Serinus Energy Inc. (“Serinus”, “SEN” or the “Company”), is pleased to report its financial and operating results for the quarter ended March 31, 2016.
Note: with the sale of its 70% ownership interest in Ukraine, the financial results from those assets have been reclassified as discontinued operations for the three months ending March 31, 2016. The comparative financial statements have been restated to show the discontinued operations separate from continuing operations. In accordance with IFRS standards, results of operations in Ukraine are included up to the date of close in Serinus’ consolidated financial results
First Quarter Highlights
- In early February, Serinus closed the sale of all its interests in Ukraine. Total final consideration was $33.2 million including the previously disclosed $32.9 million plus subsequent working capital and inter-company adjustments. The Company purchased its position in Ukraine in 2010 for $45 million, and received aggregate dividends and other payments in the amount of $41.5 million which, when combined with the sales proceeds, resulted in a 12.5% annual rate of return over the life of the project.
- From the proceeds of the Ukraine sale, the Company repaid a total of $19.2 million of debt and accrued interest to the European Bank for Reconstruction and Development (“EBRD”). Subsequent to quarter end, a further repayment of $3.4 million was made, reducing corporate debt plus accrued interest to $31.0 million
- Production for Q1 2016 averaged 2,213 boe/d, down 44% and 50% vs. Q4 2015 and Q1 2015 respectively. The major causes of the drop were the sale of the Ukraine assets, lost time to workovers and testing and natural declines manifesting themselves in Tunisia
- Tunisian netbacks rose from $4.55/boe in Q4 2015 to $11.44/boe in Q1 2016, with the Company’s ongoing cost reduction efforts more than offsetting lower commodity prices.
- Funds from Operations in the first quarter were down 35% to $2.7 million vs. $4.3 million in Q1 2015, and down 24% compared to Q4 2015, due primarily to the sale of the Ukraine assets and lower production rates. The amount allocable to SEN shareholders was $1.8 million.
- The net loss for the quarter, before currency charges, was $34.8 million ($35.5 million attributable to SEN shareholders), as compared to a $4.1 million loss in Q1 2015 ($4.3 million attributable to SEN shareholders). The Company realized a non-cash loss on disposition on the Ukraine assets of $33.0 million on closing, primarily relating to cumulative foreign exchange translation adjustments of $34.2 million being removed from the balance sheet.
- Capital expenditures for the quarter were $1.0 million vs. $11.2 million for the same period in 2015 and $1.9 million in Q4 2015 and consisted of workovers in Tunisia and preparatory work
Notes: Serinus prepares its financial results on a consolidated basis, which includes 100% of its indirectly 70% owned subsidiary, KUB-Gas LLC (“KUB-Gas”). Unless otherwise noted by the phrases “allocable to Serinus”, “net to Serinus”, “attributable to SEN shareholders” or “net to SEN WI”, all values and volumes refer to the consolidated figures. Serinus reports in US dollars; all dollar values referred to herein, whether in dollars or per share values are in US dollars unless otherwise noted.
and licencing in Romania. Low commodity prices made drilling in Tunisia uneconomic, and significant expenditures in Romania cannot be made until the final ratification of the Phase 3 extension of the Satu Mare concession.
Summary Financial Results (US$ 000’s unless otherwise noted)
| 2016 | 2015 | Change | ||
| Oil and Gas Revenue | 3,779 | 8,128 | (54%) | |
| Net Income (as reported) | (34,794) | (4,123) | 744% | |
| per share, basic and diluted | ($0.44) | ($0.05) | ||
| Net Income (allocable to SEN) | (35,515) | (4,268) | 732% | |
| per share, basic and diluted | ($0.45) | ($0.05) | ||
| Comprehensive Net Income (as reported) | (37,084) | (14,990) | 147% | |
| per share, basic and diluted | ($0.47) | ($0.19) | ||
| Funds from Operations* (as reported) | 2,732 | 4,344 | (37%) | |
| per share, basic and diluted | $0.03 | $0.06 | ||
| Funds from Operations* (allocable to SEN) | $1,828 | $3,167 | (42%) | |
| per share, basic and diluted | 0.02 | $0.04 | ||
| Capital Expenditures | $999 | $11,246 | (91%) | |
| Average Production (net to Serinus, including discontinued operations) | ||||
| Oil | (Bbl/d) | 901 | 1,240 | (27%) |
| Gas | (Mcf/d) | 7,716 | 18,581 | (58%) |
| Liquids | (Bbl/d) | 26 | 69 | (62%) |
| BOE | (boe/d) | 2,213 | 4,406 | (50%) |
| Average Sales Price Oil |
($/Bbl) |
$37.12 |
$53.85 |
(31%) |
| Gas | ($Mcf) | $6.44 | $8.13 | (21%) |
| Liquids | ($Bbl) | $29.34 | $39.83 | (26%) |
| BOE | ($/boe) | $37.98 | $49.75 | (24%) |
| March 31 | ||||
| 2016 | 2015 | |||
| Cash & Equivalents | 13,442 | 22,819 | ||
| Working Capital | (2,184) | (7,685) | ||
| Long Term Debt | 27,236 | 44,533 | ||
| Shares Outstanding | 78,629,941 | 78,629,941 | ||
| Average for period | 78,629,941 | 78,629,941 | ||
* Funds from Operations is not a recognized measure under IFRS. See Management’s Discussion and Analysis for further information on non-IFRS measures.
