Oil and gas exploration company Serica Energy could be in for an exciting year after it confirmed that it has reached an agreement with BG Group to provide pipeline access for Serica's North Sea Columbus field, which removes the last practical obstacle to the sanctioning of the project.
An independent review gives Serica a net interest of 5.6m barrels of oil equivalent in Columbus, which promises to provide much-needed cash flow, given that Serica's sole revenues are now generated through its remaining 25 per cent interest in the ageing Kambuna field in Indonesia. Serica's full-year revenues were hit through lower entitlements, while the operating loss fell by 23 per cent to $9.96m (£6.26m) on lower impairments and writedowns.
Serica also confirmed that industry giant BP will earn a 30 per cent farm-in interest for its Namibian licence. BP has agreed to cover past costs and meet the bill for a 3D geological survey covering 4,150 square kilometres of the Lüderitz basin. If the 3D data substantiates Serica's initial assessment of the licence, then BP has the option to boost its interest to 67.5 per cent by taking on the appraisal well costs.
Broker Macquarie Equities, which has raised Serica from hold to outperform following the results, gives a core NAV of 29.5p on the Columbus sanction and has a sum-of-the-parts price target of 52p on the shares.
| SERICA ENERGY (SQZ) | ||||
|---|---|---|---|---|
| ORD PRICE: | 36p | MARKET VALUE: | £63m | |
| TOUCH: | 35-37p | 12-MONTH HIGH: | 47p | LOW: 14p |
| DIVIDEND YIELD: | NIL | PE RATIO: | NA | |
| NET ASSET VALUE: | 63¢ | NET CASH: | $19.8m | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2007 | nil | -16.8 | -10.8 | nil |
| 2008 | nil | -0.80 | -0.30 | nil |
| 2009 | 7.60 | 7.30 | nil | nil |
| 2010* | 31.3 | -17.0 | -10.0 | nil |
| 2011 | 27.1 | -11.3 | -8.00 | nil |
| % change | -13 | - | - | - |
£1 = $1.59 *Restated | ||||
