2021 ANNUAL REPORT
2021 ANNUAL REPORT
STRATEGIC REPORT
03 2021 Highlights
04 Serinus at a Glance
05 Operational Summary and Outlook
06 COVID-19
07 Serinus Investment Thesis
08 Serinus' Strategy
09 Chairman's Letter
10 Letter from the CEO
11 Report from the CFO
15 Review of Operations
15 Romania
16 Tunisia
17 Reserves
20 Environmental, Social and Governance
24 Risk Management Statement
GOVERNANCE
26 Board of Directors and Management Team
28 Senior Management
30 Corporate Governance Statement
33 Remuneration Committee Report
36 Audit Committee Report
37 Report of the Directors
FINANCIAL STATEMENT
38
Independent Auditor’s Report to the Members of
Serinus Energy
42 Consolidated Statement of
Comprehensive Income
43 Consolidated Statement of
Financial Position
44 Consolidated Statement of Shareholder's Equity
45 Consolidated of Cash Flows
46 Notes to the Consolidated Financial Statements
70 Advisors
2
SERINUS ENERGY
Visit our website for more information
www.serinusenergy.com
2021 HIGHLIGHTS
FINANCIAL
•
•
•
•
•
Revenue for the year ended 31 December 2021 was $40.0 million (31 December
2020 - $24.0 million)
The Company generated net income of $8.4 million (31 December 2020 – loss of
$9.3 million)
EBITDA for the year ended 31 December 2021 was $12.3 million (31 December
2020 - $6.6 million)
The Company realised a net price of $66.82/boe for the year ended 31 December
2021, comprising:
•
•
Realised oil price - $65.19/bbl
Realised natural gas price - $11.25/Mcf
The Group’s operating netback remained strong for the year ended 31 December
2021 and was $44.60/boe (31 December 2020 - $14.55/boe), comprising:
•
•
Romania operating netback - $52.44/boe (31 December 2020 - $16.44/
boe)
Tunisia operating netback - $29.77/boe (31 December 2020 - $8.71/boe)
•
Capital expenditures of $10.7 million (31 December 2020 - $5.5 million),
comprising:
•
•
Romania - $9.5 million
Tunisia - $1.2 million
•
Cash balance as at 31 December 2021 was $8.4 million
OPERATIONAL
• Drilled two wells in Romania in 2021, bringing the Moftinu-1008 well into
production in February 2021 and discovering gas at the Sancrai-1 well,
which has subsequently been suspended
•
•
•
•
The first of two compressors at the Moftinu field was commissioned in the
fourth quarter of 2021 with the second installed and commissioned in
February 2022. It is expected that compression on the wells will stabilise
production and extend overall field life
A new 2D seismic acquisition programme has been completed and
interpretation work to support the drilling of up to three prospects
adjacent to the Moftinu field, is underway
Subject to well permitting approvals, the Company intends to begin
a multi-well drilling programme in the latter half of 2022 in Romania
In Tunisia, the first submersible pump for the Artificial Lift programme
has been delivered to the Sabria field. The Company is awaiting rig
mobilization for the workover and pump installation at the Sabria
W-1 well to commence. Plans for additional pumps in the Sabria
field are being progressed. Workovers in the Chouech Es Saida
field has resulted in increased production from wells CS-3 and CS-1
•
Production for the year averaged 1,649 boe/d, comprising:
•
•
Romania – 1,078 boe/d
Tunisia - 571 boe/d
•
Serinus has continued to operate safely and effectively through
the COVID-19 pandemic, with the successful implementation of
operational and monitoring protocols to ensure the health and
safety of our employees and achieved 1,000 accident-free days
of continuous operation at the Moftinu gas plant
2021 ANNUAL REPORT
3
SERINUS AT A GLANCE
Serinus is an oil and gas exploration, appraisal and development company.
The Group acts as the operator for all of its assets and has operations in two
business units: Romania and Tunisia.
ROMANIA
In Romania the Company currently holds one large concession area,
Satu Mare, approximately 3,000km2, located in a highly sought-after
hydrocarbon province. The Moftinu Gas Project was brought on
production in April 2019 and has produced approximately 8.4 Bcf to
the end of 2021. The Company has identified numerous additional
shallow gas prospects near the Moftinu field that it hopes to discover
and develop in the near-term. The concession is extensively
covered by legacy 2D seismic, augmented by the Company’s own
3D and 2D acquisition programs that have further refined the
identified prospects.
TUNISIA
The Company’s Tunisian operations are comprised of three
concession areas. The Company’s Tunisian concessions all
have discovered oil and gas reserves and all are currently
producing. The largest asset in the Tunisian portfolio is the
Sabria field, which is a large oilfield play with an estimated
original oil in place of 445 million barrels -of-oil-equivalent
of which 1.0% of this volume has been produced to date.
this historically under-developed
Serinus considers
field to be an excellent asset for development work to
significantly increase production in the near-term. The
Chouech Es Saida and Ech Chouech concessions in
southern Tunisia have significant gas prospectivity that
can be developed in the medium term, with the ability
to access near-by under-utilised gas transmission
capacity.
4
4
SERINUS ENERGY
SERINUS ENERGY
OPERATIONAL SUMMARY AND OUTLOOK
CORPORATE
The elimination of the Company’s legacy debt in 2020 allows Serinus to focus its operating cashflow on high-return investments that
position the Company for significant near-term growth. For the year to 31 December 2021, the Company generated cashflow from
operating activities of $14.1 million and invested $10.7 million of capital expenditure. It has also eliminated its working capital deficit.
The Company has proactively managed its production, stabilising natural declines in Romania and adding incremental production in
Tunisia through workovers on its Chouech assets. The Company is well-advanced on the implementation of its artificial lift programme
in the Sabria field in Tunisia, beginning with the Sabria-W1 well. In 2021, the Company’s capital programme was concentrated on the
two wells drilled in Romania, the installation of the first of two compressors onto the Moftinu field, and the acceleration of the design
and permitting of a new 2D seismic programme. The new 2D seismic will complement legacy 2D seismic and tie to existing 3D seismic
data to refine the high-rank prospects adjacent to the Moftinu gas field.
The Company, under the authority granted by the shareholders at the 2020 Annual General Meeting, executed the purchase of its own
shares. The Board believes that the share price at the time of its purchases did not reflect the intrinsic value of the business and will
continue to evaluate the investment return of share buybacks as part of its allocation of capital across the Group (note 17).
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 produces gas from four wells - Moftinu -1003, Moftinu-1004, Moftinu-1007 and Moftinu-1008. During
2021, the Company's Romanian operations produced a total of 2.3 Bcf of gas and 3,311 barrels of condensate, equating to an average
daily production of 1,078 boe/day.
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 has agreed to the following work commitments over the term of this evaluation phase:
•
•
Phase 1: From 28 October 2021 to 27 October 2022, the Company is required to reprocess 160.9 km 2D seismic in the
Madaras area at an estimated cost of $100,000; and
Phase 2: From 28 October 2022 to 27 October 2023, the Company is required to reprocess 30.1 km 2D seismic in the
Santau-Nusfalau area at an estimated cost of $50,000.
During the year the Company successfully drilled two wells, a production well on the Moftinu gas field (Moftinu-1008) and the first
exploration well on the Satu Mare concession since 2015, the Sancrai-1 exploration well. The Moftinu-1008 well, was drilled to a total
depth of 1,000 metres, completed and tied into the Moftinu gas plant with an initial flow rate of 4.0 MMscf/d (approximately 667
boe/d) in February. The Sancrai-1 exploration well was originally budgeted to be drilled towards the end of 2021 but as a result of
the Company's unlevered balance sheet and strong cash generation, it was able to accelerate this project and commenced drilling on
29 June 2021. Sancrai-1 was drilled to a depth of 1,600 metres and discovered gas, however the testing programme was unable to
record the flow of gas in the selected zones and the well was suspended pending further technical evaluation. The technical review
identified a range of potential factors preventing the flow of gas; however, it was determined that the additional capital expenditure
required to re-enter the well and pursue further investigation, would be better allocated to new wells.
Serinus conducted a thorough review of the Satu Mare exploration portfolio and high-graded the area and prospects to the immediate
north and east of the Moftinu field. In February 2022, a new 105km 2D seismic acquisition programme over high-ranked prospects
was executed over this area and will compliment reprocessed legacy 2D seismic and the existing Moftinu 3D data-set. The programme
objective is to further de-risk the prospects, confirm their extent and potential gas volumes in place, and determine the optimal drilling
locations for a near-term multi-well drilling programme expected to commence in the latter half of 2022. Additional interpretation
work is also being conducted on the Santau 3D area with a view to confirming drilling locations on prospects that will form the basis
for future multi-well drilling campaigns.
The first compressor was installed and commissioned onto the Moftinu-1003 gas well in November 2021. The first compressor
installation occurred at the same time as the routine gas plant maintenance to minimise the impact on production. The second
compressor was successfully installed and commissioned in February 2022.
The Company incorporated a new gas trading subsidiary, Serinus Energy Romania Trading S.r.l. in October 2021, which has commenced
trading the Company's Romanian gas production not committed under its marketing agreement into the Romanian market. Serinus
Energy Romania Trading S.r.l was created to allow our licensed gas traders to directly access the Romanian gas market and to capture
the full value of gas prices in Romania through the ability to access all available types of contracts of various durations and respond
accordingly to the price signals of these contracts that are not available under the formulaic-determined pricing of the marketing
agreement. Gas pricing in Romania has recovered significantly since a low realised price in July 2020 of $2.77/mcf to an average
realised price of $11.45/mcf for 2021, with an average realised gas price of $31.58/mcf in the fourth quarter of 2021. Gas prices on
the Romanian Commodity Exchange ("BRM") remains strong over the first quarter of 2022.
Serinus has continued to operate safely and effectively in Romania throughout the period and despite local COVID-19 restrictions
which have during periods of high case rates impacted the movement of goods and personnel internally and across national borders.
2021 ANNUAL REPORT
5
OPERATIONAL SUMMARY AND OUTLOOK (continued)
Subsequent to the year-end, the Company announced that the
Moftinu gas project had achieved 1,000 accident-free days of
continuous operation which was a testament to the professionalism
and hard work of our team in Romania.
The Company has a deemed 100% working interest in the
concession as its partner has defaulted on its obligations under
the Joint Operating Agreement. The Company has filed a Request
for Arbitration with the Secretariat of the International Court of
Arbitration of the International Chamber of Commerce seeking a
declaration affirming the Company's rightful claim of ownership
of its defaulted partner's 40% participating interest and to compel
transfer of that interest to the Company.
TUNISIA
The Company currently holds three concession areas within
Tunisia. During the course of 2021 the Zinnia and the Sanrhar,
non-producing concession areas, expired and were relinquished
by the Company. All of the remaining Tunisian licence areas have
discovered oil and gas reserves and are currently producing;
Sabria, Chouech Es Saida, and Ech Chouech. The largest asset
is the Sabria field. Sabria is a large, conventional oilfield which
the Company’s independent reservoir engineers have estimated
to have approximately 445 million barrels of oil originally in
place. Of this oil in place only 1.0% 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.
in 2022
in Tunisia
A major project for the operations
is
the introduction of the first Artificial Lift programme to be
implemented on the W-1 well in the Sabria field. The W-1 is a
currently suspended well that was identified as a candidate to
benefit from the installation of a pump. Long lead items have
been ordered and the first submersible pump has been delivered.
This is a significant achievement by our procurement team who
have had to work hard given the effects of COVID-19 on supply
chains and workplace restrictions. The Company is now awaiting
the mobilization of the rig to commence the workover and pump
installation in the second quarter 2022. Following this, the
Company will follow a programme to install artificial lift in the
remaining candidate wells in Sabria.
The Company has also accelerated the re-entry workover of the
N-2 well in Sabria. This well was drilled in 1980 but was damaged
during completion and, although in proximity to producing
wells, was not able to flow oil to surface due to damage during
completion. The workover program will re-complete the well and
remove any wellbore restrictions. The Company anticipates that
the N-2 well will be on-production in mid-2022.
During the year, the Company conducted further workover
in the Chouech Es Saida area to replace and
operations
standardise pumps in order to increase production and efficiency.
This was completed despite a difficult operating environment
in Tunisia due to the impact of COVID-19 which, as a result of
travel restrictions for extended periods, delayed our vendor’s
technical personnel entering the country to work on our workover
programmes. Further workovers are planned in 2022.
COVID-19
The Company continues to place the health, safety and wellbeing of all our staff as our top priority. The Company continues to follow
government recommendations such as enhanced sanitation of work sites, social distancing and wearing masks. Where government
advice has required, the Company has closed or reduced the presence of staff in our Head Office, Administration Office and our Business
Unit Offices. Our field operations continue to modify daily tasks and routines to ensure safe practices for all staff. Existing operations
have remained in production and our producing assets have seen no significant operational setbacks resulting from the COVID-19
pandemic.
6
SERINUS ENERGY
SERINUS INVESTMENT THESIS
Investment in Serinus offers shareholders an ability to access international oil and gas
upstream operations with strong cash flow generation through the oil and gas commodity
cycle. Our low-cost onshore asset base provides significant near-term production growth
opportunities. The size of the existing asset base allows for significant organic growth
without incremental asset acquisition cost in areas where our technical knowledge has
been refined over the years that Serinus has operated these concession areas. Serinus
offers a compelling growth opportunity where risks are mitigated by our extensive
experience in our operating areas and the low-cost nature of our assets. The Company’s
existing assets also include large exploration prospects within close proximity of existing
infrastructure. The Company allocates capital to these exploration prospects which if
successful can add meaningful production and cash flow to the Group.
Serinus’ operations in Romania are focused on the large Satu Mare Concession Area.
The Satu Mare Concession Area is located in the north west of Romania along-side the
Hungarian border. This large block contains the Moftinu gas field, and the Company
believes that numerous shallow gas opportunities with similar characteristics to
the Moftinu field are present in the immediate surrounding area. In addition, the
southern portion of the concession offers excellent exploration opportunities for
large oil prospects as across the southern boundary of the Satu Mare concession
is the Suplacu de Barcau oil field (held by OMV Petrom). This is a significant oilfield
estimated to have produced in excess of 100 million barrels.
In Tunisia, the Company’s operations are focused on the Sabria, Chouech Es Saida
(“Chouech”) and Ech Chouech fields. Sabria is a very large conventional oilfield
where our independent reservoir engineers have accessed a field with 445 million
barrels of oil equivalent originally in place. Of that number approximately 1.0%
has been recovered to date. This is a very low recovery factor for a conventional
oilfield and the Company expects to increase that recovery factor materially. The
Chouech and Ech Chouech fields in southern Tunisia offer excellent opportunities
to increase production from existing oilfields through the application of standard
oilfield practices. Serinus’ Tunisian assets can be typified as existing discovered
and producing oilfields where field optimisation provides the path to production,
revenue and cash flow growth with no exploration risk.
In addition to the strong asset base Serinus has a strong and experienced
management team. Within each jurisdiction, we have local professionals
managing the operations. Within the Company we have significant technical
and commercial experience and are able to apply that experience across our
business units.
2021 ANNUAL REPORT
7
SERINUS' STRATEGY
VISION
The Group’s goal is to transform the potential of its extensive
land base in Romania and Tunisia into enhanced shareholder
value through the efficient allocation of capital.
STRATEGY
Serinus is focused on significant growth potential within its
existing concession and license holdings in Romania and
Tunisia through the development of low cost, high return
projects, as follows:
1.
Leverage Land Position:
• One concession
two work
commitments remaining in the current evaluation
phase
in Romania with
•
•
Three exploration and production concessions in
Tunisia with all work commitments completed
Extensive oil and natural gas exploration and
development potential within multiple play horizons
2. Commitment to Shareholders:
•
•
•
Cohesive management team with a commitment to
enhancing shareholder value
Abide by the highest thresholds of disclosure for an
AIM-listed Company
Extensive experience and a proven track record of
the allocation of shareholder capital
3. Manage Risks:
• Managing surface and subsurface risks through
introduction of new
constant evaluation and
technologies
•
Allocate capital to projects with attractive returns at
relatively low risk profiles
• Operator of all concessions allows for cost control
4. Focus on Growth:
•
•
Leverage cash flow to grow through expanded
exploration and development of the existing asset
base
Seek acquisitions that will provide synergies at a cost
that is accretive to shareholders
8
SERINUS ENERGY
CHAIRMAN'S LETTER
Dear shareholders,
I hope to find you in good health.
It is again my pleasure to address our valued shareholders on the achievements and challenges of the Company in 2021 and to
highlight the significant activities that will help direct it onto a sustainable path of growth in 2022 and beyond. This past year saw the
Company recover from the pandemic-induced difficulties it faced in 2020. The Company’s successful restructuring of its legacy debt
in December 2020 provided us with the ability to allocate the Company’s cash flow to capital investments that can grow production
and, in consequence, shareholder value.
While Covid-related disruptions continued to impact us in all our locations, particularly with respect to global logistics and the supply
chain, the Company successfully drilled two wells in Romania, the Moftinu-1008 development well and Sancrai-1 exploration well. The
Moftinu-1008 well was a success and began producing in March 2021, the Sancrai-1 well discovered gas but it failed to flow it to the
surface. While the Sancrai-1 result was not what we were hoping for, we were able to drill this well six months ahead of schedule due
to the performance of our assets and the strong commodity prices. It is important to remember that this is the first discovered gas field
outside of Moftinu and validates the view that there are significant gas resources on the Satu Mare concession.
Our ability to generate significant cash flow in 2021 has continued into 2022 and has allowed the Company to initiate an intensive
capital investment program for 2022, including a multi-well drilling program in Romania and the artificial lift and well workover
programs in Tunisia. We expect these programs to increase the Company’s production by the end of 2022. Further opportunities to
invest capital and increase production exist beyond 2022.
With the anticipated production growth and expected continuing strong commodity prices in the years to come, the Company can
further exploit its sizable land acreage. I have full confidence in the strategy and plans being proposed by management and the ability
of our Romanian and Tunisian teams to execute and deliver for shareholders.
We are very disappointed in our share price performance over the past year, as I am sure you are as well. It defies logic as to how
we saw no transfer of value to equity when we completed the debt restructuring and no response to our strong growth in cash flow.
However, I firmly believe that this value will soon be recognised by investors as we firmly continue with our growth strategy this coming
year and beyond. I hope all our patience is duly rewarded.
ESG is an increasingly important factor to consider in all our investment decisions. Given our historic banking arrangements we
have complied with the most stringent of ESG reporting and compliance requirements for over a decade. We have continued and
enhanced our monitoring programs and formalised ESG oversight through the creation of our ESG committee. Over the past year,
the board and management carried out a comprehensive review of our ESG compliance outputs with the intention to enhance our
already significant ESG disclosures.
In closing, I wish to pass on my sincere appreciation of the senior management team and all employees of the Company. I have
witnessed first-hand the hard work they have put in over the last year, often under trying and demanding circumstances. Through
their dedication and focus on excellence, the Company is positioned for significant growth that equity markets will soon be unable
to ignore.
Yours sincerely,
Lukasz Rędziniak, Chairman of the Board of Directors
18 March 2021
2021 ANNUAL REPORT
9
LETTER FROM THE CEO
Dear fellow shareholders,
2021 has been a busy year for your Company. The year began on an optimistic note with
the expectations of a waning pandemic and the Company newly re-energised through
the redemption of debt held by the European Bank for Reconstruction and Development.
2021 also marked the first year in more than ten years where the cash flow generated by the
successful developments of the Company could be fully and freely applied to future growth
opportunities. A capital plan to reflect the ability to apply our operating cash flow to growth
reflected that new opportunity. Key capital plans included the receipt of partner approvals and
the initiation of workflows to install the first pumps into the Sabria field in Tunisia. The drilling
of another production well in Romania and the drilling of the Company’s first exploration well
since 2015, the Sancrai-1 well in Romania.
Critical to the execution of these plans was the Company’s goal of matching its operational
and capital spending with its operating cash flow generation. As the year progressed and
commodity prices strengthened, especially in Romania where gas prices reached record
highs, the Company was able to accelerate its capital plans. Most critically the plans to drill
the Sancrai-1 well were accelerated by approximately six months and drilling commenced on
this target in July of 2021. The Sancrai-1 well was drilled on time and under budget. The well
discovered gas but disappointingly the Company has not been able to get the discovered gas
to flow to surface. This is clearly not the result that was desired, but it is important to recognise
that the Sancrai-1 well is by no means a failure. The well discovered gas. This is the first gas
discovered outside of the Moftinu gas field and validates our view that there are many gas
fields surrounding Moftinu. The Company sought to determine why the well would not flow
and whilst there are many plausible technical explanations no one explanation was certain, and
this meant that further work on the well was not certain to resolve the issues. The decision was
made to keep the well suspended for potential re-entry in the future and continue to explore our
extensive and attractive prospect inventory.
Whilst the operating cash flow allowed the acceleration of capital plans the Company continued
to be impacted by the effects of the Covid pandemic on global supply chains. In the planning
of any project, it is imperative to identify and manage the procurement of long lead items which
act as gating items to the execution of the programme. This has been increasingly difficult as
supply chains around the world became disrupted. Critically, for example, items that would
normally have taken four weeks to procure began to have procurement times of many months.
Equally the approvals of the results of tendering were drawn out as the pandemic affected the
ability of procurement and tendering audits to occur in person. The effect of these disruptions
meant that the pumps for the W1 well in Sabria were delayed from the fourth quarter of 2021 to
the first quarter of 2022.
It has been frustrating to have the Company move to a position where it is free to allocate its
operating cash flow to its growth projects only to have procurement, partner approvals and supply
chain issues delay these projects, but it has been encouraging to see the dynamism of our teams
as they have implemented creative solutions to solve the issues caused by these unprecedented
operating hurdles. As an example, our Tunisian teams have cut the procurement time for a tubing
hanger in half by working with our Romanian colleagues and using the facilities and relationships
in Romanian to expedite the procurement process.
In the face of a challenging year, Serinus has advanced the business. This year marks the first full
year of positive earnings in the Company’s history. The Company is generating strong cash flow,
has a deep portfolio of exploration and development opportunities, and is excited for the future.
In closing I would like to thank our shareholders for their continued support. Serinus looks forward
to growing the business by investing prudently in our high return projects.
Yours sincerely,
Jeffery Auld, Chief Executive Officer
18 March 2021
10
SERINUS ENERGY
REPORT FROM THE CFO
LIQUIDITY, DEBT AND CAPITAL RESOURCES
NON-CURRENT ASSETS
During the year the Company invested a total of $10.7 million
(2020 - $5.5 million) on capital expenditures before working
capital adjustments. In Romania, the Group invested $9.5 million
(2020 - $4.2 million) on the drilling, completion and tie-in of the
Moftinu-1008 well and the drilling and completing of the Sancrai-1
exploration well. In Tunisia, the Company invested $1.2 million
(2020 - $1.3 million) completing workovers on wells to enhance
production.
The Company’s funds from operations for the year ended 31
December 2021 were $10.2 million (2020 - $7.3 million). Including
changes in non-cash working capital, the cash flow generated from
operating activities in 2021 was $14.1 million (2020 – $6.8 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.
Property, plant and equipment (“PPE”) decreased to $71.7 million
(2020 - $77.8 million), primarily due to depletion expense of $10.1
million, which was partially offset by capital expenditures in PPE of
$5.8 million. Exploration and evaluation assets (“E&E”) increased
to $4.9 million (2020 - $0.01 million), primarily due to expenditures
incurred on the Sancrai-1 well.
FINANCIAL REVIEW – YEAR ENDED 31 DECEMBER 2021
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:
($000)
Working Capital
Current assets
Current liabilities
Working Capital (deficit)
Year ended 31 December
($000)
2021
2020
17,625
16,994
16,037
22,236
631
(6,199)
Cash flow from operations
Changes in non-cash working capital
Funds from operations
Funds from operations per share
0.01
0.03
Year ended 31 December
2021
2020
14,099
(3,866)
6,781
536
10,233
7,317
The working capital at 31 December 2021 was $0.6 million (2020 –
deficit of $6.2 million). The increase in working capital is primarily
a result of strong cash flows and the release of provisions relating
to historic liabilities.
Romania generated funds from operations of $10.9 million (2020
– $10.7 million) and Tunisia generated $3.9 million (2020 - $0.5
million). Funds used at the Corporate level were $4.6 million (2020
- $3.9 million) resulting in a net funds from operations of $10.2
million (2020 – $7.3 million).
Current assets as at 31 December 2021 were $17.6 million (31
December 2020 - $16.0 million), an increase of $1.6 million.
Current assets consist of:
PRODUCTION
•
•
•
•
Cash and cash equivalents of $8.4 million (2020 - $6.0
million).
Restricted cash of $1.1 million (2020 - $1.2 million).
Trade and other receivables of $7.4 million (2020 - $8.9
million).
Product inventory of $0.7 million (2020 - $nil)
Current liabilities as at 31 December 2021 were $17.0 million
(2020 – $22.2 million), a decrease of $5.2 million. Current
liabilities consist of:
•
Accounts payable and accrued liabilities of $9.7 million
(2020 - $14.3 million).
• Decommissioning provision of $6.6 million (2020 - $7.1
million).
•
•
•
•
Brunei - $1.6 million (2020 - $1.8 million).
Canada - $1.0 million (2020 - $1.0 million) which
are offset by restricted cash in the amount of $1.1
million (2020 - $1.2 million) in current assets.
Romania - $0.3 million (2020 - $0.6 million).
Tunisia - $3.7 million (2020 - $3.7 million).
