Serinus Energy Inc.

TSX : SEN
WARSAW : SEN


Serinus Energy Inc.

March 20, 2014 18:07 ET

Serinus Achieves Record Production and Cash Flow in 2013

CALGARY, ALBERTA--(Marketwired - March 20, 2014) - Serinus Energy Inc. (TSX:SEN)(WARSAW:SEN) ("Serinus Energy", "SEN" or the "Company"), is pleased to report its financial and operating results for the year ended December 31, 2013.

In 2013, Serinus achieved several key goals and milestones, including record production and cash flow from its properties in Ukraine, and the addition of new reserves and production with the acquisition of Winstar Resources in June 2013.

2013 Highlights

  • In 2013, Serinus achieved record average production (net to SEN WI) of 4,081 boe/d (vs. 2,655 boe/d in 2012), and exited the year at 4,986 boe/d - a growth of 54% YoY - helped materially by the acquisition of Winstar Resources.
  • Organic growth in the Company's Ukraine properties continued, with average production (net to SEN WI) rising 25% to 3,319 boe/d, and reaching 3,626 boe/d in Q4.
  • Gross revenues for the year reached $146.7 million, up 47% over 2012. The portion allocable to SEN shareholders was $111.4 million vs. $69.7 million in 2012.
  • Netbacks continue to be robust, with the Company's Ukraine production receiving $41.69/boe for FY2013, and Tunisia getting $68.68/boe (for the period from June 24, 2013 to year-end)
  • Funds from Operations continued to grow in 2013, reaching $55.1 million ($0.86/sh) vs. $33.3 million ($0.75/sh) in 2012.
  • Serinus' recorded net losses of $76.9 million ($0.98/sh) and $57.5 million ($0.90/sh) in Q4 and FY2013 respectively. Income was impacted by an $83 million impairment charge against its holdings in Brunei Block L.
  • Net earnings, before impairment charges, for the year was $25.5 million ($14.4 million attributable to SEN shareholders), as compared to $8.8 million in 2012 ($1.0 million attributable to SEN shareholders)

Notes: Serinus prepares its financial results on a consolidated basis, which includes 100% of its indirectly 70% owned subsidiary, KUB-Gas LLC ("KUB-Gas"). Unless otherwise noted by the phrases "allocable to Serinus", "net to Serinus", "attributable to SEN shareholders" or "net to 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 Ending
December 31
Year Ending
December 31
2013 2012 Change 2013 2012 Change
Oil and Gas Revenue43,700 27,338 60%146,732 99,588 47%
Net Income (as reported)(76,903)1,065 na (57,526)(78,982)(27%)
per share, basic and diluted($0.98)$0.02 ($0.90)($1.78)
Net Income (allocable to Serinus)(79,740)(917)na (68,682)(86,769)(21%)
per share, basic and diluted($0.99)($0.20) ($1.07)($1.95)
Comprehensive Net Income(78,211)1,171 na (58,971)(79,019)(25%)
per share, basic and diluted($0.99)$0.02 ($0.92)($1.78)
Cash Flow from Operations (as reported)14,625 9,399 56%55,074 33,259 66%
per share, basic and diluted$0.19 $0.20 $0.86 $0.75
Cash Flow from Operations (allocable to SEN)$11,013 $5,092 116%$37,984 $16,706 127%
per share, basic and diluted0.14 0.11 $0.59 $0.38
Capital Expenditures25,040 20,518 22%75,560 57,361 32%
Average Production (net to Serinus)
Oil (Bbl/d)1,047 - 557 -
Gas (Mcf/d)23,566 16,832 40%20,418 15,098 35%
Liquids (Bbl/d)113 132 (14%)120 139 (14%)
BOE (boe/d)5,088 2,937 73%4,081 2,655 54%
Average Sales Price
Oil ($/Bbl)$108.48 $111.08
Gas ($Mcf)$11.34 $11.62 $11.39 $11.71
Liquids ($Bbl)$77.89 $98.04 $87.90 $98.91
BOE ($/boe)$76.58 $71.00 $74.77 $71.77
December 31 December 31
2013 2012 2013 2012
Cash & Equivalents19,916 35,553 19,916 35,553
Working Capital(23,132)1,217 (23,132)1,217
Long Term Debt8,030 17,112 8,030 17,112
Shares Outstanding78,611,441 48,175,673 78,611,441 48,175,673
Average for period78,611,441 48,175,673 64,018,949 44,452,298

