SERICA ENERGY PLC (SQZ) Q2 2026 Earnings Call Transcript

Good morning and welcome to the Serica Energy PLC Investor Presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions or encouragement can be submitted at any time via the Q&A tab situated on the right-hand corner of your screen. Please just simply type in your questions and press send. Before we begin, I'd like to submit the following poll. And I'd like to hand you over to Chris Cotts, CEO. Good morning, sir.

Good morning. Good morning, everyone. And welcome to Serica's 2026 half-year results presentation. I'm joined as usual by Martin Copeland, CFO, and Andrew Bembo, our Head of Investor Relations. Martin and I will now run through a short presentation, leaving time for Q&A afterwards. I'm pleased to say this has been a very strong period for Serica. We've been working hard across our asset base to increase reliability, and this has driven a material increase in production, with Q2 averaging 50,000 barrels a day. In turn, of course, supported by the stronger-than-forecast commodity prices, we have generated material cash flows, turning a net debt position of $200 million at the start of the year into net cash of $26 million by the middle of the year. We've also made significant strategic moves to support our growth and deliver value to our shareholders. We've got our refinancing done, giving us a strong liquidity position, allowing us significant flexibility as we enter the next phase of organic investment and portfolio growth. We expect very soon to be able to confirm the contracting of a rig to deliver the start of a high impact and rapid return organic growth projects in the UK North Sea and continue to seek further opportunities to deliver shareholder value via M&A. In the period, we completed the acquisition of non-operated stakes in Catcher and Golden Eagle from one dais, and prior to that, operated assets west of Shetland from Total Energies. We continue to see that as an area with huge potential for Serica, as well as a critical basin in supporting the UK's gas needs well into the next decade. As we press on with further growth in the UK, we have also made our first step in building a truly diversified and international portfolio, with the recommended acquisition of Pharos Energy. Strictly speaking, this represents a re-entry into Southeast Asia, for those of you with long enough memories to remember Serica's early history. More on that later. But our success is built on our production, which pleasingly averaged just over 45,000 barrels a day in the period. This is a significant step up from 2025, driven by far higher uptime across the portfolio, as well as the addition of production from new assets. The key driver for change was, of course, our Triton hub. Following a 24-day outage earlier in the year, during which essential safety-critical maintenance work was carried out, production restarted on the 9th of March. From that date until the end of the period, Triton produced on all but two days, with uptime of over 95%. The Q2 production of 20,300 barrels a day was a far better signifier of what the asset can deliver. And H1 production was 70% higher than H2 in 2025 and over 800% higher than H1 2025. This doesn't mean that Triton is yet performing to its true capacity. We remain facilities rather than well-stock constrained, a genuine rarity in the UKCS today. The focus has been on reliability, and we are pleased with the work Dana has been doing and continues to do, and we continue to work closely with them. the challenge is now to ensure the good work on better reliability continues whilst also optimizing for a further increase in production to deliver the true potential from the hub we still have production to come from Belinda but having said that we do not want to take away from the fact that performance in H1 has been encouraging given the tax loss shelter we have at Triton, strong production here is also highly cash generative to the bottom line. Bruce was steady with 86% uptime in the period, but the Bruce hub can also do more. We have further strengthened the team in H1, including particularly with the arrival of Scott McGinigal as our new chief operating officer. And I look forward to introducing him on a future occasion once he has had a chance to get fully up to speed with the portfolio. teams across all our assets are working hard to deliver optimized performance especially as we are now very much into the critical turnaround maintenance season at bruce we're also working to ensure that the facilities are set up to deliver the expected production uplift from the resumption of drilling next year the addition of production from west of shetland was notable in H1, with Lancaster producing robustly until production ceased, in line with expectations in May due to the FPSO being contracted elsewhere, and with the greater Lagan area then contributing well in Q2. With both our key hubs now in their annual maintenance periods, production in Q3 will always be considerably lower than the H1 average. But with expectations of a very robust to Q4, especially as we bring the spirit assets into the business from the 1st of October, we remain firmly on track to deliver rates of over 65,000 barrels a day as we hit our stride in Q4. Now I'll hand over to Martin to discuss how this robust H1 performance is translated into cash flow.

