I´ll try to find that news you refer to, however I would have though that the pipe clearance should have warrented an RNS, afterall, it means more barrels per day and hence increased revenue again.
I cannot find any indication of what Rhum 3 might produce. However, by extrapolation, R1 and R2 were producing a total of 27k boepd at the time of deal. so maybe assume that R3 would be around 12k boepd? We have 50% of Rhum so another 6k or so to us (40% payable to BP during 2018, then 50,60,60...)
If that is even close it is a big deal to us.....
Hi Franconia - the 22k blsoepd forecast is taken from SQZ's website on the anticipated production participation for them from the BP field acquisitions, which must allow for the duly staged sharing ratios you've mentioned and I assume that Stockopedia's research took that into account, too.
On that assumption, the deferral (not loss) of Erskine's contribution of around 2000 - 2,500 bls per day for, say, 30 days - 45 days, won't be that significant now, fortunately, in the overall scheme of things.
At least we both agree that being 'overweight' here is fully warranted....sasa.
sasa, It is indeed fortunate that we are no longer totally reliant on Erskine for our production. However, I must point out that the lost production IS more significan to us than you allude to. Remember that in 2018, Serica 'only' gets 40% of the BKR production, the rest going to BP, so the net figure is slightly over 7,000boepd. Thus the loss of Erskine has cut out net income by around 30%. Hopefully only for a week or two but it has dragged on before so dont count on it. I'm still overwieght on Serica and may consider a top up if we drop to 80 over the nexy few days.
Where is the operations update?
"Picking the right stocks for capital preservation and a decent yield is evermore tricky" - how true; an expensive mkt makes the search for something reliable very difficult - value traps seem to be everywhere...
I came close to taking an interest in CNCT but concentrated more on SQZ, especially post the profound BP deal for them, so no harm done. These mature, almost old - fashioned, businesses, seem to comprise a higher proportion of 'value traps' these days with their current yields often illusory - hope you haven't been too hurt by todays RNS.
Most of my stuff is ISA'd or SIPPed (effectively gross funds) so one can achieve returns, either way, provided the capital angle holds up!
Good luck with your SQZ purchase this morning; their hitherto single income source, Erskine, seems quite prone to these pipeline blockages but now Serica has four revenue streams to benefit from and thus the BP deal couldn't have been more timely for them!
Hopefully, the blockage will be cleared very soon, as previously but with Erskine now representing only some 10% of production of the 22k blsoe per day forecast from the four fields they're now benefitting from, it's not as significant a loss of income, pro tem, as before....
Hope the involvement with SQZ turns out well for you and more than offsets any CNCT 'hit' you might have incurred - sasa.
I hope you are well. I have just purchased some SQZ stock this morning, taking advantage of the blocked pipe and subsequent sp fall. I hope you didn't bother with CNCT. It looks like a profit warning has been issued. It's very strange as their management had increased the dividend only last month. Picking the right stocks for capital preservation and a decent yield is evermore tricky imo.
Although p/e ratios are not that reliable a yardstick in determining value, they're still a useful and commonplace guide in general, nevertheless...
Before the BKR deal with BP, SQZ's eps were some 4p ps and prior to the RNS on it, the shs were standing around 28p , i.e affording a p/e of 7 x.
If Stockopedia's research on SQZ, post the BP deal, proves fairly accurate (notwithstanding the many variables between implementation and the full Y/E outcome) they anticipate eps to come in around 32p - at today's price of 90p, the p/e falls to only 3!
Ergo, the shs, despite trebling over the past few weeks, are even cheaper now than before on this multiple - is that overt value or what? Worth thinking about pre the June ratification and, of course, the upcoming (free carry) Rowallan 'spud' which looks an exciting prospect, too. Should be much more to come here, imv, so GLA LTH's....sasa.
Hi eagle - as I suspected, we're both 'old school' in relation to investing our hard earned, rather than 'ducking and diving' / 'in and out' all the time; I've been in this one for some seven years now and have added to my position a couple of times to bring the holding up to where it is now, fwiw.
I'm very much in the fundamentals camp - spotting something like this, especially with a clean / healthy balance sheet nowadays with good management to husband the growing cash / resources we now have (wasn't always like this in respect of the former, of course) and we're now, seemingly, on the cusp of a 'sea change' all being well.
