Serinus Announces 2017 Financial and Operating Results
March 20 2018 - 7:10PM
Serinus Energy Inc. (“
Serinus”,
“
SEN” or the “
Company”) (TSX:SEN)
(WARSAW:SEN), is pleased to report its financial and operating
results for the year ended December 31, 2017.
2017 Highlights
- Production in 2017 has been severely impacted due to labour
issues and social unrest in Tunisia. The Chouech Es Saida field has
been shut-in since February 28, 2017, initially due to labour
issues. In addition, the Sabria field was shut-in from May 22, 2017
until early September 2017, due to social unrest in the southern
part of the country. The Company has restarted production at
Sabria resulting in average volumes of 396 boe/d in Q4 2017, a
decrease of 65% from 1,131 boe/d in Q4 2016, primarily due to the
shut-in of the Chouech Es Saida field in Q4 2017 and the
performance of the WIN-12 well in Sabria after being shut-in.
- During Q4 2017, Brent prices averaged $61.53 per bbl, as
compared to $49.19 per bbl in the comparable period of 2016, an
increase of 25%. Average realized crude oil prices were
higher in the full year 2017, at $51.48 per bbl, compared to $42.10
per bbl in 2016, reflecting the increase in average Brent prices
from $43.55 per bbl in 2016 to $54.25 per bbl in 2017. Average
realized crude oil prices were higher in Q4 2017, at $56.43 per
bbl, compared to $47.40 per bbl in Q4 2016, reflecting improved
benchmark crude pricing in 2017.
- For the three months ended December 31, 2017, funds from
operations was an outflow of $6.0 million compared to an outflow of
$0.4 million in Q4 2016. The negative funds outflow was primarily
attributable to one-time well incident cost of $4.0 million in
Romania and lower operating cashflows of $1.5 million from the
Tunisian assets. For 2017, funds from operations for
continuing operations (excluding Ukraine) was an outflow of $7.9
million, compared to an outflow of $4.7 million in 2016. The
additional funds used of $3.2 million in 2017 was due to lower
operating cash flows from Tunisia of $4.0 million in 2017 as
compared to 2016, one-time well incident costs of $4.0 million,
transaction costs of $0.7 million related to the Company’s
continuance and AIM listing transaction, partially offset by lower
G&A of $5.3 million and lower foreign exchange loss of $0.2
million.
- The net loss from continuing operations for the year ended
December 31, 2017 was $18.8 million ($0.13 per share), compared to
a net loss from continuing operations of $27.5 million ($0.35 per
share) in 2016. Included within this loss was asset
impairment of $5.0 million (2016: $16.8 million), reflecting an
impairment charge taken during Q3 2017 based on sustained low
commodity prices and negative technical revisions.
- Capital expenditures of $3.2 million and $8.9 million were
incurred for the three and twelve months ended December 31, 2017,
respectively. The majority of capital expenditures for 2017 were
focused on the construction of the Moftinu gas facility in Romania
and the reactivation and tie in of wells to this facility. On May
9, 2017, the Company entered into an EPCC contract with Confind
S.R. L. for the construction of a 15 MMcf/d gas plant at the
Moftinu 1001 well location, construction is ongoing with first
production expected in late Q2 2018.
- On December 18, 2017, the Company suffered a well incident
whereby during routine operations, to prepare the Moftinu 1001 well
for future production, an unexpected gas release occurred and
subsequently ignited. The well was subsequently brought back
under control on January 6, 2018. Immediately following the
capping operation, the Company performed a flow-kill operation and
following a period of evaluation determined that the casing bowl
assembly had been exposed to sufficient heat that its integrity was
questionable. As such the Company has abandoned the Moftinu
1001 well. The costs associated with the above emergency
operations are fully provided in the year end 2017 numbers in an
amount of $4.0 million. The Company is in the process of
completing its insurance coverage claim with its insurance
broker. The impact of the well incident is that the
construction of the gas facility, which is located on the wellsite
of the Moftinu 1001 well, has been delayed with first production
now expected late in Q2 2018. The Company has also initiated
planning and tendering for the immediate drilling of a replacement
well, Moftinu 1007, located approximately 300 metres from the
Moftinu 1001 well site. The redrill will form part of the
Company’s insurance claim.
