Serinus Energy plc
2022 Annual Report and Accounts
(US dollars)
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2022 HIGHLIGHTS
FINANCIAL
• Revenue for the year ended 31 December 2022 was $49.3 million (31 December 2021 - $40.0 million)
• EBITDA for the year ended 31 December 2022 was $12.7 million (31 December 2021 - $12.3 million)
• The Company generated net income of $1.6 million, which includes a $1.9 million asset impairment (31
December 2021 – net income of $8.4 million)
• The Company realised a net price of $149.46/boe for the year ended 31 December 2022, comprising:
o Realised oil price - $94.39/bbl
o Realised natural gas price - $34.53/Mcf
• The Group’s operating netback remained strong for the year ended 31 December 2022 and was $107.59/boe
(31 December 2021 - $44.60/boe), comprising:
o Romania operating netback - $181.57/boe (31 December 2021 - $52.44/boe)
o Tunisia operating netback - $54.34/boe (31 December 2021 - $29.77/boe)
• Capital expenditures of $12.9 million (31 December 2021 - $10.7 million), comprising:
o Romania - $8.4 million
o Tunisia - $4.5 million
• Third party reserves report attributes $85.4 million of Net Present Value at a 10% discount rate to the audited
Proved and Probable Reserves of the Company as at 31 December 2022
• Cash balance as at 31 December 2022 was $4.9 million
OPERATIONAL
• Completed the Romanian near-term exploration programme in 2022. Drilled two exploration wells in Romania
in 2022. Both the Moftinu Nord-1 well and the Canar-1 well encountered gas in targeted reservoirs however
quantities did not justify commercial development
• The Canar-1 well has been completed for use as a solar powered water injection well. Water from Moftinu
field is being disposed of at Canar-1 resulting in a cost saving of approximately $800,000 per year
• The second compressor at the Moftinu field was commissioned in February 2022. The compressors have
stabilised production and will extend overall field life
• The Company initiated a comprehensive block wide Geological Review engaging RISC Consultancy to take
the Company’s existing database of 2D, 3D and well data and using that database construct a consistent
geological model. This model, containing all of the extensive legacy and modern data covers the entirety of
the 3000 km
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Satu Mare concession
• Knowledge from the Moftinu field development and recent exploration drilling has been incorporated into the
comprehensive geological model to guide the Company in its further exploration of the highly prospective and
multi-play Satu Mare concession
• In Tunisia, the workover to install the first submersible pump for the Artificial Lift programme has commenced
at the Sabria field. Plans for additional pumps in the Sabria field are being progressed
• Workovers in the Chouech Es Saida field continue the increased production from wells CS-3 and CS-1
• Production for the year averaged 889 boe/d, comprising:
o Romania – 379 boe/d
o Tunisia - 510 boe/d
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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 the 3,000km
2
Satu Mare Concession. The Satu Mare Concession area
includes the Moftinu Gas Project which was brought on production in April 2019 and has produced approximately
9.2 Bcf and $90.9 million of revenue to the end of 2022. In addition to the Moftinu Gas Development Project the
Satu Mare Concession holds several highly prospective exploration plays. Serinus’ recently completed block wide
geological review has highlighted the potential of several plays that have encountered oil and gas on the block.
Focus on proven hydrocarbon systems known productive trends that need further data and studies over 40 legacy
wells on the concession area have encountered oil and gas. The Company has identified numerous additional gas
prospects identified by historic drilling and legacy 2D seismic. 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. Putting this extensive evidence based analysis together in a block wide review has allowed the Company
to identify a pathway towards future exploration growth.
TUNISIA
The Company’s Tunisian operations are comprised of two concession areas. The largest asset in the Tunisian
portfolio is the Sabria field, which is a large oilfield play with an estimated original in-place volume of 445 million
barrels-of-oil-equivalent of which 1.1% has been produced to date. Serinus considers this historically under-
developed field to be an excellent asset for development work to significantly increase production in the near-term.
The Company has embarked on an artificial lift programme whereby the first pumps in the Sabria field will be
installed. Independent third-party studies suggest that the use of pumps in this field can have a material impact on
production volumes. The Chouech Es Saida concession in southern Tunisia holds a producing oilfiled that produces
from three wells. Underlying this oil field are significant gas prospects. These prospects lie in a structure that
currently produces gas in an adjacent block. Exploration of these lower gas zones became commercially possible
with the recent construction of gas transportation infrastructure in the region. Upon exploration success these
prospects can be developed in the medium term, with the ability to access the near-by under-utilised gas
transmission capacity.
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OPERATIONAL SUMMARY AND OUTLOOK
CORPORATE
With the disruption of the COVID-19 pandemic and the associated global supply chain interruptions receding in
2022 the Company was able to advance its exploration and development projects. A critical foundation to the
advancement of these projects is the cash flow generation inherent in our production assets. For the year to 31
December 2022, the Company generated cashflow from operating activities of $7.5 million and invested $10.7
million of capital expenditure. The Company has a working capital surplus and in 2022 allocated the majority of the
cash flow generated by the businesses to near-term exploration and production opportunities.
The Company continues to focus on the active management of the Moftinu Gas field production levels. The Moftinu
gas field is a shallow gas field that has initial high production rates followed by natural declines. Managing these
declines to extract the most value from the gas in place has allowed the Company to extract $90.9 million of revenue
from this field since production began in 2019.
The Company continues to advance the implementation of its artificial lift programme in the Sabria field in Tunisia,
beginning with the Sabria-W1 well. In 2022 the Company was frustrated in accelerating the installation of the first
pump in the Sabria field by the default of the national rig company in Tunisia, Compagnie Tunisienne de Forage
(“CTF”). The initial rig contract committed CTF to provide their rig CTF-006 in mid-2022 but CTF was unable to
provide the rig as per their contractual obligation. An alternative rig (CTF-004) was mobilised to the site in December
2022.
The Company’s capital programme in 2022 was therefore concentrated on the two exploration wells, Canar-1 and
Moftinu Nord-1, drilled in Romania and the acceleration of the design and permitting of a new 2D seismic
programme. The new 2D seismic was designed to complement the existing 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 2022 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 km
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in the north-west of Romania. The Moftinu Gas Development project began production in
2019. The development project includes the Moftinu gas plant, and currently has four gas production wells - Moftinu
-1003, Moftinu-1004, Moftinu-1007 and Moftinu-1008. During 2022, the Company's Romanian operations produced
a total of 826 MMcf of gas and 527 barrels of condensate, equating to an average daily production of 379 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 is in routine conversations with the National Agency for Mineral Resources
(“NAMR”) regarding the further extension of this concession and will apply for a further appraisal period during 2023.
The greater Moftinu gas field area has been declared a commercial field and is exempt from this routine licence
extension procedure.
During the year the Company drilled two exploration wells; Canar-1 and Moftinu Nord-1, adjacent to the Moftinu gas
field. These near field prospects were selected due to their proximity to the Moftinu Gas Plant. It was expected
that, upon success, these fields could be quickly tied into the existing processing infrastructure to deliver near-term
cash flow. Regrettably both wells discovered gas in the expected zones however neither field contained sufficient
gas to justify commercial development. The Canar-1 well was drilled on time and under budget and encountered
gas in four prospective zones. Post drilling analysis suggest that the seal of the reservoir was compromised and
did not sufficiently prevent the gas from migrating away from the reservoir. The Moftinu Nord-1 well was drilled on
time and under budget but demonstrated a similar compromise of seal to the Canar-1 well. Whilst it is disappointing
to have discovered gas but to have that gas be in insufficient quantities, these two wells give greater insights into
those risks that must be focused on while drilling exploration wells on various prospects. Both Canar-1 and Moftinu
Nord-1 demonstrated Type-3 AVO responses. Typically, such a response is considered a Direct Hydrocarbon
Indicator. The two exploration wells demonstrated the effectiveness of the AVO responses and the use of AVO to
identify gas accumulations. The wells also highlighted the requirement to focus on seal types to allow for future
success, especially for such shallow targets. In the third quarter of 2022 the Company initiated a third party
independent geological review of the Satu Mare Concession. This review was designed to be a block wide review
of the geological development of the many play types on the block. The review was conducted by RISC, a geologic
consulting firm, and was designed to combine the myriad of technical information into a block wide exploration
model. During the study Serinus technical personal worked with RISC to analyse the many historical wells and
multitude of legacy 2D seismic. This is the first time that a block wide review of all technical information has been
prepared and the results are a valuable tool for future exploration opportunities.
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.
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After the drilling of Canar-1, the Company has implemented the technical program to convert this well into a water
injection well. This will allow the produced water volumes from the Moftinu wells to be injected in Canar-1. The
Company applied for and received all local and national permits, to get Canar-1 approved as a water injection well.
Produced water injection began in the fourth quarter of 2022. The use of Canar-1 as a water injection well has
resulted in a significant savings in operating expense. Previous water disposal required extensive trucking of
produced water volumes, injection using the Canar-1 well has resulted in cost savings in water transportation and
water injection of 91%, approximately $800,000 per year. At these injection levels, Canar-1 will recover the cost of
drilling and conversion to water injection during 2023.
The Company incorporated a new gas trading subsidiary, Serinus Energy Romania Trading S.r.l. in October 2021,
which trades the Company's Romanian gas production 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. Gas pricing in Romania has moved
significantly in 2022 from a low of $31/Mcf to a high of $67/Mcf. Much of this price volatility has occurred counter
to typical pricing seasonality. The ability of the Company to utilise its own gas trading function has resulted in an
average realised price of $39.96/Mcf for 2022, with an average realised gas price of $37.07/Mcf in the fourth quarter
of 2022. Whilst lower than the highs of 2022 current gas prices on the Romanian Commodity Exchange ("BRM")
remain strong over the first quarter of 2023.
Serinus has continued to operate safely and effectively in Romania throughout the period. As at the year-end 2022,
the Company had achieved 1,347 accident-free days of continuous operation which is 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.
After the year-end the Company announced the successful conclusion of its arbitration against its former partner.
TUNISIA
The Company currently holds two concession areas within Tunisia. These concession areas both contain
discovered oil and gas reserves and are currently producing. 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 equivalent originally in place. Of this oil in place only 1.1% 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.
A major project for the operations in Tunisia in 2022 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. The Company agreed a rig contract with the Compagnie
Tunisienne de Forage (“CTF”), the national drilling company. The contract allowed for the provision of a drilling rig
to conduct the W-1 workover. The rig was originally scheduled to have been delivered to the W-1 site in May 2022.
The Company was made aware that for a variety of reasons CTF was unable to provide the rig that was named in
the agreed rig contract, CTF-006. Additionally, CTF informed the company that it did not have another rig available
and suitable for the work that the Company anticipated. Having defaulted on the contract, CTF worked with the
Company to procure a replacement rig. However, the replacement rig, CTF-004 was only able to be provided late
in 2022. This frustrating delay has meant that the W-1 work over and pump installation has not been completed in
2022. Following the successful completion of the W-1 workover and pump installation the Company anticipates
commencing a programme to install artificial lift in the remaining candidate wells in Sabria.
The delays faced by the CTF default have also affected the 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-2023.
During the year, the Company conducted further workover operations in the Chouech Es Saida area to replace and
standardise pumps in order to increase production and efficiency. Better pump design and installation has
increased the pump life from seven months in 2019 to 24 months in 2022. The Company has applied to extend the
Ech Chouech licence but this expired in June 2022. The Company intends to continue its application to regain the
licence once the licence process is formalised.
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 closed or reduced the presence of staff in
our Head Office, Administration Office and our Business Unit Offices. Our field operations continue to remain ready
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to modify daily tasks and routines to ensure safe practices for all staff, as required. Existing operations have
remained in production and our producing assets have seen no significant operational setbacks resulting from the
COVID-19 pandemic.
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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 and Chouech Es Saida 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 1.1% 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 field in southern Tunisia offers attractive 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. Underlying the Chouech field is the prospective Acacus gas zone. Gas has been discovered
and produced from this zone in nearby concessions and recent gas infrastructure developments make this
exploration opportunity commercially attractive.
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.
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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 in Romania with multiple play types and prospects
• Two 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 constant evaluation and introduction of new 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
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CHAIRMAN’S LETTER
Dear shareholders,
It is my pleasure to write this letter to you as Chairman of Serinus Energy plc.