•
•
Income taxes payable of $0.5 million (2020- $0.6 million).
Current portion of lease obligations of $0.2 million
(2020 - $0.2 million).
Year ended
31 December 2021
Crude oil (bbl/d)
Natural gas (Mcf/d)
Condensate (bbl/d)
Total (boe/d)
Year ended
31 December 2020
Crude oil (bbl/d)
Natural gas (Mcf/d)
Condensate (bbl/d)
Total (boe/d)
Tunisia Romania
Group
-
6,419
9
471
7,016
9
%
28%
71%
1%
1,078
1,649
100%
471
597
-
571
443
654
-
552
-
10,643
14
443
11,297
14
19%
80%
1%
1,788
2,340
100%
During the year, production volumes decreased 691 boe/d (29%)
to 1,649 boe/d (2020 – 2,340 boe/d). The Company’s production
volume reduced through natural well declines as well as COVID-
related workover delays.
Romania’s production volumes decreased by 710 boe/d (40%)
to 1,078 boe/d (2020 – 1,788 boe/d). The introduction of the
first compressor onto the Moftinu gas field in the fourth quarter
is expected to stabilise production and, together with further
compressors to be introduced, extend the life of the field.
2021 ANNUAL REPORT
11
REPORT FROM THE CFO (continued)
Tunisia’s production volume increased by 19 boe/d (3%) to 571
(2019 – 552 boe/d). The Company completed workovers on the
Chouech field during the year, despite COVID-related delays
and is underway with the first Artificial Lift programme which
will be implemented on the W-1 well in the Sabria field. The
first submersible pump has been delivered to the field and the
Company is awaiting the rig to be mobilized to commence with
the well workover and pump installation.
OIL AND GAS REVENUE
($000)
Year ended
31 December 2021
Tunisia Romania
Group
Oil revenue
Gas revenue
Condensate revenue
10,984
1,993
-
-
26,809
198
10,984
28,802
198
%
27%
72%
1%
Total revenue
12,977
27,007
39,984
100%
Year ended
31 December 2020
Oil revenue
Gas revenue
Condensate revenue
5,762
1,361
-
-
16,740
167
5,762
18,101
167
24%
75%
1%
Total revenue
7,123
16,907
24,030
100%
REALISED PRICE1
Year ended
31 December 2021
Oil ($/bbl)
Gas ($/Mcf)
Condensate ($/bbl)
Average realised price ($/boe)
Tunisia Romania Group
65.19
9.18
-
63.40
-
11.45
59.75
65.19
11.25
59.75
68.61
66.82
Year ended
31 December 2020
Oil ($/bbl)
Gas ($/Mcf)
Condensate ($/bbl)
35.56
5.68
-
-
4.30
32.85
35.56
4.38
32.85
Average realised price ($/boe)
35.28
25.84
28.06
Revenue during the year increased to $40.0 million (2020 – $24.0
million) as the Group saw the average realised price increase by
$38.76/boe (138%) to $66.82/boe (2020 - $28.06/boe).
The Group’s average realised oil price increased by $29.63/bbl
(83%) to $65.19/bbl (2020 – $35.56/bbl), and average realised
natural gas prices increased by $6.87/Mcf (157%) to $11.25/Mcf
(2020 - $4.38/Mcf). Pricing remains strong with the December
average realised gas price in Romania at $35.59/Mcf and the
December realised oil prices in Tunisia at $74.27/bbl.
Under the terms of the Sabria Concession Agreement the Group
is required to sell 20% of its annual crude oil production from
the Sabria concession into the local market, which is sold at an
approximate 10% discount to the price obtained on its other
crude sales. The remaining crude oil production is sold to the
international market through periodic liftings. In 2021, the Group
completed four liftings (2020 – two liftings).
ROYALTIES
($000)
Tunisia
Romania
Total
Total ($/boe)
Tunisia (% of revenue)
Romania (% of revenue)
Total (% of revenue)
Year ended 31 December
2021
1,715
1,605
3,320
5.55
13.2%
5.9%
8.3%
2020
844
960
1,804
2.11
11.9%
5.7%
7.5%
Royalties increased for the full year to $3.3 million (2020 - $1.8
million) while the Group’s average royalty rate increased to 8.3%
(2020 – 7.5%). The Romanian royalty rate increased as a result of
the royalty reference price exceeding the realised price, compared
to the comparative period when the realised price exceeded the
reference price; this was partially offset by the statutory royalty
rate decreasing to 3.5% in the fourth quarter of 2021 due to lower
production. Within the Tunisian royalties is a historic penalty for
delayed gas royalty payments of $0.1 million (2020 - $nil).
In Romania, the Company incurred a royalty rate of 7.5% for gas
revenues and a rate of 3.5% for condensate during the first three
quarters of 2021; in the fourth quarter royalties on gas revenues
decreased to 3.5%. The royalty is calculated using a reference
price that is set by the Romanian authorities and not the realised
price to the Company. Romanian royalty rates vary based on the
level of production during a quarter. Natural gas royalty rates
range from 3.5% to 13.0% and condensate royalty rates from 3.5%
to 13.5%.
In Tunisia royalties vary based on
individual concession
agreements. Sabria royalty rates vary depending on a calculation
of cumulative revenues, net of taxes, as compared to cumulative
investment in the concession, known as the “R factor”. As the R
factor increases, so does the royalty percentage to a maximum
rate of 15%. During 2021, the royalty rate remained unchanged in
Sabria at 10% for oil and 8% for gas. Chouech and Ech Chouech
royalty rates are flat at 15% for both oil and gas.
_______________________
1 For the year ended 31 December 2021, Tunisia realised oil prices are calculated using oil sales volumes of 461 bbl/d (2020 – 443 bbl/d). As at 31 December 2021 there were
12,229 bbls of oil in inventory (2020 – nil).
12
SERINUS ENERGY
PRODUCTION EXPENSES
Year ended 31 December
($000)
Tunisia
Romania
Canada
Group
Tunisia production expense ($/boe)
Romania production expense ($/boe)
2021
2020
5,174
4,748
44
4,520
3,706
54
9,976
8,280
25.26
12.09
22.33
5.67
Total production expense ($/boe)
16.67
9.67
During the year production expenses increased by $1.7 million
(20%) to $10.0 million (2020 - $8.3 million), being an increase of
$7.00/boe (73%) to $16.67 (2020 - $9.67). The increase in costs is
the result of additional workovers being completed in Tunisia and
$0.3 million (2020 - $nil) of historic mining taxes related to Sanrhar
and Zinnia. On a per barrel basis, the increase is due to lower
comparative production.
Tunisia’s production expenses increased by $0.7 million (16%), to
$5.2 million (2020 - $4.5 million), being an increase of $2.93/boe
(13%) to $25.26/boe (2020 - $22.33/boe). The increase is due to
the workover programs and included historic mining taxes of $0.3
million related to Sanrhar and Zinnia.
Romania’s overall operating costs increased by $1.0 million (28%)
to $4.7 million (2020 – $3.7 million), being an increase of $6.42/
boe (113%) to $12.09/boe (2020 - $5.67/boe) during the year. The
change in production costs are the result of operating additional
wells and additional workovers in the current year. The Company
continues to focus on cost control measures within Romania.
Canada production expenses relate to the Sturgeon Lake assets,
which are not producing and are incurring minimal operating
costs to maintain the property.
OPERATING NETBACK
Serinus uses operating netback as a key performance indicator
to assist management in understanding Serinus’ profitability
relative to current market conditions and as an analytical tool to
benchmark changes in operational performance against prior
periods. Operating netback consists of petroleum and natural gas
revenues less direct costs consisting of royalties and production
expenses. Netback is not a standard measure under IFRS and
therefore may not be comparable to similar measures reported
by other entities.
Year ended 31 December 2021
($/boe)
Tunisia
Romania
Group
Sales volume (boe/d)
Realised price
Royalties
Production expense
561
63.40
(8.37)
(25.26)
1,078
68.61
(4.08)
(12.09)
1,639
66.82
(5.55)
(16.67)
Operating netback
29.77
52.44
44.60
Year ended 31 December 2020
($/boe)
Tunisia
Romania
Group
Sales volume (boe/d)
Realised price
Royalties
Production expense
552
35.28
(4.17)
(22.33)
Operating netback
8.78
1,788
25.84
(1.47)
(5.67)
18.70
2,340
28.06
(2.11)
(9.67)
16.28
The Group operating netback increased by $28.32/boe (174%) to
$44.60/boe (2020 - $16.28/boe). The increase is due to increased
realised prices, partially offset by higher royalties and higher
production expenses.
The Company also generated a gross profit of $7.2 million (2020
– gross loss of $2.8 million), largely due to a significant increase
in the Company’s netbacks as well as a decrease to depletion as
described below.
EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION
AND AMORTISATION (“EBITDA”)
Serinus uses EBITDA as a key performance indicator to assist
management in understanding Serinus’ cash profitability. EBITDA
is computed as net profit/loss and adding back interest, taxation,
depletion and depreciation, and amortisation expense. EBITDA
is not a standard measure under IFRS and therefore may not
be comparable to similar measures reported by other entities.
During the 12 months ended 31 December, the Group’s EBITDA
increased by $5.7 million to $12.3 million (2020 - $6.6 million).
WINDFALL TAX
Year ended 31 December
($000)
Windfall tax
Windfall tax ($/Mcf - Romania gas)
Windfall tax ($/boe - Romania gas)
2021
9,432
3.99
23.96
2020
1,486
0.38
2.29
During 2021, the Group incurred windfall taxes in Romania of $9.4
million (2020 - $1.5 million). This increase is directly related to
higher realised gas prices which increased from $4.30/Mcf in 2020
to $11.45/Mcf in 2021.
In Romania, the Group is subject to a windfall tax on its natural gas
production which is applied to supplemental income once natural
gas prices exceed 47.53 RON/Mwh. This supplemental income
is taxed at a rate of 60% between 47.53 RON/Mwh and 85.00
RON/Mwh and at a rate of 80% above 85.00 RON/Mwh. Expenses
deductible in the calculation of the windfall tax include royalties
and capital expenditures limited to 30% of the supplemental
income below the 85.00 RON/Mwh threshold.
DEPLETION AND DEPRECIATION
($000)
Tunisia
Romania
Corporate
Total
Tunisia ($/boe)
Romania ($/boe)
Total ($/boe)
Year ended 31 December
2021
3,256
6,650
149
2020
2,912
11,739
644
10,055
15,295
15.89
16.89
16.80
14.39
17.95
17.86
Depletion and depreciation expense decreased by $5.2 million
(34%) to $10.1 million (2020 - $15.3 million), being a decrease of
$1.06/boe (5%) to $16.80/boe (2020 - $17.86/boe). The decrease
is primarily due to a lower depletable base on the Group’s assets
and lower production during the year.
2021 ANNUAL REPORT
13
REPORT FROM THE CFO (continued)
GENERAL AND ADMINISTRATIVE (“G&A”) EXPENSE
($000)
G&A expense
G&A expense ($/boe)
Year ended 31 December
2021
4,479
7.47
2020
3,944
4.61
G&A costs increased during the year by $0.6 million (14%) to
$4.5 million (2020 - $3.9 million), being an increase of $2.86/boe
(62%) to $7.47/boe (2020 - $4.61/boe), due to higher compliance
expenses and the impact of foreign exchange rates in the current
year.
SHARE-BASED PAYMENT
($000)
Share-based payment
Share-based payment ($/boe)
Year ended 31 December
2021
2020
213
0.36
1,418
1.66
Share-based compensation decreased by $1.2 million or 85% to
$0.2 million (2020 – $1.4 million). This decrease is due to only 1.8
million share options being granted in the current year. In 2020,
the Group awarded 22.5 million ordinary shares under the Long-
Term Incentive Plan (“LTIP”) and a further 22.4 million share options
as well as shares issued in lieu of salary as part of the Group’s cost
savings initiatives in response to the uncertainties created by the
COVID-19 pandemic and collapse in commodity prices during
that period.
NET FINANCE EXPENSE
Year ended 31 December
($000)
Interest expense on long-term debt
AmortizationAmortisation of debt costs
AmortizationAmortisation of debt
modification
Interest on leases
Accretion on decommissioning provision
Foreign exchange and other
2021
2020
-
-
-
53
377
14
2,890
83
249
88
460
37
444
3,807
In 2021, the Company reversed a provision of $6.0 million
related to an exploration penalty due to the passage of statute of
limitations. Management deemed that a previously uncollectable
VAT receivable of $0.6 million, as collectible due to changing
circumstances during the year.
The release of provision in 2020 was the elimination of a long-
standing disputed payable for $1.9 million related to drilling costs
on Block L in Brunei, which has passed the relevant statute of
limitation period
IMPAIRMENT
At 31 December 2021, the Company completed an impairment
assessment on its PP&E to determine if there were any indicators
of impairment or impairment reversals. In South Tunisia and
Sabria, no indicators of impairment or impairment reversals were
identified. In Moftinu, the Company determined that there was an
indicator of impairment, and an impairment test was conducted
on the Moftinu cash generating unit (“CGU”). No impairment was
recorded following the completion of the impairment test.
At 30 June 2020, due to the COVID-19 pandemic, the Company
was faced with a commodity price collapse that resulted in the
Company testing for impairment. At 30 June 2020, the Company
recorded an impairment expense on both operating assets
totalling $9.6 million (Romania $6.2 million and Tunisia $3.4
million). In the second half of 2020, commodity prices began to
recover to pre COVID-19 levels.
At 31 December 2020, the preliminary costs spent on a seismic
program in Romania, which was cancelled due to the COVID-19
pandemic, were impaired and $0.7 million was recorded as
additional impairment at 31 December 2020.
TAXATION
During the year ended 31 December 2021 income tax expense
was $0.4 million (31 December 2020 - $0.8 million). The change
in income tax expense is due to the recovery of tax basis in Tunisia
during the year.
FOREIGN CURRENCY TRANSLATION
Foreign currency translation occurs from the revaluation from
fluctuations in the foreign exchange rates in entities with a
different functional currency than the reporting currency (USD).
The Romanian business unit has a functional currency in Romanian
Leu which has realised a fluctuation of approximately 9% from
0.252 to 0.229 USD:RON. The revaluation of the balance sheet
to the year-end rate resulted in a $2.5 million loss through other
comprehensive income (loss).
GOING CONCERN
Net finance expense for 2021 decreased by $3.4 million (88%)
to $0.4 million (2020 – $3.8 million). This decrease is a result
of extinguishing the European Bank for Reconstruction and
Development (“EBRD”) Convertible Loan in December 2020 and
the Company becoming debt-free. Accretion on decommissioning
provision also decreased by $0.1 million due to foreign exchange
differences
The Directors have considered the going concern of the Group
and are satisfied that the Group has sufficient resources to operate
and to meet its commitments in the normal course of business
for not less than 12 months from the date of these consolidated
financial statements. On that basis, the Directors consider it
appropriate to prepare the consolidated financial statements on
a going concern basis.
RELEASE OF PROVISION
As at 28 February 2022, the Group had cash balances of $6.4
million.
Year ended 31 December
Release of provision
2021
6,636
2020
1,905
Andrew Fairclough, Chief Financial Officer
18 March 2021
14
SERINUS ENERGY
REVIEW OF OPERATIONS
ROMANIA
•
•
Satu Mare Block – 2,949 km2 of onshore land.
Located within the Pannonian Basin (Hajdusag sub-Basin) on trend with
discovered and producing oil and gas fields and close to infrastructure.
• Multiple play types that have produced or are producing along the
same trend, including shallow amplitude-supported gas reservoirs;
conventional siliciclastic oil reservoirs; and fractured-basement oil and
gas reservoirs.
•
Serinus operates with a 100% deemed working interest which is owned
and operated through the wholly owned subsidiary Serinus Energy
Romania S.A. 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 has agreed to the following work commitments over the
term of this evaluation phase:
•
Phase 1: From 28 October 2021 to 27 October 2022, the
Company is required to reprocess 160.9 km 2D seismic in the Madaras area at an estimated cost of $100,000; and
•
Phase 2: From 28 October 2022 to 27 October 2023, the Company is required to reprocess 30.1 km 2D seismic in the
Santau-Nusfalau area at an estimated cost of $50,000.
SATU MARE CONCESSION – HISTORY
•
•
Serinus farmed-in to the Satu Mare Concession in 2008 and earned 60% working interest by funding 100% of work commitments
for Exploration Phases 1 and 2.
The Company has a deemed 100% working interest in the concession as its partner has defaulted on its obligations under the
Joint Operating Agreement. The Company has filed a Request for Arbitration with the Secretariat of the International Court
of Arbitration of the International Chamber of Commerce seeking a declaration affirming the Company’s rightful claim of
ownership of its defaulted partners’ 40% participating interest and to compel transfer of that interest to the Company.
•
Serinus has completed all the phase 1 and 2 work commitments, as follows:
•
Acquired two 3D seismic surveys covering a total of 260 km2 (80 km2 Moftinu & 180 km2 Santau Surveys).
• Drilled four wells resulting in Moftinu gas discovery (Madaras-109, Moftinu 1000, 1001 & 1002bis wells).
•
•
•
Completion of Phase 2 entitled Serinus to enter Exploration Phase 3.
The Phase 3 work program included the following commitments:
•
To drill two wells: one well to a depth of 1,000m and one well to a depth of 1,600m.
•
Serinus drilled Moftinu-1007 (a re-drill of Moftinu-1001) and Moftinu-1003 (1600m).
•
Renegotiated commitment - to drill two exploration wells: one well to a depth of 1,000m and one well to a depth of
1,600m. These wells replaced the previous commitment of 120 km2 of 3D seismic.
•
The Moftinu-1008 well was drilled in February 2021 and will qualify as the 1,000m commitment well.
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 has agreed to the following work commitments over the term of this evaluation phase:
•
•
Phase 1: From 28 October 2021 to 27 October 2022, the Company is required to reprocess 160.9 km 2D seismic in the
Madaras area at an estimated cost of $100,000; and
Phase 2: From 28 October 2022 to 27 October 2023, the Company is required to reprocess 30.1 km 2D seismic in the
Santau-Nusfalau area at an estimated cost of $50,000.
Serinus generated the first gas production in the region in April 2019, after the successful completion of the Moftinu Gas Plant. The
Moftinu Gas Project is the development of the shallow (800-1,000m), multi-zone Moftinu gas field. The field has relatively low drilling and
completion costs, with strong initial well production rates. Serinus also built a three-kilometre sales line that ties-in the Moftinu Gas Plant
into the Transgaz pipeline, Abramut. The infrastructure created by Serinus in the Satu Mare area represents a very important addition
and investment which has established the Group as one of the most significant investors in the area.
The Moftinu gas plant was designed at a capacity of 15 MMscf/d and can accommodate up to six flowlines. During 2021, production
was predominantly comprised from four wells (Moftinu-1003, Moftinu-1004, Moftinu-1007, and Moftinu-1008) and averaged 6.4
MMscf/d (2020 – 10.6 MMscf/d). The Company continues to explore future drilling locations both within the existing field of Moftinu,
and throughout the rest of the Satu Mare concession. The Company believes there are similar shallow gas fields to the Moftinu gas
field, providing Serinus with additional low-cost shallow gas reserves to tie into the gas plant. The Group drilled two wells in 2021,
Moftinu-1008 in Q1 2021 within the Moftinu gas field, and a prospect well in Sancrai in the second half of 2021.
Subsequent to the year-end, the Company has completed a 105 km 2D seismic acquisition programme. The programme objective is to
further de-risk the prospects, confirm their extent and potential gas volumes in place, and determine the optimal drilling locations for a
near-term multi-well drilling programme expected to commence in the latter half of 2022.
2021 ANNUAL REPORT
15
REVIEW OF OPERATIONS
TUNISIA
The Group currently holds three Tunisia concessions, each of which currently produces oil and gas
(Sabria, Chouech and Ech Chouech). This production has been sustained with a low-cost, low-risk
development program, but has significant growth opportunities over the medium to long-term.
The Group has no outstanding work commitments.
License
Sabria
Chouech Es Saida
Ech Chouech
Sanrhar
Zinnia
Serinus Working
Interest
Approximate Gross
Area (acres)
45% (ETAP 55%)
100%
100%
100%
100%
26,196
42,526
35,139
36,879
17,471
Expiry
November 2028
December 2027
June 2022
Relinquished 2021
Relinquished 2021
The Company has previously held the non-producing Zinnia and Sanrhar concessions, but these
were relinquished in 2021.
Sabria
•
•
•
•
Produced over 6.7 million boe (gross) to date.
Large Ordovician light oil field with stable production from its large reserve base and long reserves life index.
The Ordovician reservoir at Sabria contains 445 million bbl OIIP (P50), into which only eight wells (12 including re-entries) have
been drilled. The reservoir comprises a large stratigraphic trap with a continuous oil column that spans the Upper Hamra,
Lower Hamra and the El Atchane formations.
The Group has received delivery of the first artificial lift pump for the W-1 well in the Sabria field. The Company is now awaiting
the mobilization of the rig to commence the workover and pump installation. Plans for additional pumps in the Sabria field
are being progressed.
Chouech Es Saida
•
•
•
Produced over 3.8 million boe to date from the TAGI Formation in the Triassic reservoir.
The deeper Silurian Acacus Sands and the Tannezuft fan, which have been penetrated successfully and produced
hydrocarbons from two wells in the concession, hold enormous growth potential for Serinus. The Silurian Acacus sands, which
are hydrocarbon-charged in the Chouech block, are emerging in Southern Tunisia as a major new oil, condensate and gas play
with exploration success rates of nearly 100%.
The Company conducted workover operations in the Chouech Es Saida wells in 2021 to replace and standardise pumps in
order to increase production and efficiency.
Ech Chouech
•
•
•
Produced oil intermittently from the TAGI formation, dating back to the discovery of the field in 1970.
Adjacent to the Chouech block, the concession similarly carries significant upside potential in Silurian exploration targets that
are not yet drilled but are defined on 3D seismic (acquired in 2008).
The Group is looking to install artificial lift in the well in 2022.
16
SERINUS ENERGY
RESERVES2
COMPANY GROSS 1P & 2P RESERVES – USING FORECAST PRICES
2021
2020
Oil &
Liquids
(Mbbl)
Gas
(MMcf)
Boe
(Mboe)
Oil &
Liquids
(Mbbl)
Gas
(MMcf)
Boe
(Mboe)
Change
2,840
2,810
5,650
5,670
7,030
12,700
4
6
10
3,110
1,990
5,100
2,844
2,816
5,660
8,780
9,020
17,800
3,785
3,982
7,767
522
338
860
4,307
4,320
8,627
3,510
2,150
5,660
6,220
7,390
13,610
16
5
21
7,650
2,460
10,110
3,526
2,155
5,681
13,870
9,850
23,720
4,547
3,381
7,928
1,291
415
1,706
5,838
3,796
9,634
(17%)
18%
(2%)
(60%)
(19%)
(50%)
(26%)
14%
(10%)
Tunisia
Proved (1P)
Probable
Proved & Probable (2P)
Romania
Proved (1P)
Probable
Proved & Probable (2P)
Group
Proved (1P)
Probable
Proved & Probable (2P)
The downward revision in Group reserves was attributable to 2021 production and a reduction in reserve volumes in Romania associated
with water encroachment in the A1 zone.
NET PRESENT VALUE OF FUTURE NET REVENUES – AFTER TAX, USING FORECAST PRICING
(US$ millions)
Tunisia
Proved (1P)
Probable
Proved & Probable (2P)
Romania
Proved (1P)
Probable
Proved & Probable (2P)
Group
Proved (1P)
Probable
Proved & Probable (2P)
2021
2020
Discount rates
0%
10%
15%
0%
10%
15%
PV10%
Change
54.3
69.9
124.2
10.3
9.0
19.3
64.6
78.8
143.4
28.9
42.2
71.1
10.2
7.9
18.1
39.1
50.1
89.2
27.1
30.1
57.2
10.0
7.5
17.5
37.1
37.6
74.7
62.2
57.2
119.4
13.4
6.5
19.9
75.6
63.7
139.3
26.7
29.5
56.2
12.0
5.4
17.4
38.7
34.9
73.6
18.3
23.7
42.0
11.4
5.0
16.4
29.7
28.7
58.4
8%
43%
27%
(15%)
47%
4%
1%
44%
21%
The Group’s net present values at 10% increased by 1% for 1P reserves, whilst the 2P reserves increased by 21%.
_______________________
2 Source: 2021 and 2020 results from Gaffney Cline & Associates Limited Reserves audit at 31 December 2021 and 31 December 2020, respectively.
2021 ANNUAL REPORT
17
RESERVES (continued)
CONTINGENT RESOURCES
The Tunisian contingent resources are related to two further potential development wells. Currently the specific contingency which
would convert these contingent resources to reserves is the Company committing to the development program and setting out a
development plan.
The Romanian contingent resources consist of the resources in two specific reservoir sand layers which are expected to be recovered
from existing wells but which will require additional completion work or future recompletion prior to the start of production. The specific
contingency which would convert these resources to reserves is the Group’s decision to recomplete the producing wells to access
recovery of the gas resources from these sands, which is forecast to occur once production from the current producing sands have
become depleted.
