CALGARY, ALBERTA–(Marketwired – March 16, 2017) – Serinus Energy Inc. (“Serinus“, “SEN” or the “Company“) (TSX:SEN)(WARSAW:SEN) is pleased to report its financial and operating results for the year ended December 31, 2016.
2016 Highlights
- In 2016, Serinus achieved average production (SEN WI) in Tunisia was 1,124 boe/d, down from 1,348 boe/d during 2015. Lower production during 2016 was due to natural declines and various technical issues including a blockage at WIN-12bis and ESP pump failures and subsequent un-planned workovers required at CS-1, CS-9 and CS-3.
- The netback for Tunisia in 2016 was $11.41 per boe, compared to $20.86 per boe in 2015. The lower netback was driven by lower commodity prices for most of the year partially offset by decreased production expenses.
- Funds from operations was an outflow of $1.6 million for the year ended December 31, 2016 (2015: inflow of $16.8 million). Funds from operations from Tunisia were $4.4 million, the corporate loss was $9.0 million and offsetting this loss from continuing operations were the funds from operations from Ukraine of $3.0 million. In 2016, the sale of Ukraine in February 2016, lower production and lower commodity prices contributed to the decrease in funds from operations. The principle drivers were the lower production and netbacks described above.
- The net loss from continuing operations for the year ended December 31, 2016 was $27.5 million ($0.35 per share), compared to a net loss from continuing operations of $52.2 million ($0.66 per share) in 2015. Included within this loss was asset impairment of $16.8 million (2015: $51.4 million) as a result of negative technical reserve revisions and declining oil and natural gas prices.
- Subsequent to year end, the Company filed a short form prospectus, dated February 21, 2017, which qualified for distribution 72 million common shares of the Company at CAD$0.35 per share for aggregate gross proceeds of CAD$25.2 million (net CAD$24.3 million, after agents fees of CAD$0.9 million)(“the Offering”). The Offering closed on February 24, 2017, and the net proceeds will be used by the Company to fund the development of the Moftinu Gas Development Project and pre-work for the 2018 drilling program in the Satu Mare Concession in Romania, production enhancement in the Sabria block in Tunisia, and for general corporate purposes.
- In Q1 2016, Serinus announced the closing of the sale of its 70% interest in Ukraine to Resano Trading Ltd. for total cash consideration of $33.2 million including all working capital and inter-company adjustments. Net proceeds of the sale were used to repay $19.2 million of debt and interest outstanding with the European Bank for Reconstruction and Development (“EBRD”) against the Romania and Tunisia debt facilities. The balance of the proceeds will be used for general corporate purposes and to help fund development of the Moftinu gas discovery in Romania. The results of operations of Ukraine are included in the consolidated results of Serinus up to the date the sale closed and are reflected as discontinued operations in the statement of operations.
- As at December 31, 2016, the outstanding principal on EBRD debt was $27.1 million, reflecting prepayments made as a result of the disposition of Ukraine, regular scheduled repayments made in March and September, and a repayment under the excess cash sweep provision in May 2016.
Summary Financial Results (US$ 000’s unless otherwise noted)
| Three Months Ending December 31 | Year Ending December 31 | ||||||||||||||||
| 2016 | 2015 | Change | 2016 | 2015 | Change | ||||||||||||
| Net Oil and Gas Revenue | 4,456 | 4,794 | (7 | %) | 15,947 | 25,975 | (39 | %) | |||||||||
| Net Income from Continuing Operations | (14,419 | ) | (14,333 | ) | 1 | % | (27,521 | ) | (52,150 | ) | 47 | % | |||||
| per share, basic and diluted | (0.18 | ) | (0.18 | ) | (0.35 | ) | (0.66 | ) | |||||||||
| Funds from Continuing Operations | (368 | ) | (2,192 | ) | (83 | %) | (4,652 | ) | 935 | (598 | %) | ||||||
| per share, basic and diluted | (0.01 | ) | (0.03 | ) | (47 | %) | (0.06 | ) | 0.01 | ||||||||
| Capital Expenditures | 975 | 563 | 73 | % | 3,651 | 13,233 | (72 | %) | |||||||||
| Average Production (net to Serinus from continuing operations) | |||||||||||||||||
| Oil (Bbl/d) | 842 | 1,001 | (16 | %) | 853 | 1,055 | (19 | %) | |||||||||