Thanks Chris. It is indeed good to be presenting today a set of results which show that the confidence we have always had in the core robustness of our business is paying off in a period that combined strong operational performance with stronger commodity prices. Revenue in H1 was more than double the prior year period, with the key driver being production up 20,000 barrels of oil equivalent per day on the comparable period last year, as well as the average realised oil price, up 33% at $93 a barrel, and realised gas prices of 101 pence a therm, roughly 50% up year on year. The impact of higher commodity prices was, however, somewhat offset by our hedging, the necessary insurance price we pay for protecting the downside and as required under our RBL. Despite realised hedging losses of 89 million dollars or just under 11 dollars a barrel of oil equivalent we still realised a post hedging oil price of 73 dollars a barrel and 97 pence per therm for gas. As should be apparent from this the impact of hedging was considerably more skewed to oil than to gas which is in part because the higher tax exposure we have in our gas assets acts somewhat as a natural hedge. We've included as usual our updated hedge position in the appendix of this deck, but what I can say is that we've not added material new hedge positions since early March. Operating and lifting costs in the period were $247 million, as reported, but were inflated by the high cost of Lancaster, which included FPSO lease costs for a vessel sized for considerably more than the 6,000 barrels of oil equivalent per day the field was producing before it ceased production in May, which meant its costs were around $89 per barrel. With those costs now removed, the underlying portfolio has a creditable operating and lifting cost of just under $25 per barrel of oil equivalent, more appropriately representing our relatively low break-even and material cash-generative capacity. The corollary of materially increased business activity and higher prices was a larger-than-normal working capital outflow of just over $50 million, but we still generated a very robust post-tax CFFO of $280 million, which equates to nearly $40 per barrel of oil equivalent. This is the KPI against which we peg our refreshed distribution policy, and although we will only apply the 15 to 30% ratio in the context of the full year, it is worth noting the H1 tax position as the metric is of course post-tax. In the first half of the year, we actually received $9 million from a tax rebate due to a slight overpayment of tax in 2025 and no net payment owing in January. However, the accounting current tax charge for the period was $60 million and we would expect that cash tax payments will of course come in H2 as we make installment tax payments in July and October with for instance having paid just over 25 million dollars last month. The phasing of tax payments together with both dividend payments falling in the second half and the fact that summer maintenance occurs in Q3 and hence reduces production are the key reasons why our cash generation is naturally biased towards the first half of the year and as you can see the cash build in h1 was impressive with just under 300 million dollars added to our cash position in the period as well as the underlying strength of the business it's worth noting the receipt of 69 million dollars in total on completion of the deals with total energies and 1ds which represented the post-tax interim cash flows from the historic effective dates of those transactions and which further boosted our cash. These are, of course, not run rate items that we will see in H2. As we've also announced today, now that we have more specific timing for and details of the completion of the Spirit Energy transaction due to occur in the early hours of the 1st of October, we also expect just under £40 million to be paid out on completion for this deal after we factor in completion adjustments for the £57m agreed purchase price and the offsetting but fully 78% tax affected pre-completion cash flows. We are however seeing considerably stronger gas prices than our acquisition case and the spirit asset cash flows will be considerably more tax efficient in our hands post completion. When we announced the spirit deal we stated an expectation that the assets would generate around 100 million dollars in free cash flow by the end of 2028. We now expect the free cash flow to be more than double that figure. Including these cash flows from the 1st of October we expect to return to material cash generation in a robust fourth quarter of the year and of course the best time to fix the roof is when the sun is shining and with this in mind we are very pleased that we took proactive steps to optimise our liquidity position during the half to set us up very strongly ahead of the exciting growth investment that we're set to make in our UK portfolio while also enabling us to remain active and opportunistic in M&A. Firstly, we took advantage of positive market conditions to make our first step into the Nordic bond market, raising $300 million with a term of five years and at a very attractive fixed interest rate. The debt under our bond forms the core debt in our capital structure and is complemented by our refinanced RBL facility, which we signed and completed in July. The new bank facilities are $750 million split into a $500 million revolving loan facility and a separate $250 million tranche for issuing letters of credit. The initial borrowing base under the RBL is $458 million and the facility is fully undrawn. platform. This bank committed funding, combined with the $326 million of cash we had at the end of June, resulted in proforma liquidity of not far off $800 million. We would like to thank our counterparties in the fixed income investors and banks who have helped deliver this solid platform of liquidity which, together with continued robust cash generation, will enable us to invest in our organic growth opportunities, whilst also remaining nimble and opportunistic for M&A opportunities as they arise. And we remain committed to predictable and material shareholder returns. We have today declared our interim dividend at 6p per share, the same level as 2025, with our final dividend for the year being calculated in accordance with our policy of 15 to 30% of post-tax CFFO. The 6p interim would correspond to only about 11% of the H1 post-tax CFFO. And if we were to maintain the full year at 16p, that would be comfortably within our payout ratio guardrails at around 18% of the midpoint of our 450 to 475 million post-tax CFFO full year guidance. We will only determine our overall shareholder distribution based on the full year audited numbers, but we are confident that our financial frame gives us the flexibility to balance healthy distributions to shareholders with investment to maximize value generation through organic growth and acquisitions. And we believe there are great opportunities to create material value for shareholders. And thanks to strong financing partners and the support we enjoy from them, we have the capital available to take advantage of them and deliver. And with that, back to Chris to remind people of some of these opportunities.