COMPANY GROSS UNRISKED CONTINGENT RESOURCES – USING FORECAST PRICES
2021
Gas
(MMcf)
Oil &
Liquids
(Mbbl)
Boe
(Mboe)
Oil &
Liquids
(Mbbl)
2020
Gas
(MMcf)
Boe
(Mboe)
Change
Tunisia
1C Contingent Resources
2C Contingent Resources
3C Contingent Resources
Romania
1C Contingent Resources
2C Contingent Resources
3C Contingent Resources
Group
1C Contingent Resources
2C Contingent Resources
3C Contingent Resources
PRICE FORECASTS
400
1,000
1,900
1,000
2,900
5,300
567
1,483
2,783
400
1,000
1,900
-
-
-
2,500
4,300
7,000
400
1,000
1,900
3,500
7,200
12,300
417
717
1,167
984
2,200
3,950
1,000
2,900
5,300
2,500
4,300
7,000
-
-
-
400
1,000
1,900
3,500
7,200
12,300
567
1,483
2,783
417
717
1,167
984
2,200
3,950
0%
0%
0%
0%
0%
0%
0%
0%
0%
The commodity price forecast used in preparing the evaluation of the 2021 reserves and resources is as follows:
Year
2022
2023
2024
2025
2026
20273
Brent
(US$/bbl)
Sabria Gas
(US$/Mcf)
South Tunisia
Gas
(US$/Mcf)
Romania Gas
(US$/Mcf)
75.92
71.00
70.00
71.40
72.82
74.27
9.49
8.88
8.75
8.93
9.10
9.29
8.35
7.81
7.70
7.85
8.01
8.17
20.35
11.60
8.99
8.28
8.45
8.61
_______________________
3 +2% inflation per year on commodity prices for 2028 and beyond
18
SERINUS ENERGY
2021 ANNUAL REPORT
19
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
Serinus is an oil and gas exploration, development and production company whose strategic
purpose is to develop and produce natural resources. These business activities provide
the energy essential to many of the processes and materials that support our daily lives but
ultimately contribute to many of the environmental issues which are of concern to us today
and in the future.
Climate change is an increasingly prominent issue, both globally and for our industry. The
majority of our production is natural gas which we view as a transition fuel towards a low-
carbon economy. Our gas production is primarily utilised in the generation of electricity and
as such displaces coal in that energy mix. In all net-zero carbon scenarios oil and gas will
remain essential elements of energy supplies for decades to come, our role in this process is
to deliver our operations as cleanly and efficiently as possible.
Whilst extractive industries are essential to our modern way of life we are strongly aware
of the wider range of responsibilities that industries such as ours have. In addition to the
management and protection of the environment in those countries in which we operate we
also have a clear responsibility to the welfare and the safety of our employees, our investors
and stakeholders, local communities that may be impacted by our business, host governments
and all of our business partners.
The COVID-19 pandemic reminds us that risk management needs to be dynamic and able to
adapt to new threats and the Group quickly implemented stringent and effective protocols to
protect our workforce from the risk of infection across all of its offices and operations, which
included, amongst other measures, testing, on-site care and support, amended shift patterns
and alternate working days. Safety of our staff and contractors remains a key concern.
Therefore, a long-term goal of the Group is to be a positive influence in the regions in which we
operate through good corporate stewardship of our assets, our people and their communities.
It is a key component of the ethos of Serinus that we maintain responsible and sustainable
development while adhering to the highest operating standards and financial discipline.
We carry out our operations in full compliance with relevant regulations and comply with all
safety and environmental requirements and aim to conduct our business in an environmentally
responsible manner. The Group has established an Environmental, Social and Governance
(“ESG”) Committee, led by the Chief Executive Officer, supported by other key personnel,
and overseen by the Board, which reviews the policies and metrics under which we operate
and measure ourselves and also evaluates the environmental framework being adopted and
recommended, such as that of the Taskforce on Climate-Related Financial Disclosure (“TCFD”), in
order to determine how we may best comply with these evolving disclosures.
Whilst the TCFD is currently voluntary for smaller companies, we are applying governance, risk
management and strategy processes to manage climate-related financial risks and develop this
within our ESG strategy and integrate into the corporate strategy, growth plans, capital allocation,
operations and executive management key performance indicators.
The Sustainable Development Goals (“SDGs”) as set out by the United Nations, particularly
SDG 13 (Climate Action), are often referenced as reporting criteria for many energy companies.
Serinus will continually evaluate at the Board level, through our ESG Committee, how this may be
incorporated into our ESG reporting in an appropriate and relevant manner in the future.
ENVIRONMENT
Serinus has existing concession and licence holdings in Romania and Tunisia. Both asset portfolios
cover extensive acreage but in vastly different topographic settings with the Satu Mare licence
covering 2,949 km2 in the north-west of Romania, across primarily agricultural farmland, while the
three Tunisian concessions are located in the north, central and southern regions of the country in
both remote desert and populated, agricultural environments.
Serinus’ goal is to manage the distinct local environmental requirements of its operations in
full compliance with the relevant regulations and to reduce our carbon footprint by minimising
emissions and waste and mitigate the potential impact of our operations on the environment.
ROMANIA
Serinus Energy Romania S.A. has continued to present an excellent HSE track record through
2021, with a zero-frequency rate (per one million man hours worked) for Total Recordable Injuries
across all sites (2020 - zero for Serinus Romania employees) and in January 2022, the Moftinu Gas
Plant reached 1,000 accident-free days of continuous operation. There have been no spills or
environmental incidents at the Moftinu Gas Plant since its commissioning in 2019. Serinus Romania
20
SERINUS ENERGY
has maintained full compliance with all of its regulatory and
environmental obligations.
Serinus Energy Romania S.A. completed its annual certification
inspection and is certified for ISO 14001:2015 (Environmental
Management Systems) and ISO 9001:2015 (Quality Management).
Romanian operations currently produce gas through the Moftinu
Gas Plant which was brought onstream in April 2019 and is currently
supplied by four producing gas wells. The Moftinu-1004 well was
drilled and brought into production in February 2020, and the
most recent well, Moftinu-1008, was completed in February 2021.
The process to plan and permit the drilling of these wells involved
extensive engagement with a wide range of stakeholders from
local landowners, regional agencies and national regulators. This
process included gaining permission from each local landowner
impacted by the drilling location; receiving local environmental
permits which required environmental impact studies and a Natura
2000 study to assess the impact on local environmental protection
zones (Natura 2000 is a network of protected habitats across the
European Union); an archaeological assessment and studies to
ensure the preservation of the local area; agricultural approvals,
which required soil sampling before and after operations to
demonstrate the absence of soil contamination; the development
and approval of a flaring strategy; and regulatory permits from
local and national authorities. There were no incidents of spillage
or pollution at the Moftinu Gas Plant in 2021 (no incidents in 2020).
During 2021, energy use from grid electricity at the Moftinu
Gas Plant was 314 MWh, 0.042% of the annual production of
749.980 MWh, compared with 254 MWh in 2020, which was
0.021% of that year’s annual production of 1,223,200 MWh. A
trial project to install solar panels to provide electricity to power
water pumps for the firefighting system and provide fresh water
for the accommodation units was completed during the year and
produced 2.7 MWh of electricity to date, offsetting the equivalent
of 5,761 kg of CO2 emissions. This coming year, the intent is to
utilise further available space within the Moftinu Gas Plant and
install additional solar panels to increase the contribution of solar
generated electricity. The aim is to install sufficient numbers
of solar panels so as to generate up to 70% of the gas plant’s
electricity consumption, during the summer months.
In 2021, 9.6 MMscf of gas was flared from the four wells in
production, being less than 0.4% of annual production, and
equivalent to flared gas of 0.20 MMscf per month per being 14.3%
lower on a month per well basis than in 2020 when 8.4 MMscf of
gas flared from three wells in production, being the equivalent to
flared gas of 0.23 MMscf per month per well. 3,292 m3 of produced
water was generated from the four wells in 2021, compared with
736 m3 of produced water from three wells during 2020.
Flue gas emissions tests are performed annually, in accordance
with the requirements specified in the environmental permit.
The most recent test was undertaken in September 2021 which
monitored an average CO2 emission level of 2.04% of total flue
gas.
A Fugitive Emissions Monitoring Report was undertaken by a
European accredited emission monitoring and pipeline integrity
organisation, The Sniffers (www.the-sniffers.com), for the Moftinu
Gas Plant in February 2021. The company collected data and
presented its report in accordance with the Environmental
Protection Agency of the United States (“US EPA”) “Method 21”
EPA-453/R-95-017. The Sniffers has been accredited ISO 17025
by BELAC (the Belgian accreditation body) on 17 December 2017
for the Method: “EPA 21 Protocol for equipment leak emission
estimates, 1995, EPA-453/R-95-017”. All data and calculations
were generated by proprietary software designed by The Sniffers
called Sniffers Full Emission Management Platform “SFEMP”.
Measured parts per million values are converted to emission loss
(kg/year). These calculations are based on US EPA “Correlation
factors for Petroleum Industry”. This method uses conversion
factors depending on the source type and the measured value.
The monitoring exercise completed a Leak Detection and Repair
programme through which it identified a total of 2,468 potential
emission sources, of which 26 were not accessible (a source
of emission that cannot be measured as it cannot be reached
physically or safely without additional tools and is recalculated to
be representative of all sources) and 2,442 were accessible.
Of the 2,442 accessible potential emission sources identified,
there were only eight registered leaks, being 0.33% of accessible
sources and resulted in an emission loss of 275 kg/year. One leak
was detected above the Repair Definition threshold (the threshold
concentration indicating obligatory repair of leaking sources
which under the US EPA definition is 10,000 parts per million
volume), amounting to 264 kg/year. The report concluded that a
successful repair of the leak above Repair Definition could reduce
the emission loss by 264 kg/year, equating to 69.96% of the total
emission. The leak has been repaired.
TUNISIA
Serinus Tunisia B.V. maintained a strong HSE track record through
2021, with a zero-frequency rate (per one million man hours
worked) for Total Recordable Injuries across all sites (2020 – zero
for Serinus Tunisia employees). There were no environmental
incidents at Sabria and six minor incidents at Chouech which
were addressed and repaired. Serinus Tunisia has maintained
full compliance with all of its regulatory and environmental
obligations.
Environmental monitoring has been undertaken across all of our
Tunisian fields since 2014 in compliance with legal requirements
and the Company’s responsibilities to the local environment.
The annual environmental report for 2020 was submitted to the
Agence Nationale de Protection de l’Environnement (“ANPE”) in
June 2021 and the report for 2021 will be filed during 2022, as
required.
During 2021, annual environmental monitoring was undertaken
by Le Centre Mediterraneen d’Analyses (“CMA”) at the Sabria and
Chouech fields, assessing: air emissions from stacks at both fields;
air quality monitoring; groundwater monitoring; produced water;
fresh water; soil sampling and noise pollution.
Stack air emission analysis and air quality monitoring was
conducted at Sabria and Oum Chiah in August 2021. Analysis of
the results demonstrated that most pollutants are compliant with
limits, except for some excess carbon monoxide levels from a
number of older compressors, heaters and generators. Mitigation
measures have been
investigated, a short- and medium-
term action plan with an enhanced preventative maintenance
programme has been implemented to address this, including
the refurbishment and overhaul of affected equipment. Ground
water monitoring is conducted on a yearly basis from existing
water wells drilled at Sabria. No evidence of pollution has been
reported. Five piezometer wells were drilled at Sabria to monitor
the ground water table in 2014 which continue to be monitored.
The water disposal project manages produced water production
at Sabria. This formation water has high salinity (360 grams/
litre) with traces of heavy metals. Until 2015, disposal at Sabria
was conducted by discharge into lined surface pits for natural
evaporation of fluids. The low efficiency of natural evaporation
together with the ongoing need to construct additional lined
pits led to the introduction of automated fracturing evaporator
technology in 2015 and which has enabled the acceleration of
evaporation of produced water through an automated and a
more efficient process. At Sabria, 45,598 m3 of produced water
was disposed of in 2021 (2020 – 38,322 m3) and at Chouech
193,400 m3 of produced water was evaporated from lined surface
pits in 2021 (2020 – 193,929 m3). The Company is investigating
alternative environmentally-responsible produced water disposal
solutions.
Further environmental analysis was conducted by First North
African Consultancy for the Environment (“FNAC” www.fnac-
environment.com), an engineering consultancy, in September
2021 ANNUAL REPORT
21
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (continued)
2020, to review the environmental management of the Sabria
fields, compliance with Tunisian environmental regulations and
analyse underground water and soil pollution in proximity to the
water disposal project. The scope of work included: recovering,
analysing and assessing environmental and technical documents
and reports related to the evaporation ponds; analysing all
previous waste pit treatment operations and related reports;
analysing existing red register (hazardous waste) and blue register
(domestic waste); carry out coring and sampling investigations of
the potential impacted areas (soil and underground water) within
the Sabria field; undertake water sampling and laboratory analysis
from existing piezometers and production water discharge; and
perform an environmental monitoring program of the potential
impacted areas within Sabria field. The program was conducted in
conjunction with representatives of ANPE and the environmental
reports were submitted to ANPE. Results from the assessment
showed below threshold levels of potential pollutants set under
Tunisian regulations and equivalency with both groundwater
and soil control samples. These demonstrated the efficacy of the
water disposal project and the process of produced water storage
in evaporation pits, with no evidence of leakage or overflow from
the pits into the soil or groundwater. Recommendations from the
report are being implemented.
The environmental monitoring programme for remote locations
has been reviewed by management and has been implemented
at all sites. The Company purchased a portable stack gas analyser
in 2014 and it is used at Sabria and Chouech for ongoing air
emissions monitoring (started in August 2015). In addition the
Company has engaged the services of FNAC and CMA to conduct
an annual environmental monitoring programme at Sabria and
Chouech. In September 2021 an annual review was conducted at
Sabria and at the pumping facility at Oum Chiah. The Company
was in compliance with approved thresholds of groundwater and
soil contaminants and required solid waste management. The
Company’s own review of air emissions showed compliance in all
areas except for carbon monoxide (“CO”) emissions from older
fixed equipment. The Company has enhanced its maintenance of
the older machinery to reduce emissions. In November 2021, the
most recent annual review conducted at Chouech found that in
accordance with the air quality limits set by Decree No. 2018-447
of 18 May 2018 and Decree No.2010-2519 of 28 September 2010
the Company complied with all measurements except for those
relating to CO and CO vapour. The report made recommendations
for remedial actions and the Company is addressing these. The
annual review also determined that the Company’s operations
were within the limits for soil quality for industrial use and that
groundwater was free of any contamination as a result of the
activities of the central processing facility. Greenhouse Gas
(“GHG”) emissions were calculated for the years 2012-2016 for the
Sabria, Chouech and Sanrhar fields. During the years 2017-2019
GHG emissions were calculated for Sabria only, as a result of the
shutdown of the Chouech and Sanrhar fields:
1. Field gas consumption: CO2
- N2O - CH4
2. Flaring: CO2- N2O - CH4
3. Venting: CH4
4. Diesel consumption: CO2- N2O - CH4
5. Vehicle transport: CO2- N2O
Guidelines followed for the calculation of GHG emissions were the
Decree No. 2010-2519 dated 28 September 2010, fixing the limit
of air pollution caused by fixed sources, and Decree No. 2018-447
dated 18 May 2018, fixing the limit and alert level of ambient air
quality.
Waste management procedures have been implemented in
all locations in Tunisia and monitor a comprehensive range of
waste products including industrial waste (dry cell batteries,
lead acid batteries, empty gas cylinders, oil filters, used oil,
contaminated waste, used fluorescent lighting), resource waste
(diesel consumption), hazardous waste (sewage, medical waste),
domestic waste (food waste, plastic bottles, cooking oil, paper) and
office waste (plastic bottles, paper, printer cartridges, batteries).
For example, 757 kg of paper and plastic bottles were recycled in
the Tunis office in 2020, which increased to 822 kg of paper and
plastic bottles being recycled in 2021, as a result of training and
greater awareness of wastage. Electricity consumption at the Tunis
office in 2021 was 57,066 kWh, a further decline in consumption
in 2020 from 59,336 kWh as the impact of COVID-19 related
stay at home measures continued through that period. At Sabria
electricity consumption remained consistent with prior years at
717,836 kWh (2020 – 714,056). Chouech is not connected to the
electricity grid and power at Chouech is provided by on site gas
generators. Fresh water consumption in 2021 at Sabria was 14,949
m3 (2020 - 14,214 m3) and at Chouech, 65,558 m3 (2020 - 54,925
m3). Diesel consumption across all operational locations was
160 m3 an increase over 2020 - (114 m3) but remains a significant
reduction from 2019 (305 m3) reinforced by a combination of
greater awareness of wastage, training, optimisation and more
efficient transport management.
SOCIAL
Serinus seeks to ensure the health, safety, security and welfare of
our employees and those with whom we work and to ensure that
we have a workforce that is performing at its best and to contribute
to the economic and social development of the countries in which
we operate. Serinus Energy Romania S.A. has been certified for
ISO 45001:2018 (Occupational Health and Safety).
The safety, security and welfare of all of our colleagues is a key
priority for the Group and governs the manner in which we aim
to conduct our business. Serinus has emergency response plans
in place for all projects and assets. These plans are reviewed for
relevance and updated by senior management annually. The
plans are communicated to the workforce and personnel receive
training to ensure they are competent to carry out their emergency
roles. This is supplemented by periodic refresher training. Drills
and training exercises are routinely carried out. Where relevant,
the Group monitors the security situation at a local level and
ensures that personnel are aware and appropriate measures are
taken and updated as required. In Tunisia the HSSE team ensures
the effective implementation of the Emergency Preparedness and
Response Procedures and maintains and updates the Security
Emergency Response Plan on a regular basis.
We undertake a range of activities to continuously improve our
HSE Management Plan to ensure that the Company’s policy
commitments are applied. Routine monitoring is undertaken
to assess and improve performance and periodic audits are
conducted. Our procedures are set out as corporate standards
that define the company expected practices within the whole
organisation. The standards have been shared across the
organisation and employees and contractors are trained as
required at country level. In 2021, a total of 53 HSSE training
drills and asset protection drills took place in Tunisia and 288
HSSE training sessions took place in Romania. Regular HSSE
audits are undertaken to review policies and procedures with
25 internal HSSE audits completed in Tunisia in 2021 (2020 - 25)
and an annual audit was undertaken by Lloyds Register for ISO
certifications in Romania.
Serinus has an Emergency Response Plan in place for all projects
22
SERINUS ENERGY
which promotes the regional development of the Governorate of
Kebili, in collaboration with the regional authorities, the Ministry of
Industry, Energy and Mines, ETAP and the oil and gas companies
operating in the region (the “Kebili CSR Consortium”). Since 2015
the Kebili CSR Consortium has supported education programs,
restoring schools and providing facilities and infrastructure, health
initiatives, purchasing medical equipment and renovations, and
other social projects. The CSR program for Kébili also includes a
cultural component with a specific focus on encouraging women
to preserve the local handicraft traditions amongst others by
setting up and equipping a handicraft centre for women in Kébili.
This project has a training and development component and will
ensure the economic empowerment of women.
Social tensions and political instability in Tunisia, particularly in
the southern regions, over the past few years has impacted the
ability to execute many of these initiatives and CSR programs, but
these initiatives have been an important part of maintaining the
company’s relationships with local stakeholders throughout this
period and it is expected that with renewed stability it will become
possible to resume such support in the coming years.
GOVERNANCE
The Group recognises the
importance of good corporate
governance and is managed under the direction and supervision
of the Board of Directors. As required under the AIM Rules,
we have adopted and comply with a recognised corporate
the Quoted Companies Alliance
governance code, being
Corporate Governance Code (the “Code”) and set out a summary
of how we comply with it on pages 30 to 33 of the Annual Report.
Serinus currently operates in Romania and Tunisia. Romania
is allocated a mid-score on Transparency International’s most
recently published Corruption Perception Index (“CPI”) and is
ranked number 66 out of 180 countries in the 2021 CPI. Tunisia is
ranked number 70 on the same CPI. Neither country is designated
as high risk, Romania is within the European Union and both have
well-evolved legal systems in place, however the Group’s policies,
procedures and working practices need to remain fit for purpose
and be regularly reviewed and updated as required. The Group
maintains internal control systems to guide and ensures that
our ethical business standards for relationships with others are
achieved.
Bribery is prohibited throughout the organisation, both by our
employees and by those performing work on our behalf. Our
Anti-Bribery and Corruption (“ABC”) programme is designed to
prevent corruption and ensure systems are in place to detect,
remediate and learn from any potential violations. This includes
due diligence on new vendors, annual training for all personnel,
requisite compliance declarations from all associated persons, Gifts
and Hospitality declaration and comprehensive ‘whistleblowing’
arrangements.
and assets. This plan is reviewed annually with consultation from the
Business Units. The plans are communicated to the workforce and
response personnel receive training to ensure they are competent
to carry out their emergency roles. The plan is recirculated
to the Serinus team involved, prior to the launch of any major
works campaign. These circulations are further supplemented
by periodic refresher training, with drills and training exercises
regularly carried out. In Romania, there have been no accidents
since commencing production in 2019. There had been 981 days
without accidents as at 31 December 2021 and the Company
passed the 1,000-day milestone on 19 January 2022. In Tunisia,
there were 2,218 days with no accidents as at 31 December 2021.
In 2021, there were no Lost Time Injuries recorded across both
Tunisia and Romania operations and we maintain a continuous
focus on providing a safe working environment for our workforce.
Our goal is to maintain this high level of safety and efficiency.
A key health and safety issue for the Group in 2021 has continued to
be dominated by measures implemented to protect its workforce
from COVID-19 which included amended shift patterns and
working from home schedules as required by local regulations,
additional operational protocols to minimise the risk of infection,
the provision of protective equipment, regular disinfection of
facilities and testing of personnel, as well as on-site access to
medical staff.
Our Code and Policies commit us to providing a workplace free
of discrimination where all employees can fulfil their potential
based on merit and ability. We value a diverse workforce and
are committed to providing a fully inclusive workplace, which
ensures we recruit and retain the highest calibre candidates while
providing the right development opportunities to ensure existing
staff have rewarding careers. Both the Romanian and Tunisian
business units are led and managed by Romanian and Tunisian
nationals respectively, and we currently have no expatriates in
either of the business units. Our Romanian business is led by Ms.
Alexandra Damascan and 50% of the staff in Romania are women,
while in Tunisia 32% of the local head office are female. We value
a diverse and equal opportunities workforce and we aim to recruit
locally in all jurisdictions as we believe in the quality of our staff
and the available pool of talent in each local market.
Serinus’ Anti-Slavery and Human Trafficking Policy commits
the Group to act ethically and with integrity in all our business
dealings and relationships and to implement and enforce effective
systems and controls to ensure modern slavery is not taking place
anywhere in our own business or in any of our supply chains. The
Group is also committed to ensuring there is transparency in our
own business and in our approach to tackling modern slavery
throughout our supply chains, consistent with our disclosure
obligations under the UK Modern Slavery Act 2015. We expect the
same high standards from all our contractors, suppliers and other
business partners, and as part of our contracting processes, we
include specific prohibitions against the use of forced, compulsory
or trafficked labour, or anyone held in slavery or servitude, whether
adults or children, and we expect that our suppliers will hold
their own suppliers to the same high standards. The prevention,
detection and reporting of slavery in any part of our business
or supply chains is the responsibility of all those working for the
Group or under our control and they are encouraged to raise
concerns about any issue or suspicion of slavery in accordance
with our Whistleblowing policy.
Serinus Tunisia developed its CSR program in conjunction with
local communities and stakeholders to identify those areas which
would make a significant impact to those groups, focussing on
support for healthcare, education and culture in the local areas
within which it operates. It has managed a program since 2013
to undertake this, with support and contributions for providing
medical equipment to hospitals, repairing classrooms and school
facilities, providing books for school libraries, improving nurseries
and sponsoring local cultural events. Serinus Tunisia also
participated in projects with local and regional authorities and other
oil and gas companies operating in its areas, such as the Kébili CSR
Consortium with which it has been involved with since 2015 and
2021 ANNUAL REPORT
23
RISK MANAGEMENT STATEMENT
The Group is subject to several potential risks and
uncertainties, which could have a material impact on the
long-term performance of the Group and could cause
actual results to differ materially from expectation. The
management of risk is the responsibility of the Board
of Directors and the Group has developed a range of
internal controls and procedures in order to manage the
risks. The following list outlines the Group’s key risks and
uncertainties and provides details as to how these are
managed.
POLITICAL AND REGULATORY RISK
Operating in multiple jurisdictions poses a variety of
political, regulatory and social environments, and risks,
such as social unrest, political violence, corruption,
laws and
expropriation and non-compliance with
the
regulations. Currently
following in order to mitigate this risk:
the Company
is doing
•
Actively monitors political developments and
relationships with government,
maintains
authorities and industry bodies, as well as with
other stakeholders.
• Weekly reports assessing security, social unrest
and political developments are provided to the
Executive management team to allow for real
time reaction to dynamic situations.
• Manages compliance with laws, regulations,
and contractual obligations by employing
the requisite skills or engaging consultants to
supplement internal knowledge.
•
•
Internal policies and procedures, as well as
monitoring of performance, help mitigate risks
of non-compliance.
Actively involved with the regulatory bodies of
both operating units to ensure commitments
are agreed upon and concessions may be
extended as required.
OPERATIONAL AND DEVELOPMENT RISK
The nature of oil and gas operations brings risks such
as equipment failure, well blow-outs, fire, pollution,
performance of partners/contractors, delays in installing
property, plant or equipment, unknown geological
conditions and failure to achieve capital costs, operating
costs, production or
recruitment,
development and retention is also key to managing
operational risk. Currently the Company is doing the
following in order to mitigate this risk:
reserves. Staff
•
•
•
•
24
SERINUS ENERGY
Has extensive monitoring and review of
HSE and crisis management policies and
procedures.
all
contractor
Strict tendering protocols, physical inspection
facilities
of
and extensive financial due diligence of
counterparties
to minimise
is designed
contractor performance and counterparty
credit risk.
fabrication
Carries adequate levels of insurance.