| Gas (Mcf/d) | 1,733 | 1,655 | 5 | % | 1,628 | 1,755 | (7 | %) | |||||||||
| BOE (boe/d) | 1,131 | 1,277 | (11 | %) | 1,124 | 1,348 | (17 | %) | |||||||||
| Average Sales Price (from continuing operations) | |||||||||||||||||
| Oil ($/Bbl) | $ | 47.40 | $ | 41.85 | 13 | % | $ | 42.10 | $ | 52.75 | (20 | %) | |||||
| Gas ($Mcf) | $ | 4.91 | $ | 6.17 | (20 | %) | $ | 4.71 | $ | 8.81 | (47 | %) | |||||
| BOE ($/boe) | $ | 42.82 | $ | 40.81 | 5 | % | $ | 38.75 | $ | 52.77 | (27 | %) | |||||
| December 31 | December 31 | |||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||
| Cash & Equivalents | 4,297 | 6,594 | 4,297 | 6,594 | ||||||
| Working Capital | (38,475 | ) | (11,243 | ) | (38,475 | ) | (11,243 | ) | ||
| Long Term Debt | – | – | ||||||||
| Shares Outstanding | 78,629,941 | 78,629,941 | 78,629,941 | 78,629,941 | ||||||
| Average for Period | 78,629,941 | 78,629,941 | 78,629,941 | 78,629,941 | ||||||
General & Financial Highlights
- Revenue, net of royalties, from Tunisia for year ended December 31, 2016 decreased to $14.0 million, compared to $23.0 million in 2015, due to lower commodity prices and lower production.
- For the three months ended December 31, 2016, revenue net of royalties decreased to $3.7 million, from $4.2 million in the comparative period of 2015, due to lower production, partially offset by higher commodity prices.
- Total royalties paid decreased from $3.0 million in 2015 to $2.0 million.in 2016. Much of this decrease was due to lower production and lower commodity prices.
- Serinus made capital expenditures of $3.6 million in 2016, of which $1.9 million and $1.7 million were in Tunisia and Romania respectively.
- Due to the continued decline in oil prices and technical reserve revisions, Serinus took a further impairment charge of $16.8 million at December 31, 2016 against its Tunisian assets versus $51.4 million for 2015.
- In 2016, $7.6 million of the EBRD Senior Loan, including interest, was repaid from proceeds of the sale of Ukraine, scheduled semi-annual installments were paid in March and September 2016 of $1.7 million each and a repayment of $3.4 million was made in May 2016 under the cash sweep mechanism. As at December 31, 2016, the principle outstanding under the Senior Loan was $7.1 million.
- At December 31, 2016, the Company was not in compliance with the financial debt to EBITDA ratio financial covenant at the corporate level on its debt held with the EBRD. The EBRD subsequently waived compliance with this ratio for the year ended December 31, 2016. Debt repayments will follow their original scheduled repayment terms and the bank will not be acting on its security. However, given the covenant was breached as at December 31, 2016, Serinus has reclassified its long-term debt to current in the financial statements, as required under accounting standards.
Operational Highlights
- During 2016, production from Tunisia averaged 1,124 boe/d, down from 1,348 boe/d during 2015, a decline of 17%. Lower production during 2016 was due to natural declines and various technical issues including a blockage at WIN-12bis, ESP pump failures and subsequent un-planned workovers required at CS-1, CS-9 and CS-3.
- In Q4 2016, production volumes decreased 11% to 1,131 boe per day, compared to 1,277 boe per day in the comparable period of 2015. The decreased production was due to natural declines and lower production in Chouech Es Saida as CS-3 and CS-1 wells went down in the middle of December. These two wells remain off-line in Q1 2017 pending pump replacement and workovers. CS-3 is anticipated to be back on stream in the second quarter of 2017 pending resolution of the shut-in of the Chouech Es Saida field announced February 28, 2017. The decline in production in the Chouech Es Saida field was offset by increased production in Sabria due to increased production from WIN12-bis as compared to 2015, due to a blockage in September and October restricting October 2015 production.
- Minimal capital activity was undertaken in 2016 due to the low commodity prices restricting capital spend in Tunisia. In Romania, the National Agency for Mineral Resources (“NAMR”), the Romanian regulator, granted its final approval for the Phase 3 Extension Addendum for the Satu Mare Concession (“Satu Mare”) in northwest Romania. The term is for three years and expires on October 28, 2019.
