Serinus Energy (LON: SENX) quarterly results arrived today and the shares plunged 26%. This is one of those things that if we'd paid attention and thought about it we should have been able to predict. Which does go to show that perhaps we should pay attention before results are announced so as to position ourselves for when they are.
At the higher, strategic, level we could use Serinus as proof that the natural gas market still isn't a globally integrated one. But that higher view can also - and should have been - integrated into our company specific view here about SENX. That we didn't is shame on us and a lesson for the future. The specific point we mean is this:
“The Group's operating netback decreased, in line with commodity prices, for the three months ended 31 March 2023 and was $39.52/boe (31 March 2022 - $148.88/boe), comprising:
o Romania operating netback - $26.59/boe (31 March 2022 - $182.79/boe)
o Tunisia operating netback - $43.92/boe (31 March 2022 - $41.88/boe)”
Think on this for a moment. Global natural gas prices went wild last year. But as we can see the receipts from Romania went wild and those from Tunisia did not, Now global gas prices have fallen back to normality as did the Romanian revenues - but the Tunisian ones are pretty much statistic. What this tells us is that the Romain wells are integrated into the global - or European at least - market, while the Tunisian ones are not.
So, that's a useful lesson. Drilling for gas is fine and dandy but connectivity to the global market matters.
Serinus Energy share price from London Stock Exchange
Of course, being more specific to Serinus this did mean that revenues slumped, profits declined and in general lower output prices did a number on the corporate performance. Which neatly explains both the consistent share price decline over recent months and the slump today.
But the point for us to take away from this. Serinus did tell us that the Tunisian wells weren't really connected into the global market (they link into the Italian, but that doesn't then link into Northern Europe) and so weren't getting premium prices, but the Romanian were. We should have been able to predict this decline in performance therefore.
Thus the lesson is that the fine grained details of the markets being served should be studied to forecast future performance of a share. Yes, boring and complicated perhaps but no one ever said that making money is easy.