HIGHLIGHTS
-- The Chiya Khere-51 ("CK-5") development well was drilled to a measured depth ("MD") of 2,098 metres which was reached on June 28, 2014. The well was spudded on May 16, 2014 from the same well pad used for the Atrush-1 well discovery (the "Chamanke-A" pad) and the bottom hole location was approximately 870 metres west southwest of the well pad. CK-5 has been suspended pending completion planned in early 2015 as a Phase 1 producer. -- On April 16, 2014 the Company announced the test results of the Atrush-4 ("AT-4") appraisal and development well which was drilled to a MD of 2,916 metres. Three separate cased hole drill stem tests were conducted in the Jurassic reservoir with the highest reported rates totalling 9,059 bopd of 27-28 API from two of the tests. None of the tests produced formation water. AT-4 is a deviated well with bottom hole location approximately 2.2 kilometres southeast of the surface location. AT-4 has been suspended as a Phase 1 producer. -- A second rig will be used to drill the Chiya Khere-6 ("CK-6"), the second eastern area appraisal well. CK-6 is planned to spud in 2014 and will be drilled from the same pad (the "Chamanke-C" well pad) used to drill Atrush-3 ("AT-3"), which was the first eastern area appraisal well. CK-6 has a bottom hole target approximately 1.1 kilometres southeast of AT-3. -- The Company reported on March 13, 2014 the initial recognition of reserves (property gross of 58 MMbo 2P) as well as updates to estimated contingent resources (property gross of 518 MMboe 2C) and prospective resources (property gross unrisked best estimate of 245 MMboe) as of December 31, 2013 for the Atrush block. The reserves and resources estimates were provided by McDaniel & Associates Consultants Ltd, the Company's independent qualified resources evaluator. -- On May 15, 2014 the Company announced the listing on the Oslo Børs in Norway of the $150 million of senior secured bonds which were issued in November 2013 by General Exploration Partners, Inc. ("GEP"), a wholly owned subsidiary of the Company. The ticker for the bonds is "GEP01". -- At June 30, 2014 the Company had a cash balance of $102.8 million and working capital of $94.4 million.
1. Approved changes to terminology relating to the Atrush Block, effective from 2014, include well names. Following the Atrush-4 well all future wells on the Atrush block will be prefixed with "Chiya Khere" (or "CK"), rather than with "Atrush".
FINANCIAL AND OPERATING RESULTS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2014
During the reporting period the Company continued its appraisal and development campaign in respect of the Atrush petroleum property located in the Kurdistan Region of Iraq which constitutes the continuing operations of the Company. Atrush currently generates no revenues.
The Company reported a net loss of $1.9 million in the second quarter of 2014, which was primarily driven by net bond interest expense, included within finance cost, as well as routine general and administrative expenses and share based payments expense.
