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ShaMaran reports Record Oil Revenues at Atrush

ShaMaran Petroleum has released its financial and operating results and related management’s discussion and analysis (MD&A) for the three months and year ended December 31, 2021.

Dr. Adel Chaouch, President and Chief Executive Officer of ShaMaran, commented:

“2021 has been a transformational year for ShaMaran. The Company generated the highest annual oil sales revenues in its history at $102.3 million. ShaMaran’s 2021 EBITAX was more than triple that of 2020 and last year demonstrates the Company’s cash generating ability with cashflow from operations increasing by almost 5 times versus the year before.  Atrush continues to prove itself as a world class field with cumulative production now in excess of 54MM barrels and a continuation of full replacement of 2P reserves year on year.

“We are entering 2022 in a strong financial position and are excited about the growth opportunities that lie ahead for Shamaran. The Sarsang acquisition, expected to close in the coming months, will double the size of the Company and we continue to actively look at other market opportunities to further develop ShaMaran. We recently announced a one-of-its-kind climate action corporate sponsorship with the Hasar Organization for Earth Sciences in Kurdistan. This initiative represents a key early step in ShaMaran’s strategy towards significantly reducing its net carbon footprint.“

2021 Financial Highlights

Three months ended Dec 31

Year ended Dec 31

USD Thousands

2021

2020

2021

2020

Revenue

27,439

14,081

102,323

56,673

Gross margin on oil sales

12,662

10,253

49,889

7,106

Net result

4,061

(1,785)

13,383

(144,425)

Cash flow from operations

23,336

5,350

63,903

12,860

EBITDAX

18,456

6,614

66,375

20,052
  • The fourth quarter generated oil sales revenue of $27.4 million and during 2021 the Company generated the highest-ever annual oil sales revenues at $102.3 million;
  • A strong EBITDAX of $18.5 million for the fourth quarter and $66.4 million for the full year 2021, 3.3 times the EBITDAX of 2020;
  • Consistent oil sales and entitlement payments from the KRG with 75% of the KRG outstanding receivables paid during 2021;
  • 2021 and fourth quarter operating cash flow of $63.9 million and $12.9 million respectively; and
  • Reduction of the principal amount of the Company’s 2023 Bond by $15 million during 2021 with a further $3 million of the 2023 Bond bought back by the company at 2021 year end.

___________________________

1 All currency amounts indicated as “$” in this news release are expressed in United States Dollars. 

2021 Atrush Operational Highlights

  • Cumulative production of more than 54 million barrels of oil achieved by year end 2021;
  • Atrush Property gross 2P reserves2 had a 102% reserves replacement ratio increasing to 110.2 MMbbls as at December 31, 2021 from 109.9 in 2020, and Company gross 2P reserves increasing from 30.3 MMbbls to 30.4 MMbbls;
  • Full year 2021 average production of approximately 38,600 bopd, was very close to the 2021 guidance despite a longer than anticipated routine maintenance shutdown period in September 2021;
  • Full year 2021 lifting costs per barrel of $5.12 in line with 2021 guidance; and
  • Full year 2021 capital expenditure of $52.3 million ($14.2 million net to ShaMaran) in line with 2021 guidance.

Sarsang Acquisition

  • As announced on July 30, 2021, the Company has successfully issued and settled $111.5 million principal amount of the $300 million 12% senior unsecured bond 2021/2025 (the “2025 Bond”), which was issued at 98.5% of nominal value for gross cash proceeds to the Company of $109.8 million. This portion of the 2025 Bond and the $188.5 million balance will be issued to refinance existing indebtedness of the Company in connection with, and conditional upon completion of, the Company’s acquisition of TotalEnergies’ affiliate that holds an 18% non-operated participating interest in the Sarsang Block; and
  • The Company is currently finalizing the closing documentation for the completion of the Sarsang Acquisition and completion is expected in the first half of 2022.

