Serica Energy: what will 2011 hold?

Saturday, Feb 26 2011 by
27
Serica Energy what will 2011 hold

Serica Energy (LON:SQZ)  is listed on Toronto and Aim, both with a ticker of SQZ (ISA-able). With shares of c. 177 million, it has a market cap at 38p : £67m. The website is www.serica-energy.com and the AGM presentation (June 2010) is here. Serica had a lot of bad luck with the drill bit in 2010. Starting the year with the share price around 55p, it drilled dry holes at Conan in the East Irish Sea and Oates in in Central North Sea, then found sub-commercial gas at Dambus and Marindan in the Kutai PSC in Indonesia, ending the year at about 42p. 

So what makes this unlucky oilie a good prospect for 2011? 


Assets (1) production

Indonesia - Kambuna Gas from the Kambuna field is delivered at Pangkalan Brandan at the site of a Pertamina gas plant and refinery about eight kilometres from the coast.

Serica sold 15% working interest to Salamander Energy in August 2008 and sold a further 25% to KrisEnergy in January 2010 retaining 25% interest in the TAC.

Gas sales from the Kambuna field commenced on 11 August 2009, using temporary processing facilities.  The permanent facilities were completed in October 2010 and the field is currently producing at an average of 43 mmscfd. In addition to the gas sales, up to 4,000 barrels per day of condensate is sold at a price close to that of crude oil.


Assets (2) development

North Sea: Columbus

In 2006 Serica drilled the Columbus discovery well  which tested and produced at a stabilised average rate of 17.5 million scfd and 1,060 bpd of 47.5° API condensate  The well was suspended for potential use in the development of the Columbus field. A further appraisal well and side-track were drilled in 2007 and also suspended for use in development.

The Columbus field is a combined structural and three way stratigraphic trap comprising Forties
sandstone reservoirs lying along a turbidite fairway. The reservoir thickness is c 131 vertical feet (40.0 metres) in well 23/16f-11 and c 70 vertical feet (21.0 metres) in the 23/16f-12z well. Reservoir quality is generally fair to good with porosities of up to 25% and averaging 20%. The overall field life is expected to be up to 14 years.

Getting to production has been slowed because…

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Serica Energy plc is a United Kingdom-based oil and gas company. The Company has exploration and development activities based in the United Kingdom, Ireland, Namibia and Morocco, and an economic interest in an oilfield offshore Norway. The Company's segments include UK, Ireland and Africa. It holds licenses in the Central North Sea and the East Irish Sea, which includes the Columbus Field. It holds Frontier Exploration Licenses for Muckish, Aghla and Derryveagh, and Liffey and Boyne Prospects. The Company also holds interest in Blocks 113/26b and 113/27c, including the Doyle prospect. It holds interest in Block 113/22a, which is operated by Zennor North Sea Limited. The Company has interest in a Petroleum Agreement covering Blocks 2512A, 2513A, 2513B and 2612A in the Luderitz Basin, offshore Namibia in partnership with other companies. The Company has working interest in the Sidi Moussa license. The Company has an economic interest in the potential development of the Vette field. more »

LSE Price
104.6p
Change
1.0%
Mkt Cap (£m)
277.3
P/E (fwd)
2.7
Yield (fwd)
n/a



  Is LON:SQZ fundamentally strong or weak? Find out More »


10 Comments on this Article show/hide all

deucetoace 27th Feb '11 1 of 10
2

It's a game of patience isn't it. I bought back in very late last year on the basis that all the drilling had ceased so there was for the time being no likely bad news (given their recent record). The price is drifting whilst waiting for the results of the strategic review. Assuming this is no worse than selling Kambuna at the price they got for the last slice the price should rise. However with their unimpressive record over the last few years (both in absolute terms and even more compared to many other oil companies) the board really need to do something to justify their existence.

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repobear 28th Feb '11 2 of 10
7

Hi Manzanilla,

Nice post. Thank you for your efforts.

I am quite positive about SQZ and have a decentish shareholding, which is a bit underwater, and funnily enough I expect it to trend down until we have some news.