2022 is another year that will be remembered by all of us, primarily due to tragic war developments also heavily
impacting oil and gas sector. Our Board, however, is eager to report that notwithstanding the constraints, the
Company continues to generate strong cash flow and earnings. As shareholders will recall 2021 was the first year
since the Company’s inception that positive earnings were generated. I am happy to report that the trend is being
continued and that the Company generates positive earnings from operations in 2022. Cost control remains
essential to a cyclical commodities based business and I can assure you that in our case it does remain stable in
the face of some very difficult inflation.
Inflation remains one of the challenges posed by the COVID-19 pandemic and our team has remained focused on
executing our business plan and delivering value to our stakeholders. Our production has declined in Romania in
line with the parameters of a shallow gas field. It is now important that we use our technical skills to find the next
Moftinu Gas Development. It must be remembered as we near the $100 million of revenue from the Moftinu gas
field that these low-cost high return shallow gas fields offer dramatic earnings. Consequently the strategy in
Romania remains the same as we transition to finding the another Moftinu-like opportunity. The Satu Mare
Concession is a very large concession and we have so far identified more than thirty prospect opportunities with
expected 181 million barrels of oil equivalent to be explored for. Upon success any one of these prospects can
offer the so rewarding returns we saw with Moftinu. There are clearly major opportunities yet to be discovered
there.
In Tunisia our strategy continues to focus on the improvement in recovery from the Sabria field. Sabria is a large
conventional oil field that has had little more than one percent of the in-place oil volumes recovered. Social and
political turmoil in Tunisia has made our work difficult but we remain confident in the technical capabilities of our
teams and the large upside that is available in Sabria. As we look beyond the artificial lift programme our teams
are preparing the technical work for new wells. As part of the longer-term strategy the Company would be eager to
have the conditions allowing for new producing wells to be drilled in Sabria.
We have also made important investments in our operations, including drilling new wells and upgrading existing
facilities. As the nature of our business sometimes unfortunately dictates the exploration wells drilled in Romania
were not commercially successful and I certainly share our shareholders frustrations when we come so close by
discovering gas but fail at a later stage as there was simply not enough gas to ensure commercial sales. This was
highly disappointing however I know that this is what exploration is like and I am comfortable that the low-risk, low-
cost nature of our exploration programme will come to success in the near future.
Looking ahead, we are confident in the future of the energy sector, countries that we operate and the continued
growth of our company. We remain focused on executing our strategy, delivering value to our shareholders, and
contributing to the communities in which we operate.
Thank you for your continued support. I look forward to updating you on our progress in the coming year.
Yours sincerely,
Lukasz Rędziniak, Chairman of the Board of Directors
17 March 2023
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LETTER FROM THE CEO
Dear Fellow Shareholders,
2022 was an operationally challenging year for Serinus as inflation continued to pressure the business. Sweeping
inflation in costs across the business required nimble solutions and a far greater degree of anticipation as we worked
to achieve our operational targets. The Company reacted by ordering long lead items for our drilling plans well in
advance of what we would normally consider. These actions allowed us to avoid the steep inflation in steel tubulars
and other manufactured oilfield equipment. Delays to fabrication eased in 2022 and we did not see some of the
delays that were globally experienced in 2021. We have pre-ordered the requisite pumps for the Tunisian artificial
lift programme and those pumps are in hand in anticipation of our programme. As we look forward, we see inflation
beginning to moderate however our cost control focus will continue unabated.
Commodity prices once again took the headlines in 2022 as Russia invaded Ukraine and caused disruption to global
energy markets. Gas prices in Europe spiked and the Company’s Romania trading subsidiary was able to take
advantage of these heightened gas prices. Inevitably the higher commodity prices globally have allowed
governments to review fiscal terms and, in many countries, increased windfall taxes were the result. In Romania
we have been exposed to windfall taxes since the inception of production in Moftinu and no fiscal changes have
affected us. Fiscal terms in Tunisia have remained stable and there has been no indications that these terms will
change.
Operationally 2022 saw our business pursue our strategy in Romania of transitioning from a wholly production
business to searching for the next leg of growth. The strategy included two near field exploration wells that were
designed to add production to the existing gas plant infrastructure. Frustratingly these two wells did not discover
enough gas to assure commercial production and were therefore suspended. The Canar-1 well has now been
converted to a water injection well and has provided savings of approximately $60,000 per month in water disposal
costs. Whilst these two wells were not commercially successful they did provide the encouragement that the Satu
Mare concession is highly gas prone and significant exploration opportunities remain to be explored by the
Company. The results of the Canar-1 and Moftinu Nord-1 wells showed that the seal on reservoirs is a risk that
needs to be better understood. To that end the Company engaged independent geological and geophysical
consultants to perform a block wide technical review to refine our understanding of which exploration opportunities
to pursue next. The block remains highly prospective, and the estimated size of the prospective resources offers a
considerable economic prize for the business.
In Tunisia our strategy of increasing the recovery factor from our fields has continued. Global delays to fabrication
have meant that pump procurement has been delayed and in June we were informed by the Compagnie de
Tunisienne de Forage (“CTF”), Tunisia’s state owned, monopoly, drilling company that the rig that we had contracted
would not be made available to us. Having defaulted on this contract the CTF then attempted to provide a
replacement rig. The rig suggested was not certified to the degree required by Serinus and was therefore delayed
until mid-December. Given the state owned, monopolistic nature of CTF the Company was deprived of normal
contractual remedies and was forced to wait until a suitable rig became available. This has meant the initial
workovers associated with our pump programme were not completed within 2022 as anticipated. Technically the
merits of this programme remain valid and the Company is doggedly pursuing the completion of the workovers in
SAB W-1 and N-2 as soon as possible.
As we move into 2023 we remain confident that the technical strategy of the business is sound. Execution of the
strategy has been slower than hoped but the considerable upside, both through exploration in Satu Mare and
enhanced production in Tunisia remain excellent catalysts for growth in the business.
Yours sincerely,
Jeffery Auld, Chief Executive Officer
17 March 2023
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REPORT FROM THE CFO
LIQUIDITY, DEBT AND CAPITAL RESOURCES
During the year the Company invested a total of $12.9 million (2021 - $10.7 million) on capital expenditures before
working capital adjustments. In Romania, the Group invested $8.4 million (2021 - $9.5 million) during the year,
mostly on the 2D seismic programme and drilling the Canar-1 and Moftinu Nord-1 exploration wells. In Tunisia, the
Company invested $4.5 million (2021 - $1.2 million) completing workovers and purchasing long lead items for the
Sabria artificial lift programme.
The Company’s funds from operations for the year ended 31 December 2022 were $11.4 million (2021 - $10.2
million). Including changes in non-cash working capital, the cash flow generated from operating activities in 2022
was $7.4 million (2021 – $14.1 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.
Year ended 31 December
($000)
2022
2021
Current assets
16,654
17,625
Current liabilities
16,571
16,994
Working Capital
83
631
The working capital surplus at 31 December 2022 was $0.1 million (2021 – $0.6 million). The working capital is
primarily a result of the capital investment programme through the second half of the year which included drilling
two exploration wells and the preparations for the artificial lift programme in Tunisia.
Current assets as at 31 December 2022 were $16.7 million (31 December 2021 - $17.6 million), a decrease of $0.9
million. Current assets consist of:
• Cash and cash equivalents of $4.9 million (2021 - $8.4 million).
• Restricted cash of $1.1 million (2021 - $1.1 million).
• Trade and other receivables of $10.0 million (2021 - $7.4 million).
• Product inventory of $0.7 million (2021 - $0.7 million)
Current liabilities as at 31 December 2022 were $16.6 million (2021 – $17.0 million), a decrease of $0.4 million.
Current liabilities consist of:
• Accounts payable and accrued liabilities of $9.3 million (2021 - $9.7 million).
• Decommissioning provision of $5.1 million (2021 - $6.6 million).
o Brunei - $nil million (2021 - $1.6 million).
o Canada - $0.8 million (2021 - $1.0 million) which are offset by restricted cash in the amount of
$1.1 million (2021 - $1.1 million) in current assets.
o Romania - $0.5 million (2021 - $0.3 million).
o Tunisia - $3.8 million (2021 - $3.7 million).
• Income taxes payable of $1.9 million (2021- $0.5 million).
• Current portion of lease obligations of $0.3 million (2021 - $0.2 million).
NON-CURRENT ASSETS
Property, plant and equipment (“PP&E”) decreased to $62.3 million (2021 - $71.7 million). The decrease is due to
depletion expense of $6.7 million, a change in the estimate of asset retirement assets of $5.4 million, disposal of
assets of $1.1 million and an impairment expense of $1.9 million in Moftinu. The reductions in PP&E were partially
offset by additions of $7.7 million, net of foreign exchange adjustments of $2.0 million. Exploration and evaluation
assets (“E&E”) increased to $10.5 million (2021 - $5.0 million), due to expenditures incurred on the Canar-1 and
Moftinu Nord-1 exploration wells.
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FINANCIAL REVIEW – YEAR ENDED 31 DECEMBER 2022
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:
Year ended 31 December
($000)
2022
2021
Cash flow from operations
7,387
14,099
Changes in non-cash working capital
4,052
(3,866)
Funds from operations
11,439
10,233
Funds from operations per share
0.10
0.09
Romania generated funds from operations of $9.1 million (2021 – $10.9 million) and Tunisia generated $8.0 million
(2021 - $3.9 million). Funds used at the Corporate level were $5.6 million (2021 - $4.6 million) resulting in net funds
from operations of $11.4 million (2021 – $10.2 million).
PRODUCTION
Year ended 31 December 2022
Tunisia
Romania
Group
%
Crude oil (bbl/d)
447
-
447
50%
Natural gas (Mcf/d)
384
2,263
2,647
50%
Condensate (bbl/d)
-
1
1
-
Total (boe/d)
511
379
889
100%
Year ended 31 December 2021
Crude oil (bbl/d)
471
-
471
28%
Natural gas (Mcf/d)
597
6,419
7,016
71%
Condensate (bbl/d)
-
9
9
1%
Total (boe/d)
571
1,078
1,649
100%
During the year, production volumes decreased 759 boe/d (46%) to 889 boe/d (2021 – 1,649 boe/d) primarily due
to a combination of natural production declines and the shut-in of a well in Moftinu. Romania’s production volumes
decreased by 700 boe/d (65%) to 379 boe/d (2021 – 1,078 boe/d) while production in Tunisia declined slightly by
59 boe/d (10%) to 511 boe/d following the expiry of the licence at Ech Chouech, offsetting stronger production at
the Sabria and Chouech Es Saida concessions.
13
OIL AND GAS REVENUE
($000)
Year ended 31 December 2022
Tunisia
Romania
Group
%
Oil revenue
15,854
-
15,854
31%
Gas revenue
1,576
31,793
33,369
68%
Condensate revenue
-
57
57
1%
Total revenue
17,430
31,850
49,280
100%
Year ended 31 December 2021
Oil revenue
10,984
-
10,984
27%
Gas revenue
1,993
26,809
28,802
72%
Condensate revenue
-
198
198
1%
Total revenue
12,977
27,007
39,984
100%
REALISED PRICE
1
Year ended 31 December 2022
Tunisia
Romania
Group
Oil ($/bbl)
94.39
-
94.39
Gas ($/Mcf)
11.24
38.48
34.52
Condensate ($/bbl)
-
81.33
81.33
Average realised price ($/boe)
91.10
230.15
149.45
Year ended 31 December 2021
Oil ($/bbl)
65.19
-
65.19
Gas ($/Mcf)
9.18
11.45
11.25
Condensate ($/bbl)
-
59.75
59.75
Average realised price ($/boe)
63.40
68.61
66.82
Revenue during the year increased to $49.3 million (2021 – $40.0 million) as the Group saw the average realised
price increase by $82.64/boe (124%) to $149.45/boe (2021 - $66.82/boe).
The Group’s average realised oil price increased by $29.20/bbl (45%) to $94.39/bbl (2021 – $65.19/bbl), and
average realised natural gas prices increased by $23.28/Mcf (207%) to $34.53/Mcf (2021 - $11.25/Mcf).
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 2022, the Group completed three liftings (2021 – four liftings).
1
For the year ended 31 December 2022, Tunisia realised oil prices are calculated using oil sales volumes of 525 bbl/d (2021 –
461 bbl/d). As at 31 December 2022 there were 6,664 bbls of oil in inventory (2021 – 12,229).
