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This North Sea energy company is making waves

Investors should take note of this mid-cap's profitable growth strategy
February 22, 2024

Often when you buy local the trade-off is price. Brits have made their choice for day-to-day shopping, choosing supermarkets over high-street greengrocers. When it comes to oil and gas, however, the local choice is also the cheapest. 

Tip style
Growth
Risk rating
Medium
Timescale
Medium Term
Bull points
  • Production is climbing
  • Focus on "short payback" capex
  • Clever deal-making 
  • Roomy margins 
Bear points
  • Lower gas prices this year
  • Uncertainty around energy transition

Of the UK-listed mid-cap energy companies, Serica Energy (SQZ) is an inexpensive option. The North Sea-focused group sits on a forward enterprise value/Ebitda ratio of less than one times. By contrast, Energean (ENOG) trades on three times and Diversified Energy (DEC) – not a particularly pricey stock by any other measure – trades on almost five times. This is partly explained by its significant debt load, which boosts the enterprise value significantly. 

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