Serinus Energy : Q1 2023 Report and Accounts

Serinus Energy plc

First Quarter Report and Accounts 2023

(US dollars)

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FIRST QUARTER 2023 HIGHLIGHTS

FINANCIAL

• Revenue for the three months ended 31 March 2023 was $4.9 million (31 March 2022 - $13.4 million)
• Gross profit for the three months ended 31 March 2023 was $0.9 million (31 March 2022 - $2.9 million)
• EBITDA for the three months ended 31 March 2023 was $0.4 million (31 March 2022 - $3.1 million)
• Net loss for the three months ended 31 March 2023 was $1.3 million (31 March 2022 - net income $1.0 million)
• The Company realised a net price of $78.87/boe for the three months ended 31 March 2023 (31 March 2022 - $184.57/boe), comprising:

1. Realised oil price - $80.07/bbl

• 1. Realised natural gas price - $12.72/Mcf ($76.33/boe)
• The Group's operating netback decreased, in llne with commodity prices, for the three months ended 31 March 2023 and was $39.52/boe (31 March 2022 - $148.88/boe), comprising:
• 1. Romania operating netback - $26.59/boe (31 March 2022 - $182.79/boe)

• 1. Tunisia operating netback - $43.92/boe (31 March 2022 - $41.88/boe)
• Capital expenditures of $2.4 million (31 March 2022 - $1.5 million), comprising:
• 1. Romania - $0.6 million

• o Tunisia - $1.8 million

• Cash balance as at 31 March 2023 was $2.7 million (31 December 2022 - $4.9 million)

OPERATIONAL

• In Tunisia, production has remained stable in the first three months of 2023. The Company is expecting to perform a lifting in the latter half of May 2023 of 50,344 bbls of Tunisian crude oil
• The CTF-004 rig has completed rig-up and commenced workover operations on the Sabria N-2 well in Tunisia. The workover and recompletion is expected to take approximately 30-40 days
• The workover of the Sabria W-1 well was suspended despite good initial progress resulting in the successful removal of two of three tubing strings to a depth of 3,433 metres. However unexpected conditions were subsequently encountered in the wellbore as a result of old debris and drilling mud left in the well from operations in 1998 which prevented the further removal of the 1.5-inch tubing below 2,889 metres
• The Company has undertaken work to design a side track to complete the Sabria W-1 pump installation. Long lead items and rig availability are being determined
• The Company has engaged a local geological and geophysical consultant to assist Serinus' technical team to identify locations for two new wells in the Sabria field
• In Romania, the Company completed the block wide review during the first quarter of 2023 which has combined the extensive technical information into a block wide exploration model. This will refocus future exploration on attractive, identified play systems including the potential appraisal of existing discoveries and extrapolating productive trends onto the Satu Mare block
• The International Chamber of Commerce ("ICC") awarded a decision in favour of Serinus, confirming that the 40% participating interest of its former partner on the Satu Mare Concession, Oilfield Exploration Business Solutions S.A.'s ("OEBS"), will be transferred to Serinus
• Production for the period averaged 691 boe/d, comprising: o Romania - 163 boe/d
  o Tunisia - 528 boe/d

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OPERATIONAL UPDATE AND OUTLOOK

Serinus Energy plc and its subsidiaries ("Serinus", the "Company" or the "Group") is an oil and gas exploration, appraisal and development company. The Group is the operator of all its assets and has operations in two business units: Romania and Tunisia.

ROMANIA

The Group's Romanian operating subsidiary holds the licence to the Satu Mare concession area, covering approximately 3,000 km2 in the north-west of Romania. The Moftinu Gas Development project began production in 2019. The development project includes the Moftinu gas plant, and currently has four gas production wells - Moftinu-1003,Moftinu-1004,Moftinu-1007 and Moftinu-1008. During the three months ended 31 March 2023, the Company's Romanian operations produced a total of 88 MMcf of gas, equating to an average daily production of 163 boe/day.