14
ROYALTIES
Year ended 31 December
($000)
2022
2021
Tunisia
2,182
1,715
Romania
1,132
1,605
Total
3,314
3,320
Total ($/boe)
9.38
5.55
Tunisia oil royalty (% of oil revenue)
12.9%
13.2%
Romania gas royalty (% of gas revenue)
3.6%
6.0%
Total (% of revenue)
6.7%
8.3%
Royalties were flat for the full year at $3.3 million (2021 - $3.3 million) while the Group’s average royalty rate
decreased to 6.7% (2021 – 8.3%). The Romanian royalty rate was lower for the year primarily as a result of the
statutory royalty rate decreasing to 3.5% due to lower production. 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
2022, the royalty rate remained unchanged in Sabria at 10% for oil and 8% for gas. Chouech and Ech Chouech
royalty rates were flat at 15% for both oil and gas.
PRODUCTION EXPENSES
Year ended 31 December
($000)
2022
2021
Tunisia
4,851
5,174
Romania
5,591
4,758
Canada
49
44
Group
10,491
9,976
Tunisia production expense ($/boe)
25.35
25.26
Romania production expense ($/boe)
40.40
12.09
Total production expense ($/boe)
31.82
16.67
During the year production expenses increased by $0.5 million (5%) to $10.5 million (2021 - $10.0 million). Per unit
production expenses increased by $15.15/boe (91%) to $31.82 (2021 - $16.67).
Tunisia’s production expenses decreased from the prior year to $4.9 million (2021 - $5.2 million) but increased on
a per unit production basis to $25.35/boe (2021 - $25.26/boe). Romania’s overall operating costs increased by $0.9
million (18%) to $5.6 million (2021 – $4.7 million), with per unit production expenses increasing by $28.31/boe
(235%) to $40.40/boe (2021 - $12.09/boe) due to lower production and the overall increase in production expenses
primarily as a result of higher water disposal costs and the impact of inflation in Romania.
Canada production expenses relate to the Sturgeon Lake assets, which are not producing and are incurring minimal
operating costs to maintain the property.
15
OPERATING NETBACK
Serinus uses operating netback as a key performance indicator to assist management in understanding Serinus’
profitability relative to current market conditions and as an analytical tool to benchmark changes in operational
performance against prior periods. Operating netback consists of petroleum and natural gas revenues less direct
costs consisting of royalties and production expenses. Netback is not a standard measure under IFRS and therefore
may not be comparable to similar measures reported by other entities.
Year ended 31 December 2022
($/boe)
Tunisia
Romania
Group
Sales volume (boe/d)
524
378
903
Realised price
91.10
230.15
149.46
Royalties
(11.41)
(8.18)
(10.05)
Production expense
(25.35)
(40.40)
(31.82)
Operating netback
54.34
181.57
107.59
Year ended 31 December 2021
($/boe)
Tunisia
Romania
Group
Sales volume (boe/d)
561
1,078
1,639
Realised price
63.40
68.61
66.82
Royalties
(8.37)
(4.08)
(5.55)
Production expense
(25.26)
(12.09)
(16.67)
Operating netback
29.77
52.44
44.60
The Group operating netback increased by $62.99/boe (141%) to $107.59/boe (2021 - $44.60/boe). The increase
is due to higher realised prices through the period, partially offset by higher production expenses.
The Company also generated a gross profit of $12.9 million (2021 –$7.2 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 and in 2022 includes an impairment expense of $1.9 million. 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 2022, the Group’s EBITDA increased by $0.4 million to $12.7 million (2021 -
$12.3 million).
WINDFALL TAX
Year ended 31 December
($000)
2022
2021
Windfall tax
16,014
9,432
Windfall tax ($/Mcf - Romania gas)
19.38
3.99
Windfall tax ($/boe - Romania gas)
116.30
23.96
During 2022, the Group incurred windfall taxes in Romania of $16.0 million (2021 - $9.4 million), an increase of $6.6
million (70%). This increase is directly related to higher realised gas prices which increased from an average
realised price of $11.45/Mcf in 2021 to $38.48/Mcf in 2022.
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.
16
DEPLETION AND DEPRECIATION
Year ended 31 December
($000)
2022
2021
Tunisia
2,783
3,256
Romania
3,623
6,650
Corporate
158
149
Total
6,564
10,055
Tunisia ($/boe)
14.54
15.89
Romania ($/boe)
26.19
16.89
Total ($/boe)
19.91
16.80
Depletion and depreciation expense decreased by $3.4 million (35%) to $6.6 million (2021 - $10.1 million), being a
per unit increase of $3.11/boe (19%) to $19.91/boe (2021 - $16.80/boe). The decrease in expense is primarily due
to a lower depletable base on the Group’s assets and lower production during the year.
GENERAL AND ADMINISTRATIVE (“G&A”) EXPENSE
Year ended 31 December
($000)
2022
2021
G&A expense
5,300
4,479
G&A expense ($/boe)
16.07
7.47
G&A costs increased during the year by $0.8 million (18%) to $5.3 million (2021 - $4.5 million), being an increase
of $8.60/boe (115%) to $16.07/boe (2021 - $7.47/boe) due to lower production, with the increase in costs attributable
to higher compliance expenses, inflation and the impact of foreign exchange rates in the current year.
SHARE-BASED PAYMENT
Year ended 31 December
($000)
2022
2021
Share-based payment
70
213
Share-based payment ($/boe)
0.20
0.36
Share-based compensation decreased by $0.1 million (67%) to $0.1 million (2021 – $0.2 million). This decrease is
due to 5,000 share options being granted in the current year (2021 – 0.2 million).
NET FINANCE EXPENSE
Year ended 31 December
($000)
2022
2021
Interest on leases
33
53
Accretion on decommissioning provision
1,143
377
Foreign exchange and other
461
14
1,637
444
Net finance expense for 2022 increased by $1.2 million (246%) to $1.6 million (2021 – $0.4 million). Accretion on
decommissioning provision increased by $0.8 million due to increases in decommissioning obligations in the year.
17
RELEASE OF PROVISION
Year ended 31 December
2022
2021
Release of provision
1,639
6,636
In 2022, the Company reversed a provision of $1.6 million related to historic decommissioning liabilities which have
expired due to the passage of statute of limitations.
The release of provision in 2021 was the reversal of a provision of $6.6 million related to an exploration penalty due
to the passage of statute of limitations.
IMPAIRMENT
At 31 December 2022, the Company completed an impairment assessment to determine if there were any indicators
of impairment or impairment reversals. In Tunisia, there were no indicators of impairment or impairment reversals
identified at Sabria or South Tunisia. The Company had applied to extend the Ech Chouech licence but this expired
in June 2022. The Company intends to continue its application to regain the licence once the licence application
process is formalised. No indication has been received that they will not be successful once the process to re-apply
becomes available and as such has made the judgement that it will be able to regain the Ech Chouech licence and
therefore no impairment has been charged to this asset. In Moftinu, the Company determined that there was an
indicator of impairment and recorded an impairment expense of $1.9 million.
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. No impairment was recorded following
the completion of an impairment test.Taxation
During the year ended 31 December 2022 income tax expense was $3.1 million (31 December 2021 - $0.4 million).
The change in income tax expense is due to the recovery of tax basis in Tunisia during the year.
SOLIDARITY TAX
On 29 December 2022, the Government of Romania published Emergency Ordinance no.186/2022 detailing
measures to implement Council Regulation (EU) 2022/1854 regarding the emergency intervention to introduce a
solidarity contribution for companies that carry out activities in the oil, natural gas, coal and refinery sectors. This
additional tax in Romania is calculated at a rate of 60% applied to the company’s annual profit, in excess of 20% of
its average profits for the financial years 2018-2021. The solidarity tax will apply for the financial years 2022 and
2023.
The Company does not believe that the solidarity tax is applicable to it and has received legal advice to support that
position and will challenge the legality of this additional tax. If the Company were to consider the tax applicable the
amount due is estimated to be approximately $741,000. However the Company has made the judgement that the
solidarity tax is not applicable and therefore has made no provision in respect of this tax within the financial
statements. It should be noted that the amount due falls below materiality.
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 5% from 0.229 to 0.217 USD:RON.
The revaluation of the balance sheet to the year-end rate resulted in a $2.0 million loss through other comprehensive
income.
GOING CONCERN
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.
As at 28 February 2023, the Group had cash balances of $2.8 million.
Andrew Fairclough, Chief Financial Officer
17 March 2023
18
REVIEW OF OPERATIONS
ROMANIA
• Satu Mare Block – 2,949 km
2
of onshore land.
• Located within the Pannonian 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% 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
is in routine conversations with the National Agency for Mineral Resources (“NAMR”) regarding the further
extension of this concession. The greater Moftinu gas field area has been declared a commercial operation
and is exempt from this routine licence extension procedure.
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 100% working interest in the concession as its partner has defaulted on its obligations
under the Joint Operating Agreement. The Company filed a Request for Arbitration with the Secretariat of
the International Court of Arbitration of the International Chamber of Commerce (“ICC”) 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. Following the year end, Serinus announced
that it had received confirmation from the ICC that as a result of its partners’ default under the Joint
Operating Agreement, the defaulted partners’ 40% participating interest in the Satu Mare concession will
be transferred to Serinus Romania, directing the defaulted partner to take all necessary actions to formally
transfer the 40% participating interest to Serinus.
• Serinus has completed all the phase 1 and 2 work commitments, as follows:
o Acquired two 3D seismic surveys covering a total of 260 km
2
(80 km
2
Moftinu & 180 km
2
Santau
Surveys).
o 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:
o 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 (1,600m).
o 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 km
2
of 3D seismic.
The Moftinu-1008 well was drilled in February 2021 and will qualify as the 1,000m commitment
well and the Sancrai well was drilled in the second half of 2021 which qualified as the 1,600m
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:
o 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
o 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.
• The Phase 1 work commitment was completed in 2022 and Phase 2 is expected to be completed early in
2023.
• The Company is in routine conversations with the National Agency for Mineral Resources (“NAMR”)
regarding the further extension of this concession and will apply for a further appraisal period during 2023.
The greater Moftinu gas field area has been declared a commercial field and is exempt from this routine
licence extension procedure.
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.
19
The Moftinu gas plant was designed at a capacity of 15 MMcf/d and can accommodate up to six flowlines. During
2022, production was predominantly comprised from three wells (Moftinu-1004, Moftinu-1007, and Moftinu-1008)
and averaged 2.3 MMcf/day (2021 – 6.4 MMcf/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 2022, the Canar-1 and Moftinu Nord-1 exploration
wells.
Subsequent to the year-end, the Company has concluded a block-wide review of the regional geology with RISC
consultants which will form the basis for further exploration of the many plays that exist on the block.
TUNISIA
The Group currently holds two Tunisia concessions, each of which currently produces oil and gas (Sabria and
Chouech Es Saida). 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
Serinus Working Interest
Approximate Gross
Area (acres)
Expiry
Sabria
45% (ETAP 55%)
26,196
November 2028
Chouech Es Saida
100%
42,526
December 2027
Ech Chouech
100%
35,139
Expired June 2022
Sanrhar
100%
36,879
Relinquished 2021
Zinnia
100%
17,471
Relinquished 2021
The Ech Chouech licence expired in June 2022 and the Company previously held the non-producing Zinnia and
Sanrhar concessions which were relinquished in 2021. The Company had applied to extend the Ech Chouech
licence but this expired in June 2022. The Company intends to continue its application to regain the licence once
the licence application process is formalised.
Sabria
• Produced over 7.0 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 initiated workover operations in the W-1 well in December 2022 to complete the workover and
pump installation. Plans for additional pumps in the Sabria field are being progressed.
Chouech Es Saida
• Produced over 3.9 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 2022 to replace and
standardise pumps in order to increase production and efficiency.
20
RESERVES
2
COMPANY NET 1P & 2P RESERVES – USING FORECAST PRICES
2022
2021
Oil &
Liquids
Gas
Boe
Oil &
Liquids
Gas
Boe
Change
(Mbbl)
(MMcf)
(Mboe)
(Mbbl)
(MMcf)
(Mboe)
Tunisia
Proved (1P)
2,310
4,640
3,083
2,840
5,670
3,785
(19%)
Probable
2,630
6,290
3,678
2,810
7,030
3,982
(8%)
Proved & Probable (2P)
4,940
10,930
6,762
5,650
12,700
7,767
(13%)
Romania
Proved (1P)
0.4
1,640
274
4
3,110
522
(48%)
Probable
0.3
1,060
177
6
1,990
338
(48%)
Proved & Probable (2P)
0.7
2,700
451
10
5,100
860
(48%)
Group
Proved (1P)
2,310
6,280
3,357
2,844
8,780
4,307
(22%)
Probable
2,630
7,350
3,855
2,816
9,020
4,320
(11%)
Proved & Probable (2P)
4,941
13,630
7,212
5,660
17,800
8,627
(16%)
The downward revision in Group reserves was attributable to 2022 production, the expiry of the Ech Chouech
licence and a reduction in reserve volumes in Romania. Given that the Ech Chouech licence had expired in June
2022, the Group reserves for the year ended 31 December 2022 do not include reserves attributed to Ech Chouech.
