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1. Company Snapshot

1.a. Company Description

Serica Energy plc, an upstream oil and gas company, engages in the identification, acquisition, exploration, and exploitation of oil and gas reserves.The company holds 100% interest in the Keith oil fields; 98% interest in the Bruce gas fields; and 50% interest in the Rhum gas fields located in the Northern North Sea, as well as 18% non-operating interest in the Erskine field located in Central North Sea.It also operates the Columbus development, and Skerryvore and Ruvaal prospects located in Central North Sea; and North and South Eigg exploration prospects located in the Northern North Sea.


Serica Energy plc was founded in 2004 and is headquartered in Aberdeen, the United Kingdom.

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1.b. Last Insights on SQZ

Serica Energy's recent performance was negatively impacted by the FPSO integrity issues caused by Storm Éowyn, which led to the offline status of the Triton Area FPSO. This unforeseen event has likely disrupted production and revenue streams, contributing to the company's recent challenges. Furthermore, the UK's FTSE 100 index has faced headwinds due to weak trade data from China, exacerbating market volatility. Additionally, the company's renewed focus in the North Sea, as signaled by CEO Chris Cox, may be overshadowed by the current operational setbacks.

1.c. Company Highlights

2. Serica Energy Navigates Production Challenges, Sets Course for Growth

Serica Energy reported a mixed bag in H1 2025. While production was significantly impacted by the Triton FPSO outage, leading to a 32% drop in revenue to $305 million, the company managed to achieve a pre-tax profit and saw cash increase to $57 million. This resilience demonstrates Serica's ability to navigate short-term headwinds and maintain profitability. The company's focus on cost-efficiency, particularly through tax-efficient spending on its BKR drilling program, played a crucial role in mitigating the revenue decline.

Publication Date: Aug -17

📋 Highlights
  • Production Recovery:: Triton FPSO restart expected to boost H2 production after 40% YoY decline in H1 2025.
  • BKR Optimization:: Hub production reached 22,000 BOEPD in July, up from earlier levels.
  • Drilling Efficiency:: 5-well program completed 25 days early and $31M under budget.
  • Future Projects:: Belinda first oil expected in 2026; Kyle field projected 6,000–10,000 bpd.
  • Liquidity & Dividend:: $433M liquidity and 6p interim dividend reaffirmed shareholder returns.

Triton Back Online, Production Ramp-Up Expected

The restart of the Triton FPSO is a major positive development. The company expects production and revenues to rebound significantly in the second half of 2025 as Triton ramps up production. This return to full capacity will be a key driver of Serica’s future growth. The successful completion of the 5-well drilling program at Triton, ahead of schedule and under budget, further solidifies the company's operational capabilities and its ability to execute projects efficiently.

Kyle Development and Beyond: Growth Avenues Remain Strong

Serica's commitment to growth is evident in its plans for the Kyle field development, which has the potential to add 6,000 to 10,000 barrels of oil equivalent per day to production. Alongside the Belinda field, due for first oil in early 2026, these projects position Serica for sustained production growth in the coming years.

Shareholder Value Creation: Dividends and Strategic Acquisitions

Serica's focus on shareholder value creation is demonstrated through its commitment to dividends. The company's 6p interim dividend for 2025 aligns with the rebased dividend level announced in 2024. The company is also actively exploring strategic acquisitions, aiming to further diversify its portfolio and enhance shareholder value.

Valuation: Growth Potential at a Premium

With projected revenue growth of 17.0% next year, Serica's valuation metrics reflect its growth potential. The P/E ratio of 13.87 and the P/S ratio of 2.48 suggest that the market is pricing in future growth. However, the company's strong free cash flow yield of 9.16% and its commitment to returning value to shareholders through dividends provide investors with a compelling risk-reward profile.

