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I've said it before and I'll say it again, this share is ridiculously undervalued. It's a shame they spent $867k on a duster which in hindsight would have been better spent on a dividend or buyback but that doesn't change the fundamentals.
From the 30 June 2022 results Serinus had net assets of $37.145m (£32,626m), which divided by the 112m shares in issue gives $0.33 (or £0.29) per share.
From the 30 June 2022 results Serinus had cash in the bank of $7.2m (£6.3m), which divided by the 112m shares in issue gives $0.064 (or £0.057) per share.
Have you ever known a company whose net assets are 3.4 times more than the market cap? Have you ever know a company which has over 60% of its market cap in the bank as cash?
Quarter 3 results are coming next month and with O&G prices so high I only expect the cash position to improve, we could end up with more cash than market cap the way things are going.
Q2 production in Tunisia was 521 boe/d, we've just seen their plans to increase this by 358 boe/d (69%) in Q4 for W-1 well, 173 boe/d (33%) following this on the N-2 well and a a further 750 boe/d (143%) for the WIN-12bis well in 2023.
We may be sitting at over 1,500 boe/d in a years time.
Operating netback in Tunisia is currently $63.49boe/d which would mean Tunisia operating netback of $34.8m (£30.6m) per annum, which is £0.273 operating netback per share per year.
Even if prices dropped to O&G prices dropped to June 2021 levels we'd be looking at operating netback of $21.85 which would mean Tunisia operating netback of $12.0m (£10.5m) per annum, which is £0.094 operating netback per share per year.
It's not surprising that the price has dropped on a year of bad news, the CEO needs to do more to advertise and reassure the market that the net assets will continue to grow and their quarterly updates alone are not giving that assurance.
Share price should be over 30p now. From the 30 June 2022 results Serinus had net assets of $37.145m (£34,208m), which divided by the 112m shares in issue gives $0.33 (or £0.30) per share.
We can talk about upside opportunities in Tunisia and Romania but the fact remains that the assets alone of this company are valued at 30p per share as of June results. Undervalued is an understatement.
My opinion is this one is really flying under the radar because it’s such small beans compared to other O&G producers out there in the current high price environment, but it genuinely boggles the mind, I've never seen anything like it.
from the 30 June 2022 results Serinus had net assets of $37.145m (£34,208m), which divided by the 112m shares in issue gives $0.33 (or £0.30) per share.
But today the market cap is £10m. This is a multibagger waiting to be seized but is completely flying under the radar with very small volumes traded each day. I suspect the executive team are holding out for news from Romania before they start shouting from the rooftops and getting investor interest, but with such a high net asset value I don't think they need to wait.
To put it in perspective, £0.30 per share was the the company's existing net assets as of 30 June 2022. That doesn’t include any new wells in Romania, it doesn’t include extra profits from high oil and gas prices, it doesn’t include the August lifting in Tunisia.
I'll be holding for now - Serinus is undervalued. It's net assets as of March 31 2021 were $29m [£21m], this doesn't include a revaluation of reserves which I would expect this year from price rises. At a market cap of £32m the market is suggesting that all the expertise, equipment, contingent reserves and connections of Serinus will only generate a NPV of £11m.
There are generally two things which create value for an O&G company:
1. finding proven and probable reserves of O&G.
2. prices going up.
We've got #2 already - prices are up.
For #1 I'll be looking at the investor presentation to see how Serinus is planning to makes Sancrai-1 a success and how they can prove more of the 2P (Probable) reserves and even accessing some of the contingent resources.
They have 3,950Mboe in 3C Contingent Resources with 984Mboe in 1C across Tunisia and Romania. Using the lower Tunisian operating netback ($18.33/boe) this gives $18m [£13m] in 1C. They are in a good position with some cash on hand to make the necessary investments to turn these into P1 and P2 reserves.
Comparing the results to my estimates from the other week:
Production in Tunisia up from 552boe/d to 602 boe/d (9.1% up).
Romania is very disappointing with 1,495 boe/d - I would expect 2,478boe/d extrapolating from last years accounts. Looks like the pressure drop is a much bigger concern than anticipated, will expect to see a plan to address this at the investor presentation.
Realised gas price of $5.98 - I predicted $6.
Realised oil of 54.03/bbl - disappointing, but given when the rise in oil prices happened I should have expected lower average prices in Q1.
Sancrai-1 is the elephant in the room that could see a share price rise.
$5.3m cash balance, very healthy position to be coming out of a pandemic.
Thanks @hand-some, so 2-3%. The problem I have with this is it doesn't add up with what we can interpret from the 2019 and 2020 production in the Annual Report.
In 2019 M-1003 and M-1007 have a production of 5673Mcf/d as per the 2020 Annual report. If you extrapolate this with a 3% monthly decline you can calculate the production rate needed at M-1004 between Feb 16 2020 and Dec 31 2020 would be an initial rate of 7891Mcf/d or 1395boe/d also declining at 3% to meet the reported 10,643Mcf/d reported for 2020 in the 2020 accounts.
But M-1004 had a flow rate of 1000boe/d or 5,659Mcf/d as per the RNS from 11/02/2020.
