# Serinus Energy revenue for H1 more than doubles despite COVID 19

- Link: https://www.directorstalkinterviews.com/serinus-energy-revenue-for-h1-more-than-doubles-despite-covid-19/412851355
- Published: 2020-08-14T07:10:46+01:00
- Author: Giles Arbor

**[Serinus Energy plc](https://www.directorstalkinterviews.com/company/serinus-energy-plc/senx.l)**(
[LON:SENX](https://www.directorstalkinterviews.com/company/serinus-energy-plc/senx.l),
WSE:SEN) has announced the release of its interim results for the Six Months Ended
30 June 2020.

**HIGHLIGHTS**

**Operational**

·      Serinus Energy plc has continued to operate safely and effectively through
the COVID-19 crisis, with the successful implementation of operational and monitoring
protocols in line with the recommendations of local jurisdictions to ensure the 
health and safety of our employees.

·      For the six months ended 30 June 2020, average production (boe/d) increased
by 1,815 or 267% to 2,495 (2019 – 680), comprised of 1,903 (2019 – 372) in Romania
and 592 (2019 – 308) in Tunisia, an increase of 1,531 or 412% and 284 or 92%, respectively.

·      The first half production exit rate (boe/d) at the end of June 2020 was 2,514
comprised of 1,931 in Romania and 583 in Tunisia.

·      The Company’s Romanian 3D acquisition programme, due to be completed in the
first half of 2020, has been postponed due to the restrictions caused by COVID-19
since mid-March.

·      Production increases in Tunisia have been lower than anticipated due to the
inability of the Company to mobilize necessary technical experts across national
borders due to the COVID-19 pandemic.

·      The Company has lowered the production expense per barrel, which averaged
$8.68 (2019 – $16.54), in the face of a significant decline in commodity prices 
experienced during the period.

**Financial**

·      For the six months ended 30 June 2020 the Company generated $13.3 million(
2019 – $6.4 million) in gross revenue or $12.4 million (2019 – $6.4 million) net
of royalties. This was comprised of $9.9 million (2019 – $3.0 million) in Romania
and $3.4 million (2019 – $3.4 million) in Tunisia.

·      For the six months ended 30 June 2020 funds from operations amounted to $
4.3 million (2019 – $1.4 million).

·      For the six months ended 30 June 2020 realised crude oil price per barrel(“
bbl”) averaged $31.96 (2019 – $63.07) and realised natural gas price per thousand
cubic feet (“mcf”) averaged $4.74 (2019 – $7.82).

·      Capital expenditures for the six months ended 30 June 2020 of $3.1 million(
2019 – $1.6 million).

·      Given the ongoing uncertainty of the COVID-19 crisis and the difficulty in
moving personnel and equipment during this crisis all future capital investment 
plans have been postponed. Capital will only be allocated to ensure the safe and
continued operation of our production facilities.

·      On 22 June 2020, the Group agreed with its lender, the European Bank for 
Reconstruction and Development (“EBRD”), to pay $2.0 million of its 30 June 2020
payment under the Convertible Loan and defer the remaining $6.4 million for a period
of 12 months.

**OPERATIONAL UPDATE**

In Romania, the Company currently has three wells producing from the Moftinu field.
The Company has begun the permitting process for M-1008 which was expected to be
drilled in late 2020 or early 2021. Currently all drilling plans have been postponed
due to the COVID-19 crisis. The Company expects to advance this well as soon as 
it is deemed safe and restrictions imposed by the Romanian Government are lifted.
The Company had permitted a 148 km^(2) 3D seismic acquisition programme in the Capleni
area just north of the Moftinu Gas Plant and reached land access agreements with
all landowners within the seismic acquisition area. The Company had ordered the 
mobilization of the seismic equipment and staff to begin the programme, however,
due to restrictions imposed by the declaration of a state of emergency in Romania
as a result of the COVID-19 pandemic and the impacts on travel and services in Romania
and the Satu Mare County, the Company and its seismic contractor have postponed 
the programme. The Company is in constructive discussions with the Romanian regulatory
authorities to agree an extension to this commitment.

