Serinus Energy plc (LON:SENX) is the topic of conversation when Shore Capital’s Analyst Craig Howie caught up with DirectorsTalk for an exclusive interview.
Q1: You recently took part in a site visit at Serinus Energy, what can you tell us about that?
A1: In summary, we visited the company’s Moftinu gas plant, which has capacity of 15mmcfd and in proximity to which a 105km 2D seismic survey has been underway to de-risk identified prospects to the north. This comes ahead of a planned three well exploration programme scheduled for commencement in Q3 2022. We visited the four producing wells currently supplying the Moftinu plant, and the recently-installed compressor at Moftinu-1003, and also observed approximate drilling locations for this year’s planned three well campaign.
Q2: What changes have you made to your forecasts?
A2: With Serinus having reported a US$0.8m net profit for the nine months to September 2021, our recently upgraded estimates indicate FY21F revenues of US$41m and adjusted EBITDA of c.US$12m. Whilst we forecast healthy earnings progression through this year and next, we believe that the company’s cash generative qualities are particularly underappreciated – forecasting FY22F funds flow from operations of c.US$15m and noting the extremely strong European gas prices which currently prevail.
Q3: How do you view the company in terms of a valuation?
A3: Our Risked NAV estimate is broadly unchanged at 8.5p/share and, with the shares continuing to trade at a very substantial discount to this “above consensus” figure, we remain confident that the company is a story which offers compelling value at current levels. Our revised forecasts indicate that the shares trade on an FY22F enterprise value/funds flow from operations ratio of just 1.2x, falling to 1.0x in FY23F.
Q4: How do you view the outlook for Serinus Energy?
A4: It remains our view that the shares were disproportionately punished by last year’s results from Sancrai, which was of course a single well which only ever accounted for a small proportion of our sum-of-the-parts. In any case, we now see the tide turning from a news flow perspective, expecting preliminary results to confirm an FY21F adjusted bottom-line profit. We expect the forthcoming three well programme to provide important drilling catalysts, whilst the EBRD’s recent exit from the register has already been a positive development, in our opinion.
