UK Energy Stocks That Could Matter More After The Ofgem Price Cap Hike

UK energy bills are set to move again after Ofgem’s 13% price cap hike and renewed worries around supply routes and inflation. That combination is putting fresh attention on UK energy producers and utilities, where some stocks could benefit from stronger pricing power while others face pressure from regulation and costs. This article walks through three stocks exposed to these forces and what their stories might mean for your portfolio.

The stocks covered below are just a sample, and the full screen surfaced 8 more UK energy producers and utilities with equally interesting stories that are not included in this article. If you want to identify and analyze the wider opportunity set across this space, head straight to the UK Energy Producers and Utilities screener.

Serica Energy (AIM:SQZ)

Overview: Serica Energy is a UK based oil and gas producer that focuses on finding, developing and operating offshore fields, selling gas, oil and natural gas liquids into the domestic market. Its assets are concentrated in the North Sea, with operations run from its headquarters in Aberdeen.

Operations: Serica Energy generates about $974 million of revenue from oil and gas exploration, development, production and related activities, all from the UK.

Market Cap: £971 million

Serica Energy gives you direct exposure to UK gas and oil prices at a time when Ofgem’s price cap hike and supply concerns are putting energy security back in focus. The company has scaled up production through acquisitions and asset optimisation, and has access to sizeable reserve based lending facilities, which together support investment in higher impact North Sea projects and ongoing dividends. At the same time, Serica is still working through a period of unprofitability and carries higher funding risk due to reliance on external borrowing, while UK tax and regulatory policy around North Sea producers remains a key uncertainty. For investors who can live with that policy and earnings risk, the combination of cash flow potential, assets and yield may merit closer consideration.

Serica Energy’s combination of scaled-up production, reserve-based funding and dividends suggests a situation that many investors may be underestimating. Get the full context, including a key policy risk twist, in the 2 key rewards and 1 important warning sign

Build your own North Sea energy shortlist

Serica Energy and the two other stocks in this piece all came from a single screener, but the real value comes when you shape the filters yourself. Use our flexible Screener to combine valuation, balance sheet strength, risks and dividends in a way that fits your process, or start with any of our curated Investing Ideas.

EnQuest (LSE:ENQ)

Overview: EnQuest is a UK based oil and gas producer that acquires, develops and operates fields in the North Sea and Malaysia, selling crude and related products into global and regional markets while also providing services and assessing new energy and decarbonisation projects.

Operations: EnQuest generates about US$1.1b of revenue from oil and gas exploration and production activities, primarily from its North Sea and Malaysian assets.

Market Cap: £458 million

EnQuest operates within the current energy landscape, offering geared exposure to North Sea oil and gas prices at a time when Ofgem’s 13% cap hike, Iran related supply worries and UK tax policy are all influencing market dynamics in different ways. EnQuest’s tax loss shelter in the UK and focus on mature assets can be a strength if higher prices persist. However, very low reported margins, weak interest cover and reliance on external borrowing mean the equity carries meaningful financial risk. With the stock priced well below some fair value estimates and a special shareholder meeting set for August 2026, investors who are comfortable with policy and balance sheet uncertainty may consider that there is more going on here than the headline P/S and dividend yield suggest.

EnQuest’s low P/S and tax shield hint at a story that price alone may not capture. See how its balance sheet pressures, mature fields and policy backdrop fit together in the analysis report for EnQuest

Drax Group (LSE:DRX)

Overview: Drax Group is a UK based power company that generates renewable and low carbon electricity from biomass, pumped storage and hydro, sells compressed wood pellets, and supplies energy and system support services to business customers.

Operations: Drax Group generates most of its £5.2b revenue from Biomass Generation at about £4.1b, with additional contributions from Energy Solutions at £2.4b, Pellet Production at £849 million and Flexible Generation at £204 million, partly offset by intra group eliminations.

Market Cap: £2.4b

Drax Group sits at the heart of the UK power system, which puts it in a potentially interesting spot as Ofgem’s cap hike, higher inflation and energy security worries keep electricity prices in focus. The company combines contracted biomass generation and capacity market revenues with growing exposure to flexible assets like OCGT plants and pumped storage. It is also returning cash through buybacks and a rising dividend. Against that, the stock trades on a very high P/E, carries meaningful debt, and recent earnings quality includes large one off items and pressure on pellet economics. For investors weighing that mix of cash returns, policy backed revenue visibility and business model risk, there is more to the Drax story than the tariff headlines.

Drax Group’s mix of biomass contracts, flexible assets and cash returns looks powerful. Yet the real story sits in how its earnings quality stacks up against that high P/E. See the full picture in the analysis report for Drax Group

Seeking Alternatives Before The Crowd?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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