Rigorous review processes when selecting
Once engaged
vendors and contractors.
•
•
•
•
•
•
as a contractor the Company monitors contractor
performance to ensure contractor compliance with
Company policies.
Rigorously monitors costs, actual to budget trends and
adjusting forecasts on a frequent basis.
Employs geological and technical experts to review data
and work programs, and undertakes an annual reserves
audit with external technical expert.
Training and development opportunities are considered
for all staff.
Executive directors and senior staff have notice periods
of between six and twelve months to ensure sufficient
time to transfer responsibilities in the event of departure.
•
•
gas plant limiting the environmental impact of the
Company’s production.
in place strict emissions and
The company has
environmental monitoring. Routine monitoring and
third-party inspections for emissions, ground water
contamination, solid waste management and soil
protection are routinely performed in excess of all local
government guidance.
The Company’s strategy is to maintain a low operating
cost base in order to maintain operational flexibility in
the event of lower commodity prices.
Succession planning is considered regularly at board
level.
COVID-19
The Remuneration Committee meets quarterly and as
additionally required to evaluate compensation and
incentivisation plans to ensure they remain competitive.
The Global pandemic may
timing of operational
performance, with delays in receiving equipment and delays in
bringing international contractors out to the field to complete
workovers. Currently the Company is doing the following in order
to mitigate this risk:
impact
AVAILABILITY OF FINANCING
The risk that the Company will not be able to raise funds through
debt or equity if required. Currently the Company is doing the
following in order to mitigate this risk:
• Monitor the cash position by producing monthly cash
projections to determine future cash flow requirements.
•
•
•
Publicly listed on the AIM equity market to access
capital, if required, with its most recent fundraise in
December 2020.
The Company is currently debt-free, with a low operating
cost base and has continued to generate positive
cashflows during 2021.
The Board considers the structure and differing capital
costs of a variety of possible sources of funds as well
as the timing and access to the various capital markets.
FINANCIAL RISK
The Group is subject to commodity price volatility, interest rates,
foreign exchange rate volatility and credit risk of counterparties.
Currently the Company is doing the following in order to mitigate
this risk:
•
•
•
•
•
Actively monitoring the business, preparing monthly
forecasts with various sensitivities (commodity prices,
interest rates, foreign exchange rates) to ensure the
Company can sustain all macroeconomic changes.
Careful cost management to preserve financial flexibility
in the event of economic or commodity price downturns.
The Company has restructured its balance sheet and is
now debt-free to create greater financial flexibility.
Exposure to both oil and gas pricing diversifies
commodity price risk.
The Group’s financial risk policies are set out in Note 4 to
the financial statements.
ENVIRONMENTAL
Investor and lender sentiment may become adverse towards the
oil and gas sector. Longer term reduction in demand for oil and
gas may result in lower oil and gas prices. Currently the Company
is doing the following in order to mitigate this risk:
•
•
70% of the Company’s production is gas, providing
exposure to a cleaner, transition fuel.
The company’s main source of production is a modern
energy, emission efficient and highly automated
•
All office locations have adapted to work from home
conditions when required by local health regulations,
which include moving all IT services, data storage and
software to cloud based solutions. This has allowed
enhanced access for staff when working remotely,
increased the security from cyberattacks and reduced
physical maintenance requirements.
•
The Company has
sanitisation of all office locations.
increased
the cleaning and
• Operating fields in both Romania and Tunisia have
adapted to ensure all staff are wearing face coverings
and maintain social distance. Both fields have also
implemented a sanitisation process to ensure that the
field is sanitised on a frequent basis. Third party access
to field locations has been restricted and enhanced
access monitoring has been implemented.
2021 ANNUAL REPORT
2021 ANNUAL REPORT
25
25
BOARD OF DIRECTORS AND MANAGEMENT TEAM
BOARD OF DIRECTORS
Lukasz Rędziniak
Chairman, Non-Independent Director, Chair of Remuneration Committee, Chair of the Nomination Committee
Appointed March 2016
Mr. Rędziniak is a graduate of the Faculty of Law and Administration of the Jagiellonian University.
Mr. Redziniak is an Attorney and member of the District Bar Association in Warsaw. Between 1990 and 1991 he
worked as an Assistant at the Faculty of Law and Administration of the Jagiellonian University. During the years
1991-1992 he was an in-house Lawyer at Consoft Consulting sp. z o.o. From 1997 to 2000 he worked as an Attorney
- individual practice closely co-operating with Dewey Ballantine sp. z o.o. In the years 1993-2007 he worked in the law firm Dewey and
LeBoeuf LLP and in 2001 he was appointed as a partner. Then, in the years 2007-2009 he was Undersecretary of State in the Ministry
of Justice of the Republic of Poland. Since 2009 he was a Partner and Managing Partner at the Warsaw office at Studnicki, Płeszka,
Ćwiąkalski, Górski sp. k. In 2013, he became a Member of the Board at Kulczyk Investments S.A. He was also appointed as a member of
the Supervisory Board at Firma Oponiarska Dębica S.A. and a member of the Supervisory Board at Ciech S.A. He is also a member of the
Supervisory Board of Autostrada Wielkopolska SA and A2 Route Sp. z o.o..
Jim Causgrove
Independent Director, Chair of the Reserves Committee, Member of the Audit Committee, Member of the
Remuneration Committee, Member of the Nomination Committee
Appointed September 2017
Mr. Causgrove is an experienced Oil and Gas executive with over 35 years’ experience. On November 14, 2017,
Mr. Causgrove was appointed Chief Operating Officer of Harvest Operation Corporation. He offers both excellent
technical engineering and business experience along with a strong track record in management and leadership.
Since 1979, working for first Chevron Corporation and then Pengrowth Energy Corporation, Jim has gained
experience and skills in virtually all facets of the oil and gas business; with a particular technical focus on drilling, production, operations
and midstream. Jim gained excellent field and technical experience with Chevron working in both the Canadian head office as well as
many field offices and field sites. As well as his technical roles Jim spent time working in Joint Ventures, Human Resources, Strategic
and Business Planning and in the Midstream business. Jim gained valuable business insights as first a technical leader, then as a middle
manager, and finally as an executive for Chevron and Pengrowth. In his role as Vice President at Pengrowth, Jim worked as part of the
senior leadership team and also worked closely with the Board of Directors.
Mr. Causgrove graduated with a Chemical Engineering degree from the University of Alberta and has earned his P. Eng designation in
Alberta.
Natalie Fortescue
Independent Director, Chair of the Environmental, Social, & Governance Committee, Member of the Audit Committee,
Member of the Reserves Committee
Appointed March 2021
Ms. Fortescue has extensive capital markets and investor relations experience, including in the international oil and
gas sector. She has spent over 20 years working in and advising companies on corporate finance transactions,
fundraisings, strategy, debt refinancing and restructurings, investor relations and the impact of corporate transactions
on stakeholders. After qualifying as a Chartered Accountant, Natalie had a long investment banking career at both
Investec Investment Bank and Oriel Securities Limited. On leaving the City Natalie joined Genel Energy PLC to establish and lead an
Investor Relations function and in recent years has worked with Premier Oil Plc on a number of capital markets transactions and debt
refinancing, including the recent merger with Chrysaor Energy Limited. Current directorships/partnerships: FUTH Consulting Limited,
Hot Penny Properties Limited, Clean Power Hydrogen plc.
Ms. Fortescue has an undergraduate degree in Accounting and Finance from Kingston University.
Jonathan Kempster
Independent Director, Chair of the Audit Committee, Member of the Remuneration Committee
Appointed March 2021
Mr. Kempster has held CFO board positions at Delta plc, Fii Group plc, Frasers Group plc, Linden plc, Low & Bonar
plc, Utilitywise plc and Wincanton plc. Mr. Kempster was recently appointed as a Non-Executive Director and Audit
Committee Chair of Bonhill Group plc and is a Non-Executive Director and Audit Committee Chair at Redcentric
plc and Ted Baker plc. Mr. Kempster is currently a Non-Executive Director at FireAngel Safety Technology plc and a
Trustee of the Delta plc pension scheme. Current directorships/partnerships: Portcentric Solutions Limited.
Mr. Kempster qualified as a Chartered Accountant with Price Waterhouse in 1990 and has a BA (Hons) in Business Studies from the
University of Liverpool.
26
SERINUS ENERGY
Jeffrey Auld
Chief Executive Officer, Executive Director
Appointed September 2016
Mr. Auld has been involved with the international oil and gas business for over 30 years. In that time he has managed
companies and acted as an advisor to companies operating in the emerging markets oil and gas business. Mr. Auld
has a depth of experience in corporate finance, mergers and acquisitions and strategic management.
Mr. Auld began his career in Canada and moved to the United Kingdom in 1995. He was the Commercial Manager
for New Ventures for Premier Oil plc. Mr. Auld left Premier Oil and joined the Energy and Power team within the Mergers and Strategic
Advisory group of Goldman, Sachs and Co. When Mr. Auld left Goldman Sachs he joined PetroKazakhstan, a NYSE listed company with
assets in Kazakhstan, as a Senior Vice-President. After his time at PetroKazakhstan Mr. Auld became the Head of European Energy for
Canaccord Genuity in London. Prior to joining Serinus Mr. Auld was the Head of EMEA Oil and Gas at Macquarie Capital in London.
Mr. Auld has an undergraduate degree in Economics and Political Sciences from the University of Calgary and a Masters of Business
Administration with Distinction from Imperial College, London.
Andrew Fairclough
Chief Financial Officer, Executive Director
Appointed February 2020
Mr. Fairclough has held corporate finance, capital markets and management roles for nearly 30 years, through which
he has gained a wide range of experience, including corporate strategy, debt and equity structuring and capital
raising, M&A, capital management, financial planning, budgeting and financial reporting. Mr. Fairclough has over
17 years of investment banking experience after leaving the Army, at a number of financial institutions including
Flemings, Rothschild and Merrill Lynch. Mr. Fairclough transitioned into the oil and gas sector in 2012, joining Xcite
Energy Limited and subsequently was Chief Financial Officer of Whalsay Energy Limited prior to joining the Company.
Mr. Fairclough has an undergraduate degree in Law from University College London.
2021 ANNUAL REPORT
27
SENIOR MANAGEMENT
Stuart Morrison
Chief Operating Officer, Serinus Energy plc
Mr. Morrison has over 34 years of oil and gas industry operational experience in
numerous senior management roles. Early in his career he worked as a Petroleum
and Reservoir Engineer with BP Research, British Gas, Sun Oil and Oryx Energy UK
prior to joining Premier Oil in 1997. At Premier, Mr. Morrison assumed a variety of
technical and management positions such as Chief Petroleum Engineer, Business
Development Manager and Exploration Manager in corporate roles and business
units such as the Middle East and Falkland Islands.
Mr. Morrison has a Masters Degree in Petroleum Engineering and a Bachelor’s
Degree in Chemical Engineering, both from Heriot-Watt University (Edinburgh).
Calvin Brackman
Vice President, External Relations & Strategy
Mr. Brackman has more than 25 years’ experience in the oil & gas industry, both
in the public and private sector. He started his career working for the Department
of Natural Resources of the Government of Canada, before moving to a senior
position in the Minerals, Oil & Gas Division of the Government of the Northwest
Territories. In 2003, Mr. Brackman moved to London, UK, to join PetroKazakhstan
Inc. as Director of Government Relations. In this position he developed and
implemented strategies to reduce the company’s surface risk. Following the
sale of PetroKazakhstan to CNPC in 2005, Mr. Brackman moved back to Canada
and started a successful consulting practice, providing expert advice to various
international companies and governments. In December 2016, he joined Serinus
in his current role, working with the company’s management team and business
units to develop and implement the Group’s exploration and development
strategies and oversee government and stakeholder relations.
Mr. Brackman has a Masters Degree in Economics from the University of
Waterloo and a Bachelor’s Degree in Economics from the University of Calgary.
Alexandra Damascan
President, Serinus Energy Romania S.A.
Ms. Damascan has been with Serinus Energy Romania since 2008 and as a
senior executive with expertise in all areas of the global oil and gas industry.
Ms. Damascan has been an integral piece to bringing the Romanian assets
from the exploration phase to production in 2019. Prior to joining Serinus, Ms.
Damascan was a partner in a medium size Romanian company which handled
technical and legal translations and language interpretation for different
journals and professional magazines.
Ms. Damascan graduated from the Oil and Gas Institute as a Petroleum
Engineer. Ms. Damascan also has a degree in Political Economics, an MBA in
Business Transactions from the Academy of Economic Studies, a Law Degree
and LLM in International Arbitration from the Romanian-American University
and an MBA in Oil & Gas from the Oil and Gas Institute in Ploiesti, Romania.
Haithem Ben Hassen
President, Serinus Energy Tunisia B.V.
Mr. Ben Hassen joined Serinus Energy Tunisia B.V. in November 2014 as a
Senior Project Engineer and was then promoted to Project Manager in May
2015. In January 2018, he was promoted to President of Serinus Energy
Tunisia B.V. He has been responsible for the completion of numerous capital
projects undertaken by Serinus Energy Tunisia B.V. He was also appointed to
handle the technical aspect of the Moftinu Development Project in Romania.
Mr. Ben Hassen has over 15 years of experience in the oil and gas industry,
as well as power plants and renewable energies. He has a very well-rounded
breadth of knowledge including; project management, engineering,
construction, completions, handover and closeout and operating, contract
review, business plan development and budgeting and forecasting.
Mr. Ben Hassen has a degree in Mechanical Engineering from the École
Polytechnique of Montréal in Canada.
28
SERINUS ENERGY
2021 ANNUAL REPORT
29
CORPORATE GOVERNANCE STATEMENT
CHAIRMAN’S INTRODUCTION
to keep investors and analysts informed are as follows:
The Group is managed under the direction and supervision of
the Board of Directors. Among other things, the Board sets the
vision and strategy for the Group in order to effectively implement
the business model which is the exploration and production of
hydrocarbon resources from its current concessions in Romania
and Tunisia.
Good corporate governance creates shareholder value by
improving performance while reducing or mitigating risks that
the Group faces as we seek to create sustainable growth over
the medium to long-term. It is the role as Chairman to lead the
Board effectively and to oversee the adoption, delivery and
communication of the Group’s corporate governance model. The
Board has adopted the Quoted Companies Alliance Corporate
Governance Code (the “Code”).
The report that follows sets out in summary terms how we comply
with the Code to be read in conjunction with the Statement of
Compliance with QCA Corporate Governance Code available
on our website at http://serinusenergy.com/shareholder-
information/
As an issuer listed on the Warsaw Stock Exchange, Poland (“WSE”),
the Company was subject and followed the recommendations
and rules contained within the “Code of Best Practice for WSE
Listed Companies 2016”. These rules were adopted by the WSE
Supervisory Board on 13 October 2015 (Annex to the Resolution
No. 27/1414/2015) and are accessible at:
https://www.gpw.pl/best-practice
https://www.gpw.pl/pub/GPW/o-nas/DPSN2016_EN.pdf
PRINCIPLE 1: ESTABLISH A STRATEGY AND BUSINESS
MODEL WHICH PROMOTES THE LONG-TERM VALUE FOR
SHAREHOLDERS
•
•
•
•
The Group’s strategy is defined in the “Serinus Strategy”
section of this Annual Report.
The objective is to grow the hydrocarbon production of the
Group through efficient allocation of shareholder capital to
produce long-term return on investments for shareholders.
In order to capitalise on the available opportunities and to
mitigate the key challenges facing the Group, the Group
has assembled a high-quality Board of Directors, and set of
advisers with relative experience in the upstream oil & gas
environment. The Group has been structured to give the
Board the necessary oversight of all investment decisions of
the Group.
The long-term commercial success of the Group, meaning the
capability to generate positive net revenues on a sustainable
basis, will depend on its ability to find, acquire, develop, and
commercially produce oil and natural gas reserves.
•
•
•
•
•
Investor roadshows
Attending investor conferences
Hosting capital markets days
Timely disclosure of material information
Regular reporting
Due to the COVID-19 pandemic, the Company was unable to
make physical appearances at shareholder meetings, roadshows,
investor conferences, or other Company informational events.
The Company explored alternatives in order to stay connected
with current shareholders, and potential investors. The Company
held virtual conferences, participated in online interviews, and
continued updating shareholder presentations.
The Directors understand the importance of building relationships
with institutional shareholders and will make presentations when
appropriate. The Directors welcome all feedback and concerns
from shareholders and will implement the appropriate action
as required. The Board is in active communication with the
management team to ensure they are up to date on all recent
corporate activities.
The Annual General Meeting (“AGM”) is one forum for dialogue
with shareholders and the Board. The results of the AGM are
subsequently published on the Company’s website.
PRINCIPLE 3: TAKE INTO ACCOUNT WIDER STAKEHOLDER
AND SOCIAL RESPONSIBILITIES AND THEIR IMPLICATIONS
FOR LONG TERM SUCCESS
Key stakeholders are as follows:
•
•
•
Shareholders.
Employees.
Communities
authorities and local citizens).
in which we operate
(landowners,
local
Engaging with all stakeholders strengthens our relationships
and allows for better business decisions to ensure the Company
delivers on our commitments to all parties.
The Company also actively engages stakeholders near our
operations as follows:
•
•
Regular meetings with local authorities and governments
providing progress updates as required.
Town hall meetings are held with local citizens as required to
discuss development plans.
• We seek the input of the communities in identifying the
funding needs of different community initiatives.
PRINCIPLE 2: SEEK TO UNDERSTAND AND MEET
SHAREHOLDER NEEDS AND EXPECTATIONS
The Group is committed to listening and communicating openly
with its shareholders to ensure that its strategy, business model,
and performance are clearly understood. Providing an open
environment with investors and analysts allows us to build
our relationships with these audiences, while providing the
opportunity to further share our business model and allows us to
drive our business forward. The initiatives taken by the Company
PRINCIPLE 4: EMBED EFFECTIVE RISK MANAGEMENT,
CONSIDERING BOTH OPPORTUNITIES AND THREATS,
THROUGHOUT THE ORGANISATION
•
The Company has a risk register that outlines the key
financial and operational risks which has been circulated to
all management and Board members. A summary of these
risks is included in the Risk Management Statement of this
annual report.
30
SERINUS ENERGY
•
•
•
•
The Audit Committee monitors the integrity of the financial
statements.
•
All material contracts are required to be reviewed and signed
by a Director and reviewed by our external counsel.
The Audit Committee focuses particularly on compliance with
legal requirements, accounting standards and the relevant
rules for the listings the Company resides (AIM and Warsaw).
The Board acknowledges that the Group’s international
operations may give rise to possible claims of bribery and
corruption. The Board has adopted a zero-tolerance policy
toward bribery and has reiterated its commitment to carry out
business fairly, honestly, and openly.
The Group has also adopted a share dealing code, in
conformity with the requirements of Rule 21 of the AIM Rules
for Companies.
PRINCIPLE 5: MAINTAIN THE BOARD AS A WELL-
FUNCTIONING, BALANCED TEAM LED BY THE CHAIR
The Board comprises of a non-executive, independent Chairman,
two Executive Directors and three non-executive independent
Directors. The Board is satisfied that it has a well-diversified and
balanced team with varying levels of expertise in different facets of
the business. This allows the Board to act effectively and efficiently
in the best interests of the Company.
Directors’ attendance at Board and Committee meetings during 2021 was as follows:
Director
Total Meetings
Lukasz Redziniak
Jeffrey Auld
Andrew Fairclough
Jim Causgrove
Eleanor Barker4
Dawid Jakubowicz5
Natalie Fortescue6
Jon Kempster6
Board
Audit
Committee
Remuneration
Committee
Nomination
Committee
Reserves
Committee
8
7
8
8
6
3
1
5
5
4
-
4
4
4
2
1
2
3
2
2
-
-
2
2
-
-
-
1
1
-
-
1
1
-
1
-
1
-
1
1
1
1
-
-
-
Key Board activities this year included:
•
Continued an open dialogue with the investment community.
• Discussed and evaluated strategic priorities and shareholder
growth opportunities.
• Discussed internal governance processes.
•
•
•
Reviewed the performance of the Company’s advisers.
Reviewed the Group’s risk profile.
Reviewed feedback from shareholders post quarterly and full
year results.
The Company has effective procedures in place to monitor and
deal with conflicts of interest. Since the non-executive Directors
perform their duties on a part-time basis, the Board is aware of the
other commitments and interests of its Directors, and changes to
these commitments and interests must be reported to and, where
appropriate, agreed with the rest of the Board. The two executive
directors are full time with the Company.
The Company’s Board has a broad range of relevant experience
suitable for issues pertaining to the oversight of a publicly listed Oil
& Gas Company. These include financial, legal, capital markets and
technical. The Board of Directors and Management team section
of this annual report contains the biographies and experience of
each of the Directors and key management personnel.
PRINCIPLE 6: ENSURE THAT BETWEEN THEM THE DIRECTORS
HAVE THE NECESSARY UP-TO-DATE EXPERIENCE, SKILLS AND
CAPABILITIES
Members of the Board are listed in the Board of Directors section
of this Annual Report which also details their experience, skills
and personal qualities. The Corporate Secretary of the Company
during 2020 was JTC Group. As announced 15 March 2021, the
Company’s Corporate Secretary is now Fairway Trust Limited. The
Board is satisfied that, between the Directors, it has an effective and
appropriate balance of skills and experience, including financial,
legal, capital markets and technical skill sets. As the Board is a
strong believer in diversity, the Board has one female director,
Natalie Fortescue, and the President of the Romanian operations is
Alexandra Damascan.
All Directors receive regular and timely information on the Group’s
operational and financial performance. Board members are
provided with agendas and related materials in advance of all
meetings. The Group’s management provides the Board with a
Monthly Directors’ Report that contains share price performance,
key financial and operating indices, cash flow forecast, capital
expenditures, budget variance reports and commentary on the
opportunities and risks facing the Group.
New Directors have access to the entire management team and
other Directors to further develop their understanding of the
business operations and risks. The Directors are encouraged to
_______________________
4 Eleanor Barker retired from the board on 13 May 2021
5 Dawid Jakubowicz resigned on 26 March 2021
6 Nathalie Fortescue and Jon Kempster were appointed on 27 March 2021
2021 ANNUAL REPORT
31
CORPORATE GOVERNANCE STATEMENT (continued)
The Chairman is responsible for running the business of the
Board and for ensuring appropriate strategic focus and direction.
The CEO is responsible for proposing the strategic focus to the
Board and implementing and overseeing the projects as they are
approved by the Board. The terms of reference for the Chairman
and CEO are on the Group’s website at http://serinusenergy.com/
shareholder-information.
The Board is supported by the audit, remuneration, ESG and
reserves committees:
•
•
•
•
The Audit Committee is responsible for the financial reporting
and internal control principals of the Group, oversight of the
CFO and the finance team and maintaining a relationship
with the Group’s auditors.
for
is responsible
The Remuneration Committee
the
consideration, development and implementation of policy
on executive remuneration and fixing remuneration packages
of individual directors, so that no director shall be involved
in deciding his or her own remuneration. The committee
ensures remuneration is aligned to the implementation of the
Group strategy and effective risk management, considering
the views of shareholders, and is also assisted by executive
pay consultants as and when required.
The ESG Committee ensures the Company maintains the
highest standards in environmental, social, and governance.
The Committee is responsible for the composition of the
Board of Directors and that the Board maintains proper
levels of governance suitable to the size and activities of the
Company.
The Reserves Committee is responsible for overseeing
the evaluation of the Group's petroleum and natural gas
reserves, including retaining an “independent” engineering
firm which is a “Competent Person” (as such term is defined in
“Note for Mining and Oil & Gas Companies” issued by AIM) to
prepare a report (the “Report”) of an evaluation of the Group’s
petroleum and natural gas reserves, and meeting with
representatives of the Engineering Firm and management to
discuss the Report’s preparation results.
PRINCIPLE 10: COMMUNICATE HOW THE COMPANY IS
GOVERNED AND IS PERFORMING BY MAINTAINING A
DIALOGUE WITH SHAREHOLDERS AND OTHER RELEVANT
STAKEHOLDERS
The Company communicates with shareholders through the Annual
Report and Accounts, full-year and quarterly announcements and
the AGM. Corporate announcements, results and presentations
are available on the Company’s corporate website, www.
serinusenergy.com. The Board receives regular updates on the
views of shareholders through briefings and reports from the
CEO and the Company’s brokers. The Company communicates
with institutional investors frequently through briefings with
management. In addition, analysts’ notes, and brokers’ briefings
are reviewed to achieve a wide understanding of investors’ views.
For the Company’s shareholder meetings, any resolutions voted
by shareholders that have a significant number of dissenting votes
seek independent advice to ensure they are able to fulfil their
duties at the expense of the Company.
PRINCIPLE 7: EVALUATE BOARD PERFORMANCE BASED ON
CLEAR AND RELEVANT OBJECTIVES, SEEKING CONTINUOUS
IMPROVEMENT
The Company is constantly assessing the individual contributions
of all Board members to ensure each member:
•
•
•
Is actively contributing to the success of the Company.
Is fully committed.
Is maintaining their independence.
the non-Executive Directors discuss
Periodically
relevant
succession planning with the CEO. These discussions focus on key
individual risk as well as broader succession issues.
