TIDMSENX
RNS Number : 3539T
Serinus Energy PLC
14 November 2019
Serinus Energy plc
("Serinus", "SEN" or the "Company")
Interim Results for the Nine Months Ended 30 September 2019
(Reported in US Dollars and unaudited)
THIRD QUARTER 2019 Highlights
Operational
-- For the nine months ended September 30, 2019, production for
the period increased 811 boe/d (227%) to 1,168 boe/d from 357 boe/d
in the comparable period of 2018, comprised of 814 boe/d in Romania
and 354 boe/d in Tunisia; for the three months ended September 30,
2019, production comprised of 1,685 boe/d in Romania and 443 boe/d
in Tunisia
-- Serinus Energy plc ("Serinus" or the "Group") exited October
with a production rate of 2,142 boe/d. Production in October 2019
was 1,780 boe/d, comprised of 571 boe/d in Tunisia and 1,209 boe/d
in Romania. This average production and exit rate were impacted by
the turnaround of the Moftinu gas plant for routine maintenance
from October 14 to October 20, and the subsequent ramping up of the
Moftinu production on a smaller choke
-- The Group recommenced production at the Chouech Es Saida
("Chouech") field in Tunisia during the quarter. Serinus exited
October with production from the field of 277 bbl/d of crude
oil
-- Cash flows from operating activities increased to $5.6
million for the nine months ended September 30, 2019; this is
compared to cash used in operating activities of $3.2 million in
the same period of 2018, an increase of $8.8 million year over
year
-- Subsequent to the quarter the Group completed a successful
turnaround on the Moftinu gas facility, shutting in production for
seven days. Production was successfully brought back online on
October 20, 2019
-- Subsequent to the quarter, the Group received a one-year
extension to the Satu Mare Concession, delaying expiration until
October 28, 2020
-- The Group has begun construction of the platform for the
Moftinu-1004 production well in Romania. The Moftinu-1004
production well is permitted and, subject to rig availability, is
expected to be spudded in January 2020.
Financial
-- On September 13, 2019, the Group made the final payment
towards the Senior loan in the amount of $2.8 million, which
included $0.1 million of interest
-- The Group generated $15.5 million in gross revenue ($14.3
million net of royalties) for the nine months ended September 30,
2019, of which $9.8 million was generated in Romania and $5.7
million in Tunisia
-- Funds from operations amounted to $5.6 million for the nine
months ended September 30, 2019, a twofold increase from the same
period in 2018 ($2.8 million)
-- Realized crude oil price averaged $61.20 per bbl and net
realized Romanian natural gas price averaged $7.29 per mcf for the
nine months ended September 30, 2019
-- Capital expenditures for the nine months ended September 30,
2019 of $3.0 million which were primarily focused on the final
phase of the construction of the Moftinu gas facility and the
start-up of the Chouech field
-- Production expense has decreased to $11.96/boe in the nine
months ended September 30, 2019. This is a 42% decrease from
$20.61/boe from the nine-month period ended September 30, 2018.
For further information, please refer to the Serinus website
(www.serinusenergy.com) or contact the following:
Serinus Energy plc
Jeffrey Auld, Chief Executive Officer
Calvin Brackman, Vice President, External
Relations & Strategy +1 403 264 8877
WH Ireland Limited
(Nominated Adviser and Joint Broker)
Katy Mitchell
Harry Ansell (Broker)
Lydia Zychowska +44 (0)20 7220 1666
Arden Partners plc
(Joint Broker)
Paul Shackleton / Dan Gee-Summons (Corporate
Finance)
Fraser Marshall (Equity Sales) +44 (0) 20 7614 5900
Camarco
(Financial PR - London)
Billy Clegg
Owen Roberts +44 (0) 20 3781 8334
TBT i Wspólnicy
(Financial PR - Warsaw)
Katarzyna Terej +48 22 487 53 02
OPERATIONAL UPDATE
In Romania, gas continues to be sold on a monthly basis per the
previously announced Gas Sales Agreement. Romania requires that 50%
of the production is sold on the open market, therefore the Group
commenced selling on the open market in August and has realized
competitive prices in line with Romanian market rates.
The Group is finalizing drilling plans for Moftinu-1004,
scheduled to be spudded in January 2020 subject to rig
availability. Permits and licenses have been acquired and the lease
plans have been finalized. The drilling pad set up will be complete
by the end of 2019. The tendering process for the drilling rig has
been initiated with Requests for Quotes having been sent to
drilling companies.
In Tunisia, production returned at the Chouech field in southern
Tunisia, with four wells being placed onto production. Production
for this field exited October at 277 boe/d. The Group is optimistic
that as the water cuts decrease, production will return in line
with historical production levels, although at this stage, there
can be no guarantee that will occur.
Subsequent to the quarter, the Group received an extension from
the National Agency of Mineral Resources on the Satu Mare
concession until October 28, 2020. The Company had permitted a 148
km(2) 3D program area in the Berveni area just north of the Moftinu
gas plant, but the permitting program had been subject to
unforeseen delays in reaching land access agreement with the large
numbers of landowners within the seismic acquisition area. These
access agreements have since been concluded with all landowners,
but the delay has meant that the seismic acquisition could not be
completed prior to the expiration of the exploration phase. The
final commitment for the concession is the seismic program, which
is now scheduled to be undertaken in Q2 of 2020.
The Company is advancing the drilling of the Moftinu-1004 well.
Moftinu-1004 is anticipated to be a production well located within
the Moftinu field and drilled to a depth of approximately 1,000m.
The Moftinu-1004 well is already permitted and construction on the
surface facilities needed to drill this well is underway. It is
expected that, subject to rig availability, Moftinu-1004 will be
spudded in January 2020. Once successfully completed and tied-in,
the Moftinu-1004 well will provide additional gas production to the
Moftinu Gas Plant.
