Member Info for Sekforde

Quite and the current threshold is presently $74.21 per barrel Brent (now well below) and 57p per therm gas (now well above). So the EPL will not fall away until 2030.

I think leaving the UK would be a mistake. Friendlier tax regimes are just correspondingly more expensive. Anything that comes up for sale in Norway will be fought over by a host or Norwegian companies who will have clear advantages over a newcomer from the Uk. The cost of labour in Norway is roughly double what it is in the UK. We have plenty of good assets to develop in the North Sea some with a 12 months pay back. Hopefully the budget will be ok and we will then enjoy a period of stability and growth whilst maintaining a 23 p a year dividend and a few share buybacks.

I do not think we should relist anywhere else. It should not matter whether listed on AIM or some other exchange to valuation. The answer is share buybacks. You eliminate this irrationality by rewarding shareholders.

The dividend yield at yesterday's close is 19.7% and the company has clearly signalled that it has no plans or need to reduce it.

The market cap at yesterday's close was $591m. With net cash of $131m and fcf of $500m forecast over 36 months (with the expected tax regime and present commodity prices) the market is pricing this share as if it will have no value at all in August 2027.

Evening Oned. The original threshold was $71.40 but it is now adjusted annually for inflation.

Section 17 of the 2024 Finance (no 2 ) Act provides that in the event that the price of Brent averages $74.21 or less and the price of gas averages 57p or less over a 6 month period then the EPL ceases to apply. Brent has just hit $71. The problem is that gas is around 90p a therm. The absurdity is that a pure oil producer still has to pay even though oil is now below its 20 year average without adjustment for inflation (apart from the last 2 year). Craig Baxter told me that the company is trying to get the Government to uncouple the two which would make complete sense. Around $70 a barrel could then become an absolute sweet spot with no tax at all for Enquest to pay moving forward.

We had net cash of just over $100m on 31st December 2023. Assuming the dividend is maintained, I think we will end the year with net cash of $150m. We will know on 10th September 2024 whether this is reasonable. So if the sp remains the same we will have a EV of just $450m. That sum will be made in FCF between 1st January 2025 and 30th June 2026 if brent and gas prices hold and production is as the company predicts. Beyond lunacy.

Megla, all the assumptions made by Auctus advisers about what the chancellor will do were before the collapse in Brent to $73. That is around the level it was in 2021 (without adjusting for inflation) when the world was recovering from the pandemic and Putin was in his own country. I cannot imagine what intense lobbying there has been from trade unions about the loss of jobs if these proposals go ahead. Strangely enough I do not think the Government is completely unfair and I am sure it will not want to see investment in the North Sea collapse with the loss of good jobs. It will then be impossible to implement the transition it wants to see. I think the headline rate of tax will be increased to 78% but ALL allowances will be completely unchanged. The Tories did actually cause a huge increase in investment in 2024 as a result of the enhanced allowances despite the EPL at 35%.

The company has said it will publish its accounts and trading statements in US$ so I will do the same. I have been trying to forecast what 2025 will be like. We were told in April that the range of daily production will be between 41,000 and 46,000 boe. Using the middle of that range and at $70 boe gives a gross income of 43,500 x 70 x 365 = $1111m. From that figure must be deducted $20 x 43,500 x 365 = $317m for operating expenditure. We have no idea what capital expenditure will be like. But certainly far less than 2024 and so I am going to suggest $100m. I am going to allow another $50m for everything else (finance charges admin and decomm etc). This gives us a simple profit before taxation of $1111 - ($317m + $100m -+$50) = $644m. We had last year an effective rate of tax of 45% for 2023 and likely the same for 2024. In 2025 we will still have plenty of tailwind losses to use and (depending on the budget) there will be some capital allowances. I am going to assume that we end up in 2025 paying in tax 55% of the $644m or $354M. That leaves $290m to distribute to shareholders or to buy something cheap (like the company's shares.) There is a lot of talk of the dividend being cut. If it is it will only be because the company has decided to up the share purchases or to buy another asset. It had after all over $100m in net cash at the beginning of the year and it should have added to that sum by the end of this year even if it does pay a 10p interim dividend. I have tried to use cautious assumptions and would be interested to hear from anyone who thinks I have made any obvious errors. But obviously the present market cap of $600m is a nonsense if my forecast is anywhere near accurate.

