14th Aug 2023 13:51
(Alliance News) - Shore Capital said Serinus Energy PLC's half-year results would be unlikely to come as much of a surprise to investors, as they demonstrated a continuation of trends seen in the first quarter of the year.
The Romania and Tunisia-focused oil and gas exploration, appraisal and development company on Monday reported it had swung to a pretax loss in the first half of 2023 amid a dip in production and lower average realised oil equivalent prices.
The company said it swung to a net loss before tax of USD2.7 million in the first half of 2023 from net income of USD4.3 million the year prior. Revenue fell 70% to USD8.9 million from USD29.3 million.
Production in the period totalled 677 barrels of oil equivalent per day, down 33% from 1,006 barrels the previous year.
The decrease primarily related to a fall in production in Romania, where it fell to 144 boe per day from 485 the year prior.
Craig Howie, research analyst at Shore Capital, noted these trends have been evident for "some time", with Serinus's income statement for the six months representing a "broad continuation" of the performance reported in the first quarter.
Consequently, Howie said Monday's interim results are "unlikely" to come as much of a surprise to investors.
"From an income statement perspective, we now see a broad continuation of recent trends through financial 2024. It is, however, important to emphasise that we fully expect Serinus to continue to generate positive operating cash flow through our forecast period, enabling the maintenance of net cash in the USD1 to USD3 million range throughout our forecast period," Howie added.
Consistent with this, Shore's risked net asset value estimate for Serinus was reduced to 34 pence per share, reflecting "in particular" the temporary absence of a firm drilling schedule onshore Romania.
"Clearly, some positive newsflow is likely required to drive a meaningful share price recovery. However, at the current depressed market capitalisation, we now see a completely asymmetric risk/reward profile for Serinus shares - with our revised risked NAV estimate basically implying almost ten-bagger potential," Howie concluded.
Serinus is a house stock of Shore Capital. Shares in the firm were down 16% at 3.12 pence on Monday afternoon in London. Over the past 12 months, the stock is down 74%.
By Heather Rydings, Alliance News senior economics reporter
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