Production has continued to increase in Tunisia from more efficient subsurface pumps
and the steady decrease in water cuts. Since returning the Chouech and Ech Chouech
fields to production following their prolonged shut-in due to social disturbances,
the Company has seen steady improvements in production. The Company has continued
to identify programs to replace older pumps and other low-cost workovers that have
demonstrated positive production increases. These programs will be implemented when
there is more certainty with regard to the restrictions dictated by the COVID-19
crisis.

**OUTLOOK**

**COVID-19**

The Company’s top priority is the health, safety and wellbeing of all our staff 
throughout this difficult time. During the second quarter, Tunisia and Romania have
reopened their offices with strict safety measures, such as social distancing, reduced
daily occupancy and wearing masks. Field operations have had modifications to ensure
social distancing and to ensure safe practices and have continued to operate with
no setbacks. Governments around the world are implementing strategies to reopen 
their economies gradually, therefore the Group is closely monitoring each jurisdiction
and will continue to abide by the recommendations set forth by their local jurisdiction.

**Romania**

All capital plans in Romania have been postponed as well as the scheduled maintenance
programme at the Moftinu Gas Plant that was set for May 2020, which is now scheduled
for September 2020. Our teams have designed an incremental maintenance programme
considering the postponed gas plant turn-around and has ensured this change will
not have any negative impacts to the safety or performance of the gas plant.

The Company had previously announced that it had fully permitted and was preparing
to commence a 3D seismic acquisition programme in the Capleni area. This programme
has been delayed by the governmental restrictions on the movement of personnel and
equipment and the limitations of large gatherings during this period. The Company
has agreed with its seismic contractor to extend the existing contracts by one year
to allow for the future completion of this programme. Subject to the ongoing uncertainty
regarding the COVID-19 crisis the Company hopes to recommence this programme in 
early 2021.

The M-1008 production well has been permitted and was expected to be drilled in 
late 2020 or early 2021, however due to the COVID-19 restrictions, it is uncertain
when any further work may be completed for the drilling of this well.

**Tunisia**

The Company continues to identify work in Tunisia focused on low capital, high return
production enhancements that can be implemented in the future. During the period
the Company performed additional work in the Chouech and Ech Chouech fields focused
on pump replacement and pump performance, resulting in a gradual but progressive
increase in production. Due to the COVID-19 crisis, there have been minor disruptions
due to the availability of service providers, delaying further pump enhancement 
work. The Company will continue to monitor the crisis and the commodity prices to
determine when to continue with the workover programs.
 

**FINANCIAL REVIEW**

Liquidity, Debt and Capital Resources

In Romania, the Group invested $2.3 million (2019 – $1.4 million) in the six months
ended 30 June 2020 primarily to drill, complete, and tie in the M-1004 well. Romania
remained a significant cash flow generating unit during the period as production
increased from the addition of M-1004. The Moftinu field generated a netback per
boe of $21.34 (2019 – $34.72) for the first half of the year.

In Tunisia, the Group invested $0.8 million (2019 – $0.2 million) for the six months
ended 30 June 2020. The capital was spent in the Chouech field, related to workovers
on the CS-1 and CS-3 wells. Tunisia continued to see positive production from the
Sabria, Chouech, and Ech Chouech fields during the quarter while realizing a netback
per boe of $9.42 (2019 – $27.61) for the first half of the year.

Funds from operations increased to $4.3 million (2019 – $1.4 million) for the six
months ended 30 June 2020. This increase is mainly attributable to increased production
from the Moftinu field in 2020 offset by lower commodity prices.

The Convertible debt with the EBRD was due to be repaid in four instalments commencing
30 June 2020, when 25% of the principal and accrued interest at that date would 
be repayable with the three remaining repayments made annually thereafter on 30 
June. On 22 June 2020, the Company entered into an agreement with the EBRD to defer
$6.4 million of the $8.4 million debt payment that was due at 30 June 2020, for 
a period of one year and paid $2 million to the EBRD. The outstanding balance will
be combined with the 30 June 2021 payment for a combined payment of $14.9 million
due on 30 June 2021 and is reported as a current liability at 30 June 2020.