General & Financial Highlights

  • On June 24, 2013, the Company closed the acquisition of Winstar Resources Limited. In connection with that acquisition, the Company changed its name from Kulczyk Oil Ventures Inc. to Serinus Energy Inc., consolidated its common shares on a basis of one post-consolidation share for ten pre-consolidation shares, and listed its common shares on the Toronto Stock Exchange. The acquisition added 11.5 MMboe of 2P reserves and 23.9 MMboe 3P evaluated as at December 31, 2013. The Winstar assets produced 1,512 boe/d in the second half of 2013.
  • Excluding the acquisition of Winstar, Serinus made capital expenditures of $75.6 million in 2013, of which $30 million, $2.7 million, $0.8 million and $42.1 million were spent in Ukraine, Tunisia, Romania and Brunei respectively.
  • In July 2013, the Company entered into a strategic relationship with Dutco Energy Ltd ("Dutco") which involved entering into an option agreement with Dutco, which gives Dutco the right to acquire an interest in Brunei Block L in consideration for providing the Company with a $15 million secured credit facility. The credit facility was used to fund capital expenditures in Brunei. As at December 31, 2013, the full $15 million had been drawn on this facility.
  • During 2013, the Company through its 70% owned subsidiary in the Ukraine made an early repayment of $10 million on the European Bank for Reconstruction and Development ("EBRD") loan (the "EBRD Ukraine Facility") from cash generated by operations in Ukraine, in addition to the regular scheduled repayments, leaving a balance of $7.6 million outstanding as at December 31, 2013.
  • In November 2013, Serinus entered into two new loan agreements in the aggregate amount of USD $60 million (the "EBRD Tunisia Facility") with EBRD to assist the Company in funding the capital program being planned for its recently acquired oil and gas fields in Tunisia. As at December 31, 2013, the Company had drawn $5 million.
  • Serinus recognized impairment of its assets in Brunei Block L, and as a result, took an $83 million impairment charge. The impairment recognizes that the wells drilled in the exploration phase have been unsuccessful. The Company continues to evaluate its drilling campaign together with PetroleumBrunei.
  • Dividends in the amount of $32.5 million were successfully paid out of the Ukraine by KUB-Gas LLC ("KUB-Gas") from cash generated from Ukrainian operations during 2013 to its parent, KUBGAS Holdings Limited of which $9.7 million was allocated to the non-controlling shareholder. Serinus acquired its indirect 70% interest in KUB-Gas in June 2010 for $45 million. Since then, KUB-Gas has invested over $103 million in drilling, completions and facilities in the Ukraine licences, funded initially via shareholder loans, and then a combination of the EBRD Ukraine Facility and cash flow. Over the same period, KUB-Gas also repaid $15 million of the EBRD Ukraine Facility, and paid out $40 million in dividends.

Operational Highlights & Update

  • Average production in 2014 to the end of February was 4,843 boe/d (1,057 barrels per day ("bbl/d") of oil, 22 million cubic feet per day ("MMcf/d") of gas, 98 bbl/d of liquids). Serinus intends to issue a first quarter 2014 operational update in early April.
  • In Ukraine, on March 6th, KUB-Gas started up the new Makeevskoye gas facility, and the Company expects that gross production will increase by 5 MMcf/d (3.5 MMcf/d net to SEN WI) or more as the previously constrained production is brought on line.
  • On March 19th, the Company announced that KUB-Gas had cased the M-17 well to its total depth of 3,445 metres, and is preparing to complete, test and tie in the well. The primary objective, the S6 sand, showed 9 metres of gas pay, and other zones exhibited either pay or resource potential. The O-24 well was also tested and flowed gas at low rates. It will be added to the upcoming stimulation program.
  • Despite the recent events in Ukraine, the Company is pleased to report that all of its personnel are safe, and operations have continued without interruption.
  • On March 11th, Winstar Tunisia signed a drilling contract for the use of a 2,000 horsepower IDECO-E2100 drilling rig for the Company's 2014 drilling campaign at the Sabria Field. The spud date of the first well, Winstar-12bis, is anticipated at the beginning of June 2014. Upon completion of Winstar-12bis, the drilling rig will be moved 2.5 kilometres southwest to drill the Winstar-13 well. Major contracts for other services required to execute the 2014 drilling program are in various states of technical and commercial tender evaluation, with a number of service contracts having been awarded. The Winstar-12bis location has been surveyed, the geotechnical evaluation of the site completed, and construction of the location is underway.
  • The planned drilling program in Romania has been delayed to September (from late May) to optimize the allocation of Company personnel, and to allow for potential variations in the timing of cash flows within the year.