Condensed Interim Consolidated Statement of Comprehensive Income
(Unaudited, expressed in thousands of United States dollars)
Three months Six months ended June 30, ended June 30, 2014 2013 2014 2013 -------------------------------------------------------------------------------- Expenses from continuing operations General and administrative expense (462) (355) (1,018) (805) Share based payments expense (61) (565) (208) (566) Depreciation and amortisation expense (13) (16) (24) (35) Impairment loss - (84) - (84) Loss before finance items and income tax (536) (1,020) (1,250) (1,490) expense -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
Finance income 26 10 13 37 Finance cost (1,309) (23) (2,658) - -------------------------------------------------------------------------------- Net finance (cost) / income (1,283) (13) (2,645) 37 -------------------------------------------------------------------------------- -------- Loss before income tax expense (1,819) (1,033) (3,895) (1,453) Income tax expense (23) (10) (55) (50) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Loss from continuing operations (1,842) (1,043) (3,950) (1,503) Discontinued operations Loss from discontinued operations (1) (7) (16) (27) Loss for the period (1,843) (1,050) (3,966) (1,530) --------------------------------------------------------------------------------
Other comprehensive (loss) / income Currency translation differences (17) 11 (11) (77) -------------------------------------------------------------------------------- Total other comprehensive (loss) / income (17) 11 (11) (77) --------------------------------------------------------------------------------
Total comprehensive loss for the period (1,860) (1,039) (3,977) (1,607) --------------------------------------------------------------------------------
Condensed Interim Consolidated Balance Sheet
(Unaudited, expressed in thousands of United States Dollars)
At June 30, At December 31, 2014 2013 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Assets Non-current assets Intangible assets 379,958 344,990 Property, plant and equipment 180 179 380,138 345,169 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Current assets Cash and cash equivalents 102,780 142,588 Other current assets 246 194 103,026 142,782 -------------------------------------------------------------------------------- Assets associated with discontinued - 3 operations -------------------------------------------------------------------------------- Total assets 483,164 487,954 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
Liabilities and equity Current liabilities Accounts payable and accrued expenses 6,304 7,458 Accrued interest expense on bonds 2,252 2,252 Current tax liabilities 27 92 8,583 9,802 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Non-current liabilities Borrowings 147,354 147,050 Provisions 1,610 1,185 -------------------------------------------------------------------------------- 148,964 148,235 -------------------------------------------------------------------------------- Liabilities associated with discontinued 397 928 operations -------------------------------------------------------------------------------- Total liabilities 157,944 158,965 -------------------------------------------------------------------------------- Equity Share capital 534,068 534,068 Share based payments reserve 4,926 4,718 Cumulative translation adjustment 16 27 Accumulated deficit (213,790) (209,824) -------------------------------------------------------------------------------- Total equity 325,220 328,989 -------------------------------------------------------------------------------- Total liabilities and equity 483,164 487,954 --------------------------------------------------------------------------------
The total assets reported at June 30, 2014 have decreased by $2.5 million relative to the total assets reported at the end of 2013, which was primarily due to the use of cash on expenses from continuing operations and accounts payable during the reporting period.
The decrease by $39.8 million in the cash position of the Company during the six months ended June 30, 2014 was due to cash outflows of $28.7 million on Atrush Block appraisal and development activities, $8.6 million on interest payments to bondholders, $1.2 million on G&A and other cash expenses, $0.8 million in negative cash movements due to changes in working capital items, and $0.5 million used on discontinued operations.
Condensed Interim Consolidated Cash Flow Statement
(Unaudited, expressed in thousands of United States Dollars)
Three months Six months ended June 30, ended June 30, 2014 2013 2014 2013 -------------------------------------------------------------------------------- Operating activities Net loss from continuing operations (1,842) (1,043) (3,950) (1,503) Adjustments for: Interest expense on senior secured bonds 1,307 - 2,643 - - net Share based payments expense 61 565 208 566 Depreciation and amortisation expense 13 16 24 35 Foreign exchange (gain) / loss (15) 23 6 (18) Impairment loss - 84 - 84 Interest income (11) (10) (13) (19) Changes in provisions 533 61 425 61 Changes in inventories - 114 - 114 Changes in other current assets 1,553 31 (52) (79) Changes in current tax liabilities 8 (10) (65) (37) Changes in accounts payable and accrued 2,777 1,421 (1,154) (1,472) expenses Cash used in discontinued operations (19) (17) (544) (19) Net cash inflows from / (outflows to) 4,365 1,235 (2,472) (2,287) operating activities -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
Investing activities Interest received on cash deposits 11 10 13 19 Purchase of property, plant and equipment (7) - (43) - Purchases of intangible assets (14,948) (7,957) (28,665) (10,320) Net cash outflows to investing activities (14,944) (7,947) (28,695) (10,301) -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
Financing activities Interest payments to bondholders (8,625) - (8,625) - Net cash outflows to financing activities (8,625) - (8,625) - --------------------------------------------------------------------------------
Effect of exchange rate changes on cash - (13) (16) (53) and cash equivalents --------------------------------------------------------------------------------
Change in cash and cash equivalents (19,204) (6,725) (39,808) (12,641) Cash and cash equivalents, beginning of 121,984 35,300 142,588 41,216 the period Cash and cash equivalents, end of the 102,780 28,575 102,780 28,575 period --------------------------------------------------------------------------------
OUTLOOK
The outlook is as follows:
Atrush Block
The Abu Dhabi National Energy Company ("TAQA"), operator of the Atrush Block, announced on August 9, 2014 that, as a result of recent developments and escalating instability around the Kurdistan Region of Iraq, it had suspended its operations at the Atrush Block as a precautionary measure and significantly reduced staffing levels. The Company continues to closely monitor the security situation with its Atrush partners and the Kurdistan Regional Government ("KRG").