Subsequent to the quarter, The Group shut in production for
seven days to undertake a gas facility turnaround. The turnaround
was successful, and production was restarted at the end of
October.
OUTLOOK
Romania
The outlook for Romania remains strong. Production in October
was 1,209 boe/d and realized gas prices were $7.09/mcf. This
average production is impacted by the turnaround of the Moftinu gas
plant for routine maintenance from October 14 to October 20. While
the Moftinu - 1003 and Moftinu - 1007 wells have performed as
expected, the Moftinu -1000 well has been subject to water-loading
and has therefore produced sporadically since it was brought onto
production in July 2019.
Subsequent to the quarter, the group received confirmation that
the extension for the Satu Mare concession has been approved. The
Group has a commitment to undertake a seismic program to fulfil the
remaining work commitments for the third exploration phase of the
Satu Mare concession which expires on October 28, 2020. The seismic
acquisition program is expected to be undertaken in Q2 of 2020.The
Group completed permitting for its planned 3D seismic survey and
will be conducted over a highly prospective portion of the Satu
Mare Concession. This survey will fulfil the remaining work
commitments for the third exploration phase of the Satu Mare
concession.
The Group has finalized plans to drill the Moftinu-1004 well in
January 2020. This well is a development well designed to provide
additional gas to the Moftinu gas plant. This well will allow the
Moftinu Gas Plant to operate at full capacity and to extend the
plateau of production.
Tunisia
Operations in Tunisia are ramping up after an extended period of
stagnation due to the difficult social conditions in the country.
Our local team commenced the reopening of the Chouech field in
southern Tunisia in March 2019. During the third quarter, four
wells in Chouech recommenced production. Production is continuing
to increase as the water cuts drop off.
Sabria continues to produce with no interruptions and minimal
capital outlays. The Group will look at implementing low cost
capital programs in 2020 such as re-entry and workover of the N-2
well and introducing artificial lift in current producing
wells.
FINANCIAL REVIEW
Liquidity, Debt and Capital Resources
In Romania, the Group invested $2.0 million in the nine months
ended September 30, 2019 primarily to complete the construction of
the gas plant and commence the 3D seismic project. Also included
were the Bucharest office costs, which were capitalized until the
date production started. Romania became a significant positive cash
flow generating unit during the period due to production coming
online.
In Tunisia, production continued from the Sabria field during
the first nine months of 2019 and Tunisia was a positive cash flow
generating business unit during the period. Given the Group's focus
on initiating production in Romania, the only capital expenditures
in Tunisia were to recommence production at Chouech. The restart of
the field will enhance cash flow generation in Tunisia.
Funds from operations increased to $5.6 million for the nine
months ended September 30, 2019, as compared to $2.8 million for
the same period in 2018. Taking into consideration the movement in
working capital, the cash flows from operating activities for the
nine months ended September 30, 2019 was a net inflow of $5.6
million (2018 - outflow of $3.2 million).
Delays in commencing production in Romania resulted in a
tightened cash position and the Group has breached financial
covenants associated with its debt held with the European Bank of
Reconstruction and Development ("EBRD"), as well as contributing to
the delay of capital investment programs in Tunisia, the
implications of which are further discussed below.
In March 2019, the Group undertook a placing to raise gross
proceeds of $3.0 million, by issuing 21,553,583 shares at a price
of 10.5 pence per share. Attached to each share issued is 0.105
warrants, with each full warrant entitling the holder to purchase
one ordinary share at an exercise price of 10.5 pence per share,
exercisable for a period of 24 months after closing.
The proceeds of the equity issuance were used to fund a Senior
debt repayment to the EBRD due March 31, 2019 of $2.9 million. The
final repayment of $2.8 million was paid on September 13, 2019,
leaving just the convertible debt outstanding with the EBRD. The
Convertible debt is due to be repaid in four instalments commencing
June 30, 2020, when 25% of the principal and accrued interest at
that date will be repayable. The three remaining repayments will be
made annually on June 30. As at September 30, 2019, $7.6 million of
the Convertible debt is reported as current.
On September 25, 2019, the Group received a waiver from the EBRD
formally waiving compliance with the financial covenants for the
period ended September 30, 2019.
As at
------------------------- -------------- -------------
September 30, December 31,
($000) 2019 2018
------------------------- -------------- -------------
Current assets 13,637 13,480
Current liabilities (33,380) (28,918)
------------------------- -------------- -------------
Working capital deficit (19,743) (15,438)
------------------------- -------------- -------------
The working capital deficit of the Group at September 30, 2019
was $19.7 million. The deterioration of $4.3 million since year end
was primarily due to an increase in the current amount of the EBRD
debt. At December 31, 2018, $5.6 million of debt was current,
however given the first repayment of the Convertible debt is now
current, this has increased the current amount of debt to $7.6
million at September 30, 2019.
Included in current liabilities at September 30, 2019 was $7.6
million of EBRD debt, accounts payable of $15.2 million (of which
$8.2 million relates to Brunei and dates back to 2012/2013), a
decommissioning provision (Brunei, Canada and Tunisia) of $8.7
million, income taxes payable of $1.4 million and lease obligations
of $0.5 million.
Going Concern Statement
The Group's ability to settle its obligations as they come due
is dependent on its ability to generate future cash flows from
operations and/or obtain the necessary financing. The Group has
modelled cash flow forecasts in order to identify how available
funds could be managed in order to allow the Group to meet its
obligations as they fall due or identify where additional funding
may be required. Given the above, there are material uncertainties
as to whether the Group can meet all its cash obligations as they
fall due.
The ability to generate sufficient future cash flows from
operations to meet obligations as they fall due and the continued
availability of existing facilities, should loan covenants not be
met, represent material uncertainties that may cast significant
doubt on the ability of the Group to continue as a going concern.
Refer to note 2 below for further information.