On 22 June 2020, the Group received a waiver from the EBRD formally waiving compliance
with the financial covenant for the period ended 30 June 2020.

| As at($000) | 30 June2020 | 31 December 2019 | 
| Current assets | 13,002 | 15,243 | 
| Current liabilities | 35,117 | 32,194 | 
| Working capital deficit | (22,115) | (16,951) |

The working capital deficit of the Group at 30 June 2020 was $22.1 million, an increase
of $5.2 million since 31 December 2019, largely due to the 30 June 2021 debt payment
now being classified as current.

Included in current liabilities at 30 June 2020 was $14.9 million of EBRD debt (
31 December 2019: $7.7 million); accounts payable of $13.3 million (31 December 
2019: $16.2 million), of which $6.0 million relates to Brunei and dates back to 
2012/2013; decommissioning provision of $6.3 million (31 December 2019: $6.3 million),
income taxes payable of $0.3 million (31 December 2019: $1.4 million); and lease
obligations of $0.3 million (31 December 2019: $0.5 million). Included in the asset
retirement obligations are $1.8 million relating to Brunei, $1.0 million relating
to Canada, and $3.5 million relating to Tunisia. The obligations in Canada are offset
by cash held on deposit as restricted cash of $1.1 million (2019 – $1.1 million)
in current assets.

Going Concern Statement

The Group’s ability to settle its obligations as they come due is dependent on its
ability to generate future cash flows from operations and/or obtain the necessary
financing. The Group has modelled cash flow forecasts in order to identify how available
funds could be managed in order to allow the Group to meet its obligations as they
fall due or identify where additional funding may be required. Given the above, 
there are material uncertainties as to whether the Group can meet all its cash obligations
as they fall due.

The ability to generate sufficient future cash flows from operations to meet obligations
as they fall due and the continued availability of existing facilities, should loan
covenants not be met, represent material uncertainties that may cast significant
doubt on the ability of the Group to continue as a going concern. Refer to note 
2 below for further information.

FINANCIAL REVIEW – FIRST HALF 2020

**Funds from Operations**

The Group uses funds from operations as a key performance indicator to measure the
ability of the Group to generate cash from operations to fund future exploration
and development activities. The following table is a reconciliation of funds from
operations to cash flow from operating activities:

|   | Six months ended 30 June | 
| ($000) | 2020 | 2019 | 
| Cash flow from operations | 3,077 | 3,492 | 
| Changes in non-cash working capital | 1,240 | (2,090) | 
| Funds from operations | 4,317 | 1,402 | 
| Funds from operations per share | 0.02 | 0.01 |

The increase in funds from operations in 2020 was primarily attributable to Romania
generating cash flows for the full period in 2020, compared to just the second quarter
in 2019. Funds from operations generated in Romania were $6.3 million (2019 – $1.7
million), Tunisia funds used in operations were $0.3 million (2019 – funds from 
operations were $1.4 million) and funds used corporately was $1.7 million (2019 –
used $1.7 million). The increase in Romania is directly attributable to a full period
of production at the Moftinu field compared to limited production in the comparative
period as the field started producing 25 April 2019. The decrease in Tunisia is 
the result of tax payments totaling $1.2 million (2019 – $0.1 million).

**Production**

|   | Six months ended 30 June | 
|   | 2020 | 2019 | 
| Tunisia |   |   | 
| Crude oil (bbl/d) | 485 | 226 | 
| Natural gas (Mcf/d) | 641 | 494 | 
| Tunisia (boe/d) | 592 | 308 | 
|   |   |   | 
| Romania |   |   | 
| Natural gas (Mcf/d) | 11,331 | 2,188 | 
| Condensate (bbl/d) | 14 | 7 | 
| Romania (boe/d) | 1,903 | 372 | 
|   |   |   | 
| Group |   |   | 
| Crude oil (bbl/d) | 485 | 226 | 
| Natural gas (Mcf/d) | 11,972 | 2,682 | 
| Condensate (bbl/d) | 14 | 7 | 
| Total Group production (boe/d) | 2,495 | 680 | 
|   |   |   | 
| % liquids weighting | 20% | 34% | 
| % gas weighting | 80% | 66% |

For the six months ended 30 June 2020 Romania production (boe/d) averaged 1,903 (
2019 – 372), an increase of 1,531 (412%). The increase is due to production only
commencing on 25 April 2019, as well as M-1004 coming onto production in February
2020.

