Oil sector analysis: Serica Energy in fresh surge
5th November 2018 12:06
by Rajan Dhall from interactive investor
Financial markets analyst Rajan Dhall picks out the day's key industry news and runs the numbers to see what this share price might do next.
Energy markets continue to feel the effects of Iranian sanctions that have recently rolled in. Interestingly, price action has not been affected, as there is the possibility that Iran can keep selling its oil to a few select nations.
Later in the session, we find out the details of this specific round of sanctions and who will be allowed to continue doing business with Iran.
Companies are treading carefully as they are stuck between a rock and a hard place. The EU has told many of the big oil producing companies they are still allowed to deal with Iran, but America has turned the screw.
Serica Energy
Great news for high-flying Serica Energy as they secured a sale and purchase agreement to buy further interests in the Bruce and Keith fields and associated infrastructure in the UK North Sea.
Serica UK will acquire a 16% interest in the Bruce field and a 31.83% interest in the Keith field. Net production in the first half of 2018 from the BHP assets was about 1,760 barrels of oil equivalent per day (boe/d), of which 81% was gas.
The initial cash consideration is said to be around £1 million, but this is to be adjusted for working capital and 40% of post-tax cash flows from the effective date of 1 January 2018.
Today's deal, which will be immediately cash flow and value accretive, increases Serica's net 2P reserves by 4 million barrels of oil equivalent (mmboe) to 62.7 mmboe.
"This acquisition, in addition to the previously announced transactions with BP and Total, place us in an even better position to unlock increased value from the assets and benefit from economies of scale," cheered chief executive Mitch Flegg.
Away from this deal, the Oil and Gas Authority (OGA) has approved Serica's Field Development Plan (FDP) for the North Sea Columbus Development which was submitted for approval in June of this year. At its peak, production is expected to be 7,800 gross barrels of oil equivalent.
Chart analysis
Serica's share price broke all-time highs of 132.5p to print at 136p today, which is great news for shareholders.
As you can see on the chart below, there are some big support levels to keep an eye on if traders decide to liquidate profits, first at 117p, which is the previous consolidation resistance point and an area close to the gap close.
The gap opened up Monday morning at 119p, so there is a chance we might not reach the 117p if traders jump in early. Elsewhere, the 100p psychological mark is close to the 93p resistance level used multiple times, most notably at the beginning of 2018.
Source: TradingView (*) Past performance is not a guide to future performance
Rajan Dhall is a freelance contributor and not a direct employee of interactive investor.
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