Financial Review -Third Quarter 2019
Funds from Operations
The Group uses funds from operations as a key performance
indicator to measure the ability of the Group to generate cash from
operations to fund future exploration and development activities.
The following table is a reconciliation of funds from operations to
cash flow from operating activities:
Nine months ended
September 30
----------------------------- --- --------------------
($000) 2019 2018
----------------------------- -------- ----------
Cash flow from (used in)
operations 5,585 (3,192)
Changes in non-cash working
capital (33) 6,031
---------------------------------- -------- ----------
Funds from operations 5,552 2,839
---------------------------------- -------- ----------
Funds from operations per
share (1) 0.02 0.01
---------------------------------- -------- ----------
(1) Based on average shares outstanding in the period
The increase in funds from operations in 2019 was primarily
attributable to Romania generating cash flows in 2019, partially
offset by insurance proceeds of $2.6 million recognized in 2018
relating to the well incident in December 2017. Funds from
operations generated in Romania were $6.0 million, Tunisia $2.2
million and funds used corporately were $2.6 million.
Production
Nine months ended
September 30
------------------------ --- --------------------
2019 2018
------------------------ ---------- --------
Tunisia
Crude oil (bbl/d) 270 257
Natural gas (Mcf/d) 504 601
----------------------------- ---------- --------
Tunisia (boe/d) 354 357
----------------------------- ---------- --------
Romania
Natural gas (Mcf/d) 4,791 -
Condensate (bbl/d) 16 -
------------------------ ---------- --------
Romania (boe/d) 814 -
------------------------ ---------- --------
Group
Crude oil (bbl/d) 270 257
Natural gas (Mcf/d) 5,295 601
Condensate (bbl/d) 16 -
Total Group production
(boe/d) 1,168 357
----------------------------- ---------- --------
% liquids weighting 24% 72%
% gas weighting 76% 28%
----------------------------- ---------- --------
Production was 1,168 boe/d for the nine months ended September
30, 2019, an increase of 811 boe/d (227%) from the comparable
period of 2018, due to Romania production commencing on April 25,
2019 and Chouech coming online throughout the third quarter.
Overall production during the three months ended September 30, 2019
was 2,128 boe/d, up from 346 boe/d for the comparable period of
2018.
In Tunisia, production was from the Sabria and Chouech fields
for the nine months ended September 30, 2019 and averaged 354
boe/d, down from 357 boe/d in 2018 due to natural declines,
partially offset by Chouech production recommencing in July.
Production for the three months ended September 30, 2019 was 443
boe/d, up from 346 boe/d for the comparable period of 2018.
In Romania, production commenced April 25, 2019 and has averaged
814 boe/d for the nine months ending September 30, 2019. The
production for the three months ended September 30, 2019 averaged
1,685 boe/d compared to nil in the same period of 2018.
Oil and Gas Revenue
Nine months ended
September 30
-------------------------- --- --------------------
($000) 2019 2018
-------------------------- ---------- --------
Tunisia
Oil revenue 4,496 4,851
Gas revenue 1,226 2,009
------------------------------- ---------- --------
Tunisia revenue 5,722 6,860
------------------------------- ---------- --------
Romania
Gas revenue 9,535 -
Condensate revenue 212 -
-------------------------- ---------- --------
Romania revenue 9,747 -
-------------------------- ---------- --------
Group
Oil revenue 4,496 4,851
Gas revenue 10,761 2,009
Condensate revenue 212 -
-------------------------- ---------- --------
Total Group revenue 15,469 6,860
------------------------------- ---------- --------
Liquids revenue (%) 30% 71%
Gas revenue (%) 70% 29%
------------------------------- ---------- --------
Tunisia
Oil ($/bbl) 61.20 69.17
Gas ($/Mcf) 8.91 12.25
------------------------------- ---------- --------
Tunisia average realized
price ($/boe) 59.37 70.39
------------------------------- ---------- --------
Romania
Gas ($/Mcf) 7.29 -
Condensate ($/bbl) 54.93 -
-------------------------- ---------- --------
Romania average realized 43.94 -
price ($/boe)
-------------------------- ---------- --------
Group
Oil ($/bbl) 61.20 69.17
Gas ($/Mcf) 7.45 12.25
Condensate ($/bbl) 54.93 -
-------------------------- ---------- --------
Group average realized
price ($/boe) 48.61 70.39
------------------------------- ---------- --------
The Group is required to sell 20% of its annual crude oil
production from the Sabria concession into the local market, which
is sold at an approximate 10% discount to the price obtained on its
other crude sales. The remaining crude oil production is sold to
the international market, through which the Group has a marketing
agreement with Shell International Trading and Shipping Company
Limited ("Shell agreement"). Natural gas prices are nationally
regulated and in Sabria are tied to the current month average of
high sulphur heating oil (benchmarked to Brent).
In Romania, 50% of the natural gas production must be sold on
the open market, and the other 50% of natural gas is sold through a
gas sales agreement with Vitol Gas and Power BV. The sales price
under this agreement is linked to an average of transactions
concluded on the centralized markets of Romania.
Oil and gas revenues increased by 126% to $15.5 million in the
period, as compared to $6.9 million for the same period in 2018.
The increase was attributable to an 227% increase in production,
partially offset by a 32% decrease in the average realized price
that reflects the increase in the percentage of gas produced by the
Group versus crude oil.
Crude oil realized prices decreased to $61.20 per bbl for the
nine months ended September 30, 2019 compared to $69.17 for the
same period in 2018. This a result of a 10% decrease in the Brent
oil price from $72.18 per bbl for the nine months ended September
30, 2018 to $64.67 per bbl for the same period in 2019. The Group's
realized oil sales price was approximately 95% of the Brent oil
price in both periods.