Thanks, Martin. As we detailed at our Capital Markets Day, we have an exciting array of opportunities ahead of us in our organic portfolio. Multiple wells at Bruce plus Kyler, Glendronach and others have the potential to deliver material production uplifts totaling a possible incremental 30,000 barrels a day and delivering rates of return over 40%. I'm pleased to say that we're now close to signing a contract for a rig to deliver the start of this drilling program. We are looking to obtain a rig for an initial 400-day duration with options to extend. Drilling is expected to begin in Q3 next year and it is most likely that we will begin at Bruce with the south-central east and south-central west wells. After 15 years without a well being drilled in the brews field, this is a great opportunity to go after, potentially adding 10,000 barrels a day with production starting within a year of drilling commencement. As a reminder, this drilling would be highly tax efficient and is the logical place to start as the regulatory approval process is simpler than for other opportunities in the portfolio due to the fact that it's infill drilling in an existing producing field. After that, there is the potential for the rig to move to Kyla or head west of Shetland for Glendronach. Both opportunities are also looking attractive. While we are focused on our operated program, it is also worth noting the organic growth on our newly acquired and the yet-to-be-acquired assets, with drilling set for catcher and ongoing at Cygnus. And we also continue to seek inorganic growth. The key strategic move made in this regard came post-period end, with the announced recommended offer for Pharos Energy, a deal consistent with the strategic aims we outlined at the Capital Markets Day. It provides us with a first step in building an international platform with room for further growth at an attractive price faros is a materially cash generative business meaning the deal offers rapid payback accretive across all key metrics the acquisition cost per 2p barrel compares favorably with recent precedent transactions in the relevant countries and upon completion the transaction will boost our reserves and resources by 13% and 15% respectively, and add materially cash-generative production. The acquisition of Pharos adds a highly complementary business to ours. Similar to Serica, the business has a history of being a cash-generative dividend payer, aiming to offer both growth and returns. We believe that the assets will continue to generate cash, while being part of a company better placed to deliver further growth from the asset base and from further business development opportunities around them. This further cash generation and growth potential complements and does not reduce our commitment to the UK and is an ideal springboard for further growth in Southeast Asia. It is, of course, far from complete, but we are hopeful that we will see it added to our portfolio next year. And it is not the end of our inorganic growth aims. We have an excellent team and the financial capability to move quickly to take advantage of opportunities. We are certainly not ignoring the UK, although the recent wave of consolidation means that there is inevitably not quite the same number of opportunities available. Our team is also looking overseas at areas which can deliver Serica's strategy, with Southeast Asia standing out as somewhere that we believe growth can be delivered and acquisition opportunities are likely to be available. This is not at the expense of UK growth, but working alongside it. We are continuing to build a robust business with an attractive long-term future, delivering material value for our shareholders, and we are working hard to deliver this ambition. And we're on track so far in 2026. Our production expectation post the acquisition of Spirit Energy remains 65,000 barrels a That acquisition is now set to complete on the 1st of October. The fact that this additional production will not now start before Q4 has slightly impacted our guidance for the year. But notwithstanding this, our production is still expected to be over 40,000 barrels a day for 2026. And our post-tax cash flow from operations is expected to be in the range $450 to $475 million. dollars. We are in a strong position and continue to look forward to taking that to the main market later this year. The business has real momentum at present and we want to get our story to as many potential shareholders as possible and we expect to build on this momentum. We have numerous catalysts ahead from the signing of the rig contract through the main market move, completion of m&a and further ahead the drilling program itself and what this slide doesn't show is the value accretive m&a that we hope to deliver along the way we feel that we're in a great position we are highly cash generative with the ability to grow further both through high return organic growth and through rigorous and selective m&a as we do this we will continue to deliver material and sustainable dividends. We have a fantastic team scaled up and ready for the growth ahead and I believe we can deliver for all of our stakeholders. And with that I will hand over to Andrew to run the Q&A.

