Serinus Energy plc (LON:SENX, WSE:SEN) has announced the release of its interim results for the nine months ended 30 September 2021.
Financial
· Revenue for the nine months ended 30 September 2021 was $25.7 million (30 September 2020 – $18.2 million)
· The Company generated net income of $0.8 million (30 September 2020 – loss of $13.7 million)
· Funds from operations for the nine months ended 30 September 2021 was $7.8 million (30 September 2020 – $5.9 million)
· EBITDA for the nine months ended 30 September 2021 was $8.9 million (30 September 2020 – $6.4 million)
· Gross profit for the nine months ended 30 September 2021 was $4.4 million (30 September 2020 – gross loss $1.7 million)
· Commodity prices remain strong, with October average Brent price of $83.54/bbl and October average Day Ahead Romania BRM gas price of $30.34/Mcf. The Company realised a net price of $52.62/boe for the nine months ended 30 September 2021, comprising:
o Realised oil price – $61.69/bbl
o Realised natural gas price – $8.26/Mcf
· The Group’s operating netback remained strong for the nine months ended 30 September 2021 and was $34.13/boe (30 September 2020 – $16.51/boe), comprising:
o Romania operating netback – $37.79/boe (30 September 2020 – $18.18/boe)
o Tunisia operating netback – $26.05/boe (30 September 2020 – $11.48/boe)
· Capital expenditures of $9.3 million (30 September 2020 – $3.7 million), comprising:
o Romania – $8.5 million
o Tunisia – $0.8 million
· Cash balance as at 30 September 2021 was $6.4 million
Operational
· On 23 August 2021 the Company announced that Mr. Stuart Morrison was appointed Chief Operating Officer, bringing over 30 years of operational oil and gas industry experience to the Company
· In Tunisia the Artificial Lift programme continues to be advanced with the first pump, destined to be installed in the Sabria-W1 well, to be delivered in the first quarter of 2022. Immediately upon receipt of the pump the Company will begin the workover activities for the installation of this pump
· Serinus has designed and commenced permitting for a new 2D seismic acquisition programme to support the drilling of up to three prospects adjacent to the Moftinu field. Subject to well permitting approvals, the Company intends to begin this multi-well drilling programme in the latter half of 2022
· Installation of compression on the Moftinu gas field commenced during the last week of October 2021, on the Moftinu-1003 well. It is expected that this and further compression will enhance production from current levels, mitigate production decline and extend field life
· On 07 October 2021 the Company announced that it had incorporated a new gas trading subsidiary, Serinus Energy Romania Trading S.r.l
· Sancrai-1 will remain suspended while analysis of the drilling results, petrophysics and seismic data continues. While this work is ongoing the Company will accelerate the drilling of three prospects adjacent to the Moftinu gas field
· Production for the period averaged 1,810 boe/d, comprising:
o Romania – 1,242 boe/d
o Tunisia – 568 boe/d
· Serinus has continued to operate safely and effectively through the COVID-19 pandemic, with the successful implementation of operational and monitoring protocols to ensure the health and safety of our employees
THIRD QUARTER 2021 HIGHLIGHTS
FINANCIAL
· Revenue for the nine months ended 30 September 2021 was $25.7 million (30 September 2020 – $18.2 million)
· The Company generated net income of $0.8 million (30 September 2020 – loss of $13.7 million)
· Funds from operations for the nine months ended 30 September 2021 was $7.8 million (30 September 2020 – $5.9 million)
· EBITDA for the nine months ended 30 September 2021 was $8.9 million (30 September 2020 – $6.4 million)
· Gross profit for the nine months ended 30 September 2021 was $4.4 million (30 September 2020 – gross loss $1.7 million)
· Commodity prices remain strong, with October average Brent price of $83.54/bbl and October average Day Ahead Romania BRM gas price of $30.34/Mcf. The Company realised a net price of $52.62/boe for the nine months ended 30 September 2021, comprising:
o Realised oil price – $61.69/bbl
o Realised natural gas price – $8.26/Mcf
· The Group’s operating netback remained strong for the nine months ended 30 September 2021 and was $34.13/boe (30 September 2020 – $16.51/boe), comprising:
o Romania operating netback – $37.79/boe (30 September 2020 – $18.18/boe)
o Tunisia operating netback – $26.05/boe (30 September 2020 – $11.48/boe)
· Capital expenditures of $9.3 million (30 September 2020 – $3.7 million), comprising:
o Romania – $8.5 million
o Tunisia – $0.8 million
· Cash balance as at 30 September 2021 was $6.4 million
OPERATIONAL
· On 23 August 2021 the Company announced that Mr. Stuart Morrison was appointed Chief Operating Officer, bringing over 30 years of operational oil and gas industry experience to the Company
· In Tunisia the Artificial Lift programme continues to be advanced with the first pump, destined to be installed in the Sabria-W1 well, to be delivered in the first quarter of 2022. Immediately upon receipt of the pump the Company will begin the workover activities for the installation of this pump
· Serinus has designed and commenced permitting for a new 2D seismic acquisition programme to support the drilling of up to three prospects adjacent to the Moftinu field. Subject to well permitting approvals, the Company intends to begin this multi-well drilling programme in the latter half of 2022
· Installation of compression on the Moftinu gas field commenced during the last week of October 2021, on the Moftinu-1003 well. It is expected that this and further compression will enhance production from current levels, mitigate production decline and extend field life
· On 07 October 2021 the Company announced that it had incorporated a new gas trading subsidiary, Serinus Energy Romania Trading S.r.l
· Sancrai-1 will remain suspended while analysis of the drilling results, petrophysics and seismic data continues. While this work is ongoing the Company will accelerate the drilling of three prospects adjacent to the Moftinu gas field
· Production for the period averaged 1,810 boe/d, comprising:
o Romania – 1,242 boe/d
o Tunisia – 568 boe/d
· Serinus has continued to operate safely and effectively through the COVID-19 pandemic, with the successful implementation of operational and monitoring protocols to ensure the health and safety of our employees
OPERATIONAL UPDATE AND OUTLOOK
Serinus Energy plc and its subsidiaries (“Serinus”, the “Company” or the “Group”) is an oil and gas exploration, appraisal and development company. The Group is the operator of all its assets and has operations in two business units: Romania and Tunisia.