Royalties
Nine months ended
September 30
------------------------ --- -------------------------------
($000) 2019 2018
------------------------ ------ -----------------------
Tunisia 605 673
Romania 563 -
------------------------ ------ -----------------------
Total 1,168 673
----------------------------- ------ -----------------------
Tunisia ($/boe) 6.26 6.91
Romania ($/boe) 2.53 -
------------------------ ------ -----------------------
Total ($/boe) 3.66 6.91
----------------------------- ------ -----------------------
Tunisia (% of revenue) 10.6% 9.8%
Romania (% of revenue) 5.8% -
Total (% of revenue) 7.6% 9.8%
----------------------------- ------ -----------------------
Tunisian royalties are based on individual concession
agreements. In Sabria, the royalty rate varies depending on a
calculation of cumulative revenues, net of taxes, as compared to
cumulative investment in the concession, known as the "R factor".
As the R factor increases, so does the royalty percentage to a
maximum rate of 15%. During 2019, the royalty rate in the Sabria
concession was 10% for oil and 8% for gas. In the Chouech
concession, royalty rates are flat at 15%.
Romanian natural gas royalties step up from 3.5% to 13.0% and
condensate from 3.5% to 13.5% based on the level of production in
the quarter. Effective August 2019, Romanian royalties are
calculated using the reference price set by Romania instead of the
realized price to the Group. Currently, the Group is receiving a
higher gas price and a lower condensate price when compared to the
reference price.
Royalties increased during the nine months ended September 30,
2019 due to the increase in revenue. The effective royalty rate in
Tunisia increased to 10.6% from 9.8% in the comparable period due
to the Chouech field coming onto production and incurring a larger
royalty rate than Sabria (15% vs 10%). In Romania, the effective
royalty rate for natural gas is 5.8% and condensate 4.7%.
Production Expenses
Nine months ended
September 30
----------------- --- -----------------------------------
($000) 2019 2018
----------------- ----------------- ----------------
Tunisia 2,595 1,963
Romania 1,180 -
Canada 40 46
---------------------- ----------------- ----------------
Total 3,815 2,009
---------------------- ----------------- ----------------
Tunisia ($/boe) 26.87 20.14
Romania ($/boe) 5.31 -
----------------- ----------------- ----------------
Total ($/boe) 11.96 20.61
---------------------- ----------------- ----------------
Tunisian production expenses for the period increased to $2.6
million as compared to $2.0 million in the comparable period of
2018, due to costs associated with reopening the Chouech field in
southern Tunisia. The Romanian production expenses reflect costs
incurred since the commencement of production on April 25, 2019 for
the gas plant, field and the Bucharest office. Canadian production
expenses relate to the Sturgeon Lake assets, which are not
producing and are incurring minimal operating costs to maintain the
property.
Operating Netback
Serinus uses operating netback as a key performance indicator to
assist management in understanding Serinus' profitability relative
to current market conditions and as an analytical tool to benchmark
changes in operational performance against prior periods. Operating
netback consists of petroleum and natural gas revenues less direct
costs consisting of royalties and production expenses. Netback is
not a standard measure under IFRS and therefore may not be
comparable to similar measures reported by other entities.
Nine months ended
September 30
------------------------- --- --------------------
Tunisia 2019 2018
------------------------- --------- ---------
Production volume boe/d 354 357
Realized price 59.37 70.39
Royalties (6.26) (6.91)
Production expense (26.87) (20.14)
------------------------------ --------- ---------
Operating netback 26.24 43.34
------------------------------ --------- ---------
Nine months ended
September 30
------------------------ --- --------------------
Romania 2019 2018
------------------------ ----------- -------
Production volume boe/d 814 -
Realized price 43.94 -
Royalties (2.53) -
Production expense (5.31) -
------------------------ ----------- -------
Operating netback 36.10 -
------------------------ ----------- -------
Nine months ended
September 30
------------------------- --- --------------------
Group 2019 2018
------------------------- --------- ---------
Production volume boe/d 1,168 357
Realized price 48.61 70.39
Royalties (3.66) (6.91)
Production expense (11.96) (20.61)
------------------------------ --------- ---------
Operating netback 32.99 42.87
------------------------------ --------- ---------
The decrease in operating netback to $32.99 per boe during the
nine months ended September 30, 2019 from $42.87 from the
comparable period in 2018 was primarily due to lower oil prices and
higher production expenses in Tunisia.
Windfall Tax
Nine months ended
September 30
--------------------- --- --------------------
($000) 2019 2018
--------------------- ---------- --------
Windfall tax 2,074 -
Windfall tax ($/Mcf) 1.59 -
--------------------- ---------- --------
In Romania, the Group is subject to a windfall tax on its
natural gas production which is applied to supplemental income once
natural gas prices exceed 47.53 RON/Mwh (approximately $3.40 per
mcf). This supplemental income is taxed at a rate of 60% between
47.53 RON/Mwh and 85.00 RON/Mwh and at a rate of 80% above 85.00
RON/MWh. Expenses deductible in the calculation of the windfall tax
include royalties and capital expenditures limited to 30% of the
supplemental income.
During 2019, the Group has incurred windfall taxes of $2.1
million which equates to $1.59 per mcf of Romanian gas production
volumes.
Depletion, Depreciation and Amortization ("DD&A")
Nine months ended
September 30
----------------- --- --------------------
($000) 2019 2018
----------------- --------- ---------
Tunisia 1,383 1,177
Romania 5,168 5
Corporate 515 125
---------------------- --------- ---------
7,066 1,307
-------------------- --------- ---------
Tunisia ($/boe) 14.32 12.08
Romania ($/boe) 23.25 -
---------------------- --------- ---------
DD&A expense is computed on a concession by concession basis
considering the net book value, the future development costs
associated with the reserves as well as the proved and probable
reserves of each concession.
Tunisia DD&A expense increased from the comparable period
due to the Chouech field coming back onto production in July 2019.
Romania DD&A increased due to Satu Mare production field coming
online in April 2019.