The Company had applied to extend the Ech Chouech licence but this expired and the Company intends to continue
its application to regain the licence once the licence application process is formalised. No indication has been
received that its application would not be successful once the process to re-apply becomes available and as such
has made the judgement that it will be able to regain the Ech Chouech licence and therefore no impairment has
been charged to this asset. For the year ended 31 December 2021, the Gaffney Cline third party reserves report
attributed 253Mboe of 2P Reserves to Ech Chouech.
NET PRESENT VALUE OF FUTURE NET REVENUES – AFTER TAX, USING FORECAST PRICING
2022
2021
Discount rates
PV 10%
(US$ millions)
0%
10%
15%
0%
10%
15%
Change
Tunisia
Proved (1P)
52.6
30.3
23.5
44.2
29.0
23.9
4%
Probable
93.7
48.7
39.4
80.0
42.1
33.3
16%
Proved & Probable (2P)
146.3
79.0
62.9
124.2
71.1
57.2
11%
Romania
Proved (1P)
0.9
1.5
1.7
10.3
10.2
10.0
(85%)
Probable
5.5
4.9
4.6
9.0
7.9
7.5
(38%)
Proved & Probable (2P)
6.4
6.4
6.3
19.3
18.1
17.5
(65%)
Group
Proved (1P)
53.5
31.8
25.2
54.5
39.2
33.9
(19%)
Probable
99.2
53.6
43.9
89.0
50.0
40.8
7%
Proved & Probable (2P)
152.7
85.4
69.1
143.5
89.2
74.7
(4%)
2
Source: 2022 and 2021 results from Gaffney Cline & Associates Limited Reserves audit at 31 December 2022 and 31 December
2021, respectively.
21
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
2022
2021
Oil &
Liquids
Gas
Boe
Oil &
Liquids
Gas
Boe
Change
(Mbbl)
(MMcf)
(Mboe)
(Mbbl)
(MMcf)
(Mboe)
Tunisia
1C Contingent Resources
400
1,000
567
400
1,000
567
0%
2C Contingent Resources
1,000
2,900
1,483
1,000
2,900
1,483
0%
3C Contingent Resources
1,900
5,300
2,783
1,900
5,300
2,783
0%
Romania
1C Contingent Resources
-
2,500
417
-
2,500
417
0%
2C Contingent Resources
-
4,300
717
-
4,300
717
0%
3C Contingent Resources
-
7,000
1,167
-
7,000
1,167
0%
Group
1C Contingent Resources
400
3,500
984
400
3,500
984
0%
2C Contingent Resources
1,000
7,200
2,200
1,000
7,200
2,200
0%
3C Contingent Resources
1,900
12,300
3,950
1,900
12,300
3,950
0%
PRICE FORECASTS
The commodity price forecast used in preparing the evaluation of the 2022 reserves and resources is as follows:
Brent
Sabria Gas
Chouech Gas
Romania Gas
Year
(US$/bbl)
(US$/Mcf)
(US$/Mcf)
(US$/Mcf)
2023
83.83
10.48
9.22
24.28
2024
78.99
9.87
8.69
23.59
2025
80.00
10.00
8.80
19.03
2026
3
81.60
10.20
8.98
13.00
3
+2% inflation per year on commodity prices for 2027 and beyond
22
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
Serinus is an oil and gas exploration, development and production company whose strategic purpose is to develop
and produce hydrocarbon 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 km
2
in the north-west
of Romania, across primarily agricultural farmland, while the two Tunisian concessions are located in the 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 has continued to present an excellent HSE track record through 2022, with a zero-
frequency rate (per one million man hours worked) for Total Recordable Injuries across all sites (2021 - zero for
Serinus Romania employees) and in February 2023, the Moftinu Gas Plant reached 1,385 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 has maintained full compliance with all of its regulatory and
environmental obligations.
Serinus Energy Romania completed its annual certification inspection and is certified for ISO 14001:2015
(Environmental Management Systems), ISO 9001:2015 (Quality Management) and ISO 45001:2018 (Occupational
Health and Safety).
Romanian operations currently produce gas through the Moftinu Gas Plant which was brought onstream in April
2019 and is currently supplied by two producing gas wells. In 2022, Serinus Energy Romania completed the
23
acquisition of 100km of seismic in the area of Ghenci-Moftinu Nord-Domanesti and drilled two exploration wells,
Canar-1, to a depth of 1,570m and Moftinu Nord-1, to a depth of 1,000m. Well logging and gas show readings for
both wells indicted gas in the zones of interest, but not in sufficient quantities to justify proceeding with the testing
and completion programme on either well, and were suspended. The Canar-1 has subsequently completed testing
and re-purposing as a water injection well for produced water from the Moftinu gas field. Pumps for water injection
have been configured to use solar power further reducing the environmental footprint of our operations. In addition
to the water injection being powered by renewable solar power the use of a near field water injection facility has
obviated the requirement to transport produced water approximately 300km to the nearest water injection well,
eliminating the bulk of the transport footprint and generating significant cost savings. The Moftinu Nord-1 well is
currently suspended and it is intended to evaluate its suitability for water injection in the future.
The process to plan and permit the 2D seismic programme and drilling of the two exploration wells involved
extensive engagement with a wide range of stakeholders from local landowners, regional agencies and national
regulators. The 2D seismic acquisition programme necessitated the company to conclude landowner agreements
with over 500 local landowners and obtain over 15 local and national permits in order to begin operations. In order
to commence drilling operations for Canar-1 and Moftinu Nord-1, the process included gaining permission from
each local landowner impacted by each 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 2022 (no incidents in 2021).
During 2022, energy use from grid electricity at the Moftinu Gas Plant was 317 MWh, 0.12% of the annual production
of 267,582 MWh, compared with 314 MWh in 2021, which was 0.04% of that year’s annual production of 749,980
MWh. Nine solar panels have been installed at the Moftinu gas plant which generated 27.44kWh of energy in 2022,
offsetting the equivalent of 9,007kg of CO
2
emissions. Serinus Energy Romania continues to assess opportunities
to expand its utilisation of solar power on its available sites.
In 2022, 24,069 MMcf of gas was flared from the three wells in production, including gas utilisation by the two
compressors, during the year, being 2.8% of annual production, and equivalent to flared gas of 2,006 MMcf per
month. 19,341 m
3
of produced water was generated from the three wells in 2022, compared with 3,292 m
3
of
produced water from four wells during 2021.
Flue gas emissions tests are performed annually, in accordance with the requirements specified in the
environmental permit. The most recent test was undertaken in April 2022 which monitored an average CO
2
emission level of 2.08% of total flue gas, below the benchmark CO
2
threshold of 3.0%.
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 April 2022. 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 2,644
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 2,618 were accessible.
Of the 2,618 accessible potential emission sources identified, there were only 13 registered leaks, being 0.5% of
accessible sources and resulted in an emission loss of 1,506 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 1,489 kg/year. The report concluded that a
successful repair of the leak above Repair Definition could reduce the emission loss by 1,489 kg/year, equating to
92.25% of the total emission. The leak has been repaired.
24
TUNISIA
Serinus Tunisia maintained a strong HSE track record through 2022, with a zero-frequency rate (per one million
man hours worked) for Total Recordable Injuries across all sites (2021 – zero for Serinus Tunisia employees).
There were no environmental incidents at Sabria and five minor incidents at Chouech Es Saida 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
2022 was submitted to the Agence Nationale de Protection de l’Environnement (“ANPE”) in January 2023.
During 2022, the annual environmental monitoring was undertaken by Le Centre Mediterraneen d’Analyses (“CMA”)
at the Sabria and Chouech Es Saida fields, assessing: air emissions from stacks at both fields; air quality monitoring;
groundwater monitoring; produced water; fresh water; soil sampling and noise pollution. The environmental
monitoring programme for remote locations is reviewed by local management and implemented at all sites.
Stack air emission analysis and air quality monitoring was conducted at Sabria and Oum Chiah in October 2022.
Analysis of the results demonstrated that 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, 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, except for carbon monoxide (“CO”) emissions from older fixed
equipment. The Company has investigated mitigation measures and 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, 49,129m
3
of produced water was disposed of in 2022 (2021 – 45,598m
3
) and at Chouech Es
Saida 225,283m
3
of produced water was evaporated from lined surface pits in 2022 (2021 – 193,400m
3
). The
Company is investigating alternative environmentally-responsible produced water disposal solutions.
A review of environmental management at the Sabria fields was conducted by First North African Consultancy for
the Environment (“FNAC” www.fnac-environment.com), an engineering consultancy, in September 2020. This was
designed to review compliance at Sabria with Tunisian environmental regulations and analyse underground water
and soil pollution in proximity to the water disposal project. The scope of this work included: the recovery, analysis
and assessment of environmental and technical documents and reports related to the evaporation ponds; the
analysis of all previous waste pit treatment operations and related reports; analysis of existing red register
(hazardous waste) and blue register (domestic waste); coring and sampling investigations of the potential impacted
areas (soil and underground water) within the Sabria field; water sampling and laboratory analysis from existing
piezometers and production water discharge; and the performance of 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.
Subsequent to this review, recommendations from the report have been, and continue to be, implemented. The
Company began air emissions monitoring at Sabria and Chouech in August 2015 and continues to do so.
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, 822 kg of paper and plastic bottles were recycled
in the Tunis office in 2021, which increased to 1,164 kg of paper and plastic bottles being recycled in 2022, as a
result of training and greater awareness of wastage. Electricity consumption at the Tunis office in 2022 returned to
more equivalent pre-COVID-19 levels of 93,920 kWh, as personnel returned to work in the office. At Sabria
electricity consumption decreased 5% to 679,902 kWh (2021 – 717,836 kWh). Chouech is not connected to the
electricity grid and power at Chouech is provided by on site gas generators. Fresh water consumption in 2022 at
Sabria was 16,290m
3
(2021 - 14,949m
3
) and at Chouech, 41,440m
3
(2021 - 65,558 m
3
). Diesel consumption across
all operational locations was 153m
3
a 4% decrease over 2021 (160 m
3
) but remains a significant reduction from
2019 (305 m
3
) reinforced by a combination of greater awareness of wastage, training, optimisation and more
efficient transport management.
25
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 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. In Romania, personnel at both the head office and on-site at the
Moftinu gas plant receive monthly HSSE training for both local regulatory requirements and corporate policies.
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 2022, a total of 52 HSSE training drills and
asset protection drills took place in Tunisia and 336 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 2022
(2021 - 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 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 1,347 days without accidents
as at 31 December 2022. In Tunisia, there were 2,583 days with no accidents as at 31 December 2022. In 2022,
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 2022 was 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. While
much of the widespread impact of COVID-19 has abated, the Company remains alert to any potential resurgence
and maintains its ability to re-introduce the measures previously, and successfully, adopted to protect its workforce.
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 30% 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
26
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 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 governance code, being the Quoted Companies Alliance Corporate Governance Code (the
“Code”) and set out a summary of how we comply with it on pages 32 to 35 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 63 out of 180
countries in the 2022 CPI. Tunisia is ranked number 85 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.
27
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, expropriation, changes in the taxation environment and non-
compliance with laws and regulations. Currently the Company is doing the following in order to mitigate this risk:
• Actively monitors political developments and maintains relationships with government, 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, taxes 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 reserves. Staff recruitment,
development and retention is also key to managing operational risk. Currently the Company is doing the following
in order to mitigate this risk:
• Has extensive monitoring and review of HSE and crisis management policies and procedures.
• Follows strict tendering protocols, physical inspection of all contractor fabrication facilities and extensive
financial due diligence of counterparties is designed to minimise contractor performance and counterparty
credit risk.
• Carries adequate levels of insurance.
• Rigorous review processes when selecting vendors and contractors. Once engaged 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.
• Succession planning is considered regularly at board level.
• The Remuneration Committee meets quarterly and as additionally required to evaluate compensation and
incentivisation plans to ensure they remain competitive.
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.
• Maintain a public listing of its equity on the Alternative Investment Market of the London Stock Exchange
in order to access capital, if required.
• The Company is currently debt-free, with a low operating cost base and has continued to generate positive
cashflows during 2022.
• 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.
28
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:
• The Company’s production in Romania is 100% gas, providing exposure to a cleaner, transition fuel.