Outlook
Serinus will concentrate on the development of the Moftinu Gas Development Project in Romania which will include building surface facilities. This is a near-term project that is expected to begin producing from the gas discovery wells Moftinu-1001 and Moftinu-1000 in early 2018. The Corporation has obtained all necessary approvals for, and will soon commence, the construction of a gas plant with 15 MMcf/d of operational capacity. Construction of the project will proceed over 2017 with expected first gas from this project in Q1 2018. The Company is also developing the drilling program to meet work commitments for the extension.
Average working interest production in 2017 in Tunisia to the end of February was approximately 727 boe/d (556 bbl/d of oil, 1,030 MMcf/d of gas).
The Company’s production has been significantly curtailed in the first quarter of 2017 as a result of the shut-in of the Chouech Es Saida field in Tunisia, which is expected to continue for the duration of the first quarter. Assuming the continued shut-in, production is projected to be approximately 650 boe/d for the first quarter of 2017. Full year production for 2017 is dependent on the successful resolution of the sit-in at the Chouech Es Saida field and associated security and safety issues, as well as the timing of the above mentioned capital program in Sabria.
Executive Appointment
The Company is pleased to announce the appointment of Mr. Calvin Brackman as Vice President, External Relations & Strategy. Mr. Brackman has a wealth of external relations and strategic planning experience, including being Director of Government Relations at PetroKazakhstan Inc. from 2003 to 2005. For the past 10 years Mr. Brackman has worked as a consultant and advised numerous international oil companies. Mr. Brackman has been Director of External Relations with Serinus since December, 2016.
Supporting Documents
The full Management Discussion and Analysis (“MD&A“) and Financial Statements have been filed in English on www.sedar.com and in Polish and English via the ESPI system, and will also be available on www.serinusenergy.com.
Abbreviations
| bbl | Barrel(s) | bbl/d | Barrels per day | |
| boe | Barrels of Oil Equivalent | boe/d | Barrels of Oil Equivalent per day | |
| Mcf | Thousand Cubic Feet | Mcf/d | Thousand Cubic Feet per day | |
| MMcf | Million Cubic Feet | MMcf/d | Million Cubic Feet per day | |
| Mcfe | Thousand Cubic Feet Equivalent | Mcfe/d | Thousand Cubic Feet Equivalent per day | |
| MMcfe | Million Cubic Feet Equivalent | MMcfe/d | Million Cubic Feet Equivalent per day | |
| Mboe | Thousand boe | Bcf | Billion Cubic Feet | |
| MMboe | Million boe | Mcm | Thousand Cubic Metres | |
| CAD | Canadian Dollar | USD | U.S. Dollar |
Cautionary Statement:
BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf:1 bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
About Serinus
Serinus is an international upstream oil and gas exploration and production company that owns and operates projects in Tunisia and Romania.
For further information, please refer to the Serinus website (www.serinusenergy.com).
Translation: This news release has been translated into Polish from the English original.
Forward-looking Statements
This release may contain forward-looking statements made as of the date of this announcement with respect to future activities that either are not or may not be historical facts. Although the Company believes that its expectations reflected in the forward-looking statements are reasonable as of the date hereof, any potential results suggested by such statements involve risk and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Various factors that could impair or prevent the Company from completing the expected activities on its projects include that the Company’s projects experience technical and mechanical problems, there are changes in product prices, failure to obtain regulatory approvals, the state of the national or international monetary, oil and gas, financial, political and economic markets in the jurisdictions where the Company operates and other risks not anticipated by the Company or disclosed in the Company’s published material. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties and actual results may vary materially from those expressed in the forward-looking statement. The Company undertakes no obligation to revise or update any forward-looking statements in this announcement to reflect events or circumstances after the date of this announcement, unless required by law.
Notes: Serinus prepares its financial results on a consolidated basis. Unless otherwise noted by the phrases “allocable to Serinus”, “net to Serinus”, “attributable to SEN shareholders” or “SEN WI”, all values and volumes refer to the consolidated figures. Serinus reports in US dollars; all dollar values referred to herein, whether in dollars or per share values are in US dollars unless otherwise noted.
Calvin Brackman
Vice President, External Relations & Strategy
+1-403-264-8877
cbrackman@serinusenergy.com
Serinus Energy Inc.
Jeffrey Auld
Chief Executive Officer
+1-403-264-8877
jauld@serinusenergy.com
www.serinusenergy.com