DD&A expense associated with the IFRS 16 adjustment in 2019
was $0.4 million (Corporate - $0.3 million, Romania - $0.1
million). Refer to note 3 for further information.
General and Administrative Expense ("G&A")
Nine months ended
September 30
--------------------- --- --------------------
($000) 2019 2018
--------------------- --------- ---------
G&A expense 2,587 2,225
G&A expense ($/boe) 8.11 22.83
-------------------------- --------- ---------
G&A costs incurred by the Group are expensed, with certain
costs directly related to exploration and development assets being
capitalized or reported as production costs. The G&A expense
reported is on a net basis, representing gross G&A costs
incurred less recoveries of those costs presented as capital or
production costs.
For the nine months ended September 30, 2019, G&A costs
increased by $0.4 million which is primarily attributable to higher
professional fees and lower recoveries in 2019. On a per boe basis
G&A expenses significantly decreased due to higher production
volumes as Romania and Chouech came online during Q2 and Q3 2019,
respectively.
Share-based Compensation
Nine months ended
September 30
-------------------------- --- --------------------
($000) 2019 2018
-------------------------- --------- ---------
Share-based compensation 648 374
Share-based compensation
($/boe) 2.03 3.84
------------------------------- --------- ---------
The increase in share-based compensation expense is primarily
due to additional stock options issued during the period, which
have 1/3 vest immediately on the grant date.
Net Finance Expense
Nine months ended
September 30
------------------------------- ---
($000) 2019 2018
------------------------------- --------- ---------
Interest on long-term debt 2,684 2,542
Interest on lease obligations 81 -
Accretion 1,021 757
Foreign exchange gain (187) (227)
3,599 3,072
---------------------------------- --------- ---------
Net interest expense for the nine months ended September 30,
2019 increased to $3.6 million due to higher interest rates on the
EBRD debt (10.4% vs 9.6%), due to an increase in LIBOR, as well as
the adoption of IFRS 16 ("leases").
Capital Expenditures
Nine months ended
September 30
----------- ---
($000) 2019 2018
----------- --------- ---------
Tunisia 1,028 (31)
Romania 2,002 11,850
Corporate - 85
3,030 11,904
-------------- --------- ---------
Capital expenditures of $2.0 million in Romania were primarily
focused on the completion of the gas plant, commencing the 3D
seismic project and the capitalization of Bucharest office costs
until the date production started.
In Tunisia, capital expenditures were primarily related to the
workovers in the Chouech field to get production restarted.
Share Data
As at the date of issuing this report, the following are the
options outstanding and changes to directors' shares owned since
September 30, 2019, up to the date of this report.
Options Shares
held at held at
Sept 30 Sept 30
and Nov and Nov
Name of Director 13 2019 13 2019
-------------------------- ---------- ---------
Executive Directors:
Jeffrey Auld 8,000,000 22,197
Non-Executive Directors:
Lukasz Redziniak - -
Jim Causgrove 100,000 -
Eleanor Barker 100,000 100,000
Dawid Jakubowicz - -
8,200,000 122,197
-------------------------- ---------- ---------
As of the date of issuing this report, management is aware of
the following shareholders holding more than 5% of the ordinary
shares of the Group, as reported by the shareholders to the Group:
Kulczyk Investments S.A. 38.09%, Marlborough Fund Managers 10.64%
and JCAM Investments Ltd 7.89%.
The directors are responsible for the maintenance and integrity
of the corporate and financial information on the Group's website.
Legislation in Jersey governing the preparation and dissemination
of financial statements may differ from legislation in other
jurisdictions.
Serinus Energy plc
Condensed Consolidated Interim Statement of Comprehensive
Income
($US 000s) (unaudited)
Nine months
ended September
30
------------------------------------------ ------ -------------------
Note 2019 2018
------------------------------------------ ------ --------- --------
Revenue, net of royalties 14,301 6,187
------------------------------------------ ------ --------- --------
Cost of sales
Production expenses (3,815) (2,009)
Depletion, depreciation and
amortization (7,066) (1,307)
Windfall tax (2,074) -
Total cost of sales (12,955) (3,316)
------------------------------------------ ------ --------- --------
Gross profit 1,346 2,871
Administrative expenses (2,587) (2,225)
Share-based payment expense (648) (374)
Well incident recovery 53 3,639
Gain on disposition - 117
Listing costs (7) (1,367)
------------------------------------------ ------ --------- --------
Operating (loss) income (1,843) 2,661
Finance expense (3,599) (3,072)
------------------------------------------ ------ --------- --------
Loss before tax (5,442) (411)
Current income taxes (1,486) (2,078)
Deferred income taxes 1,319 302
------------------------------------------ ------ --------- --------
Loss for the period (5,609) (2,187)
Other comprehensive income
Other comprehensive income to be classified to
profit and loss in subsequent periods:
Foreign currency translation
adjustment (1,199) -
------------------------------------------ ------ --------- --------
Comprehensive loss for the
period (6,808) (2,187)
------------------------------------------ ------ --------- --------
Loss per share:
Basic and diluted 5 (0.02) (0.01)
------------------------------------------ ------ --------- --------
Serinus Energy plc
Condensed Consolidated Interim Statement of Financial
Position
($US 000s) (unaudited)
September 30, December 31,
As at Notes 2019 2018
------------------------------------ ------- -------------- -------------
Assets
Non-current assets
Property, plant and equipment 103,238 107,541
--------------------------------------------- -------------- -------------
Current assets
Restricted cash 1,098 1,054
Trade receivables and other 10,568 10,143
Cash and cash equivalents 1,971 2,283
--------------------------------------------- -------------- -------------
Total current assets 13,637 13,480
--------------------------------------------- -------------- -------------
Total assets 116,875 121,021
--------------------------------------------- -------------- -------------
Equity
Share capital 377,942 375,208
Contributed surplus 24,052 23,307
Accumulated other comprehensive
loss (1,199) -
Accumulated deficit (390,782) (385,173)
--------------------------------------------- -------------- -------------
Total equity 10,013 13,342
--------------------------------------------- -------------- -------------
Liabilities
Non-current liabilities
Decommissioning provision 37,427 36,573
Deferred tax liability 11,835 13,154
Long-term debt 22,660 27,667
Lease obligations 101 -
Other provisions 1,459 1,367
--------------------------------------------- -------------- -------------
Total non-current liabilities 73,482 78,761
--------------------------------------------- -------------- -------------
Current liabilities
Decommissioning provision 8,662 8,696
Current portion of long-term
debt 7,553 5,624
Current portion of lease
obligations 469 -
Accounts payable and accrued
liabilities 16,696 14,598
--------------------------------------------- -------------- -------------
Total current liabilities 33,380 28,918
--------------------------------------------- -------------- -------------
Total liabilities 106,862 107,679
--------------------------------------------- -------------- -------------
Total equity and liabilities 116,875 121,021
--------------------------------------------- -------------- -------------
These condensed consolidated interim financial statements were
approved by the Board of Directors and authorized for issue on
November 13, 2019.