• The company’s main source of production is a modern energy, emission efficient and highly automated
gas plant limiting the environmental impact of the Company’s production.
• The company has in place strict emissions and 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.
29
BOARD OF DIRECTORS AND MANAGEMENT TEAM
BOARD OF DIRECTORS
Lukasz Rędziniak
Chairman, Non-Independent Director, Chair of Remuneration Committee, Chair of the Nomination Committee,
Board Member
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 Environmental, Social, & Governance 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, Clean Power Hydrogen plc.
Ms. Fortescue has an undergraduate degree in Accounting and Finance from Kingston University.
30
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 is a Non-Executive Director and Audit Committee Chair of DX
(Group) plc and Bonhill Group plc and a Non-Executive Director at FireAngel Safety Technology plc and a Trustee
of the Delta plc pension scheme.
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.
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.
31
SENIOR MANAGEMENT
Stuart Morrison
Chief Operating Officer, Serinus Energy plc
Mr. Morrison has over 35 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.
32
CORPORATE GOVERNANCE STATEMENT
CHAIRMAN’S INTRODUCTION
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 to, and followed,
the recommendations and rules contained within the “Code of Best Practice for WSE Listed Companies 2021”.
These rules were adopted by the WSE Supervisory Board on 29 March 2021 (Resolution No. 13/1834/2021) and
are accessible at:
https://www.gpw.pl/best-practice2021
https://www.gpw.pl/pub/GPW/files/PDF/dobre_praktyki/en/DPSN2021_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 and 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.
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 to keep
investors and analysts informed are as follows:
• Presenting quarterly results presentations online
• Investor roadshows
• Participating in online interviews
• Attending investor conferences
• Hosting capital markets days
• Timely disclosure of material information
• Regular reporting
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.
33
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 in which we operate (landowners, local authorities and local citizens).
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 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.
• The Audit Committee monitors the integrity of the financial statements.
• 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.
• All material contracts are required to be reviewed and signed by a Director and reviewed by our external
counsel.
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 2022 was as follows:
Director
Board
Audit
Committee
Remuneration
Committee
Environmental
Social &
Governance
Committee
Reserves
Committee
Total Meetings
4
4
6
2
1
Lukasz Redziniak
4
1
6
2
-
Jeffrey Auld
3
3
1
2
1
Andrew Fairclough
4
4
-
2
1
Jim Causgrove
4
4
6
2
1
Natalie Fortescue
4
4
1
2
1
Jon Kempster
4
4
6
1
-
34
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 and 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 2022 was 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 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.
Periodically the non-Executive Directors discuss 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.
35
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 2022,
the Board met for its four scheduled meetings.
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.
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.
• The Remuneration Committee is responsible for 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 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.
36
REMUNERATION COMMITTEE REPORT
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:
• Annual salary and associated benefits.
• Share option plan and long-term share-based incentive plan.
• Performance based annual bonuses.
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.
2022 ACTIVITY
The Committee met six times throughout the year (2021 – two times).
37
EXECUTIVE DIRECTORS’ REMUNERATION
Compensation for the executive Directors is shown in US dollars
4
in the table below.
Director
Salaries
Benefits
5
2022 Total
2021 Total
6
Jeffrey Auld
423,626
55,036
478,662
543,411
Andrew Fairclough
302,590
39,115
341,705
387,129
726,216
94,151
820,367
930,540
The 2022 compensation package above for the executive Directors included salaries and benefits, and are short-
term in nature.
EXECUTIVE DIRECTORS’ SHARE CAPITAL
The following tables outline the share options outstanding and shares owned as at 31 December 2022 for the
executive Directors. There have been no changes between 31 December 2022 and17 March 2023.
Director
Share Options
LTIP Awards
7
Shares
Jeffrey Auld
2,580,000
1,656,355
488,875
Andrew Fairclough
175,000
903,631
108,053
2,755,000
2,559,986
596,928
Stock Options
Director
Grant date
Strike Price
Share Options
Jeffrey Auld
22 Dec 2020
£0.20
1,880,000
Jeffrey Auld
27 May 2019
£0.20
100,000
Jeffrey Auld
03 Dec 2018
£0.20
250,000
Jeffrey Auld
22 Sep 2016
£0.20
350,000
Andrew Fairclough
02 Apr 2020
£0.20
175,000
2,755,000
LTIP Awards
Director
Grant date
LTIP Awards
Jeffrey Auld
29 Apr 2022
356,355
Jeffrey Auld
24 Dec 2020
1,300,000
Andrew Fairclough
29 Apr 2022
203,631
Andrew Fairclough
24 Dec 2020
700,000
2,559,986
4
The average GBP:USD rate for the year was 0.8262 (2021 – 0.7264).
5
Benefits include medical insurance and UK pension scheme contributions.
6
2022 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.
7
Each LTIP award represents a right to acquire a share of the Company at $nil consideration.
38
NON-EXECUTIVE DIRECTORS’ REMUNERATION
Non-executive Director’s receive a £30,000 annual fee, with each Chair receiving an additional £10,000 fee.
Director
Fees
8
Share Options
9
2022 Total
2021 Total
Lukasz Redziniak
60,518
-
60,518
68,833
Jim Causgrove
48,414
-
48,414
55,066
Natalie Fortescue
48,414
-
48,414
41,300
Jon Kempster
48,414
-
48,414
37,858
205,760
-
205,760
203,057
NON-EXECUTIVE DIRECTORS’ SHARE CAPITAL
The following tables outline the share options outstanding and shares owned as at 31 December 2022 for the non-
executive Directors. There have been no changes between 31 December 2022 and17 March 2023.
Director
Options held at
31 December 2022
Shares held at
31 December 2022
Lukasz Redziniak
-
72,000
Jim Causgrove
-
40,000
Jon Kempster
10
-
60,261
-
172,261
Lukasz Redziniak, Chairman of the Remuneration Committee
17 March 2023
8
Translated using the average exchange rate for the year GBP:USD 0.8262 (2021 – GBP:USD 0.7264).
9
Share options are priced at the fair value on the grant date, calculated using Black Scholes, and amortised over the vesting
period.
10
Shares held by Catherine Kempster (the spouse of Jon Kempster)
39
AUDIT COMMITTEE REPORT
This report addresses the responsibilities, the membership and the activities of the Audit Committee in 2022 up to
the approval of the 2022 Annual Report and 2022 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.
2022 ACTIVITY
The Committee met four times throughout the year (2021 – four times).
The Committee, together with the CFO, is responsible for the relationship with the external auditor. PKF Littlejohn
LLP is the Group’s auditor.
For the 2022 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 17 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 2022, the Committee
has undertaken anti-bribery and anti-corruption exercises and has reviewed whistle blowing arrangements.
Jon Kempster, Chairman of the Audit Committee
17 March 2023
40
REPORT OF THE DIRECTORS
The Directors’ present their report, together with the audited consolidated financial statements of Group for the year
ended 31 December 2022.
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
11.66%
Crux Asset Management
8.46%
Quercus TFI SA
7.30%
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 11 to 17 of this Annual Report.
The Directors do not recommend payment of a dividend in respect of these financial statements (2021 - $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. The directors have elected to prepare
accounts under IFRS as adopted by the United Kingdom for all purposes except for the financial statements for the
purposes of the Warsaw Stock Exchange filing which are prepared under European Union (“EU”) endorsed IFRS.
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
Stock Exchange for companies trading securities on AIM.
In preparing these financial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently
• make judgements and accounting estimates that are 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.
41
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
17 March 2023
PKF Littlejohn LLP
42
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SERINUS ENERGY PLC
Opinion
We have audited the financial statements of Serinus Energy plc (the ‘group’) for the year ended 31 December 2022
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).
In our opinion, the group financial statements:
• give a true and fair view of the state of the group’s affairs as at 31 December 2022 and of
its loss for the year then ended;
• have been properly prepared in accordance with IFRS (EU) and
• have been prepared in accordance with the requirements of The Companies (Jersey) Law
1991.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (EU) (ISAs (EU)) 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 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.
• We assessed management’s price forecasts for oil and gas respectively to obtain an
understanding of the appropriateness of these price inputs.
• Reviewing and considering the adequacy of the disclosure within the financial statements
relating to the directors’ assessment of the going concern basis of preparation.
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.
43
Our application of materiality
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.
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. The basis of materiality, as well as the amount used
was consistent with prior year.
Materiality for the significant components of the group ranged from $400,000 to $600,000, based on 1% of gross
assets for each component, consistent with prior year.
Group performance materiality was set at $540,000, consistent with prior year.
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, which is unchanged from prior year. 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.
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
How our scope addressed this 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 audit team obtained a detailed understanding of the
business of Serinus Energy plc, to ensure that
appropriate aud
it 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
44
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 operating activity and development of
the assets undertaken during the year
• Ensuring ownership of licences
and that a
commitment and ability to reapply for any
expired licences existed ;
• Examined
license concession agreements
and supporting documentation in order to
assess that appropriate legal and beneficial
ownership percentage
s had been
considered;
•
Reviewing management’s impairment
indicators assessment for each cash
generating unit (CGU) against the criteria in
the accounting standard in order 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 reduc
tions 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
input
s, including discount rates, oil prices,
production estimations, capex and opex.
•
Assessing the competence and
independence of the group’s reserve expert
by reviewing the latest reserves report
provided and comparing key model inputs
to data obtained elsew
here during the
course of the audit, and to third party
publicly available data
Based on the audit work performed and the challenge
of management we do not consider the carrying value
of development and production assets to be materially
misstated. It is however important to draw users
attention to the fact that the recoverable value
($4,648,124)
of the Echouech licence area is
dependent on the successful renewal of this licence.
Failure to obtain the necessary licence renewals may
result in an impairme
nt to the carrying value of the
development and production assets held.
45
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 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.
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
46
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.
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 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 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.
