HIGHLIGHTS
-- The Company announced on October 15, 2014 that it will undertake a rights offering to holders of common shares of ShaMaran to raise gross proceeds of CAD 75 million. The rights offering is supported by a comprehensive equity support arrangement from major shareholders. The proceeds of this financing will augment the funding required for the development of the Company's oil discovery on the Atrush Block in Kurdistan. -- The Chiya Khere-8 ("CK-8")1 development well drilled to a measured depth ("MD") of 2,195 metres from the same well pad used for the Atrush-1 ("AT-1") well discovery. The well has been suspended pending completion planned in early 2015 as a Phase 1 producer. -- The Chiya Khere-5 ("CK-5") development well was drilled to a MD of 2,098 metres from the same well pad used for the AT-1 well discovery. The well 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 oil 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. -- The Chiya Khere-6 ("CK-6") appraisal well was spudded on October 1, 2014. CK-6 is the second eastern area appraisal well and is being drilled from the same pad used to drill Atrush-3 ("AT-3"). 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 September 30, 2014 the Company had a cash balance of $78.6 million and working capital of $67.0 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 NINE MONTHS ENDED SEPTEMBER 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 $1.5 million in the first three quarters 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 Nine months ended ended September September 30, 30, 2014 2013 2014 2013 -------------------------------------------------------------------------------- Expenses from continuing operations General and administrative expense (154) (572) (1,172) (1,377) Share based payments expense (51) (159) (259) (725) Depreciation and amortisation expense (14) (19) (38) (54) Impairment loss - - - (84) Loss before finance items and income tax (219) (750) (1,469) (2,240) expense -------------------------------------------------------------------------------- Finance income 64 7 71 26 Finance cost (1,326) (64) (3,978) (47) -------------------------------------------------------------------------------- Net finance cost (1,262) (57) (3,907) (21) -------------------------------------------------------------------------------- -------- Loss before income tax expense (1,481) (807) (5,376) (2,261) Income tax expense (29) (13) (84) (63) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Loss from continuing operations (1,510) (820) (5,460) (2,324) Discontinued operations Loss from discontinued operations (1) (13) (17) (40) Loss for the period (1,511) (833) (5,477) (2,364) --------------------------------------------------------------------------------
Other comprehensive (loss) / income : Currency translation differences (55) 95 (66) 18 -------------------------------------------------------------------------------- Total other comprehensive (loss) / income (55) 95 (66) 18 --------------------------------------------------------------------------------
Total comprehensive loss for the period (1,566) (738) (5,543) (2,346) --------------------------------------------------------------------------------
Condensed Interim Consolidated Balance Sheet
(Unaudited, expressed in thousands of United States Dollars)
At September At December 31, 30, 2014 2013 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Assets Non-current assets Intangible assets 406,069 344,990 Property, plant and equipment 160 179 406,229 345,169 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Current assets Cash and cash equivalents 78,640 142,588 Other current assets 172 194 78,812 142,782 -------------------------------------------------------------------------------- Assets associated with discontinued - 3 operations -------------------------------------------------------------------------------- Total assets 485,041 487,954 -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
Liabilities and equity Current liabilities Accrued interest expense on bonds 6,565 2,252 Accounts payable and accrued expenses 5,191 7,458 Current tax liabilities 29 92 11,785 9,802 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Non-current liabilities Borrowings 147,505 147,050 Provisions 1,764 1,185 -------------------------------------------------------------------------------- 149,269 148,235 -------------------------------------------------------------------------------- Liabilities associated with discontinued 282 928 operations -------------------------------------------------------------------------------- Total liabilities 161,336 158,965 -------------------------------------------------------------------------------- Equity Share capital 534,068 534,068 Share based payments reserve 4,977 4,718 Cumulative translation adjustment (39) 27 Accumulated deficit (215,301) (209,824) -------------------------------------------------------------------------------- Total equity 323,705 328,989 -------------------------------------------------------------------------------- Total liabilities and equity 485,041 487,954 --------------------------------------------------------------------------------
The total assets reported at September 30, 2014 have decreased by $2.9 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 $63.9 million in the cash position of the Company during the nine months ended September 30, 2014 was due to cash outflows of $51.6 million on Atrush Block appraisal and development activities, $8.6 million on interest payments to bondholders, $5.5 million on G&A and other cash expenses, $2.5 million in positive cash movements due to changes in working capital items, and $0.7 million used on discontinued operations.