Tunisia production (boe/d) was from the Sabria, Chouech and Ech Chouech fields and
averaged 592 (2019 – 308), an increase of 284 (92%). The increase in production 
is due to the Chouech and Ech Chouech fields producing for the full period compared
to being shut-in during the first half of 2019, as well as the performance of the
wells continuing to improve as water cuts decrease.

For the Group, production (boe/d) averaged 2,495 (2019 – 680), an increase of 1,815(
267%).

**Oil and Gas Revenue**

|   | Six months ended 30 June | 
| ($000) | 2020 | 2019 | 
| Tunisia |   |   | 
| Oil revenue | 2,813 | 2,583 | 
| Gas revenue | 611 | 845 | 
| Tunisia revenue | 3,424 | 3,428 | 
|   |   |   | 
| Romania |   |   | 
| Gas revenue | 9,784 | 2,953 | 
| Condensate revenue | 75 | 67 | 
| Romania revenue | 9,859 | 3,020 | 
|   |   |   | 
| Group |   |   | 
| Oil revenue | 2,813 | 2,583 | 
| Gas revenue | 10,395 | 3,798 | 
| Condensate revenue | 75 | 67 | 
| Total Group revenue | 13,283 | 6,448 | 
|   |   |   | 
| Liquids revenue (%) | 22% | 41% | 
| Gas revenue (%) | 78% | 59% | 
|   |   |   | 
| Realised Price |   |   | 
| Tunisia |   |   | 
| Oil ($/bbl) | 31.96 | 63.07 | 
| Gas ($/Mcf) | 5.23 | 9.46 | 
| Tunisia average realised price ($/boe) | 31.86 | 61.39 | 
|   |   |   | 
| Romania |   |   | 
| Gas ($/Mcf) | 4.71 | 7.45 | 
| Condensate ($/bbl) | 29.92 | 52.00 | 
| Romania average realised price ($/boe) | 28.26 | 44.87 | 
|   |   |   | 
| Group |   |   | 
| Oil ($/bbl) | 31.96 | 63.07 | 
| Gas ($/Mcf) | 4.74 | 7.82 | 
| Condensate ($/bbl) | 29.92 | 52.00 | 
| Group average realised price ($/boe) | 29.11 | 52.36 |

Oil and gas revenues for the six months ended 30 June 2020 increased by $6.8 million(
106%) to $13.3 million (2019 – $6.4 million). The increase was attributable to the
increase in production described above, offset by a 44% decrease in the average 
realised price per boe. The average realised price was impacted by the decrease 
in the Brent crude price as well as the product mix consisting of 80% gas (2019 –
66%) which realised a lower price per boe compared to crude oil.

The Group is required to sell 20% of its annual crude oil production from the Sabria
concession into the local market, which is sold at an approximate 10% discount to
the price obtained on its other crude sales. The remaining crude oil production 
is sold to the international market, which the Group has a marketing agreement with
Shell International Trading and Shipping Company Limited. Natural gas prices are
nationally regulated and in Sabria are tied to the current month average of high
sulphur heating oil (benchmarked to Brent).

In Romania, at least 40% of the natural gas production must be sold on the open 
market, with the remainder sold through a gas sales agreement with Vitol Gas and
Power BV. The sales price under this agreement is linked to an average of transactions
concluded on the centralized markets of Romania.