Worry not. This company is not going bust. It will be around in 30 years and worth billions. I have lost £321,000 but I am keeping the faith.

Krakenoil I do not think Stevo or any one else on this board can effect the sp. We do need a deal soon with a cash rich company that can pay down the expensive debt and exploit the tax losses. Serica has also been woeful. Its market cap is a shade above its net cash at the end of 2022. It then did its "good deal" buying tailwind which has not helped at all. But it still has net cash.

Stevo nice to have you back again after too long an absence! Given we now know the net debt figure as of 30th June 2024, what do you see the figure year end given the present Brent price? Assume that lasts until the end of the year. I wish we had done a lot more hedging when the forward prices were comfortably above $80....

I think these are good. The most important point is that net debt has come down from $409.6m as of 29th February to $321m as of 30th June 2024. So a reduction of $88.6m in just four months. I guess it could be around $280m now if the same rate of progress has been maintained.

Unfortunately net debt will be higher by the end of the year because we have $175m to pay in tax in October and the price of Brent has fallen to $73 per barrel far below its average for the first half of the year. But this could be good news in disguise. Contrary the prevailing view on this board, I do not think the present government is completely determined to ruin the north sea industry. The Offshore Energy UK forecast that the proposed tax regime will reduce by about $12bn the revenue to the Exchequer over 5 years I am sure will have been studied. With a Brent at a price far below its 20 year average when inflation is taken into account, they will have to acknowledge the there are no windfalls for any one.

One thing which is quite staggering, over £4bn has been invested by Enquest. There has never been a return to shareholders and yet the company now has a market value of £234m.

Not long to wait and I think we have nothing to worry about. Although both Brent and gas prices have slipped, the company has ample cash flow to maintain its dividend. If it cuts it it will only be to purchase more shares for cancellation which would be a great idea. It is worth listening to the April presentation on you tube at 48 minutes. Does not look like any plan to cut the dividend....

It would have to be 66% to 33% if it were to be a true merger based on present market caps.

Serica should buy Enquest and should do so for cash. The last thing it should do is to issue more shares. Enquest's share holders are so mightily fed up that they ( or we as I am one of them) would probably accept 20 p a share or about $480m. That is well within Serica's current borrowing facility. Having then doubled its production and more then doubled its reserves it could easily maintain its current dividend whilst rapidly deleveraging the balance sheet and cutting costs. Enquest is in a much better position to pivot towards a renewable energy and carbon capture company. Despite all the scepticism expressed on this board, the Government is going to pursue its current green energy policies and rather than fighting that agenda we should look to profit from it. These are gloomy times but in ten years time Serica could be worth many billions as indeed could Enquest.

Londoner. I have simply quoted from the company. But it does appear that part of the £195m referred to is used for capex. The capex in effect costs 9p in the £ in 2023 and 2024. And it has not merely allowed the maintaining of production but big increases this year over last.

Muckle six grand profit! Noting delusional about six grand!

Londoner. Yes the £195m "cash flow" is said to represent the "cash generation of the business prior to discretionary decisions regarding capital allocation" which I took to mean FCF. There have not been any forecasts for FCF by the company for 2024 or 2025 but we can be confident that the 2024 figure will be much higher because production is much higher and the bad hedging has largely fallen away. (We are always talking pounds and not dollars for Serica).

Andy 1022. Yes I do like the BBC and I admire Biden but he did the right thing to stand down. He is just too old now. Harris is ahead in the pols and I think she will win (Thank goodness). But if your think Trump will win, betfair is offering around 6/5 against. So £5000 invested now will win you £6000 in November if the orange felon prevails.