- As at December 31, 2017, the outstanding principal on the debt
held with the European Bank for Reconstruction and Development
(“EBRD”) was $5.4 million under the Senior loan and $20.0 million
under the Convertible loan. Effective October 2017, the terms
of the loan facilities with the EBRD were restructured, which the
Company believes provides the appropriate balance to be able to
meet the debt servicing requirements while also being able to make
the capital investments necessary to grow the Company.
- On February 24, 2017 the Company closed an equity offering
(“the Offering”) for aggregate gross proceeds of CAD$25.2 million
(net CAD$24.3 million, after agents’ fees of CAD$0.9 million) by
issuing 72 million common shares are a price of CAD$0.35 per
share.
- The Company has announced its intent to continue to Jersey and
seek admission to the AIM market to the London Stock
Exchange. On March 7, 2018, the Company’s shareholders voted
in favour of the continuance to Jersey. The Company is
therefore proceeding with the process to continue to Jersey and to
list on AIM.
Notes: Serinus prepares its financial results on a consolidated
basis. Unless otherwise noted by the phrases “allocable to
Serinus”, “net to Serinus”, “attributable to SEN shareholders” or
“SEN WI”, all values and volumes refer to the consolidated figures.
Serinus reports in US dollars; all dollar values referred to
herein, whether in dollars or per share values are in US dollars
unless otherwise noted.
Summary Financial Results (US$ 000’s unless
otherwise noted)
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Three Months Ending December 31 |
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Year Ending December 31 |
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2017 |
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2016 |
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Change |
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2017 |
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2016 |
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Change |
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Gross Oil
and Gas Revenue |
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1,895 |
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4,456 |
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(57 |
%) |
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6,569 |
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15,947 |
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(59 |
%) |
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Net Income
from Continuing Operations |
(9,681 |
) |
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(14,419 |
) |
|
33 |
% |
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(18,792 |
) |
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(27,521 |
) |
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32 |
% |
per share, basic and diluted |
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(0.06 |
) |
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(0.18 |
) |
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(0.13 |
) |
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(0.35 |
) |
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Funds from
Continuing Operations |
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(5,972 |
) |
|
(368 |
) |
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(1523 |
%) |
|
(7,854 |
) |
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(4,652 |
) |
|
(69 |
%) |
per share, basic and diluted |
|
(0.04 |
) |
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(0.01 |
) |
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(170 |
%) |
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(0.06 |
) |
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(0.06 |
) |
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5 |
% |
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Capital
Expenditures |
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3,203 |
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|
975 |
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|
229 |
% |
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8,852 |
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|
3,651 |
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|
142 |
% |
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Average
Production (net to Serinus from continuing operations) |
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Oil |
(Bbl/d) |
|
287 |
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842 |
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(66 |
%) |
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279 |
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|
853 |
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(67 |
%) |
Gas |
(Mcf/d) |
|
652 |
|
|
1,733 |
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(62 |
%) |
|
581 |
|
|
1,628 |
|
|
(64 |
%) |
BOE |
(boe/d) |
|
396 |
|
|
1,131 |
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(65 |
%) |
|
376 |
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1,124 |
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(67 |
%) |
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Average
Sales Price (from continuing operations) |
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Oil |
($/Bbl) |
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$56.43 |
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$47.40 |
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19 |
% |
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$51.48 |
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|
$42.10 |
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22 |
% |
Gas |
($/Mcf) |
|
$6.73 |
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|
$4.91 |
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37 |
% |
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$6.25 |
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|
$4.70 |
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33 |
% |
BOE |
($/boe) |
|
$52.03 |
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|
$42.82 |
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22 |
% |
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$47.88 |
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|
$38.75 |
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24 |
% |
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December 31 |
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December 31 |
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2017 |
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2016 |
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2017 |
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2016 |
|
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Cash &
Cash Equivalents |
|
7,252 |
|
|
4,297 |
|
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|
7,252 |
|
|
4,297 |
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Working
Capital |
|
(6,567 |
) |
|
(38,475 |
) |
|
|
|
(6,567 |
) |
|
(38,475 |
) |
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Long-term
Debt |
|
(31,261 |
) |
|
- |
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(31,261 |
) |
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- |
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Shares
Outstanding |
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150,652,138 |
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|
78,629,941 |
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150,652,138 |
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78,629,941 |
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Average for Period |
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150,652,138 |
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78,629,941 |
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139,796,985 |
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78,629,941 |
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General & Financial
Highlights
- Revenue, net of royalties, from Tunisia for year ended December
31, 2017 decreased to $5.9 million, compared to $14.0 million in
2016, due to lower production partially offset by higher commodity
prices.
