Serinus Energy plc (LON:SENX) has raised US$21m of new equity at 2p/share, US$16.5m of which will be paid out as part of a deal to retire 100% of the company’s debt, and will see the company become debt-free. It will will then concentrate the balance of the placing and, importantly, its ongoing production cash flows on new work programmes, targeting ongoing production growth from its existing portfolio going forward.
DirectorsTalk Interviews caught up with Daniel Slater, Analyst at Arden Partners to discuss the news.
Q. Daniel what can you tell us about the current asset position?
Existing portfolio returned net 2.5mboe/d production for EBITDA of US$5.3m in H1 2020, with significant opportunities for growth from new work programmes.
Q. What has been the balance sheet’s limiting factor?
US$30.8m reported end H1 2020 debt position used up the majority of company cash flows in repayments, severely limiting ability to pursue new work programmes.
Q. We note that there was an equity raise and debt retirement?
Yes Serinus Energy has raised US$21m of equity, of which US$16.5m will be paid to lender the EBRD in exchange for retiring 100% of the outstanding debt (the EBRD will also receive 9.9% equity in the enlarged plc under the deal).
Q. What can you tell us about the new work programme targeting increased production?
The company has a planned work programme across its Romania and Tunisia portfolio, targeting strong production increases over the coming years. The equity raise will free up company cash flows that will then be used to finance this growth programme.
Q. And the potential for cash flow growth?
Executing the planned work programme could see EBITDA of up to between US$39m and US$50m achieved over the coming years, based on our numbers with base case oil and gas pricing and depending on exploration success.
Q. How does this play into the valuation?
The equity raise will see value accrue to the equity from both the retirement of debt over and above the US$16.5m payment, and also from the ability to pursue the company’s planned work programme, creating newsflow and increased cash flows.