Serinus Energy plc
Condensed Consolidated Interim Statement of Shareholder's
Equity
($US 000s) (unaudited)
Nine months ended
September 30
Notes 2019 2018
------------------------------------------ ------- ---------- ----------
Share capital
Balance, beginning of period 375,208 362,534
Share issue, net of issue costs 2,733 12,674
Warrants exercised 1 -
Balance, end of period 377,942 375,208
--------------------------------------------------- ---------- ----------
Accumulated other comprehensive loss
Balance, beginning of period - -
Comprehensive loss for the period (1,199) -
------------------------------------------ ------- ---------- ----------
Balance, end of period (1,199) -
------------------------------------------ ------- ---------- ----------
Contributed surplus
Balance, beginning of period 23,307 22,487
Share-based compensation expense 648 374
Warrants issued, net of finance costs 97 -
Balance, end of period 24,052 22,861
--------------------------------------------------- ---------- ----------
Accumulated deficit
Balance, beginning of period (385,173) (381,317)
Adjustment on initial application of
IFRS 9 - 1,034
Net loss (5,609) (2,187)
Balance, end of period (390,782) (382,470)
--------------------------------------------------- ---------- ----------
Serinus Energy plc
Condensed Consolidated Interim Statement of Cash Flows
($US 000s) (unaudited)
Nine months ended
September 30
---------------------------------------- ------- --- --------------------
Notes 2019 2018
---------------------------------------- ------- --------- ---------
Operating activities
Loss for the period (5,609) (2,187)
Items not involving cash:
Depletion, depreciation
and amortization 7,066 1,307
Accretion expense 1,021 757
Gain on disposition - (117)
Share-based payment expense 648 374
Foreign exchange unrealized
gain (195) (456)
Current tax expense 1,486 2,078
Deferred tax recovery (1,319) (302)
Interest expense 2,765 2,542
Income taxes paid (311) (1,133)
Expenditures on decommissioning
liabilities - (24)
------------------------------------------------------ --------- ---------
Funds from operations 5,552 2,839
Changes in non-cash working
capital 33 (6,031)
------------------------------------------------------ --------- ---------
Cashflows from (used in)
operating activities 5,585 (3,192)
------------------------------------------------------ --------- ---------
Financing activities
Ordinary shares issued 3,000 12,674
Share issue costs (170) -
Warrants exercised 1 -
Repayment of long-term
debt (5,400) -
Interest and financing
fees (355) (432)
Lease payments (317) -
---------------------------------------- ------- --------- ---------
Cashflows (used in) from
financing activities (3,241) 12,242
------------------------------------------------------ --------- ---------
Investing activities
Property, plant and equipment expenditures,
net (1) (2,633) (12,436)
Interest earned on restricted
cash (16) (39)
Proceeds on disposition of property,
plant and equipment - 117
Cashflows used in investing
activities (2,649) (12,358)
------------------------------------------------------ --------- ---------
Impact of foreign currency translation
on cash (7) 626
Change in cash and cash
equivalents (312) (2,682)
Cash and cash equivalents, beginning
of period 2,283 7,252
------------------------------------------------- --------- ---------
Cash and cash equivalents,
end of period 1,971 4,570
------------------------------------------------------ --------- ---------
(1) Property, plant and equipment expenditures includes capital
expenditures made in the period and related changes in non-cash
working capital.
1. General information
Serinus Energy plc ("Serinus" or the "Group") and its
subsidiaries are principally engaged in the exploration and
development of oil and gas properties in Tunisia and Romania.
Serinus is incorporated under the Companies (Jersey) Law 1991. The
Group's head office and registered office is located at 28
Esplanade, St. Helier, Jersey, JE1 8SB.
Serinus is a publicly listed company whose ordinary shares are
traded under the symbol "SENX" on AIM and "SEN" on the WSE. Kulczyk
Investments, S.A. ("KI") holds a 38.09% investment in Serinus as of
September 30, 2019.
2. Basis of presentation
The condensed consolidated interim financial statements have
been prepared in accordance with the recognition and measurement
principles of International Financial Reporting Standards ("IFRS")
and their interpretations issued by the International Accounting
Standards Board ("IASB") as adopted by the European Union ("EU")
but do not include all information required for full annual
financial statements.
These consolidated financial statements are expressed in U.S.
dollars unless otherwise indicated. All references to US$ are to
U.S. dollars. All financial information is rounded to the nearest
thousand, except per share amounts and when otherwise
indicated.
Information about significant areas of estimation uncertainty
and critical judgements in applying accounting policies that have
the most significant effect on the amounts recognized in the
condensed consolidated interim financial statements are described
in note 4 to the consolidated financial statements for the year
ended December 31, 2018. There has been no change in these areas
during the nine months ended September 30, 2019.