The traders miss out on this sort of morphing into something substantial, of course, whereas the LTH's get rewarded for their patience. Have known quite a few, in my time, who've made a 'bomb' out of buying into value and simply waiting for that to come through whereas I've yet to meet a trader who's really made it big with their approach.
Not knocking 'em, per se but as the old mkt saying has it - 'the short term trader is a long term loser' and I'd generally agree with that in my experience, anyway. So, GLA - sasa.
You're a long way from being included in my somewhat dismissive assessment of modern day analysts, sasa. Your posts are always interesting and informative.
The way one arrives at a fair value of shares held in one's portfolio doesn't change the way most people trade (I don't say 'invest') in markets like AIM, where great stall is set on 'momentum investing' - quickly moving funds from one 'red hot prospect' to another. Most of those trading (by this I mean dealing frequently) in the AIM market today are after short term gains and understand very little about the underlying fundamentals - they seem to care even less.
I'm not complaining (as a long term investor) about short term pricing issues because fundamentals still win in the end. The skill (as you will know) lies in choosing the right companies (run by the right kind of management - ie competent and honest) in the right sectors and being prepared to wait for the fundamentals to play out. There are fewer of these companies around than one might think, given that risks always have to be managed.
I could carry on but you get the gist. I sense there may be some similarities in our individual approaches to investing. I've got steadily better as I have grown older, although I am still prone to being caught out by believing too readily what management either states or implies about the future of companies I have invested in.
I am expecting to reach the peak of my investing skills shortly after my death, whenever that may be. Hopefully SQZ & JOG will come good before that relevant event. JOG's team is first rate and they're sitting on an interesting discovery alongside Statoil - my guess is they'll sell it and buy production a la SQZ - hope so anyway. I'm in CLNR because I find it hard to believe Algy Cluff will want to bow out with a whimper after such a fine career. I was interested to see these two characters buying in the recent placing. Success for CLNR hinges on farming out interests in two UKCS gas licences with prospective reserves of 300MMboe: http://en.wikipedia.org/wiki/Lloyd_Dorfman http://en.wikipedia.org/wiki/Michael_Spencer
If I'm wrong, they will be too!!
When these three remaining stocks play out, that will be it for me. The markets are now too dishonest.
Hi eagle - Never took your post to be argumentative; I'm not arguing either over how to evaluate how cheap this share is...
The NAV is the most reliable yardstick in determining net worth (assets less liabilities = shareholder's funds, etc.,) but until we know how much the benefit of the BP deal turns out to be for SQZ, it's fairly academic at this stage, I'd suggest; Stockopedia had it at 134p ps, for end '18, if I recall correctly...
Earnings, yes, they're easy to manipulate which can compromise the PER calc, I agree (unlike cash) and one hopes, in this case, that TCW and the BoD will continue to be 'honest injuns' throughout in this regard.
Never been a fan of EBITDA myself, nor chartism for that matter but they're both widely used nowadays, so one should be cognisant of their influence nevertheless - hence my still utilising the p/e multiple as a reasonable tool.
I might be dim-witted, too, for all I know, despite more than fifty years in this game but we both agree that there's further value to be had here, given a fair wind; after all, the sp will determine the extent of that and when we decide to call it a day - sasa.
I'm not arguing with anyone, sasa - it's just the way I and some others look at getting somewhere close to fair value of shares in any given company. NPV is the only true way to value an asset held for gain. In simple terms any such asset's value has to be the present value of all the cash that asset will generate over its lifetime. Think about it.
I used to be a fan of P/E and/or PEG as a rough and ready way to assess value. It was also possible to use the ratios to benchmark peer standing until directors started openly cheating about what they call 'earnings' but aren't. What are called 'earnings' has become a farce because all sorts of expenditure or other form of cost is added back to arrive at a number (called 'earnings' whatever it represents) that presents directors in a better light. There is no longer any consistency and peer comparisons are a waste of time. Dim-witted so-called analysts aged about 28 accept whatever is put in front of them without having a clue what any of it means. They get good bonuses though, because short term traders (who also haven't got a clue) love to hear good stories about shares they're invested in and big 'earnings' are good news for all.
Regardless of Mr Newman of IC giving us the benefit of his valuable anaysis, I couldn't be happier with my investment here. Although I'm expecting continuing impressive returns here in the near future, I have a feeling better returns might come elsewhere. It remainsto be seen what 2018 will bring.