**Royalties**

|   | Six months ended 30 June | 
| ($000) | 2020 | 2019 | 
| Tunisia | 415 | 336 | 
| Romania | 488 | 227 | 
| Total | 903 | 563 | 
| Total ($/boe) | 1.99 | 4.57 | 
| Tunisia (% of revenue) | 12.1% | 9.8% | 
| Romania (% of revenue) | 5.0% | 7.5% | 
| Total (% of revenue) | 6.8% | 8.7% |

Royalties for the six months ended 30 June 2020 were $0.9 million (2019 – $0.6 
million) due to the increased production discussed above. The realised royalty rate
in Tunisia was 12.1% (2019 – 9.8%). The increase is due to the Chouech and Ech Chouech
fields having a flat royalty rate of 15% and producing during the quarter compared
to being shut-in in the comparative period. In Romania, the realised royalty rate
was 5.0% (2019 – 7.5%). The decrease in Romania is due to a change in the price 
structure used in the royalty calculation, using a statutory price in the royalty
calculation instead of the realised price used in the comparative period.

Tunisian royalties are based on individual concession agreements. In Sabria, the
royalty rate varies depending on a calculation of cumulative revenues, net of taxes,
as compared to cumulative investment in the concession, known as the “R factor”.
As the R factor increases, so does the royalty percentage to a maximum rate of 15%.
The royalty rates for the six months ended 30 June 2020 in the Sabria concession
for oil was 10% (2019 – 10%) and for gas 8% (2019 – 8%). In the Chouech and Ech 
Chouech concession, royalty rates were flat at 15% (2019 – 15%).

Romanian natural gas royalties step-up from 3.5% to 13.0% and condensate from 3.5%
to 13.5% based on the level of production in the quarter. Romanian royalties are
calculated using the reference price set by Romania.

**Production Expenses**

|   | Six months ended 30 June | 
| ($000) | 2020 | 2019 | 
| Tunisia | 2,003 | 1,550 | 
| Romania | 1,908 | 456 | 
| Canada | 30 | 31 | 
| Group | 3,941 | 2,037 | 
|   |   |   | 
| Tunisia production expense ($/boe) | 18.59 | 27.76 | 
| Romania production expense ($/boe) | 5.51 | 6.78 | 
| Total production expense ($/boe) | 8.68 | 16.54 |

For the six months ended 30 June 2020, the Group incurred production expenses of
$3.9 million (2019 – $2.0 million). The overall increase is due to the addition 
of the Moftinu, Chouech and Ech Chouech production in 2020. Production expenses 
per boe were $8.68 (2019 – $16.54). The decrease per boe is attributable to the 
low-cost production costs in Romania along with the significant increase in overall
production.

Tunisian production expenses for the period were $2.0 million (2019 – $1.6 million).
Additional costs are directly attributable to the addition of producing fields, 
Chouech and Ech Chouech, though the incremental production reduced production costs
per boe to $18.59 (2019 – $27.76).

Romanian production expenses for the period were $1.9 million (2019 – $0.5 million).
The comparative period had minimal production expenses as production of the Moftinu
field commenced on 25 April 2019.

Canadian production expenses relate to the Sturgeon Lake assets, which are not producing
and are incurring minimal operating costs to maintain the property.

**Operating Netback**

Serinus uses operating netback as a key performance indicator to assist management
in understanding Serinus’ profitability relative to current market conditions and
as an analytical tool to benchmark changes in operational performance against prior
periods. Operating netback consists of petroleum and natural gas revenues less direct
costs consisting of royalties and production expenses. Netback is not a standard
measure under IFRS and therefore may not be comparable to similar measures reported
by other entities.