Going concern
These consolidated financial statements have been prepared on a
going concern basis, which assumes that Serinus will continue its
operations for the foreseeable future and will be able to realize
its assets and discharge its liabilities and commitments in the
normal course of operations.
The Group meets its day-to-day working capital requirements from
net operating cash flows, cash balances, equity, and fully drawn
debt facilities (Convertible loan from the EBRD of $30.6 million).
As at October 31, 2019 the Group had cash balances of $1.9
million.
The Group has greatly increased its ability to generate cash
flow in future periods with the commencement of production in
Romania and Tunisia. However, the delays in commencing production
in Romania has resulted in a tightened cash position and the Group
has breached financial covenants associated with the debt held with
the EBRD, as well as contributing to the delay of capital
investment programs in Tunisia.
The Group has a commitment to undertake a seismic program to
fulfil the remaining work commitments for the third exploration
phase of the Satu Mare concession which expires October 28,
2020.
Equity was issued in March 2019, raising net proceeds of $2.8
million, to bridge a short-term financing need to fund a scheduled
debt repayment on the Senior loan, which was paid on March 29,
2019. The Group made its final $2.8 million Senior loan payment on
September 13, 2019, using funds from operations. The Group's $30.6
million convertible loan accumulates interest to June 30, 2020 at
which point the outstanding amount is repayable in four equal
instalments on June 30, 2020, 2021, 2022 and 2023 and interest
after June 30, 2020 is to be paid annually on the loan repayment
dates. As at September 30, 2019, the Group was not in compliance
with the financial debt to EBITDA covenant or the debt service
coverage ratio for the three months ended September 30, 2019. On
September 25, 2019, the Group received a waiver from the EBRD
formally waiving compliance with these covenants for the period
ended September 30, 2019. The implication of this waiver is that
the debt repayments will follow their original scheduled repayment
terms and the bank will not be acting on its security as a result
of the breach.
In assessing the Group's ability to continue as a going concern,
the Directors have prepared base and sensitized cash flow forecasts
for a period in excess of 12 months from the date of authorization
of the condensed consolidated interim financial statements. The key
assumptions in the base case forecasts are the performance of the
gas facility and wells in Romania, the performance of the Chouech
field in Tunisia, the lifting schedule with Shell, and commodity
prices.
The Convertible loan agreement requires compliance with a debt
to EBITDA ratio. Internally prepared forecasts indicate that
covenant compliance at December 31, 2019 is sensitive to changes in
assumptions (pricing, production, costs) which will impact whether
the covenant is met or not.
The Group's ability to settle its obligations as they come due
is dependent on its ability to generate future cash flows from
operations and/or obtain the necessary financing. The Group has
modelled cash flow forecasts in order to identify how available
funds could be managed in order to allow the Group to meet its
obligations as they fall due or identify where additional funding
may be required. Given the above, there are material uncertainties
as to whether the Group can meet all its cash obligations as they
fall due.
The Directors consider that the ability to generate sufficient
future cash flows from operations to meet obligations as they fall
due and the continued availability of existing facilities, should
loan covenants not be met, represent material uncertainties that
may cast significant doubt on the ability of the Group to continue
as a going concern. These condensed consolidated interim financial
statements do not reflect the adjustments and classifications of
assets, liabilities, revenues and expenses which would be necessary
if the Group were unable to continue as a going concern.
3. Significant accounting policies
Except as described below, the condensed consolidated interim
financial statements have been prepared following the same basis of
measurement, accounting policies and methods of computation as
described in the notes to the consolidated financial statements for
the year ended December 31, 2018.
Changes to accounting policies
IFRS 16 Leases
In January 2016, the IASB issued IFRS 16 Leases ("IFRS 16"),
which requires entities to recognize assets and lease obligations
in the statement of financial position. For lessees, IFRS 16
removes the classification of leases as either operating leases or
finance leases, effectively treating all leases as finance leases.
Certain short-term leases (less than 12 months) and leases of
low-value assets (less than $5,000) are exempt from the
requirements and may continue to be treated as operating leases.
Lessors will continue with a dual lease classification model.
Classification will determine how and when a lessor will recognize
lease revenue and what assets would be recorded.
Serinus adopted IFRS 16 on January 1, 2019, using the modified
retrospective transition approach. Under the modified retrospective
approach, the measurement of the right-of-use assets are equal to
the lease liabilities immediately before the transition date with
no impact on retained earnings. The cumulative effect is recognized
at the initial transition date with no comparative information. The
main changes are explained below.
i. Significant accounting policies
Leases
Contracts that convey the right to control the use of an
identified asset for a period of time in exchange for consideration
are classified as leases. Upon initial recognition, right-of-use
assets are measured at cost, which comprises the amount of the
initial measurement of the lease liability, lease payments made at
or before the commencement date, any initial direct costs and an
estimate of dismantling and restoration costs. Lease liabilities
are measured at the present value of the lease payments using the
interest rate implicit in the lease, or the lessee's incremental
borrowing rate if the interest rate implicit in the lease cannot be
readily determined.
Serinus has taken recognition exemptions for leases that are
short-term and leases for which the underlying asset is of low
value. Short-term leases are defined as a lease that, at the
commencement date, has a lease term of 12 months or less. An
underlying asset can only be of low value if the lessee can benefit
from the use of the underlying asset on its own, the underlying
asset is not highly dependent or interrelated with other assets and
the underlying asset has a value, when new, of $5,000 or less.
Lease payments associated with these leases are recognized as an
expense on a straight-line basis over the lease term in the
statement of comprehensive income.
ii. Impact from change in accounting policy
Operating lease payments were previously recorded in
administrative expenses in the statement of comprehensive income.