Fair comment, eagle, vis a vis the near duplication of the earlier Stockopedia analysis of SQZ, post the BP deal, comprising the IC article just out. Plagiarism comes close?
However, what Serica lacks at this point is greater visibility / awareness by the investment community of the profundity of this transformational BP deal for them. Whilst acknowledging your point about P/E ratios, most investors utilise this value indicator 'cos it's easy to understand / work out and while the preference persists, I think it'll remain relevant; similarly the PEG ratio and in this case particularly the anticipated FCF.
With SQZ selling on a prospective multiple of 2.6 and PEG of 0.3 odd (Stockopedia) at 84p, the shs remain well below 'fair value' v its recent peer group and thus I, too, remain a firm holder here, pending a move into three figures near term, hopefully.
With the Forties pipeline now fixed, apparently (we should get an RNS on Tuesday confirming this, as well as the start of the BP deal) I'd expect the sp to push on from here and with speculation building ahead of the Rowallan 'spud' in the 3rd qtr and Columbus upcoming beyond that, as you say, 2018 should be an increasingly successful year for SQZ, all being well - sasa.
I am long on SQZ, having steadily increased my position over the 12 months or so leading up to the BKR deal announcement. I retain a significant number of shares (in my terms) and am bullish about SQZ's future prospects.
At the risk of making myself unpopular on here, in my view Investors' Chronicle article about SQZ's value is laughable (if one regards the subject of valuing shares as funny). IC is full of people who don't know their proverbial from their elbow. Alex Newman is another example of the same. He appears totally confused about how one should even start to value a company like SQZ, or probably any other listed or other company for that matter, based on what he has written in his pitiful article, in which he uses none of his own initiative and only information either publicly available or cribbed from others. All the information relating to the deal was set out either in the RNS announcing the deal, or the admission document that followed about 10 days later. Any serious investor will already have been familiar with all the information and views he put forward. That said, I suppose to the extent IC is taken seriously by anyone daft enough to do so, SQZ has at least been brought to the attention of a wider spread of people, even if the profile Newman gives is so far from complete it is close to misleading.
You will deduce I am not a fan. Read what IC has to recommend then do the opposite, might be wise counsel generally imv.
In making the recommendation he does, Mr Newman shows he is not equipped with either the skills or the experience to come up with a fair present value for SQZ. Where is reference made to Columbus, which could easily transform the company again next year (ie 2018)? Or the Rockall assets? Or the strong hint given by SQZ that it isn't finished with its acquisitions yet? One thing is for sure - SQZ won't be sitting watching $193m in its bank account. It will want that cash working to produce more.
DCF modelling in order to get to NPV is the accepted way to value producing oil companies - exploration adds complications but they can be overcome by varying the assumptions. Using forecast numbers put up either by the company or its brokers and making various different assumptions (reflected in the discount rates applied) always gets the present value of SQZ shares to well over £1. Making some favourable assumptions gets it closer to £2. It doesn't need to be any more precise at this stage - SQZ's situation will continue to evolve. Watch this space.
Net assets are a useful indicator of general health - cash being the most important of these in the case of a company like SQZ, with all its oil assets in the later part their producing lives. But you don't use net assets to value a company like SQZ. Nor do you use a P/E based approach where known earnings are in decline but you don't know what's going to be added and how profitable those assets will be.
It seems to me that, following the very sad death of his wife 2 or 3 years ago now, that Mr Craven Walker has pitched himself into his work for Serica, for which all shareholders should be grateful. I certainly am. He may have been alone as an executive director and chairman while all the progress was being made, but he has a capable team below him at operating level and the quality and strength of his non-executives is remarkable. One wonders how likely it would be that Jeffrey Harris (GRG Oil) who has now stepped down from the Board - he is a US national; ref; Rhum/Iran) would have £38m at present value invested in SQZ if he wasn't confident about its future. Similarly, the somewhat curious Mr & Mrs Hardy, said to be private investors who are supportive, own 10% - worth £22m at current prices. Harris and the Hardys could block anything they like between them - and they're clearly onside which (to me) adds protection.
I could go on. Suffice to say I like my investment here - but not just for the reasons the hopeless IC commentator ha
Thanks, jontee - found it now, courtesy of the Google - 'Serica' link.