Thank you very much. First question is about Bruce. You mentioned that Bruce can do more. In what way?

Yeah we've spoken a bit about this before. Sure. So, Bruce produces most days. And as I said during the presentation, it's had decent uptime this year. But on any given day, it doesn't produce the maximum potential of all the wells we have. And that's partly due to the complexity of the facilities and some wells that are high pressure back out other wells and things like that. So there's a number of things we can do. There are individual well interventions that we need to do to do things like scale squeeze where wells get plugged up and every now and again, you just got to go in and flush them out. We can optimize the bull heading operation, which is where we pump high pressure gas into the well to try and kick wells off when they're quite low pressure. we can we can optimize the way our compression runs we're looking at potential gas lift in the future which is a much more sophisticated way of improving the performance of low pressure wells than bull heading but it does require well interventions and and one thing worth noting is If we drill these new wells starting next year and they come on at high rates, they're likely to help some of the low pressure wells to flow. So there's a lot of optimisation to be done. And it's just one of those things about getting after it every day and each day saying, have you done the maximum that you could do on that day from all of your wells? And currently the answer is no, but we're getting better.

Thank you very much. A few questions for Martin I think now actually. Does the improved cash flow leave room to consider buybacks? As to me, not me personally, the person asking the question, the shares must look exceptionally cheap to the board.

Yeah, I mean obviously we have got good cash flow and I think as we said at the CMD we're going to implement a distribution policy based on payout ratio and I gave the numbers in my in my talk there that said that if you kept the dividend at 16p it would be 18% which obviously is comfortably in the range of 15 to 30% but we'll only really know that when we get to the end of the year you know I think the we talk about shelter distributions and so our bias is towards dividends I have to say that and that's because in most of the conversations we have with shareholders that is the preference but we're not ruling out buybacks they're in our armory as it where we got our mandate renewed at the AGM. But I think our bias will probably be more towards potentially paying an additional dividend if we were to do that. But we'll also look at that as against the opportunity set we have in front of us. And, you know, Chris painted what that picture is and the returns, you know, I think we've indicated that the average return we anticipate is something like a 40% IRR. So we'll always weigh that up in terms of delivering the best value for shareholders.

I think that also answers the next question, which was why have you held the dividend at 6p? That'll be reviewed at the end of the year.

