Current Report No. 14/2017Date: 2017-03-14Issuer's
trading name: SERINUS ENERGY INC.
Title: 2016 Financial and Operating Results
Legal basis: other regulations
Content:Pursuant to Article 62.8 of the Act on Public
Offering [...]the Management of SERINUS ENERGY INC. ("Serinus", "SEN" or
the "Company") informs that in Canada via the SEDAR system it has
published information about its financial and operating results for the
year ended December 31, 2016.
• In 2016, Serinus achieved average production (SEN WI) in Tunisia was
1,124 boe/d, down from 1,348 boe/d during 2015. Lower production during
2016 was due to natural declines and various technical issues including
a blockage at WIN-12bis and ESP pump failures and subsequent un-planned
workovers required at CS-1, CS-9 and CS-3.
• The netback for Tunisia in 2016 was $11.41 per boe, compared to $20.86
per boe in 2015. The lower netback was driven by lower commodity prices
for most of the year partially offset by decreased production expenses.
• Funds from operations was an outflow of $1.6 million for the year
ended December 31, 2016 (2015: inflow of $16.8 million). Funds from
operations from Tunisia were $4.4 million, the corporate loss was $9.0
million and offsetting this loss from continuing operations were the
funds from operations from Ukraine of $3.0 million. In 2016, the sale of
Ukraine in February 2016, lower production and lower commodity prices
contributed to the decrease in funds from operations. The principle
drivers were the lower production and netbacks described above.
• The net loss from continuing operations for the year ended December
31, 2016 was $27.5 million ($0.35 per share), compared to a net loss
from continuing operations of $52.2 million ($0.66 per share) in 2015.
Included within this loss was asset impairment of $16.8 million (2015:
$51.4 million) as a result of negative technical reserve revisions and
declining oil and natural gas prices.
• Subsequent to year end, the Company filed a short form prospectus,
dated February 21, 2017, which qualified for distribution 72 million
common shares of the Company at CAD$0.35 per share for aggregate gross
proceeds of CAD$25.2 million (net CAD$24.3 million, after agents fees of
CAD$0.9 million)("the Offering"). The Offering closed on February 24,
2017, and the net proceeds will be used by the Company to fund the
development of the Moftinu Gas Development Project and pre-work for the
2018 drilling program in the Satu Mare Concession in Romania, production
enhancement in the Sabria block in Tunisia, and for general corporate
• In Q1 2016, Serinus announced the closing of the sale of its 70%
interest in Ukraine to Resano Trading Ltd. for total cash consideration
of $33.2 million including all working capital and inter-company
adjustments. Net proceeds of the sale were used to repay $19.2 million
of debt and interest outstanding with the European Bank for
Reconstruction and Development ("EBRD") against the Romania and Tunisia
debt facilities. The balance of the proceeds will be used for general
corporate purposes and to help fund development of the Moftinu gas
discovery in Romania. The results of operations of Ukraine are included
in the consolidated results of Serinus up to the date the sale closed
and are reflected as discontinued operations in the statement of
• As at December 31, 2016, the outstanding principal on EBRD debt was
$27.1 million, reflecting prepayments made as a result of the
disposition of Ukraine, regular scheduled repayments made in March and
September, and a repayment under the excess cash sweep provision in May
GENERAL & FINANCIAL HIGHLIGHTS
• Revenue, net of royalties, from Tunisia for year ended December 31,
2016 decreased to $14.0 million, compared to $23.0 million in 2015, due
to lower commodity prices and lower production.
• For the three months ended December 31, 2016, revenue net of royalties
decreased to $3.7 million, from $4.2 million in the comparative period
of 2015, due to lower production, partially offset by higher commodity
• Total royalties paid decreased from $3.0 million in 2015 to $2.0
million.in 2016. Much of this decrease was due to lower production and
lower commodity prices.
• Serinus made capital expenditures of $3.6 million in 2016, of which
$1.9 million and $1.7 million were in Tunisia and Romania respectively.