Outlook

The Company expects its capital expenditure budget for 2014 will exceed $55 million, and will include the following:

  • In Ukraine, the Company plans to drill 4 new wells in 2014. These will be funded through cash flow in Ukraine, although with the uncertainty in gas prices there, it is possible that the program could be constrained.
  • Fracture stimulations are planned for five wells in Ukraine, including NM-3, O-11, O-15, K-3 and O-24.
  • Two wells will be drilled in the Sabria field in Tunisia. Each well is anticipated to cost $14.4 million ($6.5 million SEN WI) and take 70 days to drill. The expected spud date for the first well is late May.
  • Workovers are planned to begin in April for four wells in Tunisia, ECS-1, EC-4, CS-11, and CS-8. CS Sil-1 and CS Sil-10 will also be serviced by a coiled tubing rig. Pending regulatory approval, ECS-1 and EC-4 will be fractured during the summer.
  • In Romania, Serinus will drill two exploration wells and shoot 180 km2 of new 3D seismic. Each well is expected to cost $3 million. Spud date for the first well is anticipated to be in September. The seismic acquisition is also slated to commence in September 2014.

The Company is targeting production growth of between 30% - 35% by year end 2014.

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.

About Serinus

Serinus is an international upstream oil and gas exploration and production company with a diversified portfolio of projects in Ukraine, Brunei, Tunisia, Romania and Syria and with a risk profile ranging from exploration in Brunei, Romania and Syria to production and development in Ukraine and Tunisia. The common shares of the Company trade under trading symbol "SEN" on both the WSE (Warsaw Stock Exchange) and the TSX.

In Ukraine, Serinus owns an effective 70% interest in KUB-Gas LLC through its 70% shareholding of KUBGas Holdings Limited. The assets of KUB-Gas LLC consist of 100% interests in five licences near to the City of Lugansk in the northeast part of Ukraine. Four of the licences are gas producing.

In Tunisia, Serinus owns a 100% working interest in the Chouech Essaida, Ech Chouech, Sanrhar and Zinnia concessions, and a 45% working interest in the Sabria concession. Four of the concessions are currently producing oil or gas.

In Brunei, Serinus owns a 90% working interest in a production sharing agreement which gives the Company the right to explore for and produce oil and natural gas from Block L.

In Romania, Serinus has an undivided 60% working interest in the onshore Satu Mare concession, a 2,949 square kilometre exploration and development block, in north western Romania.

In Syria, Serinus holds a participating interest of 50% in the Syria Block 9 production sharing contract which provides the right to explore for and, upon the satisfaction of certain conditions, to produce oil and gas from Block 9, a 10,032 square kilometre area in northwest Syria. The Company has an agreement to assign a 5% ownership interest to a third party which is subject to the approval of Syrian authorities, and which, if approved, would leave the Company with a remaining effective interest of 45% in Syria Block 9. Serinus declared force majeure, with respect to its operations in Syria, in July 2012.

The main shareholder of the Company is Kulczyk Investments S.A., an international investment house founded by Polish businessman Dr. Jan Kulczyk.

For further information, please refer to the Serinus website (www.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.

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Telephone: +1-403-264-8877
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Telephone: +971-4-339-5212
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Telephone: +48 (22) 414 21 00

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