Drilling plans for the remainder of the year 2014 include resumption of drilling operations on CK-8, the fourth Phase 1 development well, and the CK-6 well, a Phase 2 appraisal well. CK-8, spudded on July 19, 2014, has now been safely suspended, and CK-6 is planned to spud in 2014. Further testing of the AT-3 well is also scheduled to be conducted during 2014 following a planned re-entry. CK-7 is expected to spud in 2015.
Works are in progress to implement the 30,000 gross bopd Phase 1 production facility. The FEED for the Phase 1 Production Facilities was completed in October 2013. The production modules for the facility are currently being fabricated.
The FEED contract has been awarded to KAR Group/ILF Consulting Engineers for a dedicated feeder pipeline between the Chiya Khere production facility and the tie-in point to the main export pipeline at KCP2 at kilometre 92. The definitive route is currently being finalized.
Plans are to mobilise a workover rig in 2015 which will complete the wells for production. Following testing and commissioning of the production facilities and feeder pipeline first production is anticipated in 2015.
Budget
The Board of Directors approved a budget for the year 2014 which includes net capital spending on the Atrush Block appraisal and development program and debt service and other costs totalling $101.0 million. During the six months ended June 30, 2014 the Company spent $37.8 million of the budgeted total for the year 2014.
The Company believes that based on the forecasts and projections they have prepared and potential financing initiatives which will be pursued as required the Company will have financial resources sufficient to satisfy its contractual obligations and commitments under the agreed work program over the next 12 months. Nevertheless the potential remains that the Company's financial resources will be insufficient to fund its obligations over the next 12 months. The Company has a number of financing possibilities which it believes it would be able to pursue as required.
New Ventures
As part of its normal business the Company continues to evaluate new opportunities in the MENA region.
ABOUT SHAMARAN
ShaMaran Petroleum Corp. is a Kurdistan focused oil development and exploration vehicle with a 20.1% direct interest in the Atrush oil discovery, which is currently undergoing appraisal and development.
ShaMaran Petroleum is a Canadian oil and gas company listed on the TSX Venture Exchange and the NASDAQ OMX First North Exchange (Stockholm) under the symbol "SNM". 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.
ShaMaran Petroleum's Certified Advisor on NASDAQ OMX First North is Pareto Securities AB.
The Company's condensed interim consolidated financial statements, notes to the financial statements and management's discussion and analysis have been filed on SEDAR (www.sedar.com) and are available on the Company's website (www.shamaranpetroleum.com).
FORWARD LOOKING STATEMENTS
This press release contains statements 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. 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.
ON BEHALF OF THE BOARD,
Pradeep Kabra,
President and CEO
FOR FURTHER INFORMATION PLEASE CONTACT: ShaMaran Petroleum Corp. Keith Hill, Chairman (604) 806-3583 khill@namdo.com or ShaMaran Petroleum Corp. Pradeep Kabra, President and CEO 0041 22 560 8605 pradeep.kabra@shamaranpetroleum.com or ShaMaran Petroleum Corp. Sophia Shane, Corporate Development (604) 689-7842 (604) 689-4250 (FAX) sophias@namdo.com www.shamaranpetroleum.com
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