Serinus Announces Q3 2017 Financial and Operating Results, Contemplating AIM Listing

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| Source: Serinus Energy Inc.

CALGARY, Alberta, Nov. 09, 2017 (GLOBE NEWSWIRE) -- Serinus Energy Inc. (“Serinus”, “SEN” or the “Company”) (TSX:SEN) (WARSAW:SEN), is pleased to report its financial and operating results for the three months ended September 30, 2017.

Q3 2017 Highlights

  • Production in 2017 has been severely impacted due to labour issues and social unrest in Tunisia. The Chouech Es Saida field has been shut-in since February 28, 2017 initially due to labour issues. In addition, the Sabria field was shut-in from May 22, 2017, due to continued social unrest in the southern part of the country. The social unrest ended early September and the Company has restarted production at Sabria resulting in average volumes of 88 boe/d in Q3 2017, a decrease of 91% from 1,008 boe/d in Q3 2016.
  • The netback for Tunisia in Q3 2017 was ($29.25) per boe, compared to $12.54 per boe in Q3 2016. The negative netback was due to the production from the fields being shut-in for over two months of the quarter. 
  • Funds generated from operations was an outflow of $0.6 million for the three months ended September 30, 2017 compared to an outflow of $3.2 million in Q3 2016. The improvement was primarily attributable to lower G&A expenses in the current period, partially offset by the lower production base. On a year to date basis, funds from operations decreased by $0.6 million to an outflow of $1.9 million, compared to an outflow of $1.3 million in the nine months ended September 30, 2016, due to the disposition of Ukraine and lower production volumes and operating cash flow, partially offset by lower G&A.
  • The net loss for the nine months ended September 30, 2017 was $9.1 million, compared to a net loss of $13.1 million in the nine-month period ended September 30, 2016. 
  • Serinus is concentrating on the development of the Moftinu-1001 gas discovery, which includes building surface facilities, for the remainder of 2017.  The Moftinu gas development project is a near-term project that is expected to begin producing from the gas discovery wells Moftinu-1001 and Moftinu-1000 in early 2018.
  • Subsequent to September 30, 2017, the terms of the loan facilities with the European Bank for Reconstruction and Development (“EBRD”) have been restructured, which the Company believes provides the appropriate balance to be able to meet the debt servicing requirements while also being able to make the capital investments necessary to grow the Company. The restructured agreements provide for changes to specific terms of each loan facility as well as to the financial ratio covenants. The key points are that there is a deferral of repayments under the Senior Loan until March 31, 2019, though a cash sweep provision remains in effect. The convertible loan maturity has been extended and repayments have been amortized over four years (2020 to 2023) rather than one bullet payment in June 2021. In addition, the restructuring provides for relief from all financial covenants for one year until September 2018, and all requirements for covenants at the Tunisia level have been removed permanently. The debt to EBITDA ratio has been increased to a maximum of 10.0 times as at September 30 and December 31, 2018 and then at 2.5 times thereafter. The debt service coverage ratio, which is effective as at December 31, 2018, is set at a minimum of 1.3 times and is now only applicable to the Senior Loan.
  • At September 30, 2017, Serinus was not in compliance with the consolidated financial debt to EBITDA ratio, the consolidated debt service coverage ratio and the Tunisian financial date to EBITDA ratio on its debt held with the EBRD under the original loan agreements, effective on that date.  EBRD had formally waived compliance with these ratios prior to September 30, 2017.

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.    

Summary Financial Results (US$ 000’s unless otherwise noted)

                 
    Three Months Ended September 30
         
     2017   2016  Change
                                                                               
Oil and Gas Revenue    382   3,632      (89%)
         
Net Income (Loss) from Continuing Operations (7,043)  (4,971) (42%)
per share, basic and diluted   (0.05)  (0.06)  
         
Funds from Continuing Operations   (585)  (3,186) (82%)
per share, basic and diluted   (0.00)  (0.04) (90%)
         
Capital Expenditures    3,335   1,066    213%
           
Average Production (net to Serinus from continuing operations)     
Oil(bbl/d)                                                                         65   787  (92%)
Gas(Mcf/d)   136   1,324  (90%)
BOE(boe/d)   88   1,008  (91%)
           
Average Sales Price (from continuing operations)      
Oil($/bbl)    $50.00  $43.01  16%
Gas($/Mcf)  $6.71  $4.26  58%
BOE($/boe)    $47.48  $39.19  21%
         
    September 30 December 31  
     2017   2016   
Cash & Cash Equivalents    13,451   4,297   
Working Capital (deficit)    (2,119)  (38,475)  
Long Term Debt    25,750   -   
         
Shares Outstanding     150,652,138     78,629,941   
Average for Period    150,652,138   78,629,941   
         

