With Serinus Energy plc (LON:SENX) releasing full year results DirectorsTalk caught up with Analyst Dan Slater from Arden Partners and Craig Howie from Shore Capital to discuss the results.
Q. Dan, Serinus has released its full year results to the end of December 2020. How did the company perform operationally?
A. The results were mixed, showing good free cash flow but lower production than we had forecast. This reflected a full year of production from Moftinu in Romania and also the company’s fields in Tunisia, which underpin Serinus’ cash flow and provide funding for the forward work programme.
Q. How did that impact the company financially?
Overall, based on the operating performance and also the restructuring carried out in Q4, the company ended the year well-funded to execute its upcoming work programme, which has already seen the successful drilling of the M-1008 well, and will be followed this year by the Sancrai well and commencement of the Sabria ESP installation programme.
Q. Have you made any changes to your forecasts in any way?
A. We have left our 2021 numbers unchanged, which continue to incorporate some relatively conservative oil and gas price forecasts given performance of these year to date.
Q. How do you view the outlook for the company?
A. We expect Serinus to continue generating strong operating cash flow from its producing assets, with the ongoing work programmes in Romania and Tunisia continuing to provide news flow but also new volumes to help support and grow the production base.
Q. Craig, Serinus has released its full year results to the end of December 2020. How did the company perform operationally?
A. The FY2020 preliminary results confirm average daily production for the year of 2,340boepd (up from 1,389boepd in FY2019). Daily production increased materially in both Romania and Tunisia and Serinus has since successfully drilled, completed and tested Moftinu-1008 in Romania – this well flowed at 4mmcfd and has now been tied into the Moftinu gas plant as a commercial producer, so we see a good operational performance both in FY2020 and in the year-to-date.
Q. How did that impact the company financially?
A. From a financial standpoint, the successful ~US$21m placing undertaken late last year has seen all EBRD debt retired and left Serinus with an ungeared balance sheet. FY2020 revenues of US$24m were in line with our expectations, with Serinus reporting today normalised EBITDA and funds flow from operations of US$6.6m and US$7.3m, respectively. Unsurprisingly, the numbers reflect lower realised prices on an oil equivalent basis in the year, although the company also achieved a substantial reduction in unit production costs which fell by 30% year-on-year to just under US$10/boe – demonstrating excellent cost control, in our opinion. Closing cash at the end of December stood at US$6m, much as we expected.
Q. Have you made any changes to your forecasts in any way?
A. With the Moftinu-1008 well successfully tied in as a commercial producer and the preliminary results now released, we look forward to formally introducing forecasts shortly.
Q. How do you view the outlook for the company?
With its debt-free balance sheet, we continue to believe that Serinus is in a very strong position to fully capitalise on its pipeline of identified, near-term opportunities. In our opinion, this is now a material and cash generative producer offering the potential for significant follow-on growth.