|   | Six months ended 30 June | 
| ($/boe) | 2020 | 2019 | 
| Tunisia |   |   | 
| Production volume (boe/d) | 592 | 308 | 
| Realised price | 31.86 | 61.39 | 
| Royalties | (3.85) | (6.02) | 
| Production expense | (18.59) | (27.76) | 
| Operating netback – Tunisia | 9.42 | 27.61 | 
|   |   |   | 
| Romania |   |   | 
| Production volume (boe/d) | 1,903 | 372 | 
| Realised price | 28.26 | 44.87 | 
| Royalties | (1.41) | (3.37) | 
| Production expense | (5.51) | (6.78) | 
| Operating netback – Romania | 21.34 | 34.72 | 
|   |   |   | 
| Group |   |   | 
| Production volume (boe/d) | 2,495 | 680 | 
| Realised price | 29.11 | 52.36 | 
| Royalties | (1.99) | (4.57) | 
| Production expense | (8.68) | (16.54) | 
| Operating netback – Group | 18.44 | 31.25 |

For the six months ended 30 June 2020, the operating netback per boe for the Group
was $18.44 (2019 – $31.25). The decrease was primarily due to lower realised pricing
offset by a decrease in royalty and production expenses described above.

**Windfall Tax**

|   | Six months ended 30 June | 
| ($000) | 2020 | 2019 | 
| Windfall tax | 1,152 | 669 | 
| Windfall tax ($/Mcf – Romania gas) | 0.56 | 1.69 | 
| Windfall tax ($/boe – Romania gas) | 2.54 | 10.14 |

In Romania, the Group is subject to a windfall tax on its natural gas production
which is applied to supplemental income once natural gas prices exceed 47.53 RON/
Mwh (approximately $3.22 per mcf). This supplemental income is taxed at a rate of
60% between 47.53 RON/Mwh and 85.00 RON/Mwh and at a rate of 80% above 85.00 RON/
Mwh. Expenses deductible in the calculation of the windfall tax include royalties
and capital expenditures (limited to 30% of the supplemental income).

For the six months ended 30 June 2020, the Group incurred windfall taxes of $1.2
million (2019 – $0.7 million) which equates to $0.56 per Mcf (2019 – $1.69) of Romanian
gas production volumes. The decrease in gas prices during Q2 2020 has pushed prices
near the windfall tax thresholds resulting in $0.1 million of windfall tax during
Q2 2020.

**Depletion and Depreciation**

|   | Six months ended 30 June | 
| ($000) | 2020 | 2019 | 
| Tunisia | 1,739 | 728 | 
| Romania | 6,378 | 1,358 | 
| Corporate | 342 | 309 | 
| Total | 8,459 | 2,395 | 
|   |   |   | 
| Tunisia ($/boe) | 16.14 | 13.04 | 
| Romania ($/boe) | 18.42 | 20.18 | 
| Total ($/boe) | 18.63 | 19.45 |

For the six months ended 30 June 2020, depletion and depreciation expense in Tunisia
was $1.7 million (2019 – $0.7 million). This increase in directly attributable to
the increased production from the Chouech and Ech Chouech fields. Depletion and 
depreciation expense in Romania was $6.4 million (2019 – $1.4 million). This increase
was due to six months of production in the current year compared to two months in
the comparative period, due to the Moftinu field being put onto production on 25
April 2019.

Depletion and depreciation expense is computed on a field by field basis considering
the net book value, the future development costs associated with the reserves as
well as the proved and probable reserves of each concession.

**General and Administrative Expense (“G&A”)**

|   | Six months ended 30 June | 
| ($000) | 2020 | 2019 | 
| G&A expense | 1,684 | 1,643 | 
| G&A expense ($/boe) | 3.72 | 13.34 |

For the six months ended 30 June 2020, G&A costs were $1.7 million (2019 – $1.6
million). The nominal increase is primarily attributable to higher professional 
fees. On a per boe basis G&A expenses significantly decreased due to higher production
volumes from the Moftinu, Chouech, and Ech Chouech fields compared to the prior 
period.

G&A costs incurred by the Group are expensed, with certain costs directly related
to exploration and development assets being capitalised or reported as production
costs. The G&A expense reported is on a net basis, representing gross G&A costs 
incurred less recoveries of those costs presented as capital or production costs.