General & Financial Highlights

  • Revenue, net of royalties, from Tunisia for the three and nine months ended September 30, 2017 decreased to $0.34 million and $4.19 million, compared to $3.25 million and $10.25 million in the comparative periods of 2016.  The decrease in 2017 was attributable to lower production due to the shut-in of production in Tunisia, partially offset by higher commodity prices and lower royalty rates.
  • Total royalties paid decreased from $0.38 million in Q3 2016 to $0.04 million in Q3 2017.  Much of this decrease was due to lower production due to the shut-in of production in Tunisia, offset by higher average commodity prices.
  • Serinus made capital expenditures of $3.34 million in Q3 2017, of which $3.32 million was expended in Romania and $0.02 million was expended in Tunisia. 
  • At September 30, 2017, the Company was not in compliance with the consolidated financial debt to EBITDA ratio, the consolidated debt service coverage ratio and the Tunisian financial date to EBITDA ratio on its debt held with the EBRD under the original loan agreements, effective on that date.  EBRD had formally waived compliance with these ratios prior to September 30, 2017.  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. Given that the waiver from the EBRD was received prior to September 30, 2017, the Company was not required to reclassify its long-term debt to current in the financial statements, as it has done in recent financial statements under accounting standards. 
  • Subsequent to September 30, 2017, the terms of the loan facilities with the EBRD have been restructured, which the Company believes provides the appropriate balance to be able to meet the debt servicing requirements while also being able to make the capital investments necessary to grow the Company. The restructured agreements provide for changes to specific terms of each loan facility as well as to the financial ratio covenants. The key points are that there is a deferral of repayments under the Senior Loan until March 31, 2019, though a cash sweep provision remains in effect. The convertible loan maturity has been extended and repayments have been amortized over four years (2020 to 2023) rather than one bullet payment in June 2021. In addition, the restructuring provides for relief from all financial covenants for one year until September 2018, and all requirements for covenants at the Tunisia level have been removed permanently. The debt to EBITDA ratio has been increased to a maximum of 10.0 times as at September 30 and December 31, 2018 and then at 2.5 times thereafter. The debt service coverage ratio, which is effective as at December 31, 2018, is set at a minimum of 1.3 times and is now only applicable to the Senior Loan. 

Operational Highlights

  • During Q3 2017, production from Tunisia averaged 88 boe/d, a decrease from 1,008 boe/d in Q3 2016. Lower production during 2017 was due to the shut-in of fields in Tunisia. Chouech Es Saida field has been shut-in in since February 28, 2017 and continues to be shut-in due to social unrest in southern Tunisia. The Sabria field was also shut-in from May 22, 2017, to September 3, 2017, due to the social unrest.
  • In Tunisia, the Company incurred $0.02 million of capital expenditures for the three month period ended September 30, 2017. In Romania, the Company incurred $3.32 million of capital expenditures for the three month period ended September 30, 2017.  In Q3 2017 construction continued on the Moftinu gas plant.  Incurred costs included engineering, procurement, and construction of the Moftinu Gas Project, as well as costs associated with the Bucharest office.  

Outlook

The Company is focusing on Romania as the impetus for growth over the next several years. The Moftinu Gas Project is a near-term project that is expected to begin producing from the gas discovery wells Moftinu-1001 and Moftinu-1000 in early 2018. Construction of the project commenced in Q2 2017 and continued in Q3 2017. The project consists of a gas plant with 15 MMcf/d of operational capacity with well tie-in and a sales gas line tie-in to the Transgaz system (national natural gas transmission pipeline system of Romania), with expected first gas production in the first quarter of 2018.

The Company is also developing the drilling program to meet work commitments for the extension and plans to drill two additional development wells (Moftinu-1003 and 1004) with a potential third well in 2018. The Corporation sees potential production from these wells being able to bring the gas plant to full capacity in late 2018.

In Tunisia, the Company is currently focusing on improving production from Sabria following the shut-in and plans to focus on carrying out low cost incremental work programs to increase production from existing wells, including the Sabria N-2 re-entry and installing artificial lift on another Sabria well, having determined that production at its oil field can be restarted in a safe and secure environment with sufficient comfort that there will be no further production disruptions for the foreseeable future. The Corporation views Sabria as a large development opportunity longer term.

For the Chouech Es Saida field, the Company is evaluating the restart of the field including timing and costs to replace the electric submersible pump for the CS-3 well. The Company views the level of activity pursued in Tunisia as dependent on the following thresholds being achieved and maintained. In terms of oil prices, incremental vertical wells become economic at Brent oil prices of ~$45/bbl, with potential multi-leg horizontal wells lowering the threshold to below $30/bbl in Sabria. The current capacity of surface facilities would only allow for 1-3 incremental wells for each of Sabria and Chouech Es Saida/Ech Chouech. As well for Chouech Es Saida/Ech Chouech, the STEG El Borma gas plant is nearly at its effective capacity. Further gas developments from this concession may have to be delayed until the completion of the Nawara Pipeline for material gas pipeline capacity to come online.

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.    

Contemplating AIM Listing

The Company is investigating the listing of its shares on the Alternative Investment Market (“AIM”) of the London Stock Exchange. Significant progress has been made towards this end and the Company is currently considering the relevant regulatory requirements of its existing listings. 

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) or contact the following:

Serinus Energy Inc.
Calvin Brackman
Vice President, External Relations & Strategy
Tel.: +1-403-264-8877
cbrackman@serinusenergy.com
Serinus Energy Inc.
Jeffrey Auld
Chief Executive Officer
Tel.: +1-403-264-8877
jauld@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.