We tried to make that clear, but it is a new policy, so it's probably just worth reiterating. Our view has always been that we'll aim to keep the interim kind of flat and then look at the ratio only at the year end. And partly that's just accounting prudence in the sense that we then have fully audited numbers and we know exactly how the year has panned out and we'll be able to apply it at that point. Another question for you, Martin, is about our tax profit. um 6.1 million after tax profit at a time of high oil and gas prices looks rather underwhelming can you explain how 272 million gross profit becomes a 76 million pre-tax loss yeah it's a it's it's the fun and games of accounting relative to cash and you'll have seen that as i presented uh the slides it was really about the cash delivery and and we certainly think that most of our investors are more focused on what we deliver in terms of cash um And the real answer to that is there are two kind of relatively significant non-cash items that have that obviously weighed on the pre-tax profit. And one of them is the mark to market value of our hedge book as of the 30th of June. And that is unrealized hedging losses. So it's a it is it's a point in time view as to the potential future value, if you like, or indeed this in this instance, cost of our hedge book. but it's a point in time it just happens to be what the price or the forward curve was on the 30th of June it doesn't mean that it will pan out to be that in reality that in fact we could end up in a position where those hedges are in the money by the time they they come around to actually maturing so it is a it's what you're required to do at least under the method of hedge accounting of accounting that we follow and that's the impact that it has on on the P&L so that's one of the reasons why we we do really focus on cash because that is an artifice it's not really a fair reality of what the economic outlook is likely to be and the second one I'm afraid is even more arcane in that in the acquisitions that we've done as people will probably be aware we are confident that we'll be creating significant value by the fact that we have a good amount of tax losses and we've acquired tax paying production into it and that is the way to realize value from those losses and that is beginning to pay off and you can see that at least the beginning of that through what's coming through in the results from gla that remember we've only had in on the books for from completion since the 26th of march but the way the accounting works is it it even though obviously from an m a perspective we took that value creation into account the the accounting treatment requires you to um to recognize the notional value of that of that tax loss in your calculations whereas in reality we discounted it and we took a time value of that etc and the difference between those two things is recognised as goodwill and we think of it as technical goodwill and essentially it has to therefore be expense through the P&L and that's another 95 million difference. So both of those two things hit the profit before tax and that ends up giving us actually a loss before tax which reverses to a very small admittedly net income or profit after tax but you'll actually see that the the um and that mostly comes from the recognition of deferred tax asset value that that um creates a a a a a a positive number in the tax line so it reverses that loss um you know again though that really is just testament to the the delivery of value from the tax losses beginning to show through and we'd expect to see more of that come the year end as well yeah i just say that there's a reason why we give the table that we do on the front of the presentation that's because we think

it's the those are the best metrics on which to judge the strength of the business rather than some of the technical accounting things that you see further back we've had quite a few questions on m&a come in it's just worth reminding people that because of takeover panel rules we cannot comment on quite a few things certain relation to the faros energy transaction we've had people asking about potential cash flows and things like that. I'm afraid it's just not something we can comment on at this time. Similarly, on something we can comment on, on a slight tangent, we've had quite a few people who've been asking about BP's process. So I'll just ask one question, which is, were you surprised by BP's wish to sell its North Sea assets? Do you believe there'll be a ready market to procure them?

We were not surprised. We've said to people that we track everything that's going on in the UK, and so we look at everything and go in the UK, and we're obviously fully aware of what's going on. And it's been known, frankly, that BP's been considering this for some time. The fact that they put out an announcement on the particular day that they did, I guess, was because they had results coming up, et cetera. And I guess there'll be people looking at it now, but I suspect this is going to take quite some time to see how it all plays out.

Moving on, I still think, sadly, Chris, this is all for Martin, but SIRC has a significant tax advantage through its accumulated tax losses. when should shareholders expect this to translate into materially higher EPS rather than simply funding further acquisitions?

Well it is beginning to come through I mean you know as I mentioned it actually has reversed a loss before tax into a profit before tax so that is the beginning of it but remember that that was really only seeing that effect over a period of you know a relatively short period certainly for GLA some of it's coming through also through the Triton results as well and we expect that to continue. And we don't typically update the loss balance as it is at the half year, but we've got the numbers in there in the accounts and they're still very sizeable as you will see. So as we see healthy production and strong robust prices, that benefit is going to come through and is coming through through the numbers today.

Moving on to the politics, we've had a couple of questions.

So which aspects of the current UK tax regime having the greatest impact on serica's investment decisions what specific changes would unlock shareholder value and i'll ask a second part of that question because people have asked it a couple of times have we seen any evidence of prime ministerial pragmatism as yet can i maybe try the first one and then you can hand it over to chris i mean but the specific actions i mean you know we we actually think our portfolio as a whole is quite nicely set up to um to be able to manage in all conditions we've got because we have different parts of the business which have got different attributes and as Chris mentioned the drilling that we're planning at Bruce is tax efficient because actually we have not got losses in the entities that hold Bruce and so using the benefit of capital allowances there is very attractive and then in the other part of our business now with um at say triton where actually apart from kyla which may come in in the future there isn't that much apex going on that will benefit from the losses that we have there so we see the combination of those two things as being quite a nice balance clearly we would overall like to see the energy profits levy um removed um and that is more because it's just going to be better for the whole industry um and better for our supply chain and i'm sure the sentiment move that that would entail um would be a positive as well so but