47
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 15 Westferry Circus
For and on behalf of PKF Littlejohn LLP Canary Wharf
Chartered Accountants London E14 4HD
17 March 2023
48
Serinus Energy plc
Consolidated Statement of Comprehensive Income for the year ended 31 December 2022
(US$ 000s, except per share amounts)
Note
2022
2021
Revenue
6
49,280
39,984
Cost of sales
Royalties
(3,314)
(3,320)
Windfall tax
(16,014)
(9,432)
Production expenses
(10,491)
(9,976)
Depletion and depreciation
11, 13
(6,564)
(10,055)
Total cost of sales
(36,383)
(32,783)
Gross profit
12,897
7,201
Administrative expenses
(5,300)
(4,479)
Share-based payment expense
7
(70)
(213)
Total administrative expenses
(5,370)
(4,692)
Impairment expense
11,12
(1,871)
-
Release of provision
23
1,639
6,636
Decommissioning provision recovery
18
209
142
Loss on disposal of assets
(1,081)
-
Operating income
6,423
9,287
Finance expense
8
(1,637)
(444)
Net income before tax
4,786
8,843
Tax expense
9
(3,156)
(419)
Income after taxation attributable to equity owners of the parent
1,630
8,424
Other comprehensive income
Other comprehensive income to be classified to profit and loss in subsequent
periods:
Foreign currency translation adjustment
(1,998)
(2,463)
Total comprehensive income for the year attributable to equity owners of the
parent
(368)
5,961
Earnings per share:
Basic
10
0.01
0.07
Diluted
10
0.01
0.01
The accompanying notes on pages 52 to 76 form part of the consolidated financial statements
49
Serinus Energy plc
Consolidated Statement of Financial Position as at 31 December 2022
(US$ 000s, except per share amounts)
As at
Note
31 December
2022
31 December
2021
Non-current assets
Property, plant and equipment
11
62,311
71,747
Exploration and evaluation assets
12
10,529
5,042
Right-of-use assets
13
688
370
Total non-current assets
73,528
77,159
Current assets
Restricted cash
14
1,088
1,144
Trade and other receivables
15
10,007
7,396
Product inventory
16
705
656
Cash and cash equivalents
14
4,854
8,429
Total current assets
16,654
17,625
Total assets
90,182
94,784
Equity
Share capital
17
401,426
401,426
Share-based payment reserve
7
25,557
25,487
Treasury shares
17
(455)
(121)
Accumulated deficit
(386,356)
(387,986)
Cumulative translation reserve
(3,372)
(1,374)
Total equity
36,800
37,432
Liabilities
Non-current liabilities
Decommissioning provision
18
24,046
28,232
Deferred tax liability
19
10,942
10,516
Lease liabilities
20
465
252
Other provisions
21
1,358
1,358
Total non-current liabilities
36,811
40,358
Current liabilities
Current portion of decommissioning provision
18
5,085
6,636
Current portion of lease liabilities
20
280
193
Accounts payable and accrued liabilities
22
11,206
10,165
Total current liabilities
16,571
16,994
Total liabilities
53,382
57,352
Total liabilities and equity
90,182
94,784
The accompanying notes on pages 52 to 76 form part of the consolidated financial statements
These consolidated financial statements were approved by the Board of Directors and authorised for issue on 17 March 2023 and
were signed on its behalf by:
JON KEMPSTER
DIRECTOR, CHAIR OF THE AUDIT COMMITTEE
ANDREW FAIRCLOUGH
DIRECTOR AND CFO
50
Serinus Energy plc
Consolidated Statement of Shareholder’s Equity for the year ended 31 December 2022
(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 2020
401,426
25,274
-
(396,410)
1,089
31,379
Income for the year
-
-
-
8,424
-
8,424
Other comprehensive income for the
year
-
-
-
-
(2,463)
(2,463)
Total comprehensive income for the year
-
-
-
8,424
(2,463)
5,961
Transactions with equity owners
Shares issued
7
-
213
-
-
-
213
Share issue costs
17
-
-
(121)
-
-
(121)
Share-based payment expense
-
-
-
8,424
(2,463)
5,961
Balance at 31 December 2021
401,426
25,487
(121)
(387,986)
(1,374)
37,432
Income for the year
-
-
-
1,630
-
1,630
Other comprehensive loss for the year
-
-
-
-
(1,998)
(1,998)
Total comprehensive loss for the year
-
-
-
1,630
(1,998)
(368)
Transactions with equity owners
Share-based payment expense
-
70
-
-
-
70
Shares purchased to be held in
Treasury
-
-
(334)
-
-
(334)
Balance at 31 December 2022
401,426
25,557
(455)
(368,356)
(3,372)
36,800
The accompanying notes on pages 52 to 76 form part of the consolidated financial statements
51
Serinus Energy plc
Consolidated Statement of Cash Flows for the year ended 31 December 2022
(US$ 000s, except per share amounts)
Note
2022
2021
Operating activities
Income for the year
1,630
8,424
Items not involving cash:
Depletion and depreciation
11, 13
6,564
10,055
Impairment expense
11, 12
1,871
-
Share-based payment expense
7
70
213
Tax expense
9
3,156
419
Accretion expense on decommissioning provision
18
1,143
377
Change in other provisions
21
-
(41)
Foreign exchange (gain) / loss
144
(15)
Decommissioning provision recovery
(209)
(142)
Other income
(19)
(4)
Loss on disposal of assets
1,081
-
Release of provision
23
(1,639)
(6,636)
Income taxes paid
(2,353)
(2,085)
Expenditures on decommissioning liabilities
-
(332)
Funds from operations
11,439
10,233
Changes in non-cash working capital
26
(4,052)
3,866
Cashflows from operating activities
7,387
14,099
Financing activities
Lease payments
20
(211)
(235)
Shares purchased to be held in treasury
17
(334)
(121)
Cashflows used in from financing activities
(545)
(356)
Investing activities
Capital expenditures
26
(10,875)
(11,248)
Proceeds on disposition of property, plant and equipment
42
8
Cashflows used in investing activities
(10,833)
(11,240)
Change in cash and cash equivalents
(3,991)
2,427
Cash and cash equivalents, beginning of year
8,429
6,002
Impact of foreign currency translation on cash
416
(76)
Cash and cash equivalents, end of year
4,854
8,429
The accompanying notes on pages 52 to 76 form part of the consolidated financial statements
Serinus Energy plc
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(US$ 000s, except per share amounts, unless otherwise noted)
52
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 2
nd
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 2022 and 2021.
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 2022 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. The directors have elected to prepare
accounts under IFRS as adopted by the United Kingdom for all purposes except for the financial statements for
the purposes of the Warsaw Stock Exchange filing which are prepared under European Union (“EU”) endorsed
IFRS. No material differences have been noted between EU IFRS and UK IFRS for the year ended 31
December 2022.
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 three directly held subsidiaries, Serinus Energy Canada Inc., Serinus Holdings Limited and
Serinus Petroleum Consultants Limited. 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. and Serinus Tunisia B.V. 99.999996% of Serinus Energy
Romania S.A. is held by Serinus Holdings Limited, with Serinus Tunisia B.V. owning the remaining
0.000004% of Serinus Romania S.A. On 21 December 2022, 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. On 9 August 2022 KOB Borneo Limited was struck off and on
17 August 2022, the liquidation of Serinus B.V. was completed.
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.
Serinus Energy plc
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(US$ 000s, except per share amounts, unless otherwise noted)
53
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:
• 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.
(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.
Serinus Energy plc
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(US$ 000s, except per share amounts, unless otherwise noted)
54
(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. 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
Serinus Energy plc
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(US$ 000s, except per share amounts, unless otherwise noted)
55
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;
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.
The Group’s cash and cash equivalents, restricted cash and trade receivables and other receivables are
measured 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.
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.
Serinus Energy plc
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(US$ 000s, except per share amounts, unless otherwise noted)
56
(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 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
Serinus Energy plc
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(US$ 000s, except per share amounts, unless otherwise noted)
57
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.
(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
Serinus Energy plc
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(US$ 000s, except per share amounts, unless otherwise noted)
58
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.
(n) 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.
(o) 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.
(p) 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.
(q) 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.
(r) 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.
(s) Accounting standards issued but not yet adopted
The following standards have been published and are mandatory for accounting periods beginning after 1
January 2023 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 and IFRS - Practice Statement 2:
Disclosure of Accounting Policies – effective 1 January 2023
ii. Amendments to IAS 8: Accounting policies, Changes in Accounting Estimates and Errors –
Definition of Accounting Estimates – effective 1 January 2023
iii. Amendments to IFRS 17 Insurance contracts: Initial Application of IFRS 17 and IFRS 9 –
Comparative Information – effective 1 January 2023
iv. Amendments to IAS 12: Income Taxes – Deferred Tax related to Assets and Liabilities arising from
a Single Transaction – effective 1 January 2023
v. Amendments to IAS 1: Presentation of Financial Statements: Classification of Liabilities as Current
or Non-Current – effective 1 January 2023
vi. Amendments to IAS 1: Classification of Liabilities as Current or Non-current – Deferral of Effective
Date – effective 1 January 2023
Serinus Energy plc
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(US$ 000s, except per share amounts, unless otherwise noted)
59
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 2022, a 10% change in the price of crude oil per bbl would have impacted revenue, net of
royalties by $1.4 million (2021 - $1.0 million) and a 10% change in the price of gas per mcf would have impacted
revenue, net of royalties by $3.3 million (2021 - $2.7 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.
As at 31 December 2022
GBP
CAD
LEU
TND
Cash and cash equivalents
296
179
1,825
4,715
Restricted cash
-
1,476
22
-
Accounts receivable
49
33
14,747
15,785
Accounts payable
(660)
(58)
(15,302)
(13,484)
Lease liabilities
(322)
(165)
-
(392)
Net foreign exchange exposure
(637)
1,465
1,292
6,624
Translation to USD
1.2103
0.7370
0.2165
0.3217
USD equivalent
(771)
1,080
280
2,131
As at 31 December 2021
GBP
CAD
LEU
TND
Cash and cash equivalents
57
212
3,320
1,469
Restricted cash
-
1,449
30
-
Accounts receivable
-
4
15,731
1,909
Accounts payable
(369)
(72)
(19,526)
(3,306)
Lease liabilities
(70)
(258)
-
(431)
Net foreign exchange exposure
(382)
1,335
(445)
(359)
Translation to USD
1.3477
0.7851
0.2288
0.3464
USD equivalent
(515)
1,048
(102)
(124)
For the year ended 31 December 2022, a 1% change in foreign exchange rates would have impacted net
income by $27,000 (2021 - $3,000).
Serinus Energy plc
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(US$ 000s, except per share amounts, unless otherwise noted)
60
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 2022, Tunisia’s revenue was
generated from three customers (2021 – five), with a 80%, 10% and 10% weighting (2021 – 28%, 22%, 18%,
17% and 15%). Romania’s sales were made primarily to three customers (2021 – three), with a 49%, 37% and
11% weighting (2021 – 58%, 38% and 4%). At 31 December 2022, the Group had $nil (2021 - $nil 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 2022 and 31 December 2021.
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.
As at 31 December 2022
1 year
1 - 3 years
3+ years
Total
Accounts payable and accrued liabilities
11,205
-
-
11,205
Lease liabilities
307
237
311
855
Total
11,512
237
311
12,060
As at 31 December 2021
1 year
1 - 3 years
3+ years
Total
Accounts payable and accrued liabilities
10,165
-
-
10,165
Lease liabilities
193
183
69
445
Total
10,358
183
69
10,610
The Directors have considered the circumstances, current status and practical realisations of $5.3 million of
current liabilities that relate to long-term historic liabilities and based on this assessment do not believe that
these will become due in the next 12 months.
INTEREST RATE RISK
During the prior year, the Company fully repaid its long-term debt, and no longer has an interest rate risk.
5. USE OF ESTIMATES AND JUDGMENTS
The preparation of financial statements in conformity with IFRS requires management to make significant
estimates and judgements based on currently available information. Management uses their professional
judgement along with the most up to date information in making these estimates and judgements, however
actual results could differ. By their very nature, these estimates are subject to measurement uncertainty and
the effect on the financial statements of future periods could be material. Estimates and underlying assumptions
are reviewed on an ongoing basis and any changes are recognised in the period that the estimates and
judgements have changed. The significant estimates and judgements made by management in the statements
are described below:
Serinus Energy plc
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(US$ 000s, except per share amounts, unless otherwise noted)
61
(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 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.
During 2021 the Group commenced international arbitration proceedings in the International Chamber of
Commerce (“ICC”) against the partner to seek a ruling to formalize Serinus’ 100% interest in the Satu Mare
concession.
On 15 February 2023, the Group announced that it had received confirmation from the ICC that as a result
of the partner’s default under the JOA, the partner’s 40% participating interest in the Satu Mare concession
will be transferred to Serinus Romania, and directed the partner to take all necessary actions to formally
transfer the 40% participating interest to Serinus.
(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.
Serinus Energy plc
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(US$ 000s, except per share amounts, unless otherwise noted)
62
(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 50). 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.
(i) Impairment of assets (Note 11)
The management and directors review the carrying value of the Group’s assets to determine whether there
are any indicators of impairment such that the carrying values of the assets may not be recoverable. The
assessment of whether an indicator of impairment or reversal thereof has arisen requires considerable
judgement, taking account of factors such as future operational and financial plans, commodity prices and
the competitive environment.
For exploration and evaluation assets held by the Group, namely exploration works at the Satu Mare
concession in Romania, before the technical feasibility and commercial viability of extracting hydrocarbon
resources is demonstrable, indicators of impairment can include: (a) the right to explore in a specific area
has expired and is not expected to be renewed; (b) significant expenditure for further exploration or
evaluation activities is not being planned; (c) exploration and evaluation of mineral resources have not led
to the discovery or confirmation of commercially viable resource; or (d) that sufficient data exists to indicate
that the carrying amount of the asset may not be recovered in full from development or sale.
The Group’s operating oil & gas assets, some of which have previously been impaired, are assessed for
impairment at a Cash Generating Unit (CGU) level, in accordance with IAS 36, which align to the
concession agreements held by the Group, i.e. Moftinu and Santau in Romania and in Tunisia, Sabria and
Chouech Es Saida and Ech Chouech as the South Tunisia CGU. These assets are sensitive to changes
in operational assumptions and commodity pricing and therefore the management and directors need to
make judgements as to whether certain events represent indicators of impairment or impairment reversal.
Where such indicators exist, the carrying value of the assets of a CGU or exploration and evaluation asset
is compared with the recoverable amount of those assets, that is, the higher of its fair value less costs to
sell and value in use, which is typically determined on the basis of discounted future cash flows.
For the year ended 31 December 2022, the management and directors performed assessment of
impairment indicators across the Group’s CGUs. In Tunisia, there were no indicators of impairment or
impairment reversals identified at Sabria or South Tunisia. The Company has applied to extend the Ech
Chouech licence but this expired in June 2022. The Company intends to continue its application to regain
the licence once the licence process is formalised. No indication has been received that they will not be
successful once the process to re-apply becomes available and as such has made the judgement that they
will be able to regain the Ech Chouech licence and therefore no impairment has been charged to this asset.