Operational Highlights & Update
First quarter production and prices are broken down as follows:
Q1 2016 Production1 Q1 2016 Commodity Prices Ukraine2 Tunisia Total Ukraine Tunisia Total
| Oil | (bbl/d) | – 901 | 901 | ($/bbl) | – $37.12 | $37.12 |
| Gas | (Mcf/d) | 6,198 1,518 | 7,716 | ($/Mcf) | $6.63 $5.31 | $6.44 |
| Liquids | (bbl/d) | 26 – | 26 | ($/bbl) | $29.34 – | $29.34 |
| Boe | (boe/d) | 1,059 1,154 | 2,213 | ($/boe) | $39.52 $35.97 | $49.75 |
- Numbers may not add due to rounding
- Ukraine volumes are Serinus 70% interest
- Production in Tunisia for the first quarter was 1,154 boe/d, consisting of 901 bbl/d of oil and
1.5 MMcf/d of natural gas. This was 10% lower than in the prior quarter (Q4 2015) and was due substantially to downtime incurred changing out bottomhole pumps and wells shut in for pressure build ups. Production was down 27% vs. Q1 2015, as the WIN-12bis well continues to produce at restricted rates due to scaling issues, two more wells in Sabria require workovers, and natural declines have manifested themselves in the absence of new drilling.
- Ukraine production was 1,059 boe/d (6.2 MMcf/d of gas and 26 bbl/d of condensate, both volumes are SEN’s 70% WI) averaged over the entire quarter. The actual rates from January 1 until the closing of the sale in early February were 15.6 MMcf/d and 66 bbl/d, marginally lower than the 15.8 MMcf/d and 56 bbl/d in the prior
- During the quarter, the Company worked over two wells in the Chouech Es Saida permit to replace the electric submersible pumps (“ESP”s). The ESP in CS-3 failed in early January and was replaced in early February, restoring the well to its previous rate of approximately 275 boe/d. The ESP in CS-1 well failed in late February, and the well was returned to production in mid-March and is currently producing approximately 185 boe/d.
- The Company continued work on the program to bring the Moftinu gas discovery in Romania on to experimental production status. This included pre-permitting and licencing work for wellsites and flowline routes, land rentals and engineering studies for the requisite surface facilities.
Outlook
Average daily production for the second quarter to date was approximately 1,225 boe/d (902 bbl/d of oil, 1.9 MMcf/d of gas).
In light of the current low commodity price environment, the Company’s focus will be on reducing costs wherever possible while maintaining existing production in Tunisia. The Company estimates that new drilling will become economically viable at sustained prices in the mid – forties per barrel, although existing production in Tunisia remains cash flow positive at prices as low as $30/bbl. The 2016 budget will be re-examined on an ongoing basis in the event of that management becomes confident that such a price can be sustained, and that funding is available to recommence drilling.
In Romania, Serinus will concentrate on moving the Moftinu-1001 discovery into the experimental production phase. Management is currently refining the drilling program and has commenced preliminary design of the required surface facilities. Pending ratification by several government ministries of the Phase 3 extension of the Satu Mare Concession, and receipt of typical permits and approvals, drilling and construction could commence in the second half of 2016. The Company is considering taking on a joint venture partner to assist in financing the Moftinu project.
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 |
| UAH | Ukrainian Hryvnia | USD | U.S. Dollar |
| CAD | Canadian Dollar | $M | Thousands of Dollars |
| $MM | Millions of Dollars |
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.
Test results are not necessarily indicative of long-term performance or of ultimate recovery. Test data contained herein is considered preliminary until full pressure transient analysis is complete.
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) or contact the following:
Serinus Energy Inc. – Canada
Norman W. Holton
Vice Chairman
Tel.: +1-403-264-8877
Serinus Energy Inc. – Canada
Gregory M. Chornoboy
Director – Capital Markets & Corporate Development
Tel: +1-403-264-8877
Serinus Energy Inc. – Poland
Jakub J. Korczak
Vice President Investor Relations & Managing Director CEE
Tel.: +48 22 414 21 00
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.