- For the three months ended December 31, 2017, revenue net of
royalties decreased to $1.7 million, from $3.7 million in the
comparative period of 2016, due to lower production partially
offset by higher commodity prices.
- Total royalties decreased from $2.0 million in 2016 to
$0.7 million in 2017. This decrease was due to lower
production partially offset by higher commodity prices.
- Serinus made capital expenditures of $8.9 million in 2017, of
which $0.4 million and $8.5 million were in Tunisia and
Romania respectively.
- In 2017, $1.7 million of the EBRD Senior Loan, including
interest, was repaid from scheduled semi-annual installment paid in
March 2017. As at December 31, 2017, the principal outstanding
under the Senior Loan was $5.4 million.
- The restructured agreements provide relief from covenants until
September 2018. All covenant requirements at the Tunisia level have
been removed and the debt service coverage ratio at the
consolidated level is now only applicable to the Senior Loan. The
debt service coverage ratio changed to a minimum of 1.3 times from
1.5 times previously at the consolidated level and is effective
from December 2018. The debt to EBITDA ratio has been increased
from a maximum of 2.75 times to 10.0 times at September 2018 and
December 2018 and then to 2.5 times thereafter. At
December 31, 2017, the Company was not subject to any
financial covenants.
Operational Highlights
- On a full year basis, production decreased by 67% to 376 boe/d,
compared to 1,124 boe/d in the prior year. The decrease year over
year was due to the shut-in of both the Chouech Es Saida and Sabria
fields. The production volumes at Chouech Es Saida were
additionally impacted in Q1 2017 by lower production due to the
CS-3 and CS-1 wells which went down in the middle of December and
remained off-line in the first quarter pending pump replacement and
workovers.
- Production volumes decreased by 65% in the fourth quarter 2017
to 396 boe/d, as compared to 1,131 boe/d in the fourth quarter of
2016. The decrease in production in Q4 2017 was attributable to the
shut-in of the Chouech Es Saida field and lower volumes from the
WIN-12 well in Sabria.
- In Tunisia, the Company incurred capital expenditures of $0.4
million for the year ended December 31, 2017, which primarily
included costs for pumps and parts in preparation of workovers on
the CS-1 and CS-3 wells in Chouech Es Saida.
- In Romania, the Company incurred expenditures of $3.2 million
and $8.5 million for the three and twelve months ended December 31,
2017, respectively. The expenses consisted of the construction of
the Moftinu gas facilities, reactivation of two wells and costs
associated with the Bucharest office. The majority of the costs in
Q4 2017 relate to the procurement of major components of the gas
plant and flowlines and well testing.
- Well incident costs reflect the costs associated with dealing
with the emergency situation in Romania. On December 18,
2017, the Company suffered a well incident whereby during routine
operations, to prepare the Moftinu 1001 well for future production,
an unexpected gas release occurred and subsequently ignited.
The well was subsequently brought back under control on January 6,
2018. Immediately following the capping operation, the
Company performed a flow-kill operation and following a period of
evaluation determined that the casing bowl assembly had been
exposed to sufficient heat that its integrity was
questionable. As such the Company has plugged and abandoned
the Moftinu 1001 well.
Outlook
The Company is focusing on Romania as the
impetus for growth over the next several years. The Moftinu gas
development project is a near-term project that is expected to
begin producing from the gas discovery well Moftinu-1000 and the
planned Moftinu 1007 in late Q2 2018. The Company signed an
engineering, procurement and construction and commissioning
contract on May 9, 2017 and construction of a gas plant with 15
MMcf/d of operational capacity is progressing with expected first
gas production late Q2 2018.
The Company is also progressing the drilling
program to meet work commitments for the extension to October 2019
and plans to drill three additional development wells (Moftinu-1003
and Moftinu-1004 and Moftinu-1007) The Corporation sees potential
production from these wells being able to bring the gas plant to
full capacity by late 2018.
In Tunisia, the Company is currently focusing on
improving production from Sabria following the shut-in and plans to
focus on carrying out low cost incremental work programs to
increase production from existing wells, including the Sabria N-2
re-entry and installing artificial lift on another Sabria well,
having determined that production at its oil field can be restarted
in a safe and secure environment with sufficient comfort that there
will be no further production disruptions for the foreseeable
future. The Corporation views Sabria as a large development
opportunity longer term.
