· Revenue for the six months ended 30 June 2021 was $15.9 million (30 June 2020 – $13.3 million)
· Funds from operations for the six months ended 30 June 2021 were $5.3 million (30 June 2020 – $4.3 million)
· EBITDA for the six months ended 30 June 2021 was $5.5 million (30 June 2020 – $5.0 million)
· Gross profit for the six months ended 30 June 2021 was $2.1 million (30 June 2020 – gross loss $1.2 million)
· Commodity prices remain strong, driven by post-COVID economic recovery. European gas prices are at record highs. Net realised price of $43.83/boe, comprising:
o Realised oil price – $58.06/bbl
o Realised natural gas price – $6.59/Mcf
· The Group’s operating netback for the six months ended 30 June 2021 was $26.72/boe (30 June 2020 – $18.44/boe), comprising:
o Romania operating netback – $28.73/boe (30 June 2020 – $21.34/boe)
o Tunisia operating netback – $21.85/boe (30 June 2020 – $9.42/boe)
· Capital expenditures of $5.9 million (30 June 2020 – $3.1 million), comprising:
o Romania – $5.2 million
o Tunisia – $0.7 million
· Cash balance as at 30 June 2021 was $5.7 million
· On 15 July 2021 the Company announced that the Sancrai-1 exploration well was a gas discovery.
· The Sancrai-1 discovery is a step towards unlocking an estimated 181 MMboe mean unrisked or 73 MMboe of mean risked recoverable resources on the Satu Mare Concession Area.
· The Sancrai-1 exploration well commenced drilling on 29 June 2021. The well is the final commitment of the third exploration phase on the Satu Mare Concession and has been drilled to 1,600 metres.
· Compression on the Moftinu gas field continues to be advanced with the first compression unit due to be delivered in August. The compression project is designed to stabilise the natural decline of the Moftinu gas field and allow for extended production in the future.
· Serinus has accelerated the re-processing of 2D seismic lines on the Satu Mare Concession Area to enable the use of these legacy assets to design future drilling and development options more accurately in the Sancrai and Madaras areas.
· In Tunisia the Artificial Lift programme continues to be advanced with approvals having been received from the field partner and the design and purchase of pumps having commenced.
· Whilst the pandemic has created a more difficult operating environment the Company has conducted further workover operations in the Chouech area allowing for a standardization of pumps and increased production.
· Production for the period averaged 2,012 boe/d, comprising:
o Romania – 1,442 boe/d
o Tunisia – 570 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 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.
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 seismic and the Group considers the concession to have multiple sizable prospects available for further exploration.
During the six months ended 30 June 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).
Serinus also commenced drilling of the Sancrai-1 exploration well on 29 June 2021. 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 sand zone prior to completing the well and subsequently announced that the testing programme was unable to record the flow of gas in the selected zones. The Sancrai-1 exploration well will be suspended pending further technical studies to better understand the Sancrai structure and evaluate the options available, given the high total gas readings during drilling.The well is the final commitment of the third exploration phase on the Satu Mare Concession and lies approximately 7.8 km to the south of the Moftinu Gas Development project.
The project to introduce compression onto the first of two wells on the Moftinu gas field is progressing on-schedule and is expected to be undertaken in conjunction with a planned maintenance shutdown in the third quarter, with the second compressor to be added early next year. The project is intended to stabilise the natural decline of the Moftinu gas field and allow for extended production in the future.
Serinus has accelerated the re-processing of 2D seismic lines on the Satu Mare Concession Area to enable the use of these legacy assets to design future drilling and development options more accurately in the Sancrai and Madaras area.
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 partners’ 40% participating interest and to compel transfer of that interest to the Company.
The Company currently holds five concession areas within Tunisia. Of the five concession areas the Company is currently focused on, three of those areas 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, in time with proper reservoir studies, to conduct further development operations.
The first Artificial Lift programme, which will be implemented on the W-1 well in the Sabria field, has received approval from the field partner and the design, selection and purchase of pumps has commenced. The project is expected to continue throughout the second half of the year.
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 area to replace and standardise pumps in order to increase production.
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, Calgary and Bucharest are all currently open and working in compliance with local recommendations, however in Tunisia a recent sharp increase 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. The Company has experienced minor timing delays associated with the movement of staff and services; this has not affected our operational plans.
LIQUIDITY, DEBT AND CAPITAL RESOURCES
During the six months ended 30 June 2021, the Company spent a total of $5.9 million (2020 – $3.1 million) on capital expenditures. In Romania the Group spent $5.2 million (2020 – $2.3 million) on the drilling, completion and tie-in of the M-1008 well, as well as some drilling costs on the Sancrai-1 well. In Tunisia, the Company spent $0.7 million (2020 – $0.8 million) completing workovers on various wells to enhance production.
The Company’s funds from operations for the six months ended 30 June 2021 were $5.3 million (2020 – $4.3 million). Considering the movement in working capital, the cash flow generated from operating activities in 2021 was $5.9 million (2020 – $3.1 million). The Company is now in a strong position to expand and continue growing production within our existing resource base. The Company is debt-free and has adequate resources available to deploy capital into both operating segments to deliver growth and shareholder returns.
|30 June2021||31 December 2020|
|Working Capital deficit||(7,555)||(6,199)|
The working capital deficit at 30 June 2021 was $7.6 million (31 December 2020 – $6.2 million). The increase in working capital deficit is primarily a result of capital expenditures in the period offset by funds from operations.
Current assets as at 30 June 2021 were $15.7 million (31 December 2020 – $16.0 million), a decrease of $0.3 million. Current assets consist of:
· Cash and cash equivalents of $5.7 million (31 December 2020 – $6.0 million).
· Restricted cash of $1.2 million (31 December 2020 – $1.2 million).
· Trade and other receivables of $8.8 million (31 December 2020 – $8.9 million).
Current liabilities as at 30 June 2021 were $23.3 million (31 December 2020 – $22.2 million), an increase of $1.0 million. Current liabilities consist of:
· Accounts payable of $14.7 million (31 December 2020 – $14.3 million) which includes $6.0 million (31 December 2020 – $6.0 million) related to historic work commitments in Brunei.
· Decommissioning provision of $7.5 million (31 December 2020 – $7.1 million).
o Brunei – $1.8 million (31 December 2020 – $1.8 million).
o Canada – $1.1 million (31 December 2020 – $1.0 million) which are offset by restricted cash in the amount of $1.2 million (31 December 2020 – $1.2 million) in current assets.
o Romania – $0.7 million (31 December 2020 – $0.6 million).
o Tunisia – $3.9 million (31 December 2020 – $3.7 million).
· Income taxes payable of $0.9 million (31 December 2020 – $0.6 million).
· Current portion of lease obligations of $0.2 million (31 December 2020 – $0.2 million).
Property, plant and equipment (“PPE”) decreased to $75.6 million (31 December 2020 – $77.8 million), primarily due to depletion expense in the period of $5.9 million, partially offset by capital expenditures in PPE of $4.0 million. Exploration and evaluation assets (“E&E”) increased to $1.9 million (31 December 2020 – $0.01 million), primarily due to expenditures incurred on the Sancrai-1 well.