If we do the same extrapolation with 2%, M-1004 would need an initial production of 7147Mcf/d or 1263boe/d.
I know using the 2-3% from that interview may not consider the nuance of fluctuations, differences between the wells and all other unknowns, but I'll stick with trying to interpret the audited annual report rather than the 2-3% in the interview.
Consideration of the decline is moot anyway as it ignores the impact of the work to install compression on the Moftinu field to increase production, the impact of which is unknown (as far as I'm aware).
Do your own research and don't make decisions based on my comments.
Looking at the investormeetcompany presentation from 30/03/2021 they do state at 21:40 they intend to install compression on the Moftinu field to increase production and counter the decline in flow rates but I cant find where they mention a 3% reduction per month, the slide pack appears to show a 3% reduction each quarter, not month.
At 3% reduction per quarter I calculate a 317,176 Mcf reduction at $6.00/Mcf this is $1.9m [£1.4m] reduction in revenue, revising down my earlier figures of 880,416Mcf or $5.28m [£3.82m]. But this doesn't consider the installation of compression on the Moftinu field.
Would love a timestamp for the 3% per month comments if you know it.
Do your own research and don't make decisions based on my comments.
@hand-some , I can't find this in the investor pack from the April presentation but don't doubt it may have been verbally stated.
I'll consider my reduction calculation of 880,416Mcf or $5.28m [£3.82m] revenue reduction into my risked target share price and out from my unrisked target for now. Thanks for bringing this to my attention.
Do your own research and don't make decisions based on my comments.
Again though by 'deplete' are we talking about pulling 3% of the proven P1 and probable P2 reserves out of the ground - depleting reserves or a reducing production rate of 3% each month - these are very different things. I'd love a source for 3%.
I'm also going to revise my figure for the M-1008 well - In my first post i calculated 667 boe/d - from RNS 23/02/2020 or 3,508 Mcf/d. This should be revised to account for the well not being online until March. I can't find an exact date for when the M-1008 well went live but using 1st March as a high and 31st as a low would reduce my original estimates by between 211MCf - 316MMcf or $1.26-1.90m [£0.9-1.3m] at $6.00/Mcf.
Do your own research and don't make decisions based on my comments.
@hand-some - If true I can forecast that my estimates with a 3% reducing balance reduction a month, without intervention, would have Romania at a 31% reduction by December 31 2021. This would lead to a 880,416Mcf reduction in output of Natural Gas in 2021, at $6.00/Mcf this is a $5.28m [£3.82m] reduction in revenue. This would reduce my total to £27.8m revenue, but...
Do you have a source for the 3% reduction in flow rate a month? I can't find it in either the 2020 Accounts or the Operational updates.
Are you sure you don't mean the reduction in the reserves? - as in they're pulling 3% of P1 or P2 reserves out of the ground each month? that would mean 2 years 9 months to turn gas into cash, but by my estimates they are going to be faster than that in Romania, 1 year 5 months for P1 and an additional 6 months for P2. I would hope they are trying to pull the gas out as fast as possible so they can bank the proven (and probable) reserves and find more opportunities in phase four of the Moftinu gas field exploration.
Do your own research and don't make decisions based on my comments.
I've finally had chance to review the accounts and I've pulled together my estimates of production and revenue from the data in the 2020 accounts and various RNS. Do your own research and don't make decisions based on my advice, but here's my thoughts:
There seems to be minimal improvements expected in Tunisia so I forecast no change from 2020:
Crude Oil 443 bbl/d
Natural Gas 654 Mcf/d
Romania is the interesting area. We can interpret the accounts from 2019 and compare these to 2020 to estimate the production for wells M-1003 and M-1007 combined at:
Natural Gas 5,673 Mcf/d
M-1004 was only online on 16/02/2020 from the RNS 20/03/2020 so we can use this to determine that if this well operates all year in 2021, rather than for 319 days as in 2020, we should expect:
Natural Gas 5,687 Mcf/d
If you add M-1008 to the mix you get an additional
Natural Gas 667 boe/d - from RNS 23/02/2020 or 3,508 Mcf/d
This gives Romania a total production of Natural Gas 14,868 Mcf/d
I have totals at:
Natural Gas: 15,522 Mcf/d
Crude Oil: 443 bbl/d
I've made some revenue estimates on the back of this.
I used prices of $6.00/Mcf for Natural Gas and $60.00/bbl for Crude Oil to estimate $43.7m [£31.6m] revenue in 2021.
This assumes no further flow improvements in year, when we know they are investing in this across their sites.
My price estimates also are on the low side given Serinus was getting $7.17/Mcf in 2019 and $61.67/bbl in pre-covid 2019. And crude oil is currently sat at $63.48/bbl.
The value of their reserves, currently revalued down due to the price drop last year, is $77.6m [£56.2m] (page 59 2020 Annual report). In 2019 they were $93.0m [£67.3m].
Quite frankly I'm amazed:
- £31.6m revenue projection for 2021,
- A valuation of reserves at £56.2m, due for a revaluation upwards now prices have recovered,
- debt free,
- Projects underway to realise additional reserves.
...and a market cap of £35m.
Do your own calculations as this is all quick excel analysis on a bank holiday weekend.