– UK oil and gas company with 85% production of gas.
– Trades at 81% FCF yield for 2023.
– Low valuation is driven by the UK windfall profit tax, warmer than expected weather resulting in full gas storages that brought European gas prices down, and the absence of share buybacks as management hoars the cash.
– Serica is mostly unhedged and benefits from the current high gas prices.
– Two-thirds of the market cap is in cash.
– Based on the current gas futures curve, Serica is set to generate £239m, £237m, £145m, and £56m in the years 2023-2026.
– DCF at an 8% discount gives a fair value of £4.32/share.
– Additional 22 pence of value come from North Eigg well.
Exp. gain: +53% to £4.54/share.
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