The Canar-1 well has been converted into a water injection well and is currently injecting our produced water volumes from the Moftinu wells into Canar-1. The use of Canar-1 as a water injection well is delivering significant cost savings in operating expenses due to the elimination of the high costs of trucking produced water volumes for disposal off-site.

The Company completed the block wide geological review during the first quarter of 2023 which has combined the extensive technical information into a block wide exploration model. This will refocus future exploration on attractive, identified play systems including the potential appraisal of existing discoveries and extrapolating productive trends onto the Satu Mare block.

The Company has completed all of its commitments under the third exploration phase of the Satu Mare Concession Agreement, and in October 2021, received an additional two-year evaluation phase on the Satu Mare Concession until 27 October 2023. The Company is in routine conversations with the National Agency for Mineral Resources ("NAMR") regarding the further extension of this concession and will apply for a further period during 2023. The greater Moftinu gas field area has been declared a commercial field and is exempt from this routine licence extension procedure.

The Company announced on 15 February 2023 that the International Chamber of Commerce ("ICC") had awarded a decision in favour of Serinus, confirming that as a result of Oilfield Exploration Business Solutions S.A.'s ("OEBS") default under the Joint Operating Agreement ("JOA") between OEBS and Serinus, OEBS' 40% participating interest in the Satu Mare Concession in Romania will be transferred to Serinus.

TUNISIA

The Company currently holds two concession areas within Tunisia - Sabria and Chouech Es Saida. These concession areas both contain discovered oil and gas reserves and are currently producing. The largest asset is the Sabria field, which is a large, conventional oilfield. The Company's independent reservoir engineers have estimated to have approximately 445 million barrels of oil equivalent originally in place. Of this oil in place only 1.6% has been produced to date due to a low rate of development on the field. Serinus has spent extensive time studying the best means of further developing this field and considers this to be an excellent asset for remedial work to increase production and, on completion of ongoing reservoir studies, to conduct further development operations. The Company had applied to extend the Ech Chouech licence prior to its expiry in June 2022 and the Company intends to continue its application once the licence application process is formalised.

The workover to install a pump into the Sabria W-1 well commenced in December 2022 and initially progressed as expected, with two of three tubing strings being successfully removed to a depth of 3,433 metres. However unexpected conditions were subsequently encountered in the wellbore as a result of old drilling mud and tubulars left in the well from operations in 1998. This impeded progress with the removal of the final 1.5-inch coiled tubing below a depth of 2,889 metres. More than 85% of the 1.5-inch tubing was recovered, however an excess layer of old debris and drilling mud prevented the removal of further 1.5-inch tubing. As a result, the Company and its partner, ETAP, determined to suspend the workover pending investigations of alternative means of completing the programme.

Throughout the workover programme, Sabria production remained constant and uninterrupted.

In the meantime, the Company and its partner have elected to proceed with operations on the Sabria N-2 well to perform a workover to recomplete the well. The CTF-004 rig has completed rig-up and commenced operations on the N-2 well. The workover program is designed to recomplete the well and remove any wellbore restrictions and is expected to take approximately 30-40 days. This well was drilled in 1980 but was damaged during completion and, although in proximity to producing wells, in particular the prolific WIN-12bis well, was not able to flow oil to surface. Company engineering analysis estimates that a successful workover and recompletion will initially increase gross production from the Sabria field by approximately 420 boe/d. Upon recompletion of the N-2 well, the rig will be released.

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FINANCIAL REVIEW

LIQUIDITY, DEBT AND CAPITAL RESOURCES

During the three months ended 31 March 2023, the Company invested a total of $2.4 million (2022 - $1.5 million) on capital expenditures before working capital adjustments, out of which Romania incurred $0.6 million (2022 - $1.3 million) and Tunisia invested $1.8 million (2022 - $0.2 million) primarily on Sabria W-1 operations.