At Moftinu, the management and directors identified an indicator of impairment and recorded an impairment
expense of $1.9 million.
Note 11 and 12 disclose the carrying amounts of the Group’s property, plant and equipment and exploration
and evaluation assets, respectively, as well as assumptions made by the management and directors in the
discounted cash flow model which is used to determine estimated recoverable amounts.
(j) Solidarity Tax
On 29 December 2022, the Government of Romania published Emergency Ordinance no.186/2022
detailing measures to implement Council Regulation (EU) 2022/1854 regarding the emergency
intervention to introduce a solidarity contribution for companies that carry out activities in the oil, natural
gas, coal and refinery sectors. This additional tax in Romania is calculated at a rate of 60% applied to the
Serinus Energy plc
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(US$ 000s, except per share amounts, unless otherwise noted)
63
company’s annual profit, in excess of 20% of its average profits for the financial years 2018-2021. The
solidarity tax will apply for the financial years 2022 and 2023.
The Company does not believe that the solidarity tax is applicable to it and has received legal advice to
support that position and will challenge the legality of this additional tax. If the Company were to consider
the tax applicable the amount due is estimated to be approximately $741,000. However the Company
has made the judgement that the solidarity tax is not applicable and therefore has made no provision in
respect of this tax within the financial statements.
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 2022, the receivable balance related to contracts with customers, included within accounts
receivable is $3.8 million (31 December 2021 - $2.8 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. The 2017 options have expired. 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 £0.20, 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 2.2 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 (£0.265) on the issuance
date of the Awards. In 2021, the Company issued 175,000 stock options with a strike price of £0.20.
In 2022, the Company issued 702,717 awards under the LTIP to members of the management team on 29 April
2022. 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 (£0.169) on the issuance date of the Awards. The
total fair value of these awards was $0.1 million (£0.1 million). As at 31 December 2022, the total awards
outstanding under the LTIP was 2.9 million (2021 – 2.2 million), with a weighted average valuation of £0.0265
(2021 £0.0265).
The weighted average fair value of options granted during the year ended 31 December 2022 was £0.13 per
option (31 December 2021 - £0.01 per option) using the following assumptions:
Inputs used in the Black-Scholes model
2022
2021
Risk-free interest rate
1.31%
0.29%
Expected dividend yield
nil
nil
Expected volatility (based on actual historical volatility)
70%
71%
Forfeiture rate
5%
5%
Expected option life (in years)
10
10
Serinus Energy plc
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(US$ 000s, except per share amounts, unless otherwise noted)
64
A summary of the changes to the option plans during the year ended 31 December 2022, are presented below:
(a) CAD denominated options
2022
2021
Options
Exercise Price
Options
Exercise Price
Balance, beginning of year
10,000
3.70
20,000
3.70
Forfeited
-
-
(10,000)
-
Expired
(10,000)
(3.70)
-
-
Balance, end of year
-
-
10,000
3.70
As at 31 December 2022 there are nil (2021 – 10,000) options outstanding to non-executive directors as the
options expired in the year.
(b) GBP denominated options
2022
2021
Options
Exercise
Price
Options
Exercise
Price
Balance, beginning of year
3,364,300
0.20
3,289,300
0.20
Granted
5,000
0.20
175,000
0.20
Forfeited
(253,700)
-
(100,000)
(0.20)
Balance, end of year
3,115,600
0.20
3,364,300
0.20
As at 31 December 2022 there are 3,115,600 (2021 – 3,364,300) options outstanding to executive directors
and employees with a weighted average contractual life of 5.0 (2021 – 8.9) years and a weighted average
exercise price of £0.20 (2021 - £0.20).
GBP denominated option breakdown
Exercise price
(GBP)
Options outstanding
Options exercisable
Average life
(years)
0.20
3,115,600
3,115,600
5.0
8. FINANCE EXPENSE
Year ended 31 December
2022
2021
Interest of leases (Note 20)
33
53
Accretion on decommissioning provision (Note 18)
1,143
377
Foreign exchange and other
461
14
1,637
444
9. TAXATION
2022
2021
Current income tax expense
2,738
1,879
Deferred income tax
Origination and reversal of temporary differences (Note 19)
418
(1,460)
Tax expense
3,156
419
Serinus Energy plc
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(US$ 000s, except per share amounts, unless otherwise noted)
65
Reconciliation of the effective tax rate:
Year ended 31 December
2022
2021
Income before income taxes
4,786
8,843
Statutory tax rate
50.0%
50.0%
Expected income tax
2,393
4,422
Non-taxable (deductible) items
(2,331)
(57)
Losses utilised
(459)
(526)
Tax rate differences
1,667
(3,248)
Foreign exchange and other
3,470
35
Net change in tax attributes not recognised
(1,584)
(207)
Income tax expense
3,156
419
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 2022 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 PER SHARE
Year ended 31 December
($000’s, except per share amounts)
2022
2021
Income for the year
1,630
8,424
Weighted average shares outstanding
Basic
114,686
116,293
Diluted
114,686
117,291
Income per share
Basic and diluted
0.01
0.01
In determining diluted net income per share, the Group assumes that the proceeds received from the exercise
of “in-the-money” stock options are used to repurchase ordinary shares at the average market price. In
calculating the weighted-average number of diluted ordinary shares outstanding for the year ended 31
December 2022, the Group excluded 0.1 million (2021 – 0.1 million) stock options. All outstanding warrants
expired in 2021.
Serinus Energy plc
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(US$ 000s, except per share amounts, unless otherwise noted)
66
11. PROPERTY, PLANT AND EQUIPMENT
Oil and gas
interests
Corporate assets
Total
Cost or deemed cost:
Balance as at 31 December 2020
263,356
1,624
264,980
Capital additions
5,797
69
5,866
Change in decommissioning provision
793
-
793
Disposals
-
(50)
(50)
Balance as at 31 December 2021
269,946
1,643
271,589
Capital additions
7,702
76
7,778
Change in decommissioning provision
(5,380)
-
(5,380)
Disposals
(2,218)
-
(2,218)
Balance as at 31 December 2022
270,050
1,719
271,769
Accumulated depletion and
depreciation
Balance as at 31 December 2020
(186,884)
(1,526)
(188,410)
Depletion and depreciation
(10,378)
-
(10,378)
Disposals
-
42
42
Balance as at 31 December 2021
(197,262)
(1,484)
(198,746)
Depletion and depreciation
(6,507)
(158)
(6,665)
Disposals
1,095
-
1,095
Impairments
(1,871)
-
(1,871)
Balance as at 31 December 2022
(204,545)
(1,642)
(206,187)
Cumulative translation adjustment
Balance as at 31 December 2021
(1,109)
13
(1,096)
Currency translation adjustments
(2,175)
-
(2,175)
Balance as at 31 December 2022
(3,284)
(13)
(3,271)
Net book value
Balance as at 31 December 2021
71,575
172
71,747
Balance as at 31 December 2022
62,221
90
62,311
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 $28.7 million (2021 - $30.1 million) and
for Romania are $3.6 million (2021 - $5.3 million).
IMPAIRMENT
At 31 December 2022, the Company completed an impairment assessment to determine if there were any
indicators of impairment or impairment reversals. In Tunisia, there were no indicators of impairment or
impairment reversals identified at Sabria or South Tunisia. The Company had applied to extend the Ech
Chouech licence but this expired in June 2022. The Company intends to continue its application to regain the
licence once the licence application process is formalised. No indication has been received that they will not
be successful once the process to re-apply becomes available and as such has made the judgement that they
will be able to regain the Ech Chouech licence and therefore no impairment has been charged to this asset. In
Moftinu, the Company determined that there was an indicator of impairment, and recorded an impairment
expense of $1.9 million.
The Company determined the estimated recoverable amount based on a discounted cash flow model, using
an after-tax discount rate equal to the weighted average cost of capital of Romania (17%), computed internally
using external market data.
Serinus Energy plc
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(US$ 000s, except per share amounts, unless otherwise noted)
67
The following table shows the forecast commodity prices used in the GCA 31 December 2022 Reserve Report
and used in the discounted cash flow model:
Brent
Romania Gas
Year
(US$/bbl)
(US$/MMBtu)
2023
83.83
24.28
2024
78.99
23.59
2025
80.00
19.03
2026
81.60
13.00
2027+
+2% inflation
+2% inflation
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.
Romania ($000s)
1% increase
to discount
rate
1% decrease
to discount
rate
10% increase
to commodity
prices
10% decrease
to commodity
prices
Additional impairment, net of tax
67
(67)
(1,620)
1,620
At 31 December 2021, the Company completed an impairment assessment on its PP&E to determine if there
were any indicators of impairment or impairment reversals. In South Tunisia and Sabria, no indicators of
impairment or impairment reversals were identified. In Moftinu the Company determined that there was an
indicator of impairment and an impairment test was conducted on the Moftinu CGU. The Company determined
the estimated recoverable amount based on a discounted cash flow model, using an after-tax discount rate
equal to the weighted average cost of capital of Romania (10%), computed internally using external market
data. The following table shows the forecast commodity prices used in the GCA 31 December 2021 Reserve
Report and used in the discounted cash flow model:
Brent
Romania Gas
Year
(US$/bbl)
(US$/MMBtu)
2022
75.92
20.35
2023
71.00
11.60
2024
70.00
8.99
2025
71.40
8.28
2026+
+2% inflation
+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.
Romania ($000s)
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
-
-
-
-
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 2022, the Group recorded $0.2 million of depletion in inventory (2021 - $0.5 million).
12. EXPLORATION AND EVALUATION ASSETS
Carrying amount
2022
2021
Balance, beginning of the year
5,042
14
Additions
5,225
4,888
Change in decommissioning provision
739
494
Cumulative translation adjustment
(477)
(354)
Balance, end of the year
10,529
5,042
The Company currently holds land rights to a large amount of undeveloped land within Romania.
Serinus Energy plc
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(US$ 000s, except per share amounts, unless otherwise noted)
68
13. RIGHT-OF-USE ASSETS
The following table details the cost and accumulated depreciation of the ROU assets:
Buildings
Vehicles
Total
Cost
Balance as at 31 December 2020
840
39
879
Additions
97
-
97
Disposals
(66)
-
(66)
Balance as at 31 December 2021
871
39
910
Additions
584
-
584
Disposals
(127)
-
(127)
Balance as at 31 December 2022
1,328
39
1,367
Accumulated depreciation
Balance as at 31 December 2020
(335)
(27)
(362)
Depreciation
(212)
(12)
(224)
Disposals
66
-
66
Balance as at 31 December 2021
(481)
(39)
(520)
Depreciation
(256)
-
(256)
Disposals
127
-
127
Balance as at 31 December 2022
(610)
(39)
(649)
Cumulative translation adjustment
Balance as at 31 December 2020
(5)
-
(5)
Currency translation adjustments
(15)
-
(15)
Balance as at 31 December 2021
(20)
-
(20)
Currency translation adjustments
(10)
-
(10)
Balance as at 31 December 2022
(30)
-
(30)
Carrying amounts
Balance as at 31 December 2021
370
-
370
Balance as at 31 December 2022
688
-
688
14. CASH
As at 31 December
2022
2021
Cash and cash equivalents
4,854
8,429
Restricted cash
1,088
1,144
Total cash
5,942
9,573
The Group has cash on deposit with the Alberta Energy Regulator of $1.1 million (2021 - $1.1 million), as
required to meet future abandonment obligations existing on certain oil and gas properties in Canada (see Note
18). This deposit accrues nominal interest. The fair value of restricted cash approximates the carrying value.
15. TRADE AND OTHER RECEIVABLES
As at 31 December
2022
2021
Trade receivables
6,772
4,269
VAT receivable
723
1,956
Corporate tax receivable
380
213
Prepaids and other
2,132
958
Total trade and other receivables
10,007
7,396
The trade receivables consist of commodity sales in both Romania and Tunisia. The Group has determined
that the ECL is nominal for the years ended 31 December 2022 and 2021 while using the days past due criteria
to measure the ECL. The Company has reviewed the historical transactions with the vendors and has no
Serinus Energy plc
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(US$ 000s, except per share amounts, unless otherwise noted)
69
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 2022 and 2021.
