CALGARY, ALBERTA--(Marketwired - March 12, 2014) - Serinus Energy Inc. ("Serinus Energy", "SEN" or the "Company") (TSX:SEN)(WARSAW:SEN), an international upstream oil and gas exploration and production company, is pleased to announce that KUB-Gas LLC ("KUB-Gas") has completed the construction and commissioning of its new Makeevskoye gas processing plant. The new plant supplements existing infrastructure, and increases KUB-Gas' overall processing capacity from 30 million cubic feet per day ("MMcf/d") to 68 MMcf/d. The Company anticipates that gross daily production rates will ultimately increase by 5 MMcf/d or more from existing wells previously constrained by facility limitations, with further increases expected from the ongoing drilling program. KUB-Gas is a partially-owned subsidiary in which SEN has a 70% effective ownership interest through its 70% shareholding of KUBGas Holdings Limited.
The existing facilities in Makeevskoye were insufficient to handle the increasing production resulting from KUB-Gas' recent exploration and development success. By diverting some of the newer wells in Makeevskoye to the new plant, the Company anticipates benefits at both Makeevskoye and Olgovskoye. As system back pressures are reduced existing wells should flow more freely. Gas began flowing through the facility on March 6th 2014. In accordance with good operating practice, KUB-Gas intends to slowly increase the throughput rate in the new plant, allowing stabilization in the entire system at each step change until all the constrained production is on line.
Construction of the new Makeevskoye processing facility began in September 2013 and was completed in December 2013. Following completion of the facility, there was a testing and commissioning period after which final operating approvals were received. The facilities were constructed and delivered on time and on budget at a cost of approximately USD7.8 million (Serinus net USD5.5 million).
Jock Graham, Chief Operating Officer of Serinus said; "The expansion of our process facilities marks the beginning of the next stage in the company's development in Ukraine. In a little over 3 years KUB-Gas' production has increased from approximately 5 MMcf/d to 30 MMcf/d. The expansion of our processing capability reflects our confidence in the future potential for production growth from of our existing assets in Ukraine. It is also a tribute to the professionalism of the KUB-Gas team that work has continued unabated at a time of great uncertainty in the country."
In the month of February and to date, KUB-Gas operations have continued in the normal course of business unaffected by recent political developments.
Gas prices have been affected during the latest political strife. The effect is twofold: First, the price at which KUB-Gas sells gas is set by reference to the price at which Ukraine imports gas from Russia. During 2013 KUB-Gas sold gas at an average price of USD11.21 per thousand cubic feet ("Mcf") (USD395.72 per thousand cubic metres ("Mcm")). As a result of an agreement reached in December 2013 between Russia and the Government of Ukraine, the price of gas sold by Russia to Ukraine for the first quarter of 2014 was reduced to USD268.50/Mcm from USD410/Mcm. This dropped the Company's realized gas price in January to USD9.48/Mcf.
The second effect is the falling Ukrainian Hryvnia Gas prices from Russia are denominated in USD, but KUB-Gas is paid in UAH. If the currency takes an adverse move between the time of the custody transfer and the time of payment (which it has), the price received by KUB-Gas (and ultimately Serinus) decreases as well. The current exchange rate is about 10 UAH/USD
Gas produced by KUB-Gas in February was sold at a price of USD8.74 per Mcf (USD308.53 per Mcm). This reflects both the discounts on the Russian gas, and the ongoing deterioration of the Ukrainian Hryvnia vs. in particular the US Dollar. While the Company has been advised that the gas price for the month of March will be the same as in the month of February, media reports that the Russian gas price will not be subsidized in April and consequently the company expects that the price at which it will sell gas in April will increase.
Serinus exited 2013 with a total overall production rate of 4,986 barrels of oil equivalent per day ("boe/d"), of which approximately 73% came from its Ukrainian assets. The Company's target for 2014 is to increase overall production by 30% - 35%.
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 is party to a joint venture agreement whereby the Company is on track to earn 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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