Condensed Interim Consolidated Cash Flow Statement
(Unaudited, expressed in thousands of United States Dollars)
Three months Nine months ended September ended September 30, 30, 2014 2013 2014 2013 -------------------------------------------------------------------------------- Operating activities Net loss from continuing operations (1,510) (820) (5,460) (2,324) Adjustments for: Interest expense on senior secured bonds 1,321 - 3,964 - - net Share based payments expense 51 159 259 725 Depreciation and amortisation expense 14 19 38 54 Impairment loss - - - 84 Interest income (25) (7) (38) (26) Foreign exchange (gain) / loss (39) 63 (33) 46 Changes in provisions 154 (20) 579 41 Changes in other current assets 74 258 22 179 Changes in current tax liabilities 2 15 (63) (22) Changes in inventories - - - 114 Changes in accounts payable and accrued (1,113) 7,589 (2,267) 6,117 expenses Cash used in discontinued operations (116) 32 (660) 13 Net cash (outflows to) / inflows from (1,187) 7,288 (3,659) 5,001 operating activities -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
Investing activities Interest received on cash deposits 25 7 38 26 Repayment of deferred liability - (5,000) - (5,000) Purchase of property, plant and (2) - (45) - equipment Purchases of intangible assets (22,959) (16,185) (51,624) (26,505) Net cash outflows to investing (22,936) (21,178) (51,631) (31,479) activities -------------------------------------------------------------------------------- --------------------------------------------------------------------------------
Financing activities Interest payments to bondholders - - (8,625) - Net cash outflows to financing - - (8,625) - activities --------------------------------------------------------------------------------
Effect of exchange rate changes on cash (17) 26 (33) (27) and cash equivalents --------------------------------------------------------------------------------
Change in cash and cash equivalents (24,140) (13,864) (63,948) (26,505) Cash and cash equivalents, beginning of 102,780 28,575 142,588 41,216 the period Cash and cash equivalents, end of the 78,640 14,711 78,640 14,711 period --------------------------------------------------------------------------------
OUTLOOK
The outlook is as follows:
Atrush Block
Current drilling plans include completing drilling and testing operations on the CK-6 eastern area appraisal well in the fourth quarter of 2014, re-entering and testing the AT-3 Phase 2 eastern area appraisal well in early 2015, and planning and site preparations for additional development and or appraisal drilling in 2015.
Works are in progress to implement the 30,000 bopd Phase 1 production facility. The civil construction site preparation work for the facility is expected to be complete in the final quarter of 2014. Production modules for the facility are being fabricated for 2015 delivery. A workover rig will be used in early 2015 to conduct testing and, if successful, completion operations on CK-5 and CK-8, and to complete AT-2 and AT-4 for tie-in to the Chiya Khere production facility, which is scheduled for commissioning in the third quarter of 2015.
Front end engineering and design ("FEED") has been completed on a dedicated feeder pipeline between the Chiya Khere production facility and the tie-in point on the main export pipeline at Kurdistan Crude Pipeline pumping station #2 ("KCP2") at kilometre 92. Initial work on the elevated section of the right of way over the Chiya Khere mountain started in September 2014. Pipeline commissioning is expected to be completed in time for production start-up in the third quarter of 2015.
New Ventures
As part of its normal business the Company continues to evaluate new opportunities in the MENA region.
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 nine months ended September 30, 2014 the Company spent $64.8 million of the budgeted total for the year 2014.
The Company believes, based on the forecasts and projections it has prepared and the financing initiative being pursued by the Company at the time this MD&A was approved, that it 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.
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 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 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 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. 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", "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 Corporation.
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 Corporation 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 Corporation to predict all of these factors and to assess in advance the impact of each such factor on the Corporation'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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