Under IFRS 16, right-of-use assets and lease liabilities are
recognized in the statement of financial position for contracts
that are classified as leases. Right-of-use assets are included in
property, plant and equipment and depreciated on a straight-line
basis over the lease term. Depreciation of the right-of-use assets
is included in depletion and depreciation expense in the statement
of comprehensive income. Lease liabilities are presented at their
net present value and accreted until the end of the lease term.
Accretion of lease liabilities is recorded as interest expense and
disclosed separately in the statement of comprehensive income. The
cumulative effect of initial application of the standard on January
1, 2019 is the recognition of $0.9 million in right-of-use assets
and $0.9 million increase in lease obligations.
4. Segment information
The Group's reportable segments are organized by geographical
areas and consist of the exploration, development and production of
oil and natural gas in Romania and Tunisia. The Corporate segment
includes all corporate activities and items not allocated to
reportable operating segments and therefore includes Brunei.
Romania Tunisia Corporate Total
------------------------------------- -------- -------- ---------- ---------
As at September 30, 2019
Total assets 42,436 71,529 2,910 116,875
------------------------------------- -------- -------- ---------- ---------
For the nine months ended September
30, 2019
Petroleum and natural gas revenues
Crude oil - 4,496 - 4,496
Natural gas 9,535 1,226 - 10,761
Condensate 212 - - 212
------------------------------------- -------- -------- ---------- ---------
9,747 5,722 - 15,469
Royalties (563) (605) - (1,168)
------------------------------------- -------- -------- ---------- ---------
Revenue, net of royalties 9,184 5,117 - 14,301
------------------------------------- -------- -------- ---------- ---------
Cost of sales
Production expenses (1,180) (2,595) (40) (3,815)
Depletion and depreciation (5,168) (1,383) (515) (7,066)
Windfall tax (2,074) - - (2,074)
Total cost of sales (8,422) (3,978) (555) (12,955)
------------------------------------- -------- -------- ---------- ---------
Gross profit (loss) 762 1,139 (555) 1,346
General and administrative - - (2,587) (2,587)
Listing costs - - (7) (7)
Well incident recovery 53 - - 53
Share-based payment expense - - (648) (648)
Operating profit (loss) 815 1,139 (3,797) (1,843)
Finance expense (122) (949) (2,528) (3,599)
------------------------------------- -------- -------- ---------- ---------
Profit (loss) before income
taxes 693 190 (6,325) (5,442)
Current income tax expense - (1,485) (1) (1,486)
Deferred income tax recovery - 1,319 - 1,319
------------------------------------- -------- -------- ---------- ---------
Profit (loss) for the period 693 24 (6,326) (5,609)
------------------------------------- -------- -------- ---------- ---------
Capital expenditures (1) 2,002 1,028 - 3,030
------------------------------------- -------- -------- ---------- ---------
(1) Capital expenditures exclude the impact of changes in
non-cash working capital, IFRS 16 adjustments, and currency
translation adjustments.
Romania Tunisia Corporate Total
------------------------------------- -------- -------- ---------- --------
As at September 30, 2018
Total assets 45,963 75,178 4,634 125,775
------------------------------------- -------- -------- ---------- --------
For the nine months ended September
30, 2018
Petroleum and natural gas revenues
Crude oil - 4,851 - 4,851
Natural gas - 2,009 - 2,009
------------------------------------- -------- -------- ---------- --------
- 6,860 - 6,860
Royalties - (673) - (673)
------------------------------------- -------- -------- ---------- --------
Revenue, net of royalties - 6,187 - 6,187
------------------------------------- -------- -------- ---------- --------
Cost of sales
Production expenses - (1,963) (46) (2,009)
Depletion and depreciation (5) (1,177) (125) (1,307)
------------------------------------- -------- -------- ---------- --------
Total cost of sales (5) (3,140) (171) (3,316)
------------------------------------- -------- -------- ---------- --------
Gross (loss) profit (5) 3,047 (171) 2,871
General and administrative - - (2,225) (2,225)
Share-based payment expense - - (374) (374)
Well incident recovery 3,639 - - 3,639
Gain on disposition - 117 - 117
Listing costs - - (1,367) (1,367)
------------------------------------- -------- -------- ---------- --------
Operating profit (loss) 3,634 3,164 (4,137) 2,661
Finance income (expense) 807 (1,128) (2,751) (3,072)
------------------------------------- -------- -------- ---------- --------
Profit (loss) before income
taxes 4,441 2,036 (6,888) (411)
Current income tax expense - (2,076) (2) (2,078)
Deferred income tax recovery - 302 - 302
------------------------------------- -------- -------- ---------- --------
Profit (loss) for the period 4,441 262 (6,890) (2,187)
------------------------------------- -------- -------- ---------- --------
Capital expenditures (1) 11,850 (31) 85 11,904
------------------------------------- -------- -------- ---------- --------
(1) Capital expenditures exclude the impact of changes in
non-cash working capital, IFRS 16 adjustments, and currency
translation adjustments.
5. Loss per share
Nine months ended
September 30
----------------------------------------------- --------------------
($US 000s, except per share amounts) 2019 2018
----------------------------------------------- --------- ---------
Loss for the period (5,609) (2,187)
Weighted average shares outstanding - basic 232,637 183,863
Effect of dilutive securities (1) - -
----------------------------------------------- --------- ---------
Weighted average shares outstanding - diluted 232,637 183,863
Loss per share - basic and dilutive (0.02) (0.01)
----------------------------------------------- --------- ---------
(1) For the nine months ended September 30, 2019, there were 8.6
million options exercisable and 2.3 million warrants that were
excluded from the calculation as the impact was anti-dilutive (for
the nine months ended September 30, 2018 - 4.1 million
options).
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
QRTZMMMMGDRGLZG
(END) Dow Jones Newswires
November 14, 2019 02:01 ET (07:01 GMT)
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