ROMANIA
The Company currently holds one large concession area (approximately 3,000km2), Satu Mare, located in a highly sought-after hydrocarbon province. The Moftinu Gas Project is what the Group hopes to be the first of many shallow gas developments. The concession is extensively covered by legacy 2D and 3D seismic and the Group considers the concession to have multiple sizable prospects available for further exploration.
The Company has completed all of its commitments under the third exploration phase, and has received an additional two-year evaluation phase on the Satu Mare Concession until 27 October 2023. The Company has agreed to the following work commitments over the term of this evaluation phase:
· Phase 1: From 28 October 2021 to 27 October 2022, the Company is required to reprocess 160.9 km 2D seismic in the Madaras area at an estimated cost of $100,000; and
· Phase 2: From 28 October 2022 to 27 October 2023, the Company is required to reprocess 30.1 km 2D seismic in the Santau-Nusfalau area at an estimated cost of $50,000.
Serinus has accelerated the design and permitting of additional 2D seismic lines of approximately 105 linear kilometres. The programme will compliment legacy 2D seismic which has already been reprocessed and will tie the acquired modern 2D with the existing 3D data-set. The Company intends to use this programme to refine and expedite the high-rank prospects adjacent to the Moftinu Gas Field. The targeted prospects will form the basis of a near-term multi-well drilling programme expected to commence in the latter half of 2022. Additional interpretation work is also being conducted on the Santau 3D area with a view to confirming drilling locations on prospects that will form the basis for future multi-well drilling campaigns.
During the nine months ended 30 September 2021, the Company successfully drilled, completed and initiated production from the M-1008 well, which was drilled to a total depth of 1,000 metres and flowed at 4.0 MMscf/d (approximately 667 boe/d).
On 15 July 2021 the Company announced that the Sancrai-1 well was a gas discovery and that drilling had been completed at a total planned drilling depth of 1,600 metres, five days ahead of schedule and under-budget. Continuous formation gas shows were recorded over 20 metres of gross pay over four sand intervals from the measured depths of 855 metres to 875 metres. At this drilling interval the measured total gas ranged from 5.5% to 11.1% with an estimated average porosity of between 23% and 27%. Open-hole petrophysical analysis undertaken during the drilling operations has further confirmed this gas-bearing Pliocene sand zone. The Company perforated the well in three zones to test the Pliocene sands and subsequently announced that the testing programme was unable to record the flow of gas. The Company is reviewing all of the drilling results, petrophysics, the 3D and 2D seismic, and all of the gas readings measured from the well and considering re-entry to stimulate the well. However, regulations in Romania required the Company to insert concrete plugs during suspension of the well. Further investigations into the Sancrai-1 well would require a drilling rig to drill out these plugs. The Company has determined that in the near term this cost would be better allocated to new wells.
On 07 October 2021 the Company announced that it had incorporated a new gas trading subsidiary, Serinus Energy Romania Trading S.r.l. The subsidiary will initially trade the Company’s Romanian gas production not committed under its marketing agreement with Vitol into the Romanian market. Serinus Energy Romania Trading S.r.l has been created to allow our licensed gas traders to directly access the Romanian gas market and to capture the full value of gas prices in Romania.
The fabrication of the first compressor destined for the Moftinu Field was completed at the end of the period. Delivery and installation were conducted in October with installation planned to coincide with the routine maintenance shut-down on the Moftinu gas plant.
The Company has a deemed 100% working interest in the concession as its partner has defaulted on its obligations under the Joint Operating Agreement. The Company has filed a Request for Arbitration with the Secretariat of the International Court of Arbitration of the International Chamber of Commerce seeking a declaration affirming the Company’s rightful claim of ownership of its defaulted partner’s 40% participating interest and to compel transfer of that interest to the Company.
TUNISIA
The Company currently holds five concession areas within Tunisia. Of these areas, three have discovered oil and gas reserves and are currently producing; Sabria, Chouech Es Saida, and Ech Chouech. The largest asset is the Sabria field, which is a large oilfield play that has been historically under-developed. Serinus considers this to be an excellent asset for remedial work to increase production and, on completion of ongoing reservoir studies, to conduct further development operations.
The first Artificial Lift programme will be implemented on the W-1 well in the Sabria field. The first submersible pump will be delivered in the first quarter of 2022. This is a significant achievement by our procurement team who have had to work hard given the effects of COVID-19 on supply chains and workplace restrictions.
Despite a more difficult operating environment in Tunisia as a result of the impact of COVID-19, the Company has conducted further workover operations in the Chouech Es Saida area to replace and standardise pumps in order to increase production.
COVID-19
The Company’s top priority remains the health, safety and wellbeing of all our staff. The Group continues to monitor each jurisdiction closely and updates its working practices as local situations and rules evolve, following government recommendations such as enhanced sanitation of work sites, social distancing and wearing of masks. Our offices in London and Calgary are currently open and working in compliance with local recommendations, however in both Romania and Tunisia, recent increases in the infection rate and more limited vaccination coverage has resulted in a return to more stringent measures and routines to ensure a safe working environment for staff. Existing operations have remained in production.