2022 Atrush Guidance

  • 2022 average production guidance of 36,000 to 41,000 bopd;
  • Atrush capital expenditures for 2022 planned at $116 million ($32 million net to ShaMaran). This capital program includes:
    • The drilling and completion of three development wells, including one water injection well.
    • Initiation of the gas solution project which will significantly reduce emissions by using existing infrastructure to generate electrical power from produced gas. As the Atrush field is currently dependent on diesel-fueled generators for all electrical power, this project will also therefore greatly reduce future operating costs.
  • Atrush operating expenditure is forecast to be $76 million ($21 million net to ShaMaran) for 2022, in line with 2021 actual operating costs; and
  • Atrush average lifting costs per barrel are estimated to range from $4.80 to $5.80. Atrush lifting costs are mainly fixed costs and dollar-per-barrel estimates should decrease with increasing levels of production and operational efficiencies.

CORPORATE UPDATE

The Company is pleased to announce that the Record Date of May 6, 2022 has been set for the Annual General Meeting of Shareholders to be held on June 23, 2022.

____________________________

2 Reserves estimates, contingent resource estimates and estimates of future net revenue in respect of ShaMaran’s oil and gas assets in the Atrush Block are effective as at December 31, 2021, and are included in the report prepared by McDaniel & Associates Consultants Ltd., an independent qualified reserves evaluator, in accordance with National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (NI 51-101) and the Canadian Oil and Gas Evaluation Handbook (the COGE Handbook) and using McDaniel’s January 1, 2022 price forecasts. Certain abbreviations and technical terms used in this MD&A are defined or described under the heading “Other Supplementary Information”.

OTHER

This information is information that ShaMaran is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out below, on April 25, 2022 at 5:30 p.m. Eastern Time.  Arctic Securities AS (Swedish branch) is the Company’s Certified Advisor on Nasdaq First North Growth Market (Sweden), +46 844 68 61 00, certifiedadviser@arctic.com.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

FORWARD LOOKING STATEMENTS

This news release contains statements and information about expected or anticipated future events and financial results that are forward‐looking in nature and, as a result, are subject to certain risks and uncertainties, such as legal and political risk, civil unrest, general economic, market and business conditions, the regulatory process and actions, technical issues, new legislation, competitive and general economic factors and conditions, the uncertainties resulting from potential delays or changes in plans, the occurrence of unexpected events and management’s capacity to execute and implement its future plans.

The Covid-19 virus and the restrictions and disruptions related to it have had a drastic adverse effect on the world demand for, and prices of, oil and gas as well as the market price of the shares of oil and gas companies generally, including the Company’s common shares.  There can be no assurance that these adverse effects will not continue or that commodity prices will not decrease or remain volatile in the future. These factors are beyond the control of ShaMaran and it is difficult to assess how these, and other factors, will continue to affect the Company and the market price of ShaMaran’s common shares. In light of the current situation, as at the date of this news release, the Company continues to review and assess its business plans and assumptions regarding the business environment, as well as its estimates of future production, cash flows, operating costs, and capital expenditures.

Any statements that are contained in this news release that are not statements of historical fact may be deemed to be forward‐looking information. Forward‐ looking information typically contains statements with words such as “may”, “will”, “should”, “expect”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “projects”, “potential”, “scheduled”, “forecast”, “outlook”, “budget” or the negative of those terms or similar words suggesting future outcomes.  The Company cautions readers regarding the reliance placed by them on forward‐looking information as by its nature, it is based on current expectations regarding future events that involve a number of assumptions, inherent risks and uncertainties, which could cause actual results to differ materially from those anticipated by the Company.

Actual results may differ materially from those projected by management. Further, any forward‐looking information is made only as of a certain date and the Company undertakes no obligation to update any forward‐ looking information or statements to reflect events or circumstances after the date on which such statement is made or reflect the occurrence of unanticipated events, except as may be required by applicable securities laws. New factors emerge from time to time, and it is not possible for management of the Company to predict all of these factors and to assess in advance the impact of each such factor on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward‐looking information.

ABOUT SHAMARAN

ShaMaran is a Kurdistan focused oil development and exploration company which holds a 27.6% working interest, through its wholly-owned subsidiary General Exploration Partners, Inc., in the Atrush Block and, upon successful closing of the Sarsang Acquisition, will then also hold an 18% interest through its then wholly-owned subsidiary TEPKRI Sarsang A/S in the Sarsang Block.

ShaMaran is a Canadian oil and gas company listed on the TSX Venture Exchange and the Nasdaq First North Growth Market (Sweden) under the symbol “SNM”.

(Source: ShaMaran)

The post ShaMaran reports Record Oil Revenues at Atrush first appeared on Iraq Business News.

