plausible solution, I have to say. That might well be workable if both sides have a mutual desire for it to come to fruition.

"Just the case of agreeing merger ratios", as you say - that's the other major question, of course. However, 'where there's a will' etc.,

But if they can't agree, there's always the possibility of one going 'hostile' for the other; with AA's hefty equity position in RRE and his funding 'war chest' seemingly secured, I guess he'd come out on top in that one (much to the benefit of SQZ's sp and us LTHs, in that case!) - sasa.

Segro went ex their 14.4p divd ps yesterday, yielding now some 3% - not that high but more reliable than many others in this climate, I guess, so that's comforting, bearing in mind the business they're in should be more resilient than most... sasa.

Serica and RRE are both over capitalised at present (almost too much cash on their debt - free balance sheets) even in this anxious climate. Moreover, this inefficient retention (where they are seeing a negative real rate of return from zilch deposit rates currently applicable if they're reluctant to spend on a productive acquisition) suggests no divd threat involved to me.

SQZ's results soon will be based upon the 2019 F/Y outcome, of course - higher oil price back then + some hedges and downside protection under the BKR deal terms / very low op. costs of some $13 per boepd applicable, etc., Ergo, I see no reason for the BoD to cancel their declared intention to pay their maiden distribution.

Yes, they might decide to pay out somewhat less than they originally planned as a precautionary measure now but they should have ample cover beyond the 22p eps reported last time (my guesstimate remains around 30p eps or more this time, fwiw).

With even more cash having accrued to their burgeoning balance sheet, I reckon a 5p ps divd payout remains well within their avowed approach of introducing a sustainable dividend policy henceforth.
Anyway, we'll soon know the answer to this question - sasa.

Yes, nice to see some long overdue buoyancy here, as you say, Dynamo. I guess much of today's bounce will be traded out of by those who got in yesterday around a fiver but Monday and beyond is where the real gravy should reside... sasa.

Echo that, NewK - if RRE's results out on Monday dispel the doomsters, that should benefit both of 'em with, hopefully, Serica following up a fortnight or so later to maintain momentum.

Meanwhile, the mkts, as a whole, need a denouement of some kind to snap them out of this 'dash for cash' mentality and this might well be seen shortly. Not sure what that turning point might be but with the rapid decline in confidence in anything quoted, it can't be that far away now, imv - sasa.

Yep, I agree, dana - have just done the same at 503p, fwiw. Unless we're in for a very nasty shock next week, the 17% yield now discounts all but the proverbial 'kitchen sink' in this 'capitulation' phase that we're now in, as I read it. 'Fortune favours...' and all that - we'll soon know whether that's right come Monday - certainly hope so.

It wouldn't surprise me if AA decided to announce a partial return of capital if he prefers to put any acquisition plans on hold for now, either - sasa.