you know we we've got to get on run the business in the best possible way um and we believe that we are set up for whatever happens and i'll ask chris maybe to pick up on the wider point about that on the pragmatism point i look first of all it's i i gotta say it's very pleasing to hear the government talk about being pragmatic about energy and the North Sea in particular. That's all we've been asking for is a bit of pragmatism and I hope that that means a recognition that if we're going to use energy it might as well be our homegrown energy because it's better for jobs, it's better for the economy, it's better for the environment. um so what's not alike um so we think we think that's what's meant by um pragmatism but of course there hasn't been any policy change yet and that's not a surprise i mean it's um it's very early days and i think if i think if i was in government right now i want to take my time to make sure i i do it right rather than rush to make decisions so uh hopefully in the coming months we'll start to see uh policies come out that reflect the the good words that we're hearing chris while you have the mic i think we'll move on to triton what if any progress has been made at triton moving from single to dual compressor operations and the second part of that question which i think is related to the first if processing at triton is rate limiting um do you have any more plans to add processing throughputs for the fpso and there was me thinking we were going to get through one of these without me having a triton question because it's it's been doing really well um so on on the two compressor operations we're not running with two compressors today we're running on one we have the second compressor available to us um but actually in order to run with two compressors you also need two uh gas turbines and the second gas turbine is has got some repair work that's going to be going on during the turnaround so that should be available to us later so you know hopefully by the end of the year we'll be able to run with two compressors for now I'm very happy with the kind of uptime we have and we're getting about 20,000 barrels a day net to Serica out of Triton and if we continue like that for the rest of the year after the shut down, I'd be delighted. And of course, having that second compressor available gives you a bit of backup and it should improve our production efficiency. In terms of additional processing capacity, we don't need it. We have what we need on the platform. We just need everything to work. And so getting that second gas turbine running after the maintenance shutdown, so we've got two gas turbines and two gas compressors, that's all we need. The limiting factor at the moment is gas export. So although gas is kind of a byproduct on Triton because it's essentially a bunch of oil fields producing into there, it's our gas export capacity that's limiting us. once we get to two compressors running on a consistent basis we we don't have a restriction on the amount of oil that we can produce so we don't actually need more kit we just need everything we have to be running i'm moving on to personal bugbear of mine why it takes so long to move from aim to the main market um does the revised completion spirit add any complication to the relisting process and why is the move taking so long um so on the first part the answer was no um the spirit acquisition we've obviously had in the works for a long time so it has been

one of the reasons to be fair why it's taken so long so the the answers are kind of linked we because of um the asset acquisitions we did and spirit's actually particularly complicated because it's a combination of company and asset acquisitions in both the uk and the netherlands so from a kind of mna mechanics it's it's more complex um but that did require us both that and the prior acquisitions we did, the GLA and the 1DS required us to get a so-called competent person's report, a CPR produced for those assets. So that has been one of the factors that's caused the delay and it's essentially why we didn't get to the main market last year. So no, that date moving is not really an issue. And we'll either will or will not be successful on Pharos, that also won't necessarily cause an issue um we are committed to getting to the main market uh this year and that is what we said today again so yeah and it is as andrew said it's certainly a personal bugbear of his and um some of it is just a lot of process that you have to do which seems a little bit odd considering as a company we've been listed for 20 plus years now on aim and we're just moving from one part of the london stock exchange to another part of it but um unfortunately we don't make the rules we have to follow them yeah moving away from that i think um what is the hedging strategy given the oil glut forecast from certain analysts yeah if i knew exactly what was going to happen with the oil price um it would be really really easy to get the hedging policy right um because yeah you can hear stories of all glut but you can also see my goodness there does seem to have been some uh funny movements let's say going on in in in um in the quoted oil price which by the way for everyone's when you normally hear it it's actually the prompt month future price that you're hearing is the price so you know our strategy is probably just going to be to say steady as she goes and and i made the point that we haven't um put on new hedges since march because we are pretty fully hedged at the moment that was a deliberate policy at the beginning of the year seems hard to imagine but you know we were into were pretty bearish mood set generally at the beginning of the year and we knew we were going to have to refinance the balance sheet so those two things led to us dialing the hedging up a little bit so we now think we're in comfortably in in a good place and obviously there's a chart in the appendix which shows how that proportion of hedging tails off over the over the next year and the following year but equally we still have an RBL it's not drawn at the moment but it does have certain policies within it and the minimum hedging it requires is 25% of the current year and 15% of the following year so I think you could expect to see that as a kind of minimum level ultimately what we're focused on doing is saying we want to protect the cost base in an environment where the oil price and the gas price are not where we've seen them over the last six months and where they trend back to $60 a barrel or 60 pence a thumb we want to be able to ensure that for shareholders this business is sustainable and protected even if that eventuality occurs and that's why we do it. So hopefully that answers the question.