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ShaMaran Increases Stake in Sarsang Contract

By John Lee.

ShaMaran Petroleum has announced that it has signed an agreement with a subsidiary of French major TotalEnergies S.E. to acquire its affiliate (TEPKRI Sarsang A/S) holding an 18% non-operated participating interest in the Sarsang Production Sharing Contract in the Kurdistan Region of Iraq for an initial consideration of USD 155 million plus working capital adjustments amounting to USD 14.2 million as of January 1, 2021.

Shares in the company were up 16 percent on the news.

An additional contingent consideration of USD 15 million is payable in the future as more fully described below.  The Acquisition is transformative to ShaMaran’s production, reserves and financial profile and delivers on the Company’s focused and disciplined strategy for growth by targeting this opportunity that is accretive to the Company, its shareholders and its bondholders.

HIGHLIGHTS

The Acquisition:

  • Adds immediate incremental participating interest production of approximately 5,000 bopd of light crude oil;
  • Is expected to double ShaMaran’s Q2 2021 average net production of 11,090 bopd following the completion of the processing facility expansion at Swara Tika field by mid-2022;
  • Enhances ShaMaran’s oil reserves through the addition of high API and low sulphur oil that achieves a low discount to Brent; and
  • Provides a low cost structure with life-of-field operating expenditure anticipated to be approximately USD 5.60/boe.

The Sarsang block is on the northern border of the Company’s Atrush block and is comprised of two producing fields: Swara Tika and East Swara Tika.  At Swara Tika, an expansion project is well underway with the addition of a new 25,000 bpd processing facility which is expected to lift gross production to approximately 50,000 bopd by mid-2022. Through the Acquisition, ShaMaran will add strong cash flow and a production growth trajectory underpinned by its interests in two cash-positive PSCs with three producing fields in the same vicinity.

Following a successful closing of the Acquisition, the Company’s Q2 2021 average net production of 11,090 bopd is expected to double in second half of 2022 after the facility expansion at Swara Tika is completed. Additionally, the Sarsang crude is of high quality and enjoys one of the lowest price discounts to Brent in Kurdistan. In connection with the new facility being commissioned by mid-2022, the Sarsang block will also be connected to the Atrush feeder pipeline for future pipeline export and will thereby have a permanent pipeline connection to the export market.

The Acquisition is highly accretive and transformative to ShaMaran as it grows from a single asset company to a multi-field producer and paves the way for future growth opportunities for ShaMaran.

ShaMaran’s President and Chief Executive, Dr. Adel Chaouch, said:

“We are delighted that we have agreed the acquisition of the TotalEnergies’ non-operating interest in Sarsang, a high-quality producing asset with strong operational and financial fit to ShaMaran’s business. This is a strategic transaction for ShaMaran delivering value to equity and debt holders and strengthening the financial profile of the Company.

“Upon completion, this acquisition will add immediate material production and cash flow to ShaMaran and will provide significant value enhancement. It demonstrates our continued commitment to Kurdistan and diversifies our existing production base.

“Sarsang has an attractive discovered reserves base with a strong track record of safety and sustained production.  As a neighboring field to the Atrush field, becoming a partner in the Sarsang field presents opportunities for potential integration synergies with Atrush operations.

“We would like to thank TotalEnergies for their commitment in the negotiations of this acquisition and look forward to a constructive partnership in the future with the Sarsang operator, as well as a continued and trusted relationship with the Kurdistan Regional Government of Iraq.”

TRANSACTION DETAILS

ShaMaran has agreed to acquire 100% of the shares of TEPKRI Sarsang A/S (“TEPKRI”), a subsidiary of TotalEnergies, which holds an 18% non-operated participating interest in the Sarsang PSC.  The Acquisition has an effective date of January 1, 2021.

ShaMaran will pay an initial consideration of USD 155 million upon closing of the Acquisition before working capital and related adjustments and an additional contingent consideration of USD 15 million in the future, as follows:

  • The initial consideration of USD 155 million is divided into (i) an upfront cash payment of USD 135 million payable upon closing and (ii) a deferred consideration of USD 20 million structured as a vendor finance in the form of a 5.5% convertible promissory note issued to a subsidiary of TotalEnergies with a 12-months’ maturity from the date of closing.
  • An additional contingent consideration of USD 15 million is payable in the future upon (i) cumulative gross production from the Sarsang PSC reaching 130 MMbbls and (ii) subject to Brent crude oil prices averaging at least USD 60/bbl for a twelve months’ period.