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, 2022, the Company held
9.9 Mbbls of crude oil in inventory valued at approximately $70.70/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
2022
2021
Number of
shares
Amount
($000s)
Number of
shares
Amount
($000s)
Balance, beginning of the year
114,066,073
401,426
114,066,063
401,426
Issued for cash
-
-
100
-
Issuance costs, net of tax
-
-
-
-
Issued in lieu of salary
-
-
-
-
Issued to retire Convertible Loan
-
-
-
-
Warrants exercised
-
-
-
-
Balance, end of the year
114,066,073
401,426
114,066,073
401,426
Following shareholder approval at the Company’s AGM on 12 May 2022, the Company undertook a share
consolidation on a one for ten basis whereby for every 10 Ordinary Shares (each and Existing Share) as shown
on the register of members of the Company to be in issue at 6.00 p.m on 12 May 2022, be consolidated into
one Ordinary Share, having the same rights as the Existing Ordinary Shares. Prior to the consolidation there
were 1,140,660,729 Ordinary Shares of no par value in issue and following the consolidation there were
114,066,073 Ordinary Shares.
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
2022
2021
Number of
shares
Amount
($000s)
Number of
shares
Amount
($000s)
Balance, beginning of the year
592,500
121
-
-
Shares purchased
2,119,749
334
592,500
121
Balance, end of the year
2,712,249
455
592,500
121
Serinus Energy plc
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(US$ 000s, except per share amounts, unless otherwise noted)
70
18. DECOMMISSIONING PROVISION
As at 31 December
2022
2021
Balance, beginning of the year
34,868
34,074
Liabilities incurred
703
639
Liabilities settled
(1,852)
(332)
Accretion
1,143
377
Change in estimate
(5,611)
527
Foreign currency translation
(120)
(417)
Balance, end of year
29,131
34,868
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 2022 the decommissioning provisions of the wells in Canada to
be $0.8 million. During the year, the Company completed the abandonment of three wells in Canada and it
was determined that the Company was no longer obligated to fulfil the decommissioning provisions of $1.6
million relating to legacy properties. The remaining obligations are reported as current liabilities as they relate
to non-producing properties or expired production sharing contracts.
The change in estimate in the current year is based on changes to interest rates, discount rates, the estimated
date of abandonment and reclamation, and the expected costs of abandonment.
The Company anticipates the concession licenses will continue to be extended until they are no longer
economical for the Company to continue operating. As at 31 December 2022, the Company has aligned the
abandonment dates with the expected economic life of the asset.
The significant assumptions used in the calculation of the decommissioning provision are as follows:
As at 31 December
2022
2021
Risk-free
rate (%)
Inflation
rate (%)
Net
present
value
Risk-free
rate (%)
Inflation
rate (%)
Net
present
value
Tunisia
3.6 – 1.9
2.0
24,211
0.3 – 1.9
2.0
28,454
Romania
6.8 – 8.6
2.5 – 11.8
4,102
3.5 – 5.1
3.6
3,743
Brunei
-
-
-
-
-
1,643
Canada
-
-
818
-
-
1,028
Total
29,131
34,868
Due within one year
5,085
6,636
Long-term liability
24,046
28,232
Total
29,131
34,868
Serinus Energy plc
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(US$ 000s, except per share amounts, unless otherwise noted)
71
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:
31 December
2021
Recovery
31 December
2022
PP&E and E&E assets
(15,304)
561
(14,743)
Decommissioning provision
4,243
(937)
3,306
Other
537
(42)
495
Deferred income tax liability
(10,524)
(418)
(10,942)
Tax effect related to:
31 December
2020
Recovery
31 December
2021
PP&E and E&E assets
(16,112)
808
(15,304)
Decommissioning provision
3,928
315
4,243
Other
200
337
537
Deferred income tax liability
(11,984)
1,460
(10,524)
UNRECOGNISED DEFERRED TAX ASSETS
Deferred tax assets have not been recognised in respect of the following deductible temporary differences:
As at 31 December
2022
2021
PP&E and E&E assets
(2,100)
(3,063)
ROU assets and lease liabilities
(10)
-
Decommissioning provision
6,814
7,741
Non-capital losses carried forward and other
10,086
11,923
Unrecognised deferred tax asset
14,790
16,601
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 (2021 - $0.3 million) that do not expire, Cyprus tax
losses of $24.4 million (2021 - $14.6 million) that expire between 2025 and 2027, Tunisian losses of $0.9 million
that expire in four years and $10.5 million have no expiry date (2021 - $4.3 and $24.0 million respectively), and
Romanian losses of $4.3 million (2021 - $7.1 million) that expire after seven years between 2023 to 2029.
The Group has temporary differences associated with its investments in its foreign subsidiaries. The Group
has not recorded any deferred tax liabilities in respect to these temporary differences as they are not expected
to reverse in the foreseeable future.
The Group operates in multiple jurisdictions with complex tax laws and regulations, which are evolving over
time. The Group has taken certain tax positions in its tax filings and these filings are subject to audit and
potential reassessment after the lapse of considerable time. Accordingly, the actual income tax impact may
differ significantly from that estimated and recorded by management.
Serinus Energy plc
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(US$ 000s, except per share amounts, unless otherwise noted)
72
20. LEASE LIABILITIES
The following table details the movement in the Group’s lease obligations for the year ended 31 December
2022:
As at 31 December
2022
2021
Opening balance
445
586
Additions
584
97
Principle payments
(285)
(235)
Cumulative translation adjustment
1
(3)
Balance, end of the year
745
445
Lease liabilities due within one year
280
193
Lease liabilities due beyond one year
465
252
During the year the Company made total payments toward lease liabilities in the amount of $0.3 million (2021
- $0.2 million), of which $0.03 million (2021 - $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 2022
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
JV audit
Severance
Other
Total
Balance as at 31 December 2020
1,211
147
41
1,399
Change in provision
-
-
(41)
(41)
Balance as at 31 December 2021
1,211
147
-
1,358
Reclassification
-
-
-
-
Balance as at 31 December 2022
1,211
147
-
1,358
Current
-
-
-
-
Non-current
1,211
147
-
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 2014-2021. 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 2022.
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 2022 reflects the potential costs to
terminate the remaining employees.
22. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As at 31 December
2022
2021
Accounts payable and accrued liabilities
9,295
9,734
Taxes payable
1,911
431
Total accounts payable and accrued liabilities
11,206
10,165
23. RELEASE OF PROVISION
Year ended 31 December
2022
2021
Release of provision
1,639
6,636
In 2022, the Company reversed decommissioning provisions of $1.6 million related to Block L, due to the
passage of statute of limitations.
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 $0.6 million,
as collectible due to changing circumstances during the year.
Serinus Energy plc
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(US$ 000s, except per share amounts, unless otherwise noted)
73
24. AGGREGATE PAYROLL EXPENSE
The aggregate payroll expense of employees and executive management of Serinus was as follows:
Year ended 31 December
2022
2021
Wages, salaries, and benefits
11
5,447
5,049
Share-based payment expense
12
70
213
Total aggregate payroll expense
5,517
5,262
Of the total aggregate payroll expense, $0.1 million (2021 - $0.1 million) has been classified as E&E assets.
25. RELATED PARTY TRANSACTIONS
During the years ended 31 December 2022 and 2021, 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
2022
2021
Wages and salaries
938
1,067
Benefits
94
105
Share-based payment expense
69
224
Total related party transactions
1,101
1,396
26. SUPPLEMENTAL CASH FLOW DISCLOSURE
Year ended 31 December
2022
2021
Cash (used in) generated from:
Trade receivables and other
(3,126)
2,280
Inventory
157
(656)
Accounts payable and accrued liabilities
(1,088)
2,223
Restricted cash
5
19
Changes in non-cash working capital from operations
(4,052)
3,866
The following table reconciles capital expenditures to the cash flow statement:
Year ended 31 December
2022
2021
PP&E additions (Note 11)
7,778
5,880
E&E additions (Note 12)
5,225
4,888
Total capital additions
13,003
10,768
Changes in non-cash working capital
(2,052)
480
Total capital expenditures
10,951
11,248
27. CAPITAL MANAGEMENT
Year ended 31 December
2022
2021
Shareholders’ equity
36,800
37,432
Total capital resources
36,800
37,432
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.
11
Includes amounts in general and administrative expenses, production expenses and exploration and development expenditures.
12
Represents the amortization of share-based payment expense associated with options granted.
Serinus Energy plc
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(US$ 000s, except per share amounts, unless otherwise noted)
74
28. COMMITMENTS AND CONTINGENCIES
COMMITMENTS
During the year, the Company completed the Phase 1 work commitment associated with its two year evaluation
phase, to reprocess 160.9 km 2D seismic in the Madaras area, and has the Phase 2 work commitment to
reprocess 30.05 km of 2D seismic in the Santau-Nusfalau area outstanding.
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 2022, cumulative liquid hydrocarbon sales net of
royalties and shrinkage was 5.4 million (2021 – 5.4 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.
30. INCOME FROM OPERATIONS ANALYSIS
($000)
2022
2021
Administrative expenses
(5,300)
(4,479)
Share-based payment expense (Note 7)
(70)
(213)
Impairment recovery (expense) (Note 11, 12)
(1,871)
-
Release of provision (Note 23)
1,639
6,636
Included within administrative expenses of $5.3 million (2021 - $4.5 million) are the following:
($000)
2022
2021
Salaries and wages
(2,653)
(2,249)
Corporate audit and review fees
(450)
(431)
Consulting fees
(400)
(237)
Serinus Energy plc
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(US$ 000s, except per share amounts, unless otherwise noted)
75
31. SEGMENT INFORMATION
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 2022
Romania
Tunisia
Corporate
Total
Total assets
32,881
54,587
2,715
90,183
For the year ended 31 December 2022
Crude oil revenue
-
15,854
-
15,854
Natural gas revenue
31,793
1,576
-
33,369
Condensate revenue
57
-
-
57
Total revenue
31,850
17,430
-
49,280
Cost of sales
Royalties
(1,132)
(2,182)
-
(3,314)
Production expenses
(5,590)
(4,851)
(50)
(10,491)
Depletion and depreciation
(3,624)
(2,782)
(158)
(6,564)
Windfall tax
(16,014)
-
-
(16,014)
Total cost of sales
(26,360)
(9,815)
(208)
(36,383)
Gross profit (loss)
5,490
7,615
(208)
12,897
Administrative expenses
-
-
(5,300)
(5,300)
Share-based payment expense
-
-
(70)
(70)
Release of provision
-
-
1,639
1,639
Impairment expense
(1,871)
-
-
(1,871)
Loss on asset disposal
(63)
(1,018)
-
(1,081)
Decommissioning recovery
-
62
147
209
Operating income (loss)
3,556
6,659
(3,792)
1,658
Finance expense
(848)
(1,015)
226
(1,637)
Net income (loss) before income taxes
2,707
5,644
(3,566)
4,786
Tax expense
(152)
(3,017)
13
(3,156)
Net income (loss) for the year
2,556
2,628
(3,553)
1,630
Capital expenditures
8,388
4,452
76
12,916
Serinus Energy plc
Notes to the Consolidated Financial Statements
For the year ended 31 December 2022
(US$ 000s, except per share amounts, unless otherwise noted)
76
As at 31 December 2021
Romania
Tunisia
Corporate
Total
Total assets
33,637
55,688
5,459
94,784
For the year ended 31 December 2021
Crude oil revenue
-
10,984
-
10,984
Natural gas revenue
26,809
1,993
-
28,802
Condensate revenue
198
-
-
198
Total revenue
27,007
12,977
-
39,984
Cost of sales
Royalties
(1,605)
(1,715)
-
(3,320)
Production expenses
(4,758)
(5,174)
(44)
(9,976)
Depletion and depreciation
(6,650)
(3,256)
(149)
(10,055)
Windfall tax
(9,432)
-
-
(9,432)
Total cost of sales
(22,445)
(10,145)
(193)
(32,783)
Gross profit (loss)
4,562
2,832
(193)
7,201
Administrative expenses
-
-
(4,479)
(4,479)
Share-based payment expense
-
-
(213)
(213)
Release of provision
636
-
6,000
6,636
Decommissioning (provision)
recovery
-
(17)
159
142
Operating income
5,198
2,815
1,274
9,287
Finance expense
(99)
(290)
(55)
(444)
Net income before income taxes
5,099
2,525
1,219
8,843
Tax expense
-
(406)
(13)
(419)
Net income for the year
5,099
2,119
1,206
8,424
Capital expenditures
9,513
1,268
10
10,768
32. POST BALANCE SHEET EVENTS
On 15 February 2023, the Group announced that it had received confirmation from the International Chamber
of Commerce that as a result of the partner’s default under the Joint Operating Agreement, the partner’s 40%
participating interest in the Satu Mare concession will be transferred to Serinus Romania, and directed the
partner to take all necessary actions to formally transfer the 40% participating interest to Serinus.
