Serinus Energy : Q2 2023 Report and Accounts

Serinus Energy plc

Half Year Report and Accounts 2023 (US dollars)

HALF YEAR 2023 HIGHLIGHTS

FINANCIAL

• Revenue for the six months ended 30 June 2023 was $8.9 million (30 June 2022 - $29.3 million)
• Funds from operations for the six months ended 30 June 2023 were $0.4 million (30 June 2022 - $8.2 million)
• EBITDA for the six months ended 30 June 2023 was $0.5 million (30 June 2022 - $8.7 million)
• Gross profit for the six months ended 30 June 2023 was $0.8 million (30 June 2022 - $8.0 million)
• The Company realised a net price of $74.93/boe for the six months ended 30 June 2023 comprising: o Realised oil price - $74.75/bbl
  o Realised natural gas price - $12.56/Mcf
• The Group's operating netback decreased, in line with the commodity prices, for the six months ended 30 June 2023 and was $31.18/boe (30 June 2022 - $113.38/boe), comprising:
  o Romania operating netback - $12.53/boe (30 June 2022 - $171.01/boe) o Tunisia operating netback - $36.47/boe (30 June 2022 - $63.49/boe)
• Capital expenditures of $5.0 million (30 June 2022 - $4.2 million), comprising: o Romania - $0.5 million
  o Tunisia - $4.5 million
• Working capital deficit was $4.2 million (31 December 2022 - surplus of $0.1 million)
• Cash balance as at 30 June 2023 was $2.5 million (31 December 2023 - $4.9 million)

OPERATIONAL

• The Sabria N-2 workover commenced on 02 May and was successfully completed on 05 June 2023
• The Sabria N-2 well is currently flowing to surface and is dewatering in line with behaviour the Company has observed in other wells on the Sabria field
• Subject to the progress during the dewatering phase the company is considering acidizing the N-2 well to enhance the flow performance of the well
• The Company commenced the Sabria W-1 workover in the period. The workover was intended to allow for the first installation of artificial lift in the Sabria field. The workover was suspended when obstructions in the well made progress more expensive than returning to the well at a later date and side-tracking to the target
• The Company is currently working to design the optimal parameters of the W-1side-track
• Production in Chouech es Saida continues with no pump downtime in the period
• Serinus has engaged the services of a geological and geophysical consultancy firm with the aim of identifying the most suitable location for two future wells in the Sabria field
• In May 2023, the Company performed a lifting of 50,344 bbls of Tunisian crude oil at a price of $74.91/bbl
• The Company has scheduled the next lifting and expects to perform this lifting in September 2023
• Production for the period averaged 677 boe/d, comprising: o Romania - 144 boe/d
  o Tunisia - 533 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 six months ended 30 June 2023, the Company's Romanian operations produced a total of 156 MMcf of gas, equating to an average daily production of 144 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 six months 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 ICC had awarded a decision in favour of Serinus, confirming that as a result of 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 elected to proceed with operations on the Sabria N-2 well to perform a workover to recomplete the well. The workover operations on the Sabria N-2 well were completed in early June 2023. The workover was completed on time and within budget despite 3.5 days non-productive time caused by high winds. 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. The Company's engineering analysis estimates that a successful workover and recompletion will initially increase gross production from the Sabria field by approximately 420 boe/d.

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FINANCIAL REVIEW

LIQUIDITY, DEBT AND CAPITAL RESOURCES

During the six months ended 30 June 2023, the Company invested a total of $5.0 million (30 June 2022 - $4.2 million) on capital expenditures before working capital adjustments. In Romania, the Group invested $0.5 million (30 June 2022 - $3.5 million) on Canar-1 water injection pump, solar powered radio telecommunication system to the Moftinu gas plant, and further extension of the Satu Mare Concession. In Tunisia, the Company invested $4.5 million (30 June 2022 - $0.7 million) of which $3.4 million was invested in workovers on wells and $1.1 million was for capitalized inventory purchases.

The Company's funds from operations for the six months ended 30 June 2023 were $0.4 million (30 June 2022 - $8.2 million). Including changes in non-cash working capital, the cash flow generated from operating activities in 2023 was $1.0 million (30 June 2022 - $3.4 million). The Company continues to be in a strong position to expand and continue growing production within our existing resource base. The Company is debt-free and has adequate resources available to deploy capital into both operating segments to deliver growth and shareholder returns.