ShaMaran expects to receive significant positive cash flow upon closing of the Acquisition based on 2021 cash flows at current oil prices.

The Company intends to finance the Acquisition through the issue of new debt, equity and by utilizing the Company’s cash balance.

The “change of control” of TEPKRI resulting from the Acquisition is subject to regulatory and exchange approvals in Canada, the Kurdistan Region and Sweden.

DEBT FINANCING

The Company intends to issue an up to USD 300 million new 4-year bond to refinance existing debt and raise new capital for the Acquisition.  Subject to the closing of the Acquisition, USD 175 million of the currently outstanding USD 180 million ShaMaran 2023 bond (after the USD 5 million repayment due in late 2021) will exchange at 102% of par into the proposed new bond at par value.  In aggregate, USD 185.7 million (including the USD 7.2 million amount described below) will be issued to refinance the existing debt into the new bond upon closing of the Acquisition and up to USD 114.3 million will be issued for cash to finance the Acquisition and other general corporate purposes. Cash proceeds from the new bond will be placed in an escrow account and only released upon satisfaction of the closing conditions to the Acquisition.  The existing debt that is proposed to be refinanced into the new bond includes USD 7.2 million of the total USD 22.8 million debt currently owed by the Company to Nemesia S.à.r.l. (a private company ultimately controlled by a trust the settlor of which is the Estate of the late Adolf H. Lundin) (“Nemesia”).  The USD 15.6 million balance will remain outstanding as described below.

The Company and its advisors have engaged with a majority of bondholders that prior to the date of this news release have pre-committed to vote in favour of the conditional refinancing of the existing bond through a written summons and resolutions, as well as necessary waivers for the issuance of the new bond and other financial matters relating to the existing bond.

The Company has also obtained strong interest for the contemplated new bond from a group of existing and new bond investors.  Book-building for the contemplated bond will be launched imminently together with a summons for written resolution to refinance the existing outstanding bond conditional on closing of the Acquisition.

EQUITY FINANCING

The Company intends to raise USD 30 million of additional equity capital to fund the Acquisition, which the Lundin family, as ShaMaran’s largest shareholder, has agreed to support by Nemesia providing a USD 30 million equity underwriting.  The new equity is expected to be issued through a rights issue in eligible jurisdictions in connection with the Acquisition in order to provide all shareholders to whom subscription rights may be lawfully issued with a proportionately equal opportunity to participate.

Further information on the contemplated rights offering will be announced in due course.  The offering will be conditional on, inter alia, approval of the Acquisition by the TSX Venture Exchange, the approval of the Kurdistan Regional Government (“KRG”), the filing of a rights offering circular or prospectus in Canada and in Sweden and other regulatory approvals.  It is anticipated that the rights offering would be commenced as soon as practicable following receipt of KRG approval for the Acquisition.

The Lundin family underwriting will be by way of a stand-by commitment, meeting the requirements of applicable securities laws, to acquire shares not subscribed for by others pursuant to subscription rights issued in the offering.

(Source: Shamaran)

The post ShaMaran Increases Stake in Sarsang Contract first appeared on Iraq Business News.

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Total “in Talks” to Sell Stake in Iraqi Oil Field

By John Lee.

France’s Total is reported to be in talks to sell its 18-percent stake in the Sarsang block in Iraqi Kurdistan, in a move aimed at reducing the company’s debt.

Bloomberg says the company is working with Jefferies Financial Group on the deal, adding that the holding could be worth as much as $500 million.

More here and here.

(Source: Bloomberg)

The post Total “in Talks” to Sell Stake in Iraqi Oil Field first appeared on Iraq Business News.

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Rosneft to start work in Duhok

By John Lee.

Rosneft has reportedly sent a delegation to Duhok to discuss starting work on three oilfields next month.

According to the report from Rudaw, the state-controlled Russian company will work at three locations: Batle, Zawita, and in Sarsang and Chamanke in Amedi.

It is expected to extract 180,000 barrels of oil per day.

In October, Rosneft signed Production Sharing Agreements (PSA) with respect to five production blocks in Iraqi Kurdistan.

More here.

(Source: Rudaw)