**Share-based payment expense**

|   | Six months ended 30 June | 
| ($000) | 2020 | 2019 | 
| Share-based payment expense | 254 | 500 | 
| Share-based payment expense ($/boe) | 1.14 | 4.06 |

For the six months ended 30 June 2020, the share-based payment expense was $0.3 
million (2019 – $0.5 million). The decrease was a result of fewer unvested corporate
stock options being expensed during the quarter offset by the executive directors
receiving shares in lieu of salary during Q2 2020.

**Impairment Expense**

|   | Six months ended 30 June | 
| ($000) | 2020 | 2019 | 
| Impairment expense | 9,600 | – |

At 30 June 2020, an impairment test was conducted on the Group’s Property, plant,
and equipment to assess the impact of the continuing weakness and volatility of 
commodity prices, largely as a result of the economic impact of the global COVID-
19 pandemic. An impairment expense of $9.6 million (2019 – nil) was recorded as 
a result of the impairment test. See note 4 for details.

**Net Finance Expense**

|   | Six months ended 30 June | 
| ($000) | 2020 | 2019 | 
| Interest expense on long-term debt | 1,575 | 1,650 | 
| Amortization of debt costs | 44 | 99 | 
| Amortization of debt modification | 127 | 22 | 
| Interest on leases | 52 | 47 | 
| Accretion on decommissioning provision | 336 | 614 | 
| Other interest and foreign exchange | 7 | (212) | 
|   | 2,141 | 2,220 |

For the six months ended 30 June 2020, the net finance expense was $2.1 million (
2019 – $2.2 million). This slight decrease is due to the repayment of the Senior
Loan in 2019, lower interest rates on the convertible loan for the period, a decrease
in accretion expense due to the decreased ARO liability, offset by a larger principal
balance on the convertible loan with the EBRD debt.

**Share Data**

As at the date of issuing this report, the following are the options outstanding
and changes to directors’ shares owned since 30 June 2020, up to the date of this
report. An agreement with the executive directors was reached to settle 20% of their
salaries in common shares in lieu of cash payments. For the second quarter of 2020,
this amounted to 405,007 common shares issued. These shares were issued on 14 July
2020 for services rendered during the quarter.

|   | Options held at | Shares held at | 
| Name of Director | 30 June 2020 | 14 Aug 2020 | 30 June 2020 | 14 Aug 2020 | 
| Executive Directors: |   |   |   |   | 
| Jeffrey Auld | 8,000,000 | 8,000,000 | 22,197 | 258,451 | 
| Andrew Fairclough | 1,750,000 | 1,750,000 | – | 168,753 | 
|   |   |   |   |   | 
| Non-Executive Directors: |   |   |   |   | 
| Jim Causgrove | 100,000 | 100,000 | – | – | 
| Eleanor Barker | 100,000 | 100,000 | 100,000 | 100,000 | 
|   | 9,950,000 | 9,950,000 | 122,197 | 527,204 |

As of the date of issuing this report, management is aware of the following shareholders
holding more than 5% of the ordinary shares of the Group, as reported by the shareholders
to the Group: Kulczyk Investments S.A. 38.02%, Marlborough Fund Managers 9.85% and
JCAM Investments Ltd 7.88%.

The directors are responsible for the maintenance and integrity of the corporate
and financial information on the Group’s website. Legislation in Jersey governing
the preparation and dissemination of financial statements may differ from legislation
in other jurisdictions.

**Other Comprehensive Loss**

Other comprehensive loss consists of foreign currency translation adjustments to
convert the functional currency of different business units to the reporting currency
of the Group. The translation consists of adjusting Canadian dollars and Romanian
Leu to USD at the end of the reporting period.

**Declarations of the Board of Directors Concerning Accounting Policies**

The Board of Directors of the Company confirms that, to the best of their knowledge,
the interim condensed consolidated financial statements together with comparative
figures have been prepared in accordance with applicable accounting standards and
give a true and fair view of the state of affairs and the financial result of the
Group for the period ended 30 June 2020.

The Highlights Report in this report gives a true and fair view of the situation
on the reporting date and of the developments during the period ended 30 June 2020,
and include a description of the major risks and uncertainties.

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