PRINCIPLE 8: PROMOTE A CORPORATE CULTURE THAT IS
BASED ON ETHICAL VALUES AND BEHAVIOURS
The Board believes that the promotion of a corporate culture based
on sound ethical values and behaviours is essential to maximise
shareholder value. The Group maintains and annually reviews a
handbook that includes clear guidance on what is expected of
every employee. Adherence to these standards is a key factor in
the evaluation of performance within the Group.
PRINCIPLE 9: MAINTAIN GOVERNANCE STRUCTURES AND
PROCESSES THAT ARE FIT FOR PURPOSE AND SUPPORT
GOOD DECISION-MAKING BY THE BOARD
The Board meets at least four times annually in accordance with its
scheduled quarterly meeting calendar. This may be supplemented
by additional meetings if, and when required. During the year
ended 31 December 2021, the Board met for its four scheduled
meetings plus an additional four times.
The Board and the Committees are provided with the agenda and
other appropriate material on a timely basis in order to prepare for
each meeting. Any Director may challenge Group proposals and
after all relevant discussions, proposals are voted on. Any Director
who feels that any concern remains unresolved after discussion
may ask for that concern to be noted in the minutes of the meeting,
which are then circulated to all Directors. Any specific actions
arising from such meetings are agreed by the Board or relevant
committee and then followed up by the Company’s management.
The Board is responsible for the long-term success of the
Group. There is a formal schedule of matters reserved for the
Board. It is responsible for overall group strategy, approval of
major investments, approval of the annual and interim results,
annual budgets, and Board structure. It monitors the exposure
to key business risks and reviews the annual budgets and their
performance in relation to those budgets. There is a clear division
of responsibility at the head of the Company.
32
SERINUS ENERGY
2021 ANNUAL REPORT
2021 ANNUAL REPORT
33
33
REMUNERATION COMMITTEE REPORT
the Company will provide, on a timely basis, an explanation of
what actions it intends to take to understand the reasons behind
that vote result, and, where appropriate, any different action it has
taken, or will take, as a result of the vote.
•
•
Share option plan and long-term share-based incentive plan.
Performance based annual bonuses.
This remuneration report has been prepared by the Remuneration
Committee and approved by the Board. This report sets out the
details of the remuneration policy for the Directors and discloses
the amounts paid during the year.
MEMBERSHIP
•
•
•
Lukasz Redziniak – Chairman
Jim Causgrove
Jon Kempster
RESPONSIBILITIES
The aim of the Remuneration Committee is to:
•
•
Attract, retain and motivate the executive management of the
Company.
To offer the opportunity for employees to participate in
share option schemes to incentivise employees to enhance
shareholder value and to retain employees.
To achieve the above, the Committee considers the following
categories of remuneration:
The terms of reference of the Remuneration Committee are set
out below:
•
•
•
•
•
•
To determine and agree with the Board the overall
remuneration policy of the Chairman of the Board, the
executive directors and other members of the executive
management as designated by the Board to consider.
Review the ongoing appropriateness and relevance of the
remuneration policy.
Approve the design and targets for, any performance related
pay schemes and approve the total annual payments made
under such schemes.
Review the design of all share incentive plans for approval by
the Board and determine whether awards will be made under
the share incentive plans, including the number of awards to
each individual and the performance targets to be used.
To review and approve any, and all, termination payments.
To review and monitor the remuneration trends across the
Group and if required undertake a benchmarking exercise to
compare against a peer group, obtaining reliable, up to date
third party remuneration.
2021 ACTIVITY
•
Annual salary and associated benefits.
The Committee met twice (2020 – eight times) throughout the year.
EXECUTIVE DIRECTORS’ REMUNERATION
Compensation for the executive Directors is shown in US dollars7 in the table below.
Director
Jeffrey Auld
Andrew Fairclough
Salaries
481,828
344,163
825,991
Benefits8
2021 Total
2020 Total 9
61,583
42,966
104,549
543,411
387,129
930,540
461,664
295,548
757,212
The 2021 compensation package above for the executive Directors included salaries and benefits, and are short-term in nature. During
2021 the executive Directors received shares in lieu of a 20% salary reduction.
EXECUTIVE DIRECTORS’ SHARE CAPITAL
The following tables outline the share options outstanding and shares owned as at 31 December 2021 for the executive Directors. There
have been no changes between 31 December 2021 and 18 March 2022.
Director
Jeffrey Auld
Andrew Fairclough
_______________________
Share Options
LTIP Awards 10
Shares
26,800,000
13,000,000
3,506,752
1,750,000
7,000,000
1,080,533
28,550,000
20,000,000
4,587,285
7The average GBP:USD rate for the year was 0.7264 (2020 – 0.7786).
8Benefits include medical insurance and UK pension scheme contributions.
§2020 shares and options consists of share options, shares issued in lieu of salary, and LTIP awards. Share options are priced at the fair value on the grant date, calculated using
Black Scholes, and amortised over the vesting period. Shares issued in lieu of salary, were issued at the average share price over the period related to the salary forgone. The LTIP
awards were priced using the closing share price on the issuance date and have no vesting conditions. Both the shares issued in lieu and LTIP awards are fully expensed at date of
issuance.
10Each LTIP award represents a right to acquire a share of the Company at $nil consideration.
34
SERINUS ENERGY
Stock Options
Director
Jeffrey Auld
Jeffrey Auld
Jeffrey Auld
Jeffrey Auld
Jeffrey Auld
Andrew Fairclough
LTIP Awards
Director
Jeffrey Auld
Andrew Fairclough
Grant date
22 Dec 2020
27 May 2019
03 Dec 2018
31 May 2017
22 Sep 2016
02 Apr 2020
Strike Price
Share Options
£0.02
£0.02
£0.02
£0.02
£0.02
£0.02
18,800,000
1,000,000
2,500,000
1,000,000
3,500,000
1,750,000
28,550,000
Grant date
LTIP Awards
24 Dec 2020
24 Dec 2020
13,000,000
7,000,000
20,000,000
NON-EXECUTIVE DIRECTORS’ REMUNERATION
Non-executive Director’s receive a £30,000 annual fee, with each Chair receiving an additional £10,000 fee.
During the second and third quarter of 2020 as an effort to preserve capital, all non-executive directors agreed to a 25% reduction of
their fees.
Director
Jim Causgrove
Eleanor Barker
Lukasz Redziniak
Dawid Jakubowicz
Natalie Fortescue
Jon Kempster13
Fees11
55,066
27,533
68,833
10,325
41,300
37,858
240,915
Share Options12
2021 Total
2020 Total
-
-
-
-
-
-
-
55,066
27,533
68,833
10,325
41,300
37,858
46,713
45,591
44,952
33,714
-
-
240,915
170,970
NON-EXECUTIVE DIRECTORS’ SHARE CAPITAL
The following tables outline the share options outstanding and shares owned as at 31 December 2021 for the non- executive Directors.
There have been no changes between 31 December 2021 and 18 March 2022.
Director
Jim Causgrove
Lukasz Redziniak
Jon Kempster 13
Director
Jim Causgrove
Options held at
31 December 2021
Shares held at
31 December 2021
100,000
-
-
100,000
Strike Price
C$0.36
400,000
720,000
602,607
1,722,607
Share Options
100,000
100,000
Grant date
20 Nov 2017
Lukasz Redziniak, Chairman of the Remuneration Committee
18 March 2022
_______________________
11Translated using the average exchange rate for the year GBP:USD 0.7264 (2020 – GBP:USD 0.7786).
12Share options are priced at the fair value on the grant date, calculated using Black Scholes, and amortised over the vesting period.
13 Shares held by Catherine Kempster (the spouse of Jon Kempster)
2021 ANNUAL REPORT
35
AUDIT COMMITTEE REPORT
This report addresses the responsibilities, the membership and the
activities of the Audit Committee in 2021 up to the approval of the 2021
Annual Report and 2021 year-end Financial Statements.
MEMBERSHIP
•
•
Jon Kempster – Chairman
Jim Causgrove
• Natalie Fortescue
RESPONSIBILITIES
The main responsibilities of the Audit Committee are the following:
• Monitor the integrity of the annual and interim financial statements.
•
Review the effectiveness of financial and related internal controls
and associated risk management.
• Manage the relationship with our external auditors including
plans and findings, independence and assessment regarding
reappointment.
2021 ACTIVITY
The Committee met four (2020 – four) times throughout the year.
The Committee, together with the CFO,
is responsible for the
relationship with the external auditor. The Committee recommended the
appointment of PKF Littlejohn LLP as the auditor for the 2021 fiscal year-
end, which was approved.
For the 2021 fiscal year-end, the Committee has reviewed the following
significant financial reporting issues:
1. Carrying value of E&E and PP&E Assets.
2. Decommissioning provisions.
3. Going concern (see page 15 of this Annual Report or Note 2 of the
Financial Statements).
4. Cash flow forecasts.
INTERNAL CONTROLS AND RISK MANAGEMENT, WHISTLEBLOWING
AND FRAUD
The Committee is vigilant regarding internal financial controls and
risk management. During 2021, the Committee has undertaken anti-
bribery and anti-corruption exercises and has reviewed whistle blowing
arrangements.
Jon Kempster, Chairman of the Audit Committee
18 March 2022
36
SERINUS ENERGY
REPORT OF THE DIRECTORS
The Directors’ present their report, together with the audited
consolidated financial statements of Group for the year ended 31
December 2021. During 2021 and 2020 the following changes
have been made to the Group’s directors:
Stock Exchange for companies trading securities on AIM.
In preparing these financial statements, the directors are required
to:
In February 2020, Andrew Fairclough was appointed CFO
and was appointed a Director
•
select suitable accounting policies and then apply them
consistently
In March 2021, Dawid Jakubowicz resigned as a Director
• make
judgements and accounting estimates that are
•
•
•
•
In March 2021, Jon Kempster and Natalie Fortescue were
appointed as Directors
In May 2021, Eleanor Barker did not stand for re-election as
a Director
PRINCIPAL ACTIVITIES
The principal activity of the Group is oil and gas exploration and
development.
DIRECTORS AND DIRECTORS’ INTERESTS
Directors who held office during the year, their remuneration and
interests held in the Company are detailed in the Remuneration
Report. Directors’ biographies for those holding office at the
end of the year are detailed in the Board and Management Team
section of this annual report.
SUBSTANTIAL SHAREHOLDERS
As of the date of issuing this report, management is aware of the
following shareholders holding more than 5% of the ordinary
shares of the Company, as reported by the shareholders to the
Company:
Richard Sneller
Crux Asset Management
Quercus TFI SA
11.42%
8.30%
7.16%
RESULTS AND DIVIDENDS
The results for the year are set out in the Consolidated Statement
of Comprehensive Loss. The results are further discussed in the
CFO Report on pages 9 to 15 of this Annual Report..
The Directors do not recommend payment of a dividend in respect
of these financial statements (2020 - $nil).
STATEMENT OF DIRECTORS RESPONSIBILITIES IN RESPECT OF
THE FINANCIAL STATEMENTS
The directors are responsible for preparing the annual report and
the financial statements in accordance with applicable law and
regulations.
Companies (Jersey) Law 1991 requires the directors to prepare
financial statements for each financial year. Under that law the
directors have elected to prepare the group financial statements
in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the United Kingdom. Under company law
the directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of
affairs of the group and company and of the profit or loss of the
group for that period. The directors are also required to prepare
financial statements in accordance with the rules of the London
reasonable and prudent
•
•
state whether they have been prepared in accordance with
IFRSs as adopted by the United Kingdom, subject to any
material departures disclosed and explained in the financial
statements
prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business (note 2).
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the company’s
transactions and disclose with reasonable accuracy at any time
the financial position of the company and enable them to ensure
that the financial statements comply with the requirements of
Companies (Jersey) Law 1991. They are also responsible for
safeguarding the assets of the company and hence for taking
reasonable steps for the prevention and detection of fraud and
other irregularities.
WEBSITE PUBLICATION
The Directors are responsible for ensuring the annual report and
the financial statements are made available on a website. Financial
statements are published on the company’s website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity of
the Company’s website is the responsibility of the Directors. The
Directors’ responsibility also extends to the ongoing integrity of
the financial statements contained therein.
STATEMENT OF DISCLOSURE TO AUDITORS
As far as the Directors are aware, there is no relevant audit
information of which the Group’s auditor is unaware and each
Director has taken all the steps that they ought to have undertaken
as a Director in order to make themselves aware of any relevant
audit information and to establish that the Group’s auditor is aware
of that information.
AUDITORS
PKF Littlejohn LLP has indicated its willingness to continue in
office, and a resolution that they are appointed will be proposed
at the next annual general meeting.
On behalf of the Board
Jeffrey Auld, Chief Executive Officer
18 March 2022
2021 ANNUAL REPORT
37
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF SERINUS ENERGY PLC
PKF Littlejohn LLP
Opinion
We have audited the financial statements of Serinus Energy plc (the
‘group’) for the year ended 31 December 2021 which comprise
the Consolidated Statement of Comprehensive Income, the
Consolidated Statement of Financial Position, the Consolidated
Statement of Changes in Equity, the Consolidated Statement
of Cash Flows and notes to the financial statements, including
significant accounting policies. The financial reporting framework
that has been applied in their preparation is applicable law and
International Financial Reporting Standards (IFRSs)(UK).
Based on the work we have performed, we have not identified
any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the
group's ability to continue as a going concern for a period of
at least twelve months from when the financial statements are
authorised for issue.
Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections
of this report.
In our opinion, the group financial statements:
Our application of materiality
•
•
•
give a true and fair view of the state of the group’s affairs as at
31 December 2021 and of its profit for the year then ended;
have been properly prepared in accordance with IFRS (UK)
and
have been prepared in accordance with the requirements of
The Companies (Jersey) Law 1991.
We apply the concept of materiality both in planning and
performing our audit, and in evaluating the effect of misstatements.
At the planning stage, materiality is used to determine the financial
statement areas that are included within the scope of our audit
and the extent of sample sizes during the audit. No significant
changes have come to light through the audit fieldwork which has
required a revision of our materiality figure.
Basis for opinion
in accordance with
We conducted our audit
International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the
Auditor’s responsibilities for the audit of the financial statements
section of our report. We are independent of the group in
accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, including the
FRC’s Ethical Standard as applied to listed entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that
the directors’ use of the going concern basis of accounting in
the preparation of the financial statements is appropriate. Our
evaluation of the directors’ assessment of the group’s ability
to continue to adopt the going concern basis of accounting
included:Assessing and sensitising key cost and income streams
included in the group cash flow forecast which has been prepared
by the directors for a period of no less than twelve months from
the date of approval of these financial statements
•
•
•
•
Assessing and key cost and income streams included in the
group cash flow forecast which has been prepared by the
directors for a period of no less than twelve months from the
date of approval of these financial statements. We reviewed
management’s sensitised versions of the cash flow forecast
to assess whether a downturn could lead to future concerns.
Challenging and critiquing the directors’ assumptions
included in the cash flow forecast and agreeing the inputs
to evidence obtained during the course of the audit and the
understanding of the business obtained during the course
of the audit.
Assessing management’s price
gas respectively
appropriateness of these price inputs..
to obtain an understanding of
forecasts
for oil and
the
Reviewing and considering the adequacy of the disclosure
within the financial statements relating to the directors’
assessment of the going concern basis of preparation
We calculated group materiality at 1% of gross assets which
gives a figure of $900,000. Gross assets were determined as an
appropriate basis for materiality because the principal focus of
the group remains on the development of its oil and gas assets in
Tunisia and Romania.
Materiality for the significant components of the group ranged
from $400,000 to $600,000, based on 1% of gross assets for each
component.
Group performance materiality was set at $540,000.
We agreed to report to those charged with governance all
corrected and uncorrected misstatements we identified through
our audit with a value in excess of $45,000. We also agreed to
report any other audit misstatements below that threshold that we
believe warranted reporting on qualitative grounds.
Our approach to the audit
In designing our audit, we determined materiality and assessed
the risks of material misstatement in the financial statements. In
particular we looked at areas involving significant accounting
estimates and judgements by the directors and considered future
events that are inherently uncertain. These included, but were
not limited to the carrying value of both the production assets
and exploration & evaluation assets, and the completeness and
accuracy of the decommissioning provision. We also addressed
the risk of management override of internal controls, including
among other matters consideration of whether there was evidence
of bias that represented a risk of material misstatement due to
fraud.
Our group audit scope focused on the principal areas of
operation, being Romania and Tunisia. Each component was
assessed as to whether they were significant or not significant to
the group by either their size or risk. The parent Company and
two operating subsidiaries were considered to be significant due
to identified risk and size. We have performed the audit of the
Parent Company that is registered in Jersey. However, the two
remaining components are located in Romania and Tunisia and
have been subject to full scope audits by component auditors. As
group auditors we maintained oversight and regular contact with
the component auditor throughout all stages of the audit and we
were responsible for the scope and direction of their work.
38
SERINUS ENERGY
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) we identified, including those which had the greatest effect
on: the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
Key Audit Matter
Carrying value of development and production assets (see note
11)
The group’s total development and production assets are highly
material and are key to the group’s operations.
Management are required to assess at the end of the reporting
period as to whether there are any indications of impairment
in line with IAS 36. If such indicators are identified, the entity is
required to estimate the recoverable amount.
The assessments undertaken by management in undertaking
these impairment reviews include significant judgements and
estimates.
There is the risk that the group’s development and production
assets are impaired and that the judgements and estimates
made in the calculations are inappropriate.
The audit team obtained a detailed understanding of the
business of Serinus Energy plc, to ensure that appropriate
audit procedures were performed. As part of the audit work
performed, the audit team specifically:
•
•
•
•
•
•
•
•
Held meetings with operational management in order to be
able to assess the operating activity and development of the
assets undertaken during the year
Ensuring ownership of licences;
Examining license concession agreements and supporting
documentation in order to assess that appropriate legal and
beneficial ownership percentages had been considered;
Reviewing management’s impairment indicators assessment
for each cash generating unit (CGU) against the criteria in the
accounting standard to determine whether their assessment
was complete and in accordance with the requirements of
the accounting standard;
Challenging managements’ reserve stress testing analysis
which was performed to determine the point at which there
would be working capital issues. Our testing considered
whether such scenarios, including significant reductions
in commodity prices and production levels, would have a
material impact on the carrying value of the development
and production assets
Checking the arithmetical accuracy and integrity of the
impairment model;
Reviewing the reasonableness of key inputs, including
discount rates, oil prices, production estimations, capex and
opex; and
Assessing the competence and independence of the group’s
reserve expert and reviewing the latest reserves report
provided and comparing key model inputs to data obtained
elsewhere during the course of the audit, and to third party
publicly available data
Based on the testing performed and the challenge of
management, we agreed with management’s decision that an
impairment for the group was not required however it should be
noted that should licences not be renewed in accordance with
expectation this may result in an impairment.
Other information
The other information comprises the information included in the
annual report, other than the financial statements and our auditor’s
report thereon. The directors are responsible for the other
information contained within the annual report. Our opinion on the
group financial statements does not cover the other information
and, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in
the course of the audit, or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether this
gives rise to a material misstatement in the financial statements
themselves. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we
are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the regulations of the
Warsaw Stock Exchange
In our opinion, the information contained in the Directors’ Report
In our opinion, the information contained in the Directors’ Report
on the Group’s activities complies with the requirements of the
regulations of the Warsaw Stock Exchange issuers and is consistent
with the information presented in the accompanying consolidated
financial statements.
2021 ANNUAL REPORT
39
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF SERINUS ENERGY PLC (continued)
Based on our knowledge obtained during the audit about
the Group and its environment we have identified no material
misstatements in the Directors’ Report on the Group’s activities.
The Company’s Management and members of
its Audit
Committee are responsible for the preparation of a declaration
on the application of corporate governance in accordance with
regulations of the Warsaw Stock Exchange.
In connection with our audit of the consolidated financial
statements it was our responsibility to read the declaration on
the application of corporate governance, constituting a separate
section of the Annual Report.
In our opinion, the declaration on the application of corporate
governance contains all information specified in paragraph 70
section 6 point 5 of the Minister’s of Finance Decree of 29 March
2018 on the current and periodic information provided by the
issuers of securities and on the conditions for recognising as
equally valid the information required by the regulations of a state
that is not a member state (2018 Journal of Laws, item 757).
Information provided in paragraph 70 section 6 point 5 letters
c-f, h and i of the regulations contained in the statement on the
application of corporate governance are in accordance with the
applicable regulations and information contained in the annual
consolidated financial statements.
We draw the users attention to the fact that ESEF requirements
related to the Warsaw Stock Exchange requirements have not
been met.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and
their environment obtained in the course of the audit, we have
not identified material misstatements in the strategic report or the
directors’ report.
We have nothing to report in respect of the following matters in
relation to which The Companies (Jersey) Law 1991 requires us to
report to you if, in our opinion:
•
•
•
adequate accounting records have not been kept, or returns
adequate for our audit have not been received from branches
not visited by us; or
the financial statements are not in agreement with the
accounting records and returns; or
we have not received all the information and explanations we
require for our audit.
•
Responsibilities of directors
As explained more fully in the Report of the Directors, the
directors are responsible for the preparation of the group financial
statements and for being satisfied that they give a true and fair
view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the group financial statements, the directors are
responsible for assessing the group’s ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless
the directors either intend to liquidate the group or to cease
operations, or have no realistic alternative but to do so.
•
•
40
SERINUS ENERGY
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
Irregularities, including fraud, are instances of non-compliance
with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements
in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud
is detailed below:
• We obtained an understanding of the group and the industry
in which it operates to identify laws and regulations that
could reasonably be expected to have a direct effect on the
financial statements. We obtained our understanding in this
regard through discussions with management, application of
cumulative audit knowledge and experience of the industry
sector.
• We determined the principal laws and regulations relevant
to the group in this regard to be those arising from AIM
Rules for Companies July 2016, The Companies (Jersey)
Law 1991, IFRSs, Health and Safety Regulations and License
requirements and local laws and regulations applicable in
the jurisdictions where the Group has operations. The team
remained alert to instances of non-compliance with laws and
regulations throughout the audit.
• We designed our audit procedures to ensure the audit team
considered whether there were any indications of non-
compliance by the group with those laws and regulations.
These procedures included, but were not limited to: enquiries
of management; review of minutes of board meetings;
review of Regulatory News Service announcements and
correspondence.
• We have also discussed among the engagement how and
where fraud might occur and any potential indicators of
fraud. We then challenged the key assumptions made by
management
in respect of their significant accounting
estimates (see key audit matter).
As in all of our audits, we addressed the risk of fraud arising
from management override of controls by performing
audit procedures which included, but were not limited to:
the testing of journals; reviewing accounting estimates for
evidence of bias; and evaluating the business rationale of any
significant transactions that are unusual or outside the normal
course of business.
The component auditors performed audit procedures for
each of the components, based on the instructions issued
to them by us. This included reviewing journal entries for
evidence of material misstatement due to fraud; reviewing
accounting estimates, judgements and assumptions for
evidence of management bias; and performing a review of
the bank transactions to ensure appropriate authorisation.
The audit team was in constant communication with the
component auditors during the component audits, including
regular discussions on those areas that were of concern to
the component auditors.
Because of the inherent limitations of an audit, there is a risk
that we will not detect all irregularities, including those leading
to a material misstatement in the financial statements or non-
compliance with regulation. This risk increases the more that
compliance with a law or regulation is removed from the events
and transactions reflected in the financial statements, as we will
be less likely to become aware of instances of non-compliance.
The risk is also greater regarding irregularities occurring due to
fraud rather than error, as fraud involves intentional concealment,
forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities.
This description forms part of our auditor’s report.
Use of our report
This report is made solely to the group’s members, as a body, in
accordance with our engagement letter dated 16 December 2021.