3. NewsRoom

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UK Value Stocks Trading At Estimated Discounts

Nov -19

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UK's Intriguing Trio: ACG Metals and Two Stocks Estimated Below Fair Value

Nov -17

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3 UK Stocks Estimated To Be Up To 50% Below Intrinsic Value

Nov -07

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Serica Energy to buy 40% interest in North Sea licence

Nov -04

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Next 15 Group Leads Our Trio Of UK Penny Stocks

Oct -22

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BP to Sell Stake in UK North Sea Licenses to Serica Energy for $232M

Oct -14

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Serica Energy to acquire bp’s interest in Culzean field in North Sea

Oct -14

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Serica to Acquire BP Stake in Culzean Field offshore UK

Oct -13

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.78%)

6. Segments

Gas

Expected Growth: 4.83%

Serica Energy's 4.83% growth in gas production is driven by increased production from the Columbus field, successful drilling campaigns, and improved operational efficiency. Additionally, the company's strategic acquisitions, such as the purchase of BP's interests in the Bruce, Keith, and Rhum fields, have expanded its production capacity and contributed to the growth.

Oil

Expected Growth: 4.73%

Serica Energy plc's 4.73% growth in oil production is driven by increased drilling activities, improved operational efficiency, and successful exploration efforts in the North Sea. Additionally, the company's strategic acquisitions and partnerships have expanded its asset base, contributing to the growth. Favorable oil prices and a strong demand for energy also support the company's growth momentum.

Natural Gas Liquids

Expected Growth: 4.65%

Serica Energy plc's 4.65% growth in Natural Gas Liquids is driven by increasing demand from the petrochemical sector, improved operational efficiency, and strategic acquisitions. Additionally, favorable market conditions, including rising global energy demand and limited supply, contribute to the growth. Furthermore, the company's focus on cost optimization and capital discipline enables it to maintain a competitive edge in the market.

7. Detailed Products

Oil and Gas Exploration

Serica Energy plc is involved in the exploration and production of oil and natural gas, with a focus on the North Sea region.

Gas Storage

The company provides gas storage services, allowing for the injection and withdrawal of natural gas to meet seasonal demand.

Oil and Gas Production

Serica Energy plc produces oil and natural gas from its operated fields, including the Columbus and Erskine fields.

Decommissioning Services

The company provides decommissioning services for oil and gas fields that have reached the end of their productive life.

8. Serica Energy plc's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Serica Energy plc is moderate, as there are alternative energy sources available, but they are not yet widely adopted.

Bargaining Power Of Customers

The bargaining power of customers for Serica Energy plc is low, as they are largely dependent on the company for their energy needs.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Serica Energy plc is moderate, as they have some negotiating power due to the specialized nature of their products.

Threat Of New Entrants

The threat of new entrants for Serica Energy plc is high, as the energy industry is attractive and there are low barriers to entry.

Intensity Of Rivalry

The intensity of rivalry for Serica Energy plc is high, as the energy industry is highly competitive and there are many established players.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 28.93%
Debt Cost 6.12%
Equity Weight 71.07%
Equity Cost 6.12%
WACC 6.12%
Leverage 40.70%

11. Quality Control: Serica Energy plc passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
TotalEnergies EP Gabon

A-Score: 6.8/10

Value: 7.8

Growth: 2.8

Quality: 8.0

Yield: 10.0

Momentum: 6.0

Volatility: 6.3

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Ithaca Energy

A-Score: 6.7/10

Value: 8.0

Growth: 5.9

Quality: 4.6

Yield: 10.0

Momentum: 10.0

Volatility: 1.7

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Serica Energy

A-Score: 6.1/10

Value: 5.7

Growth: 5.3

Quality: 6.0

Yield: 9.4

Momentum: 9.5

Volatility: 1.0

1-Year Total Return ->

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Maurel & Prom

A-Score: 6.0/10

Value: 7.3

Growth: 6.0

Quality: 8.0

Yield: 8.8

Momentum: 3.5

Volatility: 2.7

1-Year Total Return ->

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DNO

A-Score: 5.4/10

Value: 8.2

Growth: 2.9

Quality: 2.1

Yield: 9.4

Momentum: 7.0

Volatility: 3.0

1-Year Total Return ->

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Seplat Energy

A-Score: 5.4/10

Value: 7.6

Growth: 4.0

Quality: 5.3

Yield: 8.1

Momentum: 4.5

Volatility: 3.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

1.74$

Current Price

1.74$

Potential

-0.00%

Expected Cash-Flows