The Company's funds used in operations for the three months ended 31 March 2023 were $0.8 million (2022 - funds from operations of $2.9 million). Including changes in non-cash working capital, the cash flow from operating activities in 2023 was $0.01 million (2022 - cash flow used in operating activities of $0.6 million). The Company is debt-free and has adequate resources available to deploy capital into both operating segments.

(US$ 000s)	31 March	31 December
Working Capital	2023	2022
Current assets	16,036	16,654
Current liabilities	16,893	16,571
Working Capital	(857)	83

The working capital deficit at 31 March 2023 was $0.9 million (31 December 2022 - $0.1 million). The decrease in working capital is primarily a result of continued investment into operating activities.

Current assets as at 31 March 2023 were $16.0 million (31 December 2022 - $16.7 million), a decrease of $0.7 million. Current assets consist of:

• Cash and cash equivalents of $2.7 million (31 December 2022 - $4.9 million)
• Restricted cash of $1.1 million (31 December 2022 - $1.1 million)
• Trade and other receivables of $11.4 million (31 December 2022 - $10.0 million)
• Product inventory of $0.8 million (31 December 2022 - $0.7 million)

Current liabilities as at 31 March 2023 were $16.9 million (31 December 2022 - $16.6 million), an increase of $0.3 million. Current liabilities consist of:

• Accounts payable of $12.0 million (31 December 2022 - $9.3 million)
• Decommissioning provision of $4.6 million (31 December 2022 - $5.1 million)

1. Canada - $0.8 million (31 December 2022 - $0.8 million) which is offset by restricted cash in the amount of $1.1 million (31 December 2022 - $1.1 million) in current assets

1. Romania - $nil (31 December 2022 - $0.5 million)

• 1. Tunisia - $3.8 million (31 December 2022 - $3.8 million)
• Income taxes payable of $nil (31 December 2022 - $1.9 million)
• Current portion of lease obligations of $0.3 million (31 December 2022 - $0.3 million)

NON-CURRENT ASSETS

Property, plant and equipment ("PP&E") increased to $63.2 million (31 December 2022 - $62.3 million), as a result of capital expenditures in PP&E of $2.4 million partially offset by depletion in the period of $1.3 million as well as a change in decommissioning estimates of $0.2 million. There were no additions or adjustments to exploration and evaluation assets ("E&E") in the period (31 December 2022 - $10.5 million). Right-of-use assets ("ROU") decreased to $0.5 million (31 December 2022 - $0.7 million) due to depreciation of assets.

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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:

	Period ended 31 March
(US$ 000s)	2023	2022
Cash flows from (used in) operations	14	(587)
Changes in non-cash working capital	(813)	3,534
Funds (used in) from operations	(799)	2,947
Funds from operations per share	(0.00)	0.00

Romania generated funds from operations of $0.1 million (2022 - $4.0 million) and Tunisia generated $0.5 million (2022 - $0.4 million). Funds used at the Corporate level were $1.4 million (2022 - $1.5 million) resulting in net funds used in operations of $0.8 million (2022 funds from operations - $2.9 million).

PRODUCTION

Period ended 31 March 2023	Tunisia	Romania	Group	%
Crude oil (bbl/d)	468	-	468	68%
Natural gas (Mcf/d)	361	979	1,340	32%
Condensate (bbl/d)	-	-	-	0%
Total production (boe/d)	528	163	691	100%

Period ended 31 March 2022	Tunisia	Romania	Group	%
Crude oil (bbl/d)	441	-	441	39%
Natural gas (Mcf/d)	381	3,630	4,011	60%
Condensate (bbl/d)	-	5	5	1%
Total production (boe/d)	505	610	1,115	100%

For the three months ended 31 March 2023 production volumes were 691 boe/d, a decrease of 424 boe/d against the comparative period (31 March 2022 - 1,115 boe/d).

Romania's production volumes were 163 boe/d in the period (31 March 2022 - 610 boe/d). Production continues to decrease due to natural declines as well as water breakthrough in some producing formations within some of the producing wells.

Tunisia's production volumes increased to 528 boe/d against comparative period (31 March 2022 - 505 boe/d).

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