($000)	30 June	31 December
Working Capital	2023	2022
Current assets	14,306	16,654
Current liabilities	(18,522)	(16,571)
Working Capital (deficit)	(4,216)	83

Working capital deficit at 30 June 2023 was $4.2 million (31 December 2022 - $0.1 million surplus). The decrease in working capital is primarily due to lower commodity prices as well as an increase in accounts payable due to ongoing well workover operations in Tunisia.

Current assets as at 30 June 2023 were $14.3 million (31 December 2022 - $16.7 million), a decrease of $2.4 million. Current assets consist of:

• Cash and cash equivalents of $2.5 million (31 December 2022 - $4.9 million)
• Restricted cash of $1.1 million (31 December 2022 - $1.1 million)
• Trade and other receivables of $10.1 million (31 December 2022 - $10.0 million)
• Product inventory of $0.6 million (31 December 2022 - $0.7 million)

Current liabilities as at 30 June 2023 were $18.5 million (31 December 2022 - $16.6 million), an increase of $1.9 million. Current liabilities consist of:

• Accounts payable of $13.4 million (31 December 2022 - $9.3 million)
• Decommissioning provision of $4.9 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 2023 - $0.5 million)

• 1. Tunisia - $4.1 million (31 December 2022 - $3.8 million)
• Income taxes payable of $nil (31 December 2022 - $1.9 million)
• Current portion of lease obligations of $0.2 million (31 December 2022 - $0.3 million)

NON-CURRENT ASSETS

Property, plant and equipment ("PP&E") increased to $64.7 million (31 December 2022 - $62.3 million), primarily due to capital expenditures in PP&E of $5.0 million offset by depletion in the period of $2.4 million as well as a change in decommissioning estimates of $0.2 million which decreased due to the higher discount rates applied to the calculation during the period. Exploration and evaluation assets ("E&E") increased to $10.7 million (31 December 2022 - $10.5 million), due to change in decommissioning estimates. Right-of-use assets decreased to $0.4 million (31 December 2022 - $0.7 million) due to depreciation in the period.

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FINANCIAL REVIEW - SIX MONTHS ENDED 30 JUNE 2023

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:

	Six months ended 30 June
($000)	2023	2022
Cash flow from operations	967	3,394
Changes in non-cash working capital	(569)	4,782
Funds from operations	398	8,176
Funds from operations per share	0.00	0.07

Romania used funds in operations of $0.4 million (30 June 2022 - generated $5.3 million) and Tunisia generated $3.4 million (30 June 2022 - $6.0 million). Funds used at the Corporate level were $2.6 million (30 June 2022 - $3.1 million) resulting in net funds from operations of $0.4 million (30 June 2022 - $8.2 million). Changes in non- cash working capital increased by $5.4 million to $0.6 million (30 June 2022 - $4.8 million), due to an increase in accounts receivable for oil sales on contract, as well as an increase in prepaid expenditures, timing of payments, and is consistent with the prior quarter.

PRODUCTION
Six months ended 30 June 2023	Tunisia	Romania	Group	%
Crude oil (bbl/d)	471	-	471	70%
Natural gas (Mcf/d)	373	862	1,235	30%
Condensate (bbl/d)	-	-	-	0%
Total (boe/d)	533	144	677	100%
Six months ended 30 June 2022
Crude oil (bbl/d)	454	-	454	45%
Natural gas (Mcf/d)	398	2,894	3,292	54%
Condensate (bbl/d)	-	3	3	1%
Total (boe/d)	521	485	1,006	100%

During the six months ended 30 June 2023 production volumes decreased 329 boe/d to 677 boe/d against the comparative period (30 June 2022 - 1,006 boe/d).

Romania's production volumes decreased by 341 boe/d to 144 boe/d against the comparative period (30 June 2022

- 485 boe/d). Production continues to reflect the natural decline profile of shallow gas fields.

Tunisia's production volumes increased by 12 boe/d to 533 boe/d against the comparative period (30 June 2022 - 521 boe/d). Production increased during the first half of 2023 as a result of the Company's programme of pump installation and maintenance. The recently completed N-2 workover was successful in removing the well bore restrictions and the well is flowing in the de-watering phase. Ongoing workover programmes continue in the Chouech Es Saida field, with the aim to optimize production.

OIL AND GAS REVENUE
($000)
Six months ended 30 June 2023	Tunisia	Romania	Group	%
Oil revenue	6,162	-	6,162	77%
Natural gas revenue	703	2,012	2,715	23%
Condensate revenue	-	-	-	0%
Total revenue	6,865	2,012	8,877	100%

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