For the Chouech Es Saida field, the Company is
evaluating the restart of the field including timing and costs to
replace the electric submersible pump for the CS-3 well. The
Company views the level of activity pursued in Tunisia as dependent
on the following thresholds being achieved and maintained. In terms
of oil prices, incremental vertical wells become economic at Brent
oil prices of ~$45/bbl, with potential multi-leg horizontal wells
lowering the threshold to below $30/bbl in Sabria. The current
capacity of surface facilities would only allow for 1 to 3
incremental wells for each of Sabria and Chouech Es Saida/Ech
Chouech. As well for Chouech Es Saida/Ech Chouech, the STEG El
Borma gas plant is nearly at its effective capacity. Further gas
developments from this concession may have to be delayed until the
completion of the Nawara Pipeline for material gas pipeline
capacity to come online.
Average working interest production in 2018 in
Tunisia to the end of February was approximately 393 boe/d
(286 bbl/d of oil, 643 Mcf/d of gas).
The Company’s production continues to be
significantly curtailed in the first quarter of 2018 as a result of
the continued shut-in of the Chouech Es Saida field in Tunisia, and
the lower volumes from the WIN-12 well in Sabria. The Company
is evaluating the restart of the Chouech Es Saida field in the
latter part of 2018. Full year production for 2018 is
dependent on the successful the restart of production at the
Chouech Es Saida field and the security and safety issues in and
around our areas of operation, as well as the timing of the above
mentioned capital program in Sabria.
Supporting Documents
The full Management Discussion and Analysis
(“MD&A”) and Financial Statements have been
filed in English on www.sedar.com and in Polish and English via the
ESPI system, and will also be available on
www.serinusenergy.com.
Abbreviations
bbl |
Barrel(s) |
bbl/d |
Barrels per day |
boe |
Barrels of Oil Equivalent |
boe/d |
Barrels of Oil Equivalent per day |
Mcf |
Thousand Cubic Feet |
Mcf/d |
Thousand Cubic Feet per day |
MMcf |
Million Cubic Feet |
MMcf/d |
Million Cubic Feet per day |
Mcfe |
Thousand Cubic Feet Equivalent |
Mcfe/d |
Thousand Cubic Feet Equivalent per day |
MMcfe |
Million Cubic Feet Equivalent |
MMcfe/d |
Million Cubic Feet Equivalent per day |
Mboe |
Thousand boe |
Bcf |
Billion Cubic Feet |
MMboe |
Million boe |
Mcm |
Thousand Cubic Metres |
CAD |
Canadian Dollar |
USD |
U.S. Dollar |
Cautionary Statement:BOEs may
be misleading, particularly if used in isolation. A BOE
conversion ratio of 6 Mcf:1 bbl is based on an energy
equivalency conversion method primarily applicable at the burner
tip and does not represent a value equivalency at the wellhead.
About SerinusSerinus is an
international upstream oil and gas exploration and production
company that owns and operates projects in Tunisia and Romania.
For further information, please refer to the
Serinus website (www.serinusenergy.com) or contact the
following:
Serinus Energy
Inc.Calvin BrackmanVice President, External
Relations & StrategyTel.:
+1-403-264-8877cbrackman@serinusenergy.com |
Serinus Energy Inc.
Jeffrey AuldChief Executive OfficerTel.:
+1-403-264-8877jauld@serinusenergy.com |
Translation: This news
release has been translated into Polish from the English
original.
Forward-looking Statements
This release may contain forward-looking statements made as
of the date of this announcement with respect to future activities
that either are not or may not be historical facts. Although the
Company believes that its expectations reflected in the
forward-looking statements are reasonable as of the date hereof,
any potential results suggested by such statements involve risk and
uncertainties and no assurance can be given that actual results
will be consistent with these forward-looking statements.
Various factors that could impair or prevent the Company from
completing the expected activities on its projects include that the
Company's projects experience technical and mechanical problems,
there are changes in product prices, failure to obtain regulatory
approvals, the state of the national or international monetary, oil
and gas, financial, political and economic markets in the
jurisdictions where the Company operates and other risks not
anticipated by the Company or disclosed in the Company's published
material. Since forward-looking statements address future events
and conditions, by their very nature, they involve inherent risks
and uncertainties and actual results may vary materially from those
expressed in the forward-looking statement. The Company undertakes
no obligation to revise or update any forward-looking statements in
this announcement to reflect events or circumstances after the date
of this announcement, unless required by law.
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