• Due to the continued decline in oil prices and technical reserve
revisions, Serinus took a further impairment charge of $16.8 million at
December 31, 2016 against its Tunisian assets versus $51.4 million for
• In 2016, $7.6 million of the EBRD Senior Loan, including interest, was
repaid from proceeds of the sale of Ukraine, scheduled semi-annual
installments were paid in March and September 2016 of $1.7 million each
and a repayment of $3.4 million was made in May 2016 under the cash
sweep mechanism. As at December 31, 2016, the principle outstanding
under the Senior Loan was $7.1 million.
• At December 31, 2016, the Company was not in compliance with the
financial debt to EBITDA ratio financial covenant at the corporate level
on its debt held with the EBRD. The EBRD subsequently waived compliance
with this ratio for the year ended December 31, 2016. Debt repayments
will follow their original scheduled repayment terms and the bank will
not be acting on its security. However, given the covenant was breached
as at December 31, 2016, Serinus has reclassified its long-term debt to
current in the financial statements, as required under accounting
Summary of 2016 Financial Results is presented in the attachment.
• During 2016, production from Tunisia averaged 1,124 boe/d, down from
1,348 boe/d during 2015, a decline of 17%. Lower production during 2016
was due to natural declines and various technical issues including a
blockage at WIN-12bis, ESP pump failures and subsequent un-planned
workovers required at CS-1, CS-9 and CS-3.
• In Q4 2016, production volumes decreased 11% to 1,131 boe per day,
compared to 1,277 boe per day in the comparable period of 2015. The
decreased production was due to natural declines and lower production in
Chouech Es Saida as CS-3 and CS-1 wells went down in the middle of
December. These two wells remain off-line in Q1 2017 pending pump
replacement and workovers. CS-3 is anticipated to be back on stream in
the second quarter of 2017 pending resolution of the shut-in of the
Chouech Es Saida field announced February 28, 2017. The decline in
production in the Chouech Es Saida field was offset by increased
production in Sabria due to increased production from WIN12-bis as
compared to 2015, due to a blockage in September and October restricting
October 2015 production.
• Minimal capital activity was undertaken in 2016 due to the low
commodity prices restricting capital spend in Tunisia. In Romania, the
National Agency for Mineral Resources ("NAMR"), the Romanian regulator,
granted its final approval for the Phase 3 Extension Addendum for the
Satu Mare Concession ("Satu Mare") in northwest Romania. The term is for
three years and expires on October 28, 2019.
OUTLOOKSerinus will concentrate on the development of the
Moftinu Gas Development Project in Romania which will include building
surface facilities. This is a near-term project that is expected to
begin producing from the gas discovery wells Moftinu-1001 and
Moftinu-1000 in early 2018. The Corporation has obtained all necessary
approvals for, and will soon commence, the construction of a gas plant
with 15 MMcf/d of operational capacity. Construction of the project will
proceed over 2017 with expected first gas from this project in Q1 2018.
The Company is also developing the drilling program to meet work
commitments for the extension.
Average working interest production in 2017 in Tunisia to the end of
February was approximately 727 boe/d (556 bbl/d of oil, 1,030 MMcf/d of
The Company's production has been significantly curtailed in the first
quarter of 2017 as a result of the shut-in of the Chouech Es Saida field
in Tunisia, which is expected to continue for the duration of the first
quarter. Assuming the continued shut-in, production is projected to be
approximately 650 boe/d for the first quarter of 2017. Full year
production for 2017 is dependent on the successful resolution of the
sit-in at the Chouech Es Saida field and associated security and safety
issues, as well as the timing of the above mentioned capital program in
EXECUTIVE APPOINTMENTThe Company is pleased to announce the
appointment of Mr. Calvin Brackman as Vice President, External Relations
& Strategy. Mr. Brackman has a wealth of external relations and
strategic planning experience, including being Director of Government
Relations at PetroKazakhstan Inc. from 2003 to 2005. For the past 10
years Mr. Brackman has worked as a consultant and advised numerous
international oil companies. Mr, Brackman has been Director of External
Relations with Serinus since December, 2016.
SUPPORTING DOCUMENTSThe 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.
CAUTIONARY STATEMENTBOEs 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.
This text contains selected excerpts from the original news release in
English, which has been filed by Company in Canada (country of its
registered office) by way of the SEDAR system and is available at the
website www.sedar.com by entering the Company name at
translation of the entire text of the news release is available at the