Serica Energy (SQZ) H1 2024 earnings summary

Executive summary

• H1 2024 production averaged 43,700 boepd, in line with guidance, with a 60% gas and 40% liquids split and robust subsurface properties.

• New CEO expresses strong confidence in asset base, management, and subsurface team, noting positive surprises since joining.

• Focus on operational efficiency, safety, and maximizing well capacity, with ongoing emission reduction initiatives and positive ESG culture.

• Material cash generation supports shareholder returns, reinvestment, and ongoing five-well Triton drilling campaign with promising early results.

• Strong balance sheet with $362 million cash and net cash position of $131 million at 30 June 2024.

Financial highlights

• H1 2024 revenue was $462 million, up from $422 million last year, but down from $545 million on a like-for-like basis due to lower realized gas prices and Triton outage.

• EBITDAX was $279 million, with operating profit of $202 million and profit after tax of $82.5 million, down from $98.5 million YoY.

• Free cash flow for H1 2024 was nearly $100 million.

• Operating costs increased to $19/boe (H1 2023: $17.5/boe), remaining low and in line with guidance.

• Interim dividend maintained at 9p per share; over £200 million in dividends paid to date.

Outlook and guidance

• Full-year production expected at the bottom end of 41,000–46,000 boepd guidance due to extended Triton maintenance shutdown.

• Full-year CapEx guidance retained at $260 million pre-tax, with H2 spending focused on Triton drilling.

• Company expects to generate over $500 million in free cash flow by end of 2027, even under worst-case tax scenarios.

• Awaiting clarity on UK fiscal regime and EPL capital allowances post-Autumn Budget for future investment decisions.

• Optionality in capital allocation with limited committed spend and continued focus on organic growth and M&A.