Our audit work has been undertaken so that we might state to the
group’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone, other than the group and the group's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Joseph Archer
For and on behalf of PKF Littlejohn LLP
Chartered Accountants
15 Westferry Circus
Canary Wharf
London E14 4HD
18 March 2022
2021 ANNUAL REPORT
41
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
FOR THE YEAR ENDED 31 DECEMBER 2021
(US$ 000s, EXCEPT PER SHARE AMOUNTS)
Revenue
Cost of sales
Royalties
Windfall tax
Production expenses
Depletion and depreciation
Total cost of sales
Gross profit (loss)
Administrative expenses
Share-based payment expense
Total administrative expenses
Impairment expense
Release of provision
Decommissioning provision recovery
Operating income (loss)
Gain on extinguishment of debt
Finance expense
Net income (loss) before tax
Tax expense
Income (loss) after taxation attributable to equity owners of the parent
Other comprehensive income (loss)
Other comprehensive income (loss) to be classified to profit and loss in
subsequent periods:
Foreign currency translation adjustment
Total comprehensive income (loss) for the year attributable to equity owners of
the parent
Earnings (loss) per share:
Basic
Diluted
Note
6
11, 13
7
11, 12
23
18
8
9
2021
2020
39,984
24,030
(3,320)
(9,432)
(9,976)
(10,055)
(32,783)
(1,804)
(1,486)
(8,280)
(15,295)
(26,865)
7,201
(2,835)
(4,479)
(213)
(4,692)
-
6,636
142
9,287
-
(444)
8,843
(419)
8,424
(3,944)
(1,418)
(5,362)
(10,348)
1,905
-
(16,640)
11,985
(3,807)
(8,462)
(835)
(9,297)
(2,463)
1,332
5,961
(7,965)
10
10
0.01
0.01
(0.03)
(0.03)
The accompanying notes on pages 49 to 73 form part of the consolidated financial statements
42
SERINUS ENERGY
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
(US$ 000s, EXCEPT PER SHARE AMOUNTS)
As at
Non-current assets
Property, plant and equipment
Exploration and evaluation assets
Right-of-use assets
Total non-current assets
Current assets
Restricted cash
Trade and other receivables
Product inventory
Cash and cash equivalents
Total current assets
Total assets
Equity
Share capital
Share-based payment reserve
Treasury shares
Accumulated deficit
Cumulative translation reserve
Total equity
Liabilities
Non-current liabilities
Decommissioning provision
Deferred tax liability
Lease liabilities
Other provisions
Total non-current liabilities
Current liabilities
Current portion of decommissioning provision
Current portion of lease liabilities
Accounts payable and accrued liabilities
Total current liabilities
Total liabilities
Total liabilities and equity
Note
31 December
2021
31 December
2020
11
12
13
14
15
16
14
17
7
17
18
19
20
21
18
20
22
71,747
5,042
370
77,159
1,144
7,396
656
8,429
17,625
94,784
77,799
14
512
78,325
1,159
8,876
-
6,002
16,037
94,362
401,426
25,487
(121)
(387,986)
(1,374)
401,426
25,274
-
(396,410)
1,089
37,432
31,379
28,232
10,516
252
1,358
40,358
6,636
193
10,165
16,994
57,352
94,784
26,950
11,976
422
1,399
40,747
7,124
164
14,948
22,236
62,983
94,362
The accompanying notes on pages 49 to 73 form part of the consolidated financial statements
These consolidated financial statements were approved by the Board of Directors and authorised for issue on 18 March 2022 and were
signed on its behalf by:
JON KEMPSTER
DIRECTOR, CHAIR OF THE AUDIT COMMITTEE
ANDREW FAIRCLOUGH
DIRECTOR AND CFO
2021 ANNUAL REPORT
43
CONSOLIDATED STATEMENT OF SHAREHOLDER’S EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
(US$ 000S, EXCEPT PER SHARE AMOUNTS)
Note
Share
capital
Share-
based
payment
reserve
Treasury
Shares
Accumulated
deficit
Accumulated
other
comprehensive
loss
Total
Balance at 31 December 2019
377,942
23,932
Loss for the year
Other comprehensive loss for the year
Total comprehensive loss for the year
Transactions with equity owners
Shares issued
Share issue costs
Share-based payment expense
Shares issued to retire Convertible Loan
Balance at 31 December 2020
Income for the year
Other comprehensive loss for the year
Total comprehensive income for the year
Transactions with equity owners
Share-based payment expense
Shares purchased to be held in Treasury
-
-
-
21,315
(1,573)
76
3,666
-
-
-
-
-
1,342
-
401,426
25,274
-
-
-
-
-
-
-
-
213
-
17
17
7
17
7
17
Balance at 31 December 2021
401,426
25,487
-
-
-
-
-
-
-
-
-
-
-
-
-
(121)
(121)
(387,113)
(243)
14,518
(9,297)
-
(9,297)
-
-
-
-
-
1,332
1,332
-
-
-
-
(9,297)
1,332
(7,965)
21,315
(1,573)
1,418
3,666
(396,410)
1,089
31,379
8,424
-
8,424
-
-
-
(2,463)
8,424
(2,463)
(2,463)
5,961
-
-
213
(121)
(387,986)
(1,374)
37,432
The accompanying notes on pages 49 to 73 form part of the consolidated financial statements
44
SERINUS ENERGY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2021
(US$ 000s, EXCEPT PER SHARE AMOUNTS)
Operating activities
Income (loss) for the year
Items not involving cash:
Depletion and depreciation
Impairment expense
Interest expense
Share-based payment expense
Tax expense
Accretion expense on decommissioning provision
Change in other provisions
Foreign exchange (gain) / loss
Decommissioning provision recovery
Other income
Release of provision
Gain on extinguishment of debt
Income taxes paid
Expenditures on decommissioning liabilities
Funds from operations
Changes in non-cash working capital
Cashflows from operating activities
Financing activities
Proceeds from equity issuance
Share issue costs
Repayment of long-term debt
Lease payments
Shares purchased to be held in treasury
Cashflows (used in) generated from financing activities
Investing activities
Capital expenditures
Proceeds on disposition of property, plant and equipment
Cashflows used in investing activities
Impact of foreign currency translation on cash
Change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
11, 13
11, 12
8
7
9
18
21
23
26
17
17
20
17
26
The accompanying notes on pages 49 to 73 form part of the consolidated financial statements
Note
2021
2020
8,424
(9,297)
10,055
-
-
213
419
377
(41)
(15)
(142)
(4)
(6,636)
-
(2,085)
(332)
10,233
3,866
14,099
-
-
-
(235)
(121)
(356)
(11,248)
8
(11,240)
(76)
2,427
6,002
8,429
15,295
10,348
3,222
1,418
835
460
76
20
-
(4)
(1,905)
(11,985)
(1,166)
-
7,317
(536)
6,781
21,315
(1,573)
(18,500)
(537)
-
705
(4,360)
49
(4,311)
47
3,222
2,780
6,002
2021 ANNUAL REPORT
45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(US$ 000s, EXCEPT PER SHARE AMOUNTS UNLESS OTHERWISE NOTED)
1. GENERAL INFORMATION
Serinus Energy plc and its subsidiaries are principally engaged in the exploration and development of oil and gas properties in Tunisia
and Romania. Serinus is incorporated under the Companies (Jersey) Law 1991. The Group’s head office and registered office is located
at 2nd Floor, The Le Gallais Building, 54 Bath Street, St. Helier, Jersey, JE1 1FW.
Serinus is a publicly listed company whose ordinary shares are traded under the symbol “SENX” on AIM and “SEN” on the WSE.
The consolidated financial statements for Serinus include the accounts of the Group and its subsidiaries for the years ended 31 December
2021 and 2020.
2. BASIS OF PRESENTATION
The principal accounting policies adopted in the preparation of the consolidated financial statements are set out below. The policies
have been consistently applied to all years presented, unless otherwise stated. The consolidated financial statements have been
prepared on a historical cost basis except as noted in the accompanying accounting policies.
The consolidated financial statements of the Group for the 12 months ended 31 December 2021 have been prepared in accordance
with International Financial Reporting Standards (“IFRS”) and their interpretations issued by the International Accounting Standards
Board (“IASB”) as adopted by the United Kingdom applied in accordance with the provisions of the Companies (Jersey) Law 1991.
These consolidated financial statements are expressed in U.S. dollars unless otherwise indicated. All references to US$ are to U.S.
dollars. All financial information is rounded to the nearest thousands, except per share amounts and when otherwise indicated.
GOING CONCERN
The Group’s business activities, together with the factors likely to affect its future development and performance are set out in the
Operational Summary, the Chairman’s Letter and the Letter from the CEO. The financial position of the Group is described in these
consolidated financial statements and in the Report from the CFO.
The Directors have given careful consideration to the appropriateness of the going concern assumption, including cashflow forecasts
through the going concern period and beyond, planned capital expenditure and the principal risks and uncertainties faced by the
Group. This assessment also considered various downside scenarios including oil and gas commodity prices and production rates.
Following this review, the Directors are satisfied that the Group has sufficient resources to operate and meet its commitments as they
come due in the normal course of business for at least 12 months from the date of these consolidated financial statements. Accordingly,
the Directors continue to adopt the going concern basis for the preparation of these consolidated financial statements.
3. SIGNIFICANT ACCOUNTING POLICIES
a. Principles of consolidation
The consolidated financial statements include the results of the Group and all subsidiaries. Subsidiaries are entities over which
the Group has control. All intercompany balances and transactions, and any recognised gains or losses arising from intercompany
transactions are eliminated upon consolidation. Serinus has four directly held subsidiaries, Serinus Energy Canada Inc., Serinus
Holdings Limited, Serinus Petroleum Consultants Limited and Serinus B.V. Through Serinus Holdings Limited, the Group has
the following indirect wholly-owned subsidiaries: Serinus Energy Romania Trading S.r.l, Serinus Energy Romania S.A., SE Brunei
Limited, AED South East Asia Ltd., KOV Borneo Limited, and Serinus Tunisia B.V. 99.999996% of Serinus Energy Romania S.A. is
also held by Serinus Holdings Limited, with Serinus Tunisia B.V. owning the remaining 0.000004% of Serinus Romania S.A. On
21 December 2021, the Group completed a reorganisation whereby by the interests in Serinus Tunisia B.V. and Serinus Energy
Romania S.A. were transferred from Serinus B.V. to Serinus Holdings Limited.
Some of the Group’s activities are conducted through jointly controlled assets. The consolidated financial statements therefore
include the Group’s share of these assets, associated liabilities and cashflows in accordance with the term of the arrangement.
The Group’s associated share of revenue, cost of sales and operating costs are recorded within the Statement of Comprehensive
Income (Loss).
Basis of consolidation
Where the Group has control over an investee, it is classified as a subsidiary. The Group controls an investee if all three of the
following elements are present: power over the investee, exposure to variable returns from the investee and the ability of the
investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there
may be a change in any of these elements of control.
De-facto control exists in situations where the Group has the practical ability to direct the relevant activities of the investee without
holding the majority of the voting rights. In determining whether de-facto control exists the Group considers all relevant facts and
circumstances, including:
46
SERINUS ENERGY
•
•
The size of the Group’s voting rights relative to both the size and dispersion of other parties.
Substantive potential voting rights held by the Group and by other parties.
• Other contractual arrangements.
•
Historic patterns in voting attendance.
The consolidated financial statements present the results of the Group as if they formed a single entity. Intercompany transactions
and balances between group companies are eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the
statement of financial position, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their
fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive
loss from the date on which control is obtained. They are deconsolidated from the date on which control ceases.
b. Segment information
Operating segments have been determined based on the nature of the Group’s activities and the geographic locations in which
the Group operates and are consistent with the level of information regularly provided to and reviewed by the Group’s chief
operating decision makers.
c. Foreign currency
i. Foreign currency transactions
Transactions in foreign currencies are translated to the Group’s functional currency at exchange rates at the dates of the
transactions. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at
the year-end exchange rate. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair
value are translated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign
currency differences arising on translation are recognised in profit or loss.
ii. Foreign currency translation
In preparing the Group’s consolidated financial statements, the financial statements of each entity are translated into U.S.
dollars, the presentational currency of the Group. The assets and liabilities of foreign operations that do not have a functional
currency of US dollars are translated into US dollars using exchange rates at the reporting date. Revenues and expenses
of foreign operations are translated into US dollars using foreign exchange rates that approximate those on the date of the
underlying transaction. Significant foreign exchange differences are recognised in Other Comprehensive Income (Loss).
d. Revenue recognition
The Group earns revenue from the sale of crude oil, natural gas and natural gas liquids. Royalties are recorded at the time of
production.
Revenue from the sale of crude oil, natural gas and natural gas liquids is recorded when performance obligations are satisfied.
Performance obligations associated with the sale of crude oil are satisfied at the point in time when the products are delivered to
the loading terminal and the volumes and prices have been agreed upon with the customer, which is considered to be the point
at which the Group transfers control of the product. Performance obligations associated with the sale of natural gas and natural
gas liquids are satisfied upon delivery to the respective concession delivery points, which is where the Group transfers control.
e. Windfall tax
Within the Romanian operating segment, the Company incurs a windfall tax if the realised price of gas exceeds a price set by the
Romanian authorities. The windfall tax is recognised on a production basis and is shown as a cost of sale.
f. Share-based compensation
The Group reflects the economic cost of awarding share options to employees and Directors by recording an expense in the
Consolidated Statement of Comprehensive Income equal to the fair value of the benefit awarded. The expense is recognised in
the Consolidated Statement of Comprehensive Income or Loss over the vesting period of the award. Fair value is measured by
use of a Black-Scholes model which takes into account conditions attached to the vesting and exercise of the equity instruments.
The expected life used in the model is adjusted, based on management’s best estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations.
Share awards issued under the Company’s LTIP comprise of a right to acquire a share of the Company at no cost and are valued
at the closing price on the date of issuance. There are no vesting conditions for these awards, therefore the full value of the
awards are expensed upon issuance and carried within the Company’s share-based payment reserve.
Shares issued in lieu of salary are issued to the equivalent amount of salary forfeited. In determining the number of shares
awarded, the Company uses the volume weighted average share price for the equivalent period of the salary forfeited. As there
are no vesting conditions for these shares, they are fully expensed during the period the salary was forfeited and are recorded
within Share Capital.
When a share option modification is completed, the Company compares the original fair-value of the share option on the
modification date, to the modified fair-value on the modification date. If the fair-value of the modified share option is lower than
the original fair-value, no adjustment is required as the original fair-value is the minimum the Company is required to expense.
2021 ANNUAL REPORT
47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(US$ 000s, EXCEPT PER SHARE AMOUNTS UNLESS OTHERWISE NOTED) continued
The increase in incremental fair-value is expensed over the remaining vesting period. If the share option is fully vested, the
incremental fair-value is expensed immediately through profit and loss and carried under the share-based payment reserve.
g. Taxes
Current and deferred income taxes are recognised in profit or loss, except when they relate to items that are recognised directly
in equity or other comprehensive income, in which case the current and deferred taxes are also recognised directly in equity or
other comprehensive loss, respectively. When current income tax or deferred income tax arises from the initial accounting for a
business combination, the tax effect is included in the accounting for the business combination.
Current income taxes are measured at the amount expected to be paid to or recoverable from the taxation authorities based on
the income tax rates and laws that have been enacted at the end of the reporting period.
The Group follows the balance sheet method of accounting for deferred income taxes, where deferred income taxes are
recorded for the effect of any temporary difference between the accounting and income tax basis of an asset or liability, using
the substantively enacted income tax rates expected to apply when the assets are realised, or the liabilities are settled. Deferred
income tax balances are adjusted for any changes in the enacted or substantively enacted tax rates and the adjustment is
recognised in the period that the rate change occurs.
Deferred income tax liabilities are generally recognised for all taxable temporary differences. Deferred income tax assets are
recognised to the extent that it is probable future taxable profits will be available against which the temporary differences can
be utilised. The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and reduced
to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the asset to be
recovered. Deferred income tax assets and liabilities are only offset where they arise within the same entity and tax jurisdiction.
Deferred income tax assets and liabilities are presented as non-current.
Taxes in Tunisia are prepaid based on the prior year tax balance, and are used to reduce future taxes payable, and may not be
refunded. The Company classifies these as prepaid taxes when they are paid. The Company reassesses the likelihood that these
prepaid taxes will result in a benefit to the Company, and to the extent that these are deemed to have no value, the Company
includes this through profit and loss as a tax expense.
h. Cash and cash equivalents and restricted cash
Cash and cash equivalents include short-term investments such as term deposits held with banks or similar type instruments
with a maturity of three months or less. Restricted cash is comprised of cash held in trust by a financial institution for the benefit
of a third party as a guarantee that certain work commitments will be met. Once the work commitments are met, the restricted
cash is released from the trust and returned to cash.
i. Financial instruments
Financial instruments are recognised when the Group becomes a party to the contractual provisions of the instrument and are
subsequently measured at amortised cost.
Classification and measurement of financial assets
The initial classification of a financial asset depends upon the Group’s business model for managing its financial assets and the
contractual terms of the cash flows. There are three measurement categories into which the Group classified its financial assets:
i. Amortised costs: includes assets that are held within a business model whose objective is to hold assets to collect contractual
cash flows and its contractual terms give rise on specified dates to cashflows that represent solely payments of principal and
interest;Fair value through other comprehensive income (“FVOCI”): includes assets that are held within a business model
whose objective is achieved by both collecting contractual cash flows and selling the financial assets, where its contractual
terms give rise on specified dates to cash flows that represent solely payments of principal and interest; or
ii. Fair value through other comprehensive income (“FVOCI”): includes assets that are held within a business model whose
objective is achieved by both collecting contractual cash flows and selling the financial assets, where its contractual terms
give rise on specified dates to cash flows that represent solely payments of principal and interest; or
iii. Fair value through profit or loss (“FVTPL”): includes assets that do not meet the criteria for amortised cost or FVOCI and
are measured at fair value through profit or loss.Trade receivables and other receivables are initially measured at fair value.
The Group holds trade receivables and other receivables with the objective to collect the contractual cash flows and therefore
measures them subsequently at amortised cost.
Trade receivables and other receivables are initially measured at fair value. The Group holds trade receivables and other
receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised
cost. Trade receivables and other receivables are presented as current assets as collection is expected within 12 months after
the reporting period.
48
SERINUS ENERGY
The Group has no financial assets measured at FVOCI or FVTPL.
Impairment of financial assets
The Group recognised loss allowances for expected credit losses (“ECLs”) on its financial assets measured at amortised cost.
Due to the nature of its financial assets, the Group measures loss allowances at an amount equal to the lifetime ECLs. Lifetime
ECLs are the anticipated ECLs from all possible default events over the expected life of a financial asset. ECLs are a probability-
weighted estimate of credit losses.
Classification and measurement of financial liabilities
A financial liability is initially measured at amortised cost or FVTPL. A financial liability is classified and measured at FVTPL if it is
held-for-trading, a derivative or designated as FVTPL on initial recognition.
The Group’s accounts payable and accrued liabilities, lease liabilities and long-term debt are measured at amortised cost.
Accounts payable and accrued liabilities are initially measured at fair value and subsequently measured at amortised cost.
Accounts payable and accrued liabilities are presented as current liabilities unless payment is not due within 12 months after
the reporting period.
Long-term debt is initially measured at fair value, net of transaction costs incurred. The contractual cash flows of the long-term
debt are subsequently measured at amortised cost. Long-term debt is classified as current when payment is due within 12
months after the reporting period.
The Group has no financial liabilities measured at FVTPL.
The Group characterises its fair value measurements into a three-level hierarchy depending on the degree to which the inputs
are observable, as follows:
Level 1: inputs are quoted prices in active markets for identical assets and liabilities;
Level 2: inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability either
directly or indirectly; and
Level 3: inputs are unobservable inputs for the asset or liability.
j. Exploration and evaluation (“E&E”) and Property, plant and equipment (“PP&E”)
i. Exploration and evaluation expenditures
Pre-license costs are costs incurred before the legal rights to explore a specific area have been obtained. These costs are
expensed in the period in which they are incurred.
E&E costs, including the costs of acquiring licenses and directly attributable general and administrative costs, are capitalised
as E&E assets. The costs are accumulated in cost centres by well, field or exploration area pending determination of technical
feasibility and commercial viability.
E&E assets are assessed for impairment when (i) facts and circumstances suggest that the carrying amount exceeds the
recoverable amount, or (ii) sufficient data exists to determine technical feasibility and commercial viability, and the assets
are to be reclassified.
The technical feasibility and commercial viability of extracting a resource is considered to be determinable based on several
factors including the assignment of proved or probable reserves. A review of each exploration license or field is carried out,
at least annually, to ascertain whether the project is technically feasible and commercially viable. Upon determination of
technical feasibility and commercial viability, exploration and evaluation assets attributable to those reserves are first tested
for impairment and then reclassified from E&E assets to a separate category within PP&E referred to as oil and natural gas
interests.
ii. Development and production costs
Items of PP&E, which include oil and gas development and production assets, are measured at cost less accumulated
depletion and depreciation and accumulated impairment losses. Development and production assets are grouped into
cash generating units (“CGU”) for impairment testing and categorised within property and equipment as oil and natural
gas interests. PP&E is comprised of drilling and well servicing assets, office equipment and other corporate assets. When
significant parts of an item of PP&E, including oil and natural gas interests, have different useful lives, they are accounted for
as separate items (major components).
Gains and losses on disposal of an item of PP&E, including oil and natural gas interests, are determined by comparing the
proceeds from disposal with the carrying amount of PP&E and are recognised within profit or loss.
iii. Subsequent costs
Costs incurred subsequent to the determination of technical feasibility and commercial viability and the costs of replacing
parts of PP&E are capitalised only when they increase the future economic benefits embodied in the specific asset to which
they relate. All other expenditures are recognised in profit or loss as incurred. Such capitalised costs generally represent
costs incurred in developing proved and/or probable reserves and bringing in or enhancing production from such reserves
and are accumulated on a field or geotechnical area basis. The carrying amount of any replaced or sold component is
2021 ANNUAL REPORT
49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(US$ 000S, EXCEPT PER SHARE AMOUNTS UNLESS OTHERWISE NOTED) continued
recognised. The costs of the day-to-day servicing of PP&E are recognised in profit or loss as incurred.
iv. Depletion and depreciation
The net carrying value of development or production assets is depleted using the unit-of-production method based on
estimated proved and probable reserves, taking into account future development costs, which are estimated costs to
bring those reserves into production. For purposes of the depletion assessment, petroleum and natural gas reserves are
converted to a common unit of measurement on the basis of their relative energy content where six thousand cubic feet
(“Mcf”) of natural gas equates to one barrel of oil.
Certain of the Group’s assets are not depleted based on the unit of production method as they relate to infrastructure,
corporate and other assets. Such plant and equipment items are recorded at cost and are depreciated over the estimated
useful lives of the asset using the declining balance basis at rates ranging from 20% to 45%. The expected lives of other
PP&E are reviewed on an annual basis and, if necessary, changes in expected useful lives are accounting for prospectively.
v.
Impairment
The carrying amounts of the Group’s PP&E are reviewed whenever events or changes in circumstances indicate that that the
carrying value of an asset may not be recoverable and at a minimum at each reporting date. For the purpose of impairment
testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that
are largely independent of the cash inflows of other assets or groups of assets (CGUs). The recoverable amount is then
estimated. The recoverable amount of an asset or a CGU is the greater of its value in use and its fair value less costs to sell.
Value-in-use is generally computed as the present value of the future cash flows, discounted to present value using a pre-
tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset,
expected to be derived from production of proved and probable reserves.
An impairment loss is recognised if the carrying amount of an asset or a CGU exceeds its estimated recoverable amount.
Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to
reduce the carrying amount of any goodwill allocated to the unit and then to reduce the carrying amounts of the other
assets in the unit on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior
years are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment
loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss
is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been
determined, net of depletion and depreciation if no impairment loss had been recognised.
vi. Corporate assets
Corporate assets consist primarily of office equipment and computer hardware. Depreciation of office equipment and
computer hardware is provided over the useful life of the assets on the declining balance basis between 20% and 45% per
year.
k. ROU asset and lease liabilities
Serinus does not act as a lessor, and therefore this policy solely reflects Serinus acting in the manor of a lessee. Serinus
recognises a right-of-use asset and an offsetting lease obligation on the date the asset is available to the Company for use. The
asset and lease obligation are initially measured at the present value of the future lease payments, using the implicit interest rate
stated in the agreement, if available. If no interest rate is defined in the contract, the Company uses the weighted average cost
of capital of the business unit the lease is incurred within. Over the life of the lease, the Company incurs interest expense which
is added to the lease obligation, which is reduced by each future lease payment.
Modifications to lease contracts results in remeasuring the lease asset and obligation as of the effective date, with the resulting
change reflected through an addition to the underlying right-of-use asset and corresponding lease obligation.
Short-term leases and leases of low-value are not recognised on the balance sheet. Instead, these lease payments are recognised
through profit and loss as incurred.
l. Product inventory
Product inventory consists of the Company’s unsold Tunisia crude oil barrels, valued at the lower of cost, using the first-in, first-
out method, or net realisable value. Cost includes royalties, operating expenses and depletion associated with the barrels as
determined on a country-by-country basis.
50
SERINUS ENERGY
m. Provisions
i. General
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can
be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to the liability. Provisions are not recognised for future
operating losses. Management uses its best judgement in determining the likelihood that the provision will be settled within
one year; provisions that are settled within one year are classified as a current provision.
ii. Decommissioning provisions
Decommissioning provisions include legal or constructive obligations where the Group will be required to retire tangible
long-lived assets such as well sites and processing facilities. The amount recognised is the present value of estimated future
expenditures required to settle the obligation using the risk-free interest rate associated with the type of expenditure and
respective jurisdiction. A corresponding asset equal to the initial estimate of the liability is capitalised as part of the related
asset and depleted to expense over its useful life. The obligation is accreted until the date of expected settlement of the
retirement obligation and is recognised within financial costs in the statement of comprehensive loss.
Changes in the estimated liability resulting from revisions to the estimated timing or amount of undiscounted cash flows
or the discount rates are recognised as changes in the decommissioning provision and related asset. Actual expenditures
incurred are charged against the provision to the extent the provision was established. Downward revisions to the liability
in cases when the full decommissioning asset has been impaired, the resulting change in estimate will flow through the
Statement of Comprehensive Income (Loss).
n. Long-term debt
Long-term debt is classified as a financial liability or equity instrument in accordance with the substance of the contractual
arrangement. In determining whether a financial instrument is a financial liability rather than an equity instrument, the following
conditions must both be met:
i. The instrument includes a contractual obligation to deliver cash or another financial asset, or to exchange financial assets
and financial liabilities under conditions that are potentially unfavourable.
ii.
If the instrument will or may be settled in equity instruments it is a non-derivative that includes a contractual obligation to
deliver a variable number of equity instruments, or a derivative that will be settled by exchanging a fixed amount of cash or
another financial asset for a fixed number of equity instruments.
Long-term debt that contains a conversion feature is assessed using the criteria above. If the conversion feature fails to meet the
definition of an equity instrument it is classified as a derivative liability. Derivative liabilities are recorded at their fair value each
reporting period with changes recognised in profit or loss.