On a slightly related note can you please confirm the macro deck on which the CFFO guidance is set?

Yeah well that we did it based on the current forward curve and just to people's understanding because of the hedging and I think made the point that the hedging is more skewed towards oil than it is towards gas because of the hedging that we have in place we're we're actually not that exposed between now and the end of the year on the oil price we obviously we are on um on production so you know and we had a great first half and we obviously look forward to having a strong second half but on prices for oil not that exposed so really what you're looking at is the gas price forward curve that's the key variant within that and even there it's slightly dampened because the gas business is going to be taxed at largely at 78 percent so funnily enough although you'd think there was a massive sensitivity to commodity prices it's not as big as you would think the bigger driver is going to be production performance over the course of the next six months moving on to the last couple of questions now and apologies to any that i've missed do you foresee much churn in the shareholder base when moving to the main market um well first of all churn turns just you know people selling out etc and one of the byproducts of we admit it's been a long time we've been talking about moving to the main market and we haven't yet done it but one of the benefits of that is that anyone who was you know holding us because we were aim only and they had to hold us only you know could only hold aim has had plenty of time and have in fact cycled out so we don't expect to see any um material amount of selling pressure but the opposite is what we expect to see and that probably won't come immediately although some of it is it actually comes in because it it foresees the action but we will see funds that track only the either the footsie all share or we hope in due course as when we would enter the footsie 250 that track the footsie 250 index and then we would expect to see index funds basically having to buy into us because they have to buy every component of the index on under its weighting so that will create a degree of churn if you like but it'll essentially be a buying component at the the outset as people as index money has to come into our register that isn't there today thank you very much and as the final question why do you feel the share price is currently unrepresentative of the true value and expectations of the company we always think that the share price should be um you know higher uh than it than it is and i i'm going to comment on you know how it represents value etc there are plenty of analysts that cover us that got views out there and i know certainly our consensus target price is materially above where our share price is today the thing that seems to be happening at the moment but not just to us by the way but to many of our peers is the movement of the share price any given day is driven

by sentiment and more often than not by donald trump's tweets or truth social posts than anything fundamental and that is a frustration but it's not a frustration that we can really do much about other than just deliver and and you know we hope to think that what we've just shown in the last six months is delivery i know chris you wanted to comment more on i don't know i i completely agree with you we for for most of this year our share price has moved on a daily basis uh almost based on what mr trump has said and um i hope we get back to a place soon where people are looking at the fundamentals of the business rather than um you know politics in a different part of the world but we are where we are and thank you very much and with that chris you've got any final comments um please go ahead um well i i just like to um acknowledge the fact that we've we've had much better operational performance in the first half of the year um and and it's really pleasing to see it it's been a huge effort by lots of people to get to this place um and and a lot of that's dana let's face it that's uh helped with that turnaround um long may it continue there's still we mentioned this already there's more to come still from both our major hubs um but uh but look, it's pleasing to see a bit of an improvement, at least in the first half of the year. And we need that, frankly. I think we have to earn the right to spend money. And good production performance gives us the right, I think, to go out and spend money on some of the organic opportunities that we have in our asset base. And that's what's coming next. and I think the next time we speak to the market is probably going to be to announce that we've secured a rig and we'll probably share a bit more about the specifics of the drilling program that we're going to pursue so I look forward to sharing that with everybody soon so thank you very much.

Perfect thank you guys for your presentation this morning could please ask investors not to close this session as you now be automatically redirected to provide your feedback, which will help the company better understand your views and expectations. On behalf of the management team of Serica Energy PLC, we'd like to thank you for attending today's presentation and good morning to you.