Serica's post-period cash surge

With the deal now complete – and expanded to include the acquisition of Total’s, BHP’s and Marubeni’s stakes on similar terms – investors finally have an answer. But it probably wasn’t Serica’s cash flow or income statements that caused the group’s shares to rocket on the publication of 2018 results, even if the one month of BKR output was enough to compensate for a nine-month shut-in of the Erskine field.

Investors were more likely wowed by the $36.9m (£28.3m) increase in cash balances in the first three months of 2019, which hints at the current profitability of net daily production of more than 30,000 barrels of oil equivalent. As such, last year’s 35 per cent drop in operating profit to $9.1m – itself the result of $11.7m of BKR transaction costs – is of little concern, particularly after Serica managed to bank a bargain purchase gain of $52.9m on the deal.

A growing cash pile should help with two strategic priorities: the extension of the life of the BKR fields, and the hunt for further assets “where Serica can add value when the current operator may be unable to do so”, in the words of chief executive Mitch Flegg.

On average, analysts expect earnings per share of 48¢ for 2019, falling to 45¢ the following year.