I like the look of Spaniards and the Slyne basin and feel that with these their drilling luck could turn quite dramatically. However given that I feel that the Indonesian assets may well be worth a good chunk of the current market cap, and that percentage may well increase on any shareprice drift, I think there is a danger that the company gets taken out and someone then makes a turn on the Indonesian assets and gets what's left for next to nothing.

There are rumours that Encore will get sold soon, but I don't believe it will be a deal that doesn't give Boothy the chance to drill the attractive prospects that are still to be appraised in the portfolio. The 40% of Spaniards must be high up there on that list. If Encore gets merged into Enquest, which has been mooted in some quarters, Boothy and pals might be tempted to sell off the Greater Catcher Block and operatorship to PMO, or more likely Wintershall:-) They would then have plenty of cash.

Taking out SQZ would be well worth it if Encore fancy Spaniards and perhaps the Irish assets as much as I think they do. My previous speculation as to what AB might do with a cash windfall didn't come to fruition but my thoughts were along the right lines.

http://boards.fool.co.uk/well-sterling-resources-is-at-44-cents-on-the-tsx-11326186.aspx?sort=username

Well Sterling Resources is at 44 cents on the TSX. That's a market cap of C$ 56.5m. Considering the Q3 report states that they have C$ 11.5m in cash and C$ 32.6m in cash equivalents that makes C$12 million for the whole business. That is 6.3m quid.

Here's hoping that AB gets the pot of gold from the gas storage and spends the bulk of it on taking Sterling out of their current crisis.

60% of Breagh and 56.5% of Cladhan aka Bowstring really would put AB on track to repeat the Encana. Punt the Rumanian assets on and buy up a couple more chunks and then sell each to the highest bidder when the financial markets/oil and gas prices are stronger.

Just a thought.....

repo

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nigelpm 28th Feb '11 4 of 10
1

I have some shares in Serica but they've been so unsuccessful with the drill bit one wonders if they are a busted flush or their time will come. Certainly worth holding on I feel but I'd seriously carefully consider other stocks before opening any new position especially with the likes of Soco and Heritage trading very cheaply.

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doverbeach 2nd Mar '11 5 of 10
2

Serica are presenting at Oilbarrel on 17th March

db

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sawney 4th Mar '11 6 of 10

Looks like they've dropped out of the Conference on 17th

 

 

 

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REO100 18th Apr '11 7 of 10
2

On a day where red is everywhere, SQZ pops up near the end of the day.  May be hopeful thinking on my part, but somehow I think there may be a little more to it - has the Indonesian review completed ?

Anyway hoping it is something positive.

Reo

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fuiseog 18th Apr '11 8 of 10
1

An ADVFN poster (triples) speculated that the SQZ rise may be driven by Encore Oils (EO.) confirmation today of splitting off the explo assets at the end of May. With operator XEO (Encore 2) cash rich, Spaniards will be a prime target for early drilling.

http://www.investegate.co.uk/Article.aspx?id=201104180700080599F

But could be a leak on Indonesia, or it could be both. I'm easy!

fuiseog

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thebuffoon 18th Apr '11 9 of 10
1

In reply to post #55850

The prospectus goes out at the end of May. You'll see no action for a few weeks..

Still, it's what people think that matters..

What can't be denied is that SQZ was countertrending today; although come to think of it, it's been doing that for some time. :^{

Buffy

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REO100 19th Apr '11 10 of 10
1

Well it's about time they delivered I hope it will be the sale of the Indonesian assets (though the price may not be as hoped), also they were heavily linked with a licence recently until Chariot cried unfair dealings - where was the money for that to come from - sale of Indonesian assets and some fund raising in due course ?

Spaniards will receive attention, but doubt it was anything to do with the rise yesterday, XEO will highlight the potential but not until the end of May - that gives the traders at least another 5-6 trades before showing any interest !

They listed the following in the recent results:

·      Indonesian assets under discussion with interested parties which may lead to a sale

·      New acreage under negotiation

Hopefully that is why Mr Ellis is hanging around.

Reo

 

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About doverbeach

Doverbeach

I used to work in derivatives, now retired I am a private investor and CAB advisor. I blog about personal finance and food at www.doshandnosh.com. I post as manzanilla on TMF. (avatar from http://xkcd.com/695/ ) more »

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