VANCOUVER, BRITISH COLUMBIA -- (Marketwired) -- 03/09/18 -- ShaMaran Petroleum Corp. ("ShaMaran" or the "Company") (TSX VENTURE: SNM)(OMX: SNM) is pleased to announce its financial and operating results for year ended December 31, 2017. Unless otherwise stated all currency amounts indicated as "$" in this news release are expressed in thousands of United States dollars.
Chris Bruijnzeels, President and CEO of ShaMaran, commented, "2017 was a defining year for ShaMaran with start of production in July 2017. I am encouraged by the production performance and the continued payments from the Kurdistan Regional Government which will allow us to continue investing in Atrush and work towards defining the next phase of development."
HIGHLIGHTS AND DEVELOPMENTS
Operations
-- Oil production on the Atrush Block commenced in July 2017. Average
production in the fourth quarter of 2017 was 21,700 barrels of oil per
day ("bopd"). To address certain production constraints the facilities
were shut down in the beginning of October. These constraints have now
successfully been resolved. In winter months the Atrush Production
Facilities are limited to processing approximately 27,000 bopd of the
total 30,000 bopd capacity due to low ambient temperatures which reduces
the amount of heat otherwise available to process the oil to export
specifications.
-- 3.4 million barrels of oil were produced and exported from Atrush for
sale to the Kurdistan Regional Government ("KRG") during the second half
of 2017 resulting in an average production of 18.1 thousand barrels per
day. The Company's entitlement share(1) of 2017 exports was
approximately 400 thousand barrels which were sold at an average netback
price(2) of $44.38 per barrel of oil. In the fourth quarter of 2017 oil
was exported and sold from Atrush totalling 2.0 million barrels. The
Company's entitlement share of fourth quarter exports was approximately
295 thousand barrels which were sold at an average netback price of
$47.0 per barrel of oil.
-- The Company's cash inflows from Atrush related activities are comprised
of three elements:
-- Entitlement share of Atrush PSC profit oil and cost oil: from
commencement of exports in July 2017 up to the date of the MD&A the
Company has received payments totalling $8.5 million which reflect
its entitlement share of the $44.2 million in total payments
received by the Atrush Non-Government Contractors from the KRG for
July through November 2017 oil sales.
-- Atrush Exploration Costs receivable: over this same period the
Company collected a further $458 thousand of Atrush Exploration Cost
receivables from the KRG's entitlement share of July through
November 2017 oil sales.
-- The Atrush Development Cost Loan and the Atrush Feeder Pipeline Cost
Loan ("the KRG Loans"), In January 2018 the Non-Government
Contractors and the KRG agreed that substantially all the first two
instalments on the KRG Loans, which were due in November and
December of 2017, would be offset against amounts owed to the KRG
for security services which they provided for the Atrush operations,
and an Atrush production bonus. The KRG Loan balances collected by
the Company under the agreement was $2.6 million. January 2018 and
subsequent invoices are expected to be paid in line with the current
practice for crude oil sales payments. The January 2018 invoice is
therefore expected to be paid in April 2018.
-- The Chiya Khere-7 ("CK-7") well, which was spudded on September 17, 2017
reached a final depth of 1,861 metres in early November 2017. The
reservoir section was encountered approximately 114 metres shallower
than prognosis which had a positive impact of the Company's 2P reserves
reported as at December 31, 2017. The well was drilled on time and under
budget.
-- In February 2018 a new sales agreement was concluded between the Atrush
Non-Government Contractors and the KRG for the sale of Atrush oil
whereby the KRG will buy oil exported from the Atrush field by pipeline
at the Atrush block boundary based upon the Dated Brent oil price minus
$15.73 ($16.04 under the previous agreement) for quality discount and
all local and international transportation costs. This discount is based
on the same principles as other oil sales agreements in the Kurdistan
Region of Iraq and reflects a better API gravity than was assumed in the
previous sales agreement.
Corporate
-- On January 30, 2017 the Company completed the issue of 360 million
common shares of ShaMaran on a private placement basis (the "Private
Placement") at a price per share of CAD 0.10 (equal to SEK 0.67) which
resulted in gross proceeds to the Company of $27.3 million ($26.4
million net of transaction related costs). Zebra Holdings and
Investments SARL, Lorito Holdings SARL and Lundin Petroleum BV, the
Company's major shareholders, subscribed for 43,463,618 shares,
16,984,621 shares and 17,800,000 shares, respectively, in the Private
Placement.
-- On February 15, 2018 the Company reported estimated reserves and
contingent resources for the Atrush field as at December 31, 2017. Total
Field Proven plus Probable ("2P") Reserves on a property gross basis for
Atrush increased from 85.1 MMbbl reported as at December 31, 2016 to
102.7 MMbbl which, when 2017 Atrush production of 3.4 MMbbl is included,
represents an increase of 25 percent. Total Field Unrisked Best Estimate
Contingent Oil Resources ("2C")(3) on a property gross basis for Atrush
was approximately the same as the 2016 estimate at 296 MMbbl. Total
discovered oil in place in the Atrush Block is a low estimate of 1.5
billion barrels, a best estimate of 2.1 billion barrels and a high
estimate of 2.9 billion barrels.