During the retirement of any debt obligation, differences between the carrying value and the amount settled (cash and equity)
will be recognised through profit and loss. If equity is issued during the extinguishment of debt, the shares will be valued at the
fair value on the date of issuance.
o. Share Capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of ordinary shares and share
options are recognised as a deduction from equity, net of any tax effects.
p. Treasury shares
The Group also from time to time acquires own shares to be held as treasury shares. Treasury shares are held at cost and shown
as a deduction from total equity in the Consolidated Statement of Financial Position.
Consideration received for the sale of such shares is also recognised in equity, with any difference between the proceeds from
sale and the original cost being taken to reserves. No gain or loss is recognised in the profit or loss on the purchase, sale, issue
or cancellation of treasury shares.
q. Warrants
Warrants are classified as equity. Incremental costs directly attributable to the issuance of warrants are recognised as a deduction
from equity, net of any tax effects. Fair value is measured by use of a Black-Scholes model which takes into account conditions
attached to the vesting and exercise of the equity instruments.
r. Dividends
To date the Group has not paid a dividend and does not anticipate paying dividends in the foreseeable future. Should the
Group decide to pay dividends in the future, it would need to satisfy certain liquidity tests as established in the Companies
(Jersey) Law 1991.
2021 ANNUAL REPORT
51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(US$ 000s, EXCEPT PER SHARE AMOUNTS UNLESS OTHERWISE NOTED) continued
s. Changes and amendments to accounting policies
During the year, there were no new standards or amendments to standards adopted that had a material effect to the Group.
t. Accounting standards issued but not yet adopted
The following standards have been published and are mandatory for accounting periods beginning after 1 January 2022 but
have not been early adopted by the Group and could have an impact on the Group financial statements:
i. Amendments to IAS 1: Presentation of Financial Statements: Classification of Liabilities as Current or Non-current and
Amendments to IAS 1: Classification of Liabilities as Current or Non-current – Deferral of Effective Date – effective 1 January
2023
ii. Amendments to IFRS 3: Business Combinations – Reference to the Conceptual Framework – effective 1 January 2022
iii. Amendments to IAS 16: Property, Plant and Equipment – effective 1 January 2022
iv. Amendments to IAS 37: Provisions, Contingent Liabilities and Contingent Assets – effective 1 January 2022
v. Annual Improvements to IFRS Standards 2018-2020 Cycle – 1 January 2022
4. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The fair values of cash and cash equivalents, restricted cash, trade receivables and other receivables and accounts payable and accrued
liabilities approximate their carrying amounts due to their short-term maturities.
The fair value of the lease liabilities and long-term debt approximates its carrying value as it is at a market rate of interest and accordingly
the fair market value approximates the carrying value (level 2).
RISK MANAGEMENT
The Directors have overall responsibility for identifying the principal risks of the Group and ensuring the policies and procedures are in
place to appropriately manage these risks. Serinus’ management identifies, analyses and monitors risks and considers the implication
of the market condition in relation to the Group’s activities.
Market risk is the risk that the fair value of future cash flows of financial assets or financial liabilities will fluctuate due to movements in
market prices. Market risk is comprised of commodity price risk, foreign currency risk and interest rate risk, as well as credit and liquidity
risks.
COMMODITY PRICE RISK
The Group is exposed to commodity price risk in fluctuations in the price of oil, natural gas and natural gas liquids. In Tunisia, the
Company enters into lifting agreements with trading counterparties based on the market price of Brent crude oil. In Romania, the
Company enters into contracts with customers for a stated gas price based on the Romanian gas trading activity.
The Group has no commodity hedge program in place which could limit exposure to price risk. For the year ended 31 December 2021,
a 10% change in the price of crude oil per bbl would have impacted revenue, net of royalties by $1.0 million (2020 - $0.6 million) and a
10% change in the price of gas per mcf would have impacted revenue, net of royalties by $2.7 million (2020 - $1.8 million).
FOREIGN CURRENCY EXCHANGE RISK
The Group is exposed to risks arising from fluctuations in various currency exchange rates. Gas prices are based in Romanian LEU
(“LEU”) or Tunisian dinar (“TND”), while condensate and oil prices are based in USD. The Company has payables that originate in GBP,
CAD, LEU and TND. As such the Company is affected by changes in the USD exchange rate compared to the following currencies; GBP,
CAD, LEU and TND.
The Company’s day to day operations will often generate invoices in other currencies, but these are not sensitive to the foreign exchange
practice of the business.
52
SERINUS ENERGY
As at 31 December 2021
Cash and cash equivalents
Restricted cash
Accounts receivable
Accounts payable
Lease liabilities
Net foreign exchange exposure
Translation to USD
USD equivalent
As at 31 December 2020
Cash and cash equivalents
Restricted cash
Accounts receivable
Accounts payable
Lease liabilities
Net foreign exchange exposure
Translation to USD
USD equivalent
GBP
57
-
-
(369)
(70)
(382)
1.3477
(515)
GBP
388
-
-
(474)
(93)
(179)
1.3649
(244)
CAD
212
1,449
4
(72)
(258)
1,335
0.7851
1,048
CAD
24
1,441
6
(79)
(242)
1,150
0.7854
903
LEU
3,320
30
15,731
(19,526)
-
(445)
0.2288
(102)
LEU
1,454
109
16,456
(5,559)
-
12,460
0.2521
3,142
TND
1,469
-
1,909
(3,306)
(431)
(359)
0.3464
(124)
TND
218
-
2,334
(1,405)
(537)
610
0.3697
226
For the year ended 31 December 2021, a 1% change in foreign exchange rates would have impacted net income by $3,000 (2020 -
$40,300).
CREDIT RISK
The Group’s cash and cash equivalents and restricted cash are held with major financial institutions. The Group monitors credit risk by
reviewing the credit quality of the financial institutions that hold the cash and cash equivalents and restricted cash. The Group’s trade
receivables consist of receivables for revenue in Tunisia and Romania, along with receivables from joint venture partners in Tunisia.
Management believes that the Group’s exposure to credit risk is manageable, as commodities sold are under contract or payment within
30 days. Commodities are sold with reputable parties and collection is prompted based on the individual terms with the parties. For the
year ended 31 December 2021, Tunisia’s revenue was generated from five customers (2020 – three), with a 28%, 22%, 18%, 17% and 15%
weighting (2020 – 62%, 19% and 19%). Romania’s sales were made primarily to three customers (2020 – three), with a 58%, 38% and 4%
weighting (2020 – 70%, 15% and 4%). At 31 December 2021, the Group had $nil (2020 - $0.8 million) of revenue receivables that were
considered past due (over 90 days outstanding).
The Company applied the simplified model for assessing the ECLs under IFRS 9. This approach uses a lifetime expected loss allowance
based on the days past due criteria. Upon reviewing the historical transactions with the Company’s vendors, it was determined that the
ECL was insignificant as there is no history of default or unpaid invoices. As a result the Company has determined the ECL percentage
to be nominal and has not recorded any allowance for doubtful accounts as at 31 December 2021 and 31 December 2020.
The Company manages its current VAT receivables by submitting VAT returns on a monthly basis. This allows the Company to receive
the VAT in a timely matter while any amounts that may come under scrutiny, only delays one month’s refund. Management has no
formal credit policy in place for customers and the exposure to credit risk is approved and monitored on an ongoing basis individually
for all significant customers. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the
statement of financial position. The Group does not require collateral in respect of financial assets.
LIQUIDITY RISK
Liquidity risk is the risk that Serinus will not be able to pay financial obligations when due. There are inherent liquidity risks, including the
possibility that additional financing may not be available to the Group, or that actual capital expenditures may exceed those planned.
The Group mitigates this risk through monitoring its liquidity position regularly to assess whether it has the resources necessary to fund
working capital, development costs and planned exploration commitments on its petroleum and natural gas properties or that viable
options are available to fund such commitments. Alternatives available to the Group to manage its liquidity risk include deferring
planned capital expenditures that exceed amounts required to retain concession licenses, farm-out arrangements and securing new
equity or debt capital.
2021 ANNUAL REPORT
53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(US$ 000s, EXCEPT PER SHARE AMOUNTS UNLESS OTHERWISE NOTED) continued
As at 31 December 2021
Accounts payable and accrued liabilities
Lease liabilities
Total
As at 31 December 2020
Accounts payable and accrued liabilities
Lease liabilities
Total
1 year
10,165
193
10,358
1 year
14,948
236
15,184
1 - 3 years
3+ years
-
183
183
-
69
69
1 - 3 years
3+ years
-
224
224
-
218
218
Total
10,165
445
10,610
Total
14,948
678
15,626
The Directors have considered the circumstances, current status and practical realisations of $5.3 million of current liabilities that relate
to long-term historic liabilities and based on this assessment do not believe that these will become due in the next 12 months.
INTEREST RATE RISK
During the prior year, the Company fully repaid its long-term debt, and no longer has an interest rate risk. In the prior year the Group’s
interest rate risk arose from the floating rate on the Convertible Loan. The Convertible Loan’s interest rate was based on LIBOR and
incremental revenue with a floor of 8% and ceiling of 17%. In the prior year, if interest rates applicable to the long-term debt increased
by 1%, assuming the debt remain unchanged, the impact to net loss before income taxes would have been $0.3 million.
5. USE OF ESTIMATES AND JUDGMENTS
The preparation of financial statements in conformity with IFRS requires management to make significant estimates and judgements
based on currently available information. Management uses their professional judgement along with the most up to date information
in making these estimates and judgements, however actual results could differ. By their very nature, these estimates are subject to
measurement uncertainty and the effect on the financial statements of future periods could be material. Estimates and underlying
assumptions are reviewed on an ongoing basis and any changes are recognised in the period that the estimates and judgements have
changed. The significant estimates and judgements made by management in the statements are described below:
a. Cash generating units
The determination of CGUs requires judgment in defining a group of assets that generate independent cash inflows from other
assets. CGUs are determined by similar geological structure, shared infrastructure, geographical proximity, commodity type,
similar exposure to market risks and materiality.
b. Oil and gas reserves
The process of determining oil and gas reserves is complex and involves many different assumptions. The Company conducts
a reserve audit at the end of each fiscal year, which is completed by independent qualified reserves engineers. The Company’s
reserve estimates are based on current production forecasts, commodity price forecasts, licences being renewed as and
when required, and other economic conditions. Estimates are amended for all available information such as historical well
performance and updated commodity prices.
The Company’s reserves drive the calculation of depletion of the oil and gas assets, calculating the future cash flows of the
assets and the recoverable amount for each CGU. The Company compares the recoverable amount to the carrying amount
to determine any potential impairment. In determining the recoverable amount, the Company makes other key estimates
and judgements which involve the proved and probable reserves, forecasted commodity prices, expected production, future
development costs and discount rates. Any changes to these estimates may materially impact the expected reserves of the
Company. An impairment sensitivity analysis is detailed in Note 11.
c. Deemed 100% interest in the Satu Mare concession
The Group currently holds a deemed 100% interest in the Satu Mare concession due to the working interest partner, who
held a 40% interest in the Satu Mare concession, declining to participate in future exploration or development phases and
not contributing their share of costs. The Group therefore issued a notice of default to the partner in December 2016 under
the terms of the joint operating agreement (“JOA”). The partner did not have the necessary means or intention to remedy the
situation and as such the partner is not entitled to participate in joint venture operations and has no right to transfer their interest
to a third party.
The Group has provided the partner with a Notice of Deemed Transfer pursuant to the JOA. This Notice of Deemed Transfer
54
SERINUS ENERGY
states that the Group has claimed this interest without any obligation to the partner. Under the terms of the JOA and pursuant
to the notice of default and notice of deemed transfer, the Group has commercially assumed 100% of the joint operation. The
Group has notified the National Agency for Mineral Resources (“NAMR”) of the default of the partner and has provided the
requisite guarantees to NAMR for 100% of the project.
d. Decommissioning provisions (Note 18)
The Group recognises liabilities for the future decommissioning and restoration of oil and gas assets. Management is required
to apply estimates and judgements related to the estimated abandonment techniques, costs and abandonment dates.
Technological advancements in the industry could lead to changes to reserve life delaying the abandonment dates, as well as
possible cheaper abandonment techniques. Any changes to these estimates, along with the inflation and discount rates, could
result in material differences and affect future financial results.
e.
Income taxes (Notes 9 and 19)
Deferred income taxes require estimates and judgements from management in determining the future cash flows and taxable
income of each business unit to determine the likelihood that any assets may be recognised by the Company.
Within Tunisia, taxes are at times paid in advance based on gross sales in certain circumstances. Management uses their best
estimates and future cash flow projections to determine if these advances will be utilised against income taxes in the future
periods. When it is deemed that these advances will not be utilised in the future, they are recorded through the Statement of
Comprehensive Income as a tax expense.
f. VAT receivable
The Company has outstanding VAT claims that have been disputed by Romanian authorities dating back to 2017. The VAT in
question relates to operational and developmental costs in Romania for costs paid in full by the Company at 100% working
interest (see Note 5(c)). Management believes that these amounts are fully recoverable and therefore the Company has
recorded 100% of the VAT balance in Trade and other receivables.
g. Product inventory (Note 16)
Within Tunisia, crude oil inventory volumes are estimated based on historical production less volumes sold and other adjustments
for shrinkage, as well as estimates based on facility capacity and volume assumptions.
h. Exploration and evaluation assets (Note 12)
E&E assets are subject to ongoing technical, commercial and management review to confirm the continued intent to establish the
technical feasibility and commercial viability of any prospect for which costs have been incurred. E&E assets remain capitalised
until a point at which management determines whether a project is economically viable.
6. REVENUE
The Group sells its production pursuant to variable-price contracts with customers. The transaction price for these variable-priced
contracts is based on underlying commodity prices, adjusted for quality, location and other factors depending on the contract terms.
Under the contracts, the Group is required to deliver a variable volume of crude oil and natural gas to the contract counterparty. The
disaggregation of revenue by major products and geographical market is included in the segment note (see Note 31).
As at 31 December 2021, the receivable balance related to contracts with customers, included within accounts receivable is $2.8 million
(31 December 2020 - $2.9 million).
7. SHARE-BASED PAYMENT EXPENSE
The Group has granted ordinary share purchase options to directors and employees with exercise prices equal to or greater than the
fair value of the ordinary shares on the grant date. Upon exercise, the options are settled in ordinary shares on the AIM market. For
options issued prior to 2016, each tranche of the share purchase options had a five-year term and vested one-third immediately with
the remaining two-thirds at one-third per year each anniversary of the grant date. In 2016, options were granted with a seven-year term
and vested one-third per year on the anniversary of the grant date for the three subsequent years. In 2017, options were granted with
a five-year term, which vested one-third per year on the anniversary date for the three subsequent years. In 2018, options were granted
with a ten-year term, which vested one-third immediately with the remaining two-thirds at one-third per year each anniversary of the
grant date for the two subsequent years.
In 2020, the Group repriced all stock options with the exception of those of the non-executive directors, to a strike price of £0.02, which
constitutes a modification to the share-based payment plan. The Group expensed the incremental fair-value increase related to all
vested stock options and will expense the fair-value increase related to unvested stock options over the remaining term of the options.
The options granted to non-executive directors have not been repriced or converted to the Company’s LTIP. The increase in the fair value
was calculated using the Black-Scholes model as of the day of modification, with and without the amended strike price. The incremental
fair value increase was determined to be insignificant.
In 2020, the Company issued 22.5 million awards under the LTIP (“Awards”) to members of the management team on 21 December
2020. These Awards were issued to management and provide the right to acquire one share of the Company at $nil cost. These Awards
were valued at the closing price (£0.0265) on the issuance date of the Awards. The total fair value of these awards was $0.8 million (£0.6
million). As at 31 December 2021, the total awards outstanding under this LTIP was 22.5 million (2020 – 22.5 million), with a weighted
average valuation of £0.0265 (2020 £0.0265).
2021 ANNUAL REPORT
55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(US$ 000s, EXCEPT PER SHARE AMOUNTS UNLESS OTHERWISE NOTED) continued
Also in 2020, the Company also issued shares to the executive Directors in lieu of a voluntary 20% salary reduction during the second
and third quarters. These shares were awarded at the weighted average closing share price over the respective periods.
The weighted average fair value of options granted during the year ended 31 December 2021 was £0.01 per option (31 December
2020 - £0.03 per option) using the following assumptions:
Inputs used in the Black-Scholes model
Risk-free interest rate
Expected dividend yield
Expected volatility (based on actual historical volatility)
Forfeiture rate
Expected option life (in years)
2021
0.29%
nil
71%
5%
10
2020
0.02%
nil
146%
5%
7.3
A summary of the changes to the option plans during the year ended 31 December 2021, are presented below:
a. CAD denominated options
Balance, beginning of year
Forfeited
Balance, end of year
b. GBP denominated options
Balance, beginning of year
Granted
Expired
Forfeited
Balance, end of year
2021
2020
Options
Exercise Price
Options
Exercise Price
200,000
(100,000)
100,000
0.37
-
0.37
200,000
-
200,000
0.37
-
0.37
2021
2020
Options
Exercise Price
Options
Exercise Price
32,893,000
1,750,000
-
(1,000,000)
33,643,000
0.02
0.02
-
(0.02)
0.02
13,079,667
22,380,000
-
(2,566,667)
32,893,000
0.17
0.02
-
(0.19)
0.02
As at 31 December 2021 there are 33,643,000 (2020 – 32,893,000) options outstanding to executive directors and employees with a
weighted average contractual life of 8.9 (2020 – 8.0) years and a weighted average exercise price of £0.02 (2020 - £0.02).
GBP denominated option breakdown
Exercise price
(GBP)
Options
outstanding
Options
exercisable
Average life
(years)
0.02
33,643,000
25,349,668
8.9
8. FINANCE EXPENSE
Year ended 31 December
Interest expense on long-term debt
Amortisation of debt costs
Amortisation of debt modification
Interest of leases (Note 20)
Accretion on decommissioning provision (Note 18)
Foreign exchange and other
56
SERINUS ENERGY
2021
-
-
-
53
377
14
444
2020
2,890
83
249
88
460
37
3,807
9. TAXATION
Current income tax expense
Deferred income tax
Origination and reversal of temporary differences (Note 19)
Tax expense
Reconciliation of the effective tax rate:
Year ended 31 December
Income (loss) before income taxes
Statutory tax rate
Expected income tax
Non-taxable (deductible) items
Losses utilised/expired
Tax rate differences
Advance taxes unrecoverable
Foreign exchange and other
Net change in tax attributes not recognised
Income tax expense
2021
1,879
(1,460)
419
2021
8,843
50.0%
4,422
(57)
(526)
(3,248)
-
35
(207)
419
2020
2,251
(1,416)
835
2020
(8,462)
50.0%
(4,231)
(699)
207
(190)
1,777
656
3,315
835
The Company has elected to use the Sabria concession tax rate as the statutory rate instead of using 0% tax rate applicable to the
Company in Jersey. Sabria is currently the only producing concession that does not have the ability to eliminate all tax liability through
the utilisation of loss pools, and therefore the majority of the Company’s tax expense relates to Sabria.
The advance taxes unrecoverable in the year ending 31 December 2020 is related to taxes that are prepaid within the various operating
concessions in Tunisia. Tunisia requires taxes to be paid in advance based on the prior year tax balance. The amounts paid may only be
deducted from future taxes and are unrecoverable. The Company has determined that based on the future development plans within
Tunisia that the Company will not generate enough taxable income to fully utilise all advance taxes paid, losses carried forward and other
taxable pools available to the Company.
10. EARNINGS (LOSS) PER SHARE
Year ended 31 December
($000’s, except per share amounts)
Income (loss) for the year
Weighted average shares outstanding
Basic
Diluted
Income (loss) per share
Basic and diluted
2021
8,424
1,162,931
1,172,911
0.01
2020
(9,297)
272,411
272,411
(0.03)
In determining diluted net income per share, the Group assumes that the proceeds received from the exercise of “in-the-money” stock
options are used to repurchase ordinary shares at the average market price. In calculating the weighted-average number of diluted
ordinary shares outstanding for the year ended 31 December 2021, the Group excluded 0.1 million (2020 – 33.1 million) stock options.
In 2020 there were 2.3 million warrants excluded as they were anti-dilutive due to the Company being in a loss position. These warrants
expired in 2021.
2021 ANNUAL REPORT
57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(US$ 000s, EXCEPT PER SHARE AMOUNTS UNLESS OTHERWISE NOTED) continued
11. PROPERTY, PLANT AND EQUIPMENT
Cost or deemed cost:
Balance as at 31 December 2019
Capital additions
Change in decommissioning provision
Disposals
Balance as at 31 December 2020
Capital additions
Change in decommissioning provision
Disposals
Balance as at 31 December 2021
Accumulated depletion and depreciation
Balance as at 31 December 2019
Depletion and depreciation
Impairment
Disposals
Balance as at 31 December 2020
Depletion and depreciation
Disposals
Balance as at 31 December 2021
Cumulative translation adjustment
Balance as at 31 December 2020
Currency translation adjustments
Balance as at 31 December 2021
Net book value
Balance as at 31 December 2020
Balance as at 31 December 2021
Oil and gas interests
Corporate assets
Total
256,234
5,567
1,646
(91)
263,356
5,797
793
-
269,946
(163,048)
(14,307)
(9,600)
71
(186,884)
(10,378)
-
(197,262)
1,211
(2,320)
(1,109)
77,683
71,575
2,552
141
-
(1,069)
1,624
69
-
(50)
1,643
(2,152)
(443)
-
1,069
(1,526)
-
42
(1,484)
18
(5)
13
116
172
258,786
5,708
1,646
(1,160)
264,980
5,866
793
(50)
271,589
(165,200)
(14,750)
(9,600)
1,140
(188,410)
(10,378)
42
(198,746)
1,229
(2,325)
(1,096)
77,799
71,747
Future development costs associated with the proved plus probable reserves are included in the calculation of the Group’s depletion.
The future development costs for Tunisia are $30.1 million (2020 - $29.8 million) and for Romania are $5.3 million (2020 - $4.7 million).
IMPAIRMENT
At 31 December 2021, the Company completed an impairment assessment on its PP&E to determine if there were any indicators of
impairment or impairment reversals. In South Tunisia and Sabria, no indicators of impairment or impairment reversals were identified. In
Moftinu the Company determined that there was an indicator of impairment and an impairment test was conducted on the Moftinu CGU.
The Company determined the estimated recoverable amount based on a discounted cash flow model, using an after-tax discount rate
equal to the weighted average cost of capital of Romania (10%), computed internally using external market data. The following table
shows the forecast commodity prices used in the GCA 31 December 2021 Reserve Report and used in the discounted cash flow model:
58
SERINUS ENERGY
Year
2022
2023
2024
2025
2026+
Brent
(US$/bbl)
75.92
71.00
70.00
71.40
+2% inflation
Romania Gas
(US$/Mcf)
20.35
11.60
8.99
8.28
+2% inflation
Although the discounted cash flow model indicated no further net impairment or reversal of impairment for the year ended 31
December 2021, the following table provides a sensitivity of the impairment expense that would arise with the following changes to the
key assumptions used in the model.
1% increase to
discount rate
1% decrease to
discount rate
10% increase
to commodity
prices
10% decrease
to commodity
prices
Additional impairment, net of tax
-
-
-
-
An impairment assessment was completed at 30 June 2020, which resulted in the Company recording $9.6 million of impairment within
both operating units (Romania, $6.2 million and Tunisia, $3.4 million). An impairment test was conducted on the Group’s Property, plant
and equipment to assess the impact of the weakness and volatility of commodity prices, largely as a result of the economic impact of the
global COVID-19 pandemic. Management performed impairment assessments on all CGUs and identified that impairment tests were
required for the following CGUs: Sabria, Chouech and Moftinu. The Group determined the estimated recoverable amount based on a
discounted cash flow. The following table shows the forecast consensus prices used at 30 June 2020:
Year
2020 (remaining)
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Remainder
Brent
(US$/bbl)
Sabria Gas
(US$/Mcf)
Chouech Gas
(US$/Mcf)
Romania Gas
(US$/Mcf)
42.45
52.24
57.26
59.49
62.97
64.23
65.51
66.82
68.16
69.52
70.91
75.28
5.91
7.28
7.98
8.29
8.78
8.96
9.14
9.32
9.51
9.70
9.89
10.50
4.64
5.72
6.27
6.52
6.90
7.04
7.18
7.32
7.47
7.62
7.77
8.17
3.60
5.25
5.75
5.75
5.75
5.75
5.75
5.75
5.75
5.75
5.75
5.75
At 31 December 2020, the Company completed an impairment assessment on its PP&E to determine if there were any indicators of
impairment or impairment reversals. Due to the continued lower commodity prices the Company deemed that there were indicators of
impairment and an impairment test was conducted on all CGUs. During the assessment, the Company combined two CGUs (Chouech
and Ech Chouech) into one new CGU, “South Tunisia”. The Company determined that the Ech Chouech concession is reliant on the
Chouech facilities to operate. Therefore, the Company assessed that the two concessions are a single CGU.
The CGUs that remain unchanged resulted in no further impairment as the estimated recoverable amount exceeded the carrying value.
The Company determined the estimated recoverable amount based on a discounted cash flow, using an after-tax discount rate equal to
the weighted average cost of capital of each subsidiary (Romania – 8%, Tunisia – 18%), computed internally using external market data.
The Company determined that no reversals of impairment were appropriate at this time due to the highly volatile commodity prices.