It largely corresponds to the Stockopedia analysis put out a fortnight ago, which is very encouraging and there might be some New Year press tips to come over the w/e - given the lowly pros. p/e and PEG ratio etc., as this seems so strong on 'fundamentals' even now, it should certainly warrant a good mention but then, I'm biased, of course!
I did post the link.
It's better and safer to copy and paste.
However, if any difficulty you can Google the words - Investors Chronicle Serica - and you will see the link too and you don;t need a sub to read this article.
Hope this helps.
I'm expecting (hoping) for a bit of a bounce when this is up and running fully; if only, just because it would be good news and good news inspires confidence.
I'll take a guess at 85p for end of year (by Friday close) and into the 90's for January.
PS: I never get it right - lol.
Happy new year all Sericans.
Yep, that'll be good news once Ineos confirms it, Franconia; I'd expect SQZ to put out an RNS upon the Jan1st commencement of operations to give the sp a useful fillip, too.
Given the Stockopedia impressive earnings forecast for next year, there must be a good chance, too, of a maiden divd, especially if the Rowallen 'spud' proves successful with the F/Y figs.
Even a very conservative one, say, 3p ps, (10 x covered) would afford a reasonable yield to underpin the appeal of the shs and then, of course, there's the possibility moving from AIM to the main mkt at some point. Much to look forward to....sasa.
Just seen your post, bioking - yep, Peel Hunt could well say their post BP forecast for the sp was 'pessimistic' if Stockopedia's calcs. are anything to go by!
They're estimating eps of 34p for next year putting these on a p/e of 2.5 at todays price and with a PEG ratio of 0.3 and an NAV of 134p these shs are still way undervalued against their figs; aren't Peel Hunt supposed to be the shop here? - sasa.
My mistake, the spud date for Rowallan has slipped form late Q2 18 (June Preso) to Q3 18 as per yesterdays preso.
Reading what was said yesterday convinces me further what a great deal BKR is. We don't even need to find the £12.8m initial consideration out of cash reserves as this is not payable until completion (mid 2018) and will be funded by BKR revenue from 1/1/18 ! What are we going to do with all our cash? OK so we are opening a new Operational HQ in Aberdeen and will need to pay the TUPEd staff but that will be covered by BKR revenue. In the meantime we sit on £30m plus!
Maybe there was a hint in the Chairman's Statement yesterday:
"We felt that a significant transaction would also have the added benefit of creating increased financing
capacity and scale, thereby boosting the range of new opportunities open to us. "
Sounds to me like another deal in the planning stages!
Bioking, thanks for your comments re the GM yesterday, much appreciated. Very interesting re Rowallan. Can't believe that this is so "low key" here. Spud due late Q2 18, fully carried by Eni and a P50 case of 8,000bopd net to Serica by 2024 if successful. I dont reckon ANY value has been given to this in our current sp.
shareholder noted BP announcement that the deal with Serica will produce £300 million to BP and Chairman indicated that this figure did not surprise him - our 50% is therefore presumably worth more than our current market cap !! Ops Man was very optimistic on the results from the carried interest in Rowallen - about 6 months to wait for these - and Columbus - possibly 2019 - plus strong feeling that Serica lower costs in themselves would extend the commercial life of the minor fields. All very positive. BTW I overheard Peel Hunt indicating that their target of £1.15 was very pessimistic....
Important message from the Financial Conduct Authority:
Posting inside information that is not public knowledge, or information that is false or misleading, may constitute market abuse.
This could lead to an unlimited fine and up to seven years in prison.
If you have any information, concerns or queries about market abuse, click here.
The content of the messages posted represents the opinions of the author, and does not represent the opinions of Interactive Investor Trading Limited or its affiliates and has not been approved or issued by Interactive Investor Trading Limited.
You should be aware that the other participants of the above discussion group are strangers to you and may make statements which may be misleading, deceptive or wrong.
Please remember that the value of investments or income from them may go down as well as up and that the past performance of an investment is not a guide to its performance in the future.
The discussion boards on this site are intended to be an information sharing forum and is not intended to address your particular requirements.
Whilst information provided on them can help with your investment research you need to consider carefully whether you should make (or refraining from making) investment or other decisions based on what you see without doing further research on investments you are interested in.
Participating in this forum cannot be a substitute for obtaining advice from an appropriate expert independent adviser who takes into account your circumstances and specific investment needs in selected investments that are appropriate for you.