With regards to the South Tunisia CGU, the Company first tested for impairment on an individual CGU basis prior to combination to
determine the potential impairment or reversal of impairment, and then compared the carrying value of the new South Tunisia CGU
against the discounted cash flow model.
Prior to the combination, the Ech Chouech concession had a $nil carrying value, yet management’s calculations using a discounted cash
flow model resulted in positive value attributable to the CGU. Due to the current status of the field management determined that an
impairment reversal in the amount of $5.4 million was appropriate as this aligned with the expected discounted future cash flows. The
Chouech field had a carrying value in excess of the discounted cash flow model of $5.4 million therefore, management determined that
on a stand-alone basis, that an impairment charge of $5.4 million is required. In completing the impairment analysis for the combined
South Tunisia CGU, management determined there to be no impairment charge. The net impairment charge/reversal nets to $nil at
31 December 2020. In Romania, the Company determined that the 3D seismic acquired in 2014 in the Santau area of the Satu Mare
Concession identified future prospects that are in a distinct geographic area from the Moftinu area and concluded that each of Santau
and Moftinu should be identified as separate CGUs. There was no impairment expense identified in the Santau and Moftinu CGUs at
31 December 2020.
2021 ANNUAL REPORT
59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(US$ 000s, EXCEPT PER SHARE AMOUNTS UNLESS OTHERWISE NOTED) continued
The following table shows the forecast commodity prices used in the GCA 31 December 2020 reserve report and used in the discounted
cash flow model:
Year
2021
2022
2023
2024
2025+
Brent
(US$/bbl)
53.95
56.70
59.85
63.00
+2% inflation
Sabria Gas
(US$/Mcf)
6.26
6.59
6.96
7.34
+2% inflation
South Tunisia Gas
(US$/Mcf)
5.51
5.80
6.13
6.46
+2% inflation
Romania Gas
(US$/Mcf)
6.32
5.96
5.72
6.00
+2% inflation
Although the discounted cash flow indicated no further net impairment or reversal of impairment for the year ended 31 December 2020,
the following table provides a sensitivity of the impairment expense that would arise with the following changes to the key assumptions
used in the model.
1% increase to
discount rate
1% decrease to
discount rate
10% increase to
commodity prices
10% decrease to
commodity prices
Additional impairment, net of tax
-
0.1
-
1.3
The results of the impairment tests completed by management are sensitive to changes with regards to any of the key assumptions such
as, commodity prices, future development costs, change in reserves and production, or the future operating costs. Any changes to the
assumptions could increase or decrease the expected recoverable amounts from the assets and may result in impairment or potential
reversal of impairment.
At 31 December 2021, the Group recorded $0.5 million of depletion in inventory (2020 - $nil).
12. EXPLORATION AND EVALUATION ASSETS
Carrying amount
Balance, beginning of the year
Additions
Change in decommissioning provision
Recoveries
Impairment of exploration expense
Cumulative translation adjustment
Balance, end of the year
2021
14
4,888
494
-
-
(354)
5,042
2020
1,004
-
-
(235)
(748)
(7)
14
The Company currently holds land rights to a large amount of undeveloped land within Romania.
In the year ended 31 December 2020, within the Satu Mare concession, the Company incurred permitting and pre-seismic work in the
Capleni-Domanesti area, after which no seismic acquisition was completed. The Company has determined that the costs related to the
preliminary seismic work is fully impaired.
The Company has recorded an impairment expense of $nil (2020 - $0.7 million) as at 31 December 2021. All remaining E&E costs relate
to work on the exploratory well in Sancrai and preliminary costs related to seismic acquisition in the Satu Mare Concession.
60
SERINUS ENERGY
13. RIGHT-OF-USE ASSETS
The following table details the cost and accumulated depreciation of the ROU assets:
Buildings
Vehicles
Cost
Balance as at 31 December 2019
Additions
Disposals
Balance as at 31 December 2020
Additions
Disposals
Balance as at 31 December 2021
Accumulated depreciation
Balance as at 31 December 2019
Depreciation
Disposals
Balance as at 31 December 2020
Depreciation
Disposals
Balance as at 31 December 2021
Cumulative translation adjustment
Balance as at 31 December 2019
Currency translation adjustments
Balance as at 31 December 2020
Currency translation adjustments
Balance as at 31 December 2021
Carrying amounts
Balance as at 31 December 2020
Balance as at 31 December 2021
14. CASH
As at 31 December
Cash and cash equivalents
Restricted cash
Total cash
1,293
247
(700)
840
97
(66)
871
(504)
(531)
700
(335)
(212)
66
(481)
2
(7)
(5)
(15)
(20)
500
370
39
-
-
39
-
-
39
(13)
(14)
-
(27)
(12)
-
(39)
-
-
-
-
-
12
-
2021
8,429
1,144
9,573
2020
6,002
1,159
7,161
Total
1,332
247
(700)
879
97
(66)
910
(517)
(545)
700
(362)
(224)
66
(520)
2
(7)
(5)
(15)
(20)
512
370
The Group has cash on deposit with the Alberta Energy Regulator of $1.1 million (2020 - $1.2 million), as required to meet future
abandonment obligations existing on certain oil and gas properties in Canada (see Note 18). This deposit accrues nominal interest. The
fair value of restricted cash approximates the carrying value.
15. TRADE AND OTHER RECEIVABLES
As at 31 December
Trade receivables
VAT receivable
2,605
Corporate tax receivable
Prepaids and other
Total trade and other receivables
2021
4,269
1,956
213
958
7,396
2020
5,317
228
726
8,876
2021 ANNUAL REPORT
61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(US$ 000s, EXCEPT PER SHARE AMOUNTS UNLESS OTHERWISE NOTED) continued
The trade receivables consist of commodity sales in both Romania and Tunisia. The Group has determined that the ECL is nominal for
the years ended 31 December 2021 and 2020 while using the days past due criteria to measure the ECL. The Company has reviewed
the historical transactions with the vendors and has no history of default or unpaid invoices and has used a nominal percentage in
calculating the ECL. The Company has not taken an allowance for doubtful accounts as at 31 December 2021 and 2020.
The VAT receivable relates to operating and development costs in Romania and are recovered through the Romanian government. Of
the VAT receivable, $1.7 million relates to 2018 and prior which has been disputed by the Romanian authorities. In 2021, the Company
received $1.1 million of the prior year balance from the Romanian authorities. Serinus strongly believes the Company is entitled to the
remaining $1.7 million and is pursuing strategies to recover this.
16. PRODUCT INVENTORY
Product inventory consists of the Company's entitlement crude oil barrels in Tunisia, which are valued at the lower of cost or net
realisable value. Costs include operating expenses and depletion associated with crude oil entitlement barrels and are determined on
a concession-by-concession basis.
These costs are initially capitalised and expensed when sold. As at December 31, 2021, the Company held 12.2 Mbbls of crude oil in
inventory valued at approximately $53.65/bbl..
17. SHAREHOLDER’S CAPITAL
AUTHORISED
The Group is authorised to issue an unlimited number of ordinary shares without nominal or par value. Changes in issued ordinary
shares are as follows:
Year ended 31 December
2021
2020
Number of shares
Amount ($000s)
Number of shares
Amount ($000s)
Balance, beginning of the year
Issued for cash
Issuance costs, net of tax
Issued in lieu of salary
Issued to retire Convertible Loan
Warrants exercised
1,140,660,629
100
-
-
-
-
401,426
-
-
-
-
-
238,881,285
787,936,852
-
917,090
112,925,402
-
Balance, end of the year
1,140,660,729
401,426
1,140,660,629
377,942
21,315
(1,573)
76
3,666
-
401,426
TREASURY SHARES
Treasury shares represent the shares purchased and held by the Group. All treasury shares held, as below, are excluded from earnings
per share calculations.
Year ended 31 December
Balance, beginning of the year
Shares purchased
Balance, end of the year
Number of
shares
-
5,925,000
5,925,000
2021
Amount
($000s)
-
121
121
Number of
shares
-
-
-
2020
Amount
($000s)
-
-
-
62
SERINUS ENERGY
WARRANTS
Year ended 31 December
Balance, beginning of the year
Warrants expired
Balance, end of the year
18. DECOMMISSIONING PROVISION
As at 31 December
Balance, beginning of the year
Liabilities incurred
Liabilities settled
Accretion
Change in estimate
Foreign currency translation
Balance, end of year
Number of
Warrants
2,254,229
(2,254,229)
-
2021
Amount
($000s)
97
-
97
Number of
Warrants
2,254,229
-
2,254,229
2021
34,074
639
(332)
377
527
(417)
34,868
2020
Amount
($000s)
97
-
97
2020
31,638
843
-
460
838
295
34,074
The Group’s decommissioning provisions are based on its net ownership in wells and facilities in Tunisia, Romania, Brunei and Canada.
Management estimates the costs to abandon and reclaim the wells and facilities using existing technology and the estimated time
period during which these costs will be incurred in the future. During the year, liabilities were incurred in Romania relating to two new
wells, reduced by the abandonment of one well. In Tunisia, the Company incurred liabilities related to two new water pits.
The Group has estimated as at 31 December 2021 the decommissioning provisions of Brunei’s Block L and the wells in Canada to be
$2.7 million. During the year, it was determined that the Company was no longer obligated to fulfil the decommissioning provisions of
$0.2 million relating to one of the legacy properties. The remaining obligations are reported as current liabilities as they relate to non-
producing properties or expired production sharing contracts.
The change in estimate in the current year is based on changes to interest rates, discount rates, the estimated date of abandonment and
reclamation, and the expected costs of abandonment.
The Company anticipates the concession licenses will continue to be extended until they are no longer economical for the Company
to continue operating. As at 31 December 2021, the Company has aligned the abandonment dates with the expected economic life of
the asset.
The significant assumptions used in the calculation of the decommissioning provision are as follows:
As at 31 December
2021
2020
Tunisia
Romania
Brunei
Canada
Total
Due within one year
Long-term liability
Total
Risk-free
rate (%)
0.3 - 1.9
3.5 – 5.1
-
-
Risk-free
rate (%)
0.1 – 1.7
2.3 – 3.0
-
-
Inflation
rate (%)
Net present
value
2.0
3.6
-
-
28,454
3,743
1,643
1,028
34,868
6,636
28,232
34,868
Inflation
rate (%)
Net present
value
1.4
2.5
-
-
27,426
3,800
1,801
1,047
34,074
7,124
26,950
34,074
2021 ANNUAL REPORT
63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(US$ 000s, EXCEPT PER SHARE AMOUNTS UNLESS OTHERWISE NOTED) continued
19. DEFERRED INCOME TAX
The deferred taxes are recognised on a taxable body basis, specifically on an entity-by-entity basis with the exception of Tunisia. Tunisia
taxes each concession on a standalone basis, and therefore the deferred taxes are determined on each concession.
Movement in deferred income tax balances:
Tax effect related to:
PP&E and E&E assets
Decommissioning provision
Other
Deferred income tax liability
Tax effect related to:
PP&E and E&E assets
Decommissioning provision
Other
Deferred income tax liability
31 December 2020
Recovery
31 December 2021
(16,104)
3,928
200
(11,976)
808
315
337
1,460
(15,296)
4,243
537
(10,516)
31 December 2019
Recovery
31 December 2020
(16,962)
3,661
(91)
(13,392)
858
267
291
1,416
UNRECOGNISED DEFERRED TAX ASSETS
Deferred tax assets have not been recognised in respect of the following deductible temporary differences:
As at 31 December
PP&E and E&E assets
ROU assets and lease liabilities
Decommissioning provision
Non-capital losses carried forward and other
Unrecognised deferred tax asset
2021
(3,063)
-
7,741
11,923
16,601
(16,104)
3,928
200
(11,976)
2020
(3,718)
157
7,578
13,325
17,342
Deferred tax assets have not been recognised in respect of these items because it is uncertain that future taxable profits will be available
against which they can be utilised due to the large amount of non-capital losses available to the Company.
The Group has Canadian non-capital losses of $0.3 million (2020 - $0.3 million) that do not expire, Cyprus tax losses of $14.6 million
(2020 - $12.5 million) that expire between 2022 and 2026, Tunisian losses of $4.3 million that expire in five years and $24.0 million have
no expiry date (2020 - $15.4 and $41.6 million respectively), and Romanian losses of $7.1 million (2020 - $5.6 million) that expire after
seven years between 2022 to 2028.
The Group has temporary differences associated with its investments in its foreign subsidiaries. The Group has not recorded any
deferred tax liabilities in respect to these temporary differences as they are not expected to reverse in the foreseeable future.
The Group operates in multiple jurisdictions with complex tax laws and regulations, which are evolving over time. The Group has taken
certain tax positions in its tax filings and these filings are subject to audit and potential reassessment after the lapse of considerable time.
Accordingly, the actual income tax impact may differ significantly from that estimated and recorded by management.
64
SERINUS ENERGY
20. LEASE LIABILITIES
The following table details the movement in the Group’s lease obligations for the year ended 31 December 2021:
As at 31 December
Opening balance
Additions
Principle payments
Cumulative translation adjustment
Balance, end of the year
Lease liabilities due within one year
Lease liabilities due beyond one year
2021
586
97
(235)
(3)
445
193
252
2020
876
247
(537)
-
586
164
422
During the year the Company made total payments toward lease liabilities in the amount of $0.2 million (2020 - $0.6 million), of which
$0.1 million (2020 - $0.1 million) was interest.
The Group has elected to exclude short-term leases and low-value leases from the Group’s lease liabilities. Payments towards short-term
leases, and leases of low-value assets for the year ended 31 December 2021 were nominal and have been included in G&A expense
in the Statement of Comprehensive Loss. The Group’s short-term leases and leases of low-value consist primarily of office equipment
leases.
21. OTHER PROVISIONS
Balance as at 31 December 2019
Change in provision
Balance as at 31 December 2020
Reclassification
Balance as at 31 December 2021
Current
Non-current
JV audit
Severance
Other
1,135
76
1,211
-
1,211
-
1,211
147
-
147
-
147
-
147
41
-
41
(41)
-
-
-
Total
1,323
76
1,399
(41)
1,358
-
1,358
The Group is subject to audits arising in the normal course of business, with its joint venture partner in the Sabria concession in Tunisia.
A provision is made to reflect management’s best estimate of eventual settlement of these audits. The years currently under audit are
2014-2019. Management has reviewed the audit claims and has made a provision for what it expects to settle. Management expects
settlement of the joint venture audit provision to occur later than twelve months from 31 December 2021.
As at 31 December 2017, a provision was made for potential severance costs relating to the termination of employees in the Chouech
field in Tunisia. Since shutting in the field, agreements have been reached with the majority of the employees. The remaining provision
at 31 December 2021 reflects the potential costs to terminate the remaining employees.
22. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As at 31 December
Accounts payable and accrued liabilities
Taxes payable
Total accounts payable and accrued liabilities
23. RELEASE OF PROVISION
Year ended 31 December
Release of provision
2021
9,734
431
10,165
2020
14,319
629
14,948
2021
6,636
2020
1,905
In 2021, the Company reversed a provision of $6 million related to an exploration penalty due to the passage of statute of limitations.
Management deemed that a previously uncollectable VAT receivable of $0.6 million, as collectible due to changing circumstances
during the year.
The release of provision in 2020 was the elimination of a long-standing disputed payable for $1.9 million related to drilling costs on
Block L in Brunei, which has passed the relevant statute of limitation period.
2021 ANNUAL REPORT
65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(US$ 000s, EXCEPT PER SHARE AMOUNTS UNLESS OTHERWISE NOTED) continued
24. AGGREGATE PAYROLL EXPENSE
The aggregate payroll expense of employees and executive management of Serinus was as follows:
Year ended 31 December
Wages, salaries, and benefits14
Share-based payment expense15
Total aggregate payroll expense
2021
5,049
213
5,262
2020
4,450
1,418
5,868
Of the total aggregate payroll expense, $0.1 million (2020 - $0.1 million) has been classified as E&E assets.
25. RELATED PARTY TRANSACTIONS
During the years ended 31 December 2021 and 2020, related party transactions include the compensation of key management
personnel. Key management personnel consist of Serinus’ Board of Directors, both executive and non-executive. Transactions with key
management personnel are noted in the table below:
Year ended 31 December
Wages and salaries
Benefits
Share-based payment expense
Total related party transactions
26. SUPPLEMENTAL CASH FLOW DISCLOSURE
Year ended 31 December
Cash provided by (used in):
Trade receivables and other
Inventory
Accounts payable and accrued liabilities
Restricted cash
Changes in non-cash working capital from operations
The following table reconciles capital expenditures to the cash flow statement:
Year ended 31 December
PP&E additions (Note 11)
E&E additions (recoveries) (Note 12)
Total capital additions
Changes in non-cash working capital
Total capital expenditures
2021
1,067
105
224
1,396
2020
832
94
1,177
2,103
2021
2020
2,280
(656)
2,223
19
3,866
2021
5,880
4,888
10,768
480
11,248
932
-
(1,468)
-
(536)
2020
5,708
(235)
5,473
(1,113)
4,360
_______________________
14 Includes amounts in general and administrative expenses, production expenses and exploration and development expenditures.
15 Represents the amortization of share-based payment expense associated with options granted.
66
SERINUS ENERGY
The following table reconciles the long-term debt movements:
As at 31 December
Balance, beginning of the year
Cash Changes:
Principal payment on Convertible Loan
Non-cash Changes:
Gain on extinguishment of debt
Shares issued to extinguish debt
Fees incurred to retire Convertible Loan
Interest on Convertible Loan
Amortisation of modification gain
Amortisation of discounts and debt costs
Balance, end of the year
27. CAPITAL MANAGEMENT
Year ended 31 December
Shareholders’ equity
Total capital resources
2021
-
-
-
-
-
-
-
-
-
2020
31,096
(18,500)
(11,985)
(3,666)
(167)
2,890
249
83
-
2021
37,432
37,432
2020
31,379
31,379
The Group manages its capital structure to maximise financial flexibility as well as closely monitors cash forecasts. Management considers
capital to include debt and equity instruments. The Group has the ability to manage its capital structure raising financing through debt
or equity issuances, repurchasing shares and settling debt obligations. Further, each potential acquisition and investment opportunity
is assessed to determine the nature and total amount of capital required together with the relative proportions of debt and equity to be
deployed. The Group does not presently utilise any quantitative measures to monitor its capital.
In December 2020 the Company raised $19.7 million, net of issuance costs, in equity from the issuance of 787.9 million ordinary shares.
The funds were used to facilitate the repayment of the Convertible Loan.
28. COMMITMENTS AND CONTINGENCIES
COMMITMENTS
During the year, the Company met all the commitments of the third exploration phase on the Satu Mare Concession, and agreed with
the National Agency for Mineral Resources (“NAMR”) to enter a two-year evaluation phase from 28 October 2021 and 27 October 2023,
with the following work commitments:
Phase 1: from 28 Oct 2021 to 27 Oct 2022 the Company is required to reprocess 160.9 km 2D seismic in the Madaras area at an
estimated total cost of US$100,000.
Phase 2: from 28 Oct 2022 to 27 Oct 2023 the Company is required to reprocess 30.05 km of 2D seismic in the Santau-Nusfalau area at
estimated total cost of US$50,000.
CONTINGENCIES
The Tunisian state oil and gas company, ETAP, has the right to back into up to a 50% working interest in the Chouech concession if, and
when, the cumulative crude oil sales, net of royalties and shrinkage, from the concession exceeds 6.5 million barrels. As at 31 December
2021, cumulative liquid hydrocarbon sales net of royalties and shrinkage was 5.4 million (2020 – 5.3 million) barrels. The Company
currently does not expect to meet this threshold by the expiry of the concession.
29. PRIOR YEAR COMPARATIVES
The prior year comparatives have been reclassified to align with the current year disclosure. These reclassifications are immaterial.
2021 ANNUAL REPORT
67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
(US$ 000s, EXCEPT PER SHARE AMOUNTS UNLESS OTHERWISE NOTED) continued
30. INCOME (LOSS) FROM OPERATIONS ANALYSIS
($000)
Administrative expenses
Share-based payment expense (Note 7)
Impairment recovery (expense) (Note 11, 12)
Release of provision (Note 23)
Included within administrative expenses of $4.5 million (2020 - $3.9 million) are the following:
($000)
Salaries and wages
Audit and review fees
Consulting fees
31. SEGMENT INFORMATION
2021
(4,479)
(213)
-
6,636
2021
(2,249)
(431)
(237)
2020
(3,944)
(1,418)
(10,348)
1,905
2020
(1,704)
(497)
(350)
The Group’s reportable segments are organised by geographical areas and consist of the exploration, development and production of
oil and natural gas in Romania and Tunisia. The Corporate segment includes all corporate activities and items not allocated to reportable
operating segments and therefore includes Brunei.
As at 31 December 2021
Total assets
Romania
33,637
Tunisia
55,688
Corporate
5,459
For the year ended 31 December 2021
Crude oil revenue
Natural gas revenue
Condensate revenue
Total revenue
Cost of sales
Royalties
Production expenses
Depletion and depreciation
Windfall tax
-
26,809
198
27,007
(1,605)
(4,758)
(6,650)
(9,432)
10,984
1,993
-
12,977
(1,715)
(5,174)
(3,256)
-
Total cost of sales
(22,445)
(10,145)
Gross profit (loss)
Administrative expenses
Share-based payment expense
Release of provision
Decommissioning (provision) recovery
Operating income
Finance expense
Net income before income taxes
Tax expense
Net income for the year
Capital expenditures
4,562
-
-
636
-
5,198
(99)
5,099
-
5,099
9,513
2,832
-
-
-
(17)
2,815
(290)
2,525
(406)
2,119
1,268
-
-
-
-
-
(44)
(149)
-
(193)
(193)
(4,479)
(213)
6,000
159
1,274
(55)
1,219
(13)
1,206
10
Total
94,784
10,984
28,802
198
39,984
(3,320)
(9,976)
(10,055)
(9,432)
(32,783)
7,201
(4,479)
(213)
6,636
142
9,287
(444)
8,843
(419)
8,424
10,768
68
SERINUS ENERGY
As at 31 December 2020
Total assets
For the year ended 31 December 2020
Crude oil revenue
Natural gas revenue
Condensate revenue
Total revenue
Cost of sales
Royalties
Production expenses
Depletion and depreciation
Windfall tax
Total cost of sales
Gross loss
Administrative expenses
Share-based payment expense
Impairment expense
Release of provision
Operating loss
Extinguishment of debt
Finance expense
Net income (loss) before income taxes
Tax expense
Net income (loss) for the year
Capital expenditures
Romania
31,077
Tunisia
57,212
Corporate
6,073
-
16,740
167
16,907
(960)
(3,706)
(11,739)
(1,486)
(17,891)
(984)
-
-
(6,948)
-
(7,932)
-
(5)
(7,937)
-
(7,937)
4,210
5,762
1,361
-
7,123
(844)
(4,520)
(2,912)
-
(8,276)
(1,153)
-
-
(3,400)
-
(4,553)
-
(415)
(4,968)
(824)
(5,792)
1,251
-
-
-
-
-
(54)
(644)
-
(698)
(698)
(3,944)
(1,418)
-
1,905
(4,155)
11,985
(3,387)
4,443
(11)
4,432
12
Total
94,362
5,762
18,101
167
24,030
(1,804)
(8,280)
(15,295)
(1,486)
(26,865)
(2,835)
(3,944)
(1,418)
(10,348)
1,905
(16,640)
11,985
(3,807)
(8,462)
(835)
(9,297)
5,473
2021 ANNUAL REPORT
69
Nominated Advisor & Joint Broker
Arden Partners plc
125 Old Broad Street
London EC2N 1AR
Joint Broker
Shore Capital Stockbrokers Limited
57 St James's Street
London SW1A 1LD
Legal Advisors
Jersey Solicitors to the Company
Mourant Ozannes
22 Grenville Street
St Helier
Jersey JE4 8PX
English Solicitors to the Company
McCarthy Tétrault, Registered Foreign Lawyers & Solicitors
18th Floor
1 Angel Ct
London EC2R 7HJ
Polish Solicitors to the Company
T. Studnicki, K. Płeszka, Z. Ćwiąkalski, J. Górski sp.k.
Oddział w Warszawie
ul. Złota 59
00-120, Warsaw
Financial Public Relations Advisor
Camarco
3rd Floor
62-64 Cannon Street
London, EC4N 6AE
TBT i Wspólnicy
ul. A. Branickiego 10, lok. 2
02-972 Warsaw
ADVISORS
Registered Office
2nd Floor, The Le Gallais Building
54 Bath Street
St Helier
Jersey JE1 1FW
Executive Office
33 St. James’s Street
Fifth Floor
London SW1A 1HD
Administrative Office
950, 800 – 6th Avenue S.W.
Calgary, Alberta, T2P 3G3
+1 (403) 264-8877
Registration Number
126344
Company Secretary
Fairway Trust Limited
2nd Floor, The Le Gallais Building
54 Bath Street
St Helier
Jersey JE1 1FW
Registrar
Computershare Investor Services (Jersey) Limited
13 Castle Street
St Helier
Jersey JE1 1ES
Auditors
PKF Littlejohn LLP
15 Westferry Circus
Canary Wharf
London E14 4HD
Competent Person
Gaffney, Cline & Associates
Bentley Hall, Blacknest Road
Alton
Hampshire GU34 4PU
70
SERINUS ENERGY
2021 ANNUAL REPORT
71
Registered Office
2nd Floor, The Le Gallais Building
54 Bath Street
St Helier
Jersey JE1 1FW
www.serinusenergy.com