OUTLOOK
Operations
-- Production guidance for Atrush gross in 2018 is 25,000 to 30,000 bopd
with lifting costs for the year forecasted at $6.8/bbl.
-- Capital expenditure guidance is $19.6 million (20.1% working interest in
Atrush) which includes:
-- identify and install additional heat sources ahead of the next
winter months;
-- continue with program to identify debottleneck opportunities to
further increase production capacity beyond 30,000 bopd;
-- testing and completion of the CK-7 well;
-- install the CK-7 flow line and bring CK-7 into production;
-- drilling, testing and completion of Chiya Khere ("CK-10"), a sixth
development well;
-- drilling and completion of Chiya Khere ("CK-9"), a dedicated water
disposal well; and
-- conducting extended testing of the CK-6 well which is located on the
eastern side of the Atrush Block and which is outside the 2P reserve
area of Atrush. This would involve the installation of temporary
production facilities near the Chamanke-C well pad and the delivery
by truck of oil to the main Phase 1 Production Facilities.
-- Following the results of the CK-7 and CK-10 wells, the extended well
testing in CK-6 and sustained production from the Phase 1 Production
Facilities the Company expects to further assess the significant
undeveloped Atrush resource base with the potential to grow organically
to approximately 100,000 bopd production.
FINANCIAL AND OPERATING RESULTS FOR THE YEAR ENDED DECEMBER 31, 2017
Oil production commenced on July 3, 2017 from the Atrush Block located in the Kurdistan Region of Iraq and work continued on the Atrush development program throughout the year 2017.
Financial Results
The Company has reported in 2017 a net loss of $11.5 million which was primarily driven by finance cost, the substantial portion of which was expensed borrowing costs on the Company's bonds, and routine general and administrative expenses. These charges have been offset by the gross margin on Atrush oil sales, interest income on Atrush cost loans and interest on cash held in short term deposits.
Statement of Comprehensive Income
(Audited, expressed in thousands of United States Dollars)
For the year ended December 31,
2017 2016
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Revenues 17,689 -
Cost of goods sold:
Lifting costs (5,547) -
Other costs of production (834) -
Depletion (7,628) -
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Gross margin on oil sales 3,680 -
Service fee income - 120
Share based payments expense (11) (249)
Depreciation and amortisation expense (26) (45)
General and administrative expense (4,511) (3,811)
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Loss from operating activities (868) (3,985)
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Finance income 1,649 484
Finance cost (12,195) (5,586)
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Net finance cost (10,546) (5,102)
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Loss before income tax expense (11,414) (9,087)
Income tax expense (85) (69)
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Loss for the year (11,499) (9,156)
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Other comprehensive income
Items that may be reclassified to profit
or loss:
Currency translation differences 31 22
Items that will not be reclassified to
profit or loss:
Actuarial (loss) / gain on defined
pension plan (13) 15
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Total other comprehensive income 18 37
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Total comprehensive loss for the year (11,481) (9,119)
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Consolidated Balance Sheet
(Audited, expressed in thousands of United States Dollars)
As at December 31,
2017 2016
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Assets
Non-current assets
Property, plant and equipment 184,921 174,658
Intangible assets 89,119 89,007
Loans and receivables 44,696 46,114
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318,736 309,779
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Current assets
Loans and receivables 32,277 7,252
Cash and cash equivalents, unrestricted 3,094 4,416
Cash and cash equivalents, restricted 2,162 -
Other current assets 212 224
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37,745 11,892
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Total assets 356,481 321,671
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Liabilities and equity
Current liabilities
Borrowings 185,692 -
Accounts payable and accrued expenses 4,827 6,434
Accrued interest expense on bonds 2,799 2,503
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193,318 8,937
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Non-current liabilities
Provisions 9,427 8,869
Pension liability 1,781 1,670
Borrowings - 165,129
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11,208 175,668
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Total liabilities 204,526 184,605
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Equity
Share capital 637,538 611,179
Share based payments reserve 6,495 6,484
Cumulative translation adjustment (30) (61)
Accumulated deficit (492,048) (480,536)
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Total equity 151,955 137,066
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Total liabilities and equity 356,481 321,671
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Total assets increased over the year 2017 by $34.8 million due to increases in share capital and equity reserves by $26.4 million, borrowings and accrued interest by $20.8 million and other non-current liabilities by $0.7 million which were offset by an increase in the accumulated deficit by $11.5 million, principally due to the net loss recorded in the period and a decrease in current liabilities by $1.6 million.
Property, plant & equipment assets increased during the 12 months ended December 31, 2017 by $10.3 million which was due to additions of $9.1 million in Atrush development costs and $8.8 million in capitalised borrowing net of $7.6 million in depletion costs. The increase in intangible assets by $112 thousand during the year 2017 resulted from net additions of $104 thousand and $16 thousand in capitalised borrowing costs net of $8 thousand in amortisation and revaluation of foreign currency item. Loans and receivables increased by $23.6 million from accruing $14.0 million of accounts receivables on Atrush oil sales, funding $7.2 million of Feeder Pipeline costs and $3.7 million of the KRG's share of development costs, and accruing interest of $1.5 million on the outstanding loan balances, net of $0.2 million Atrush Exploration Cost Receivables collected and $2.6 million of loans amounts due from the KRG which were offset against amounts owed to the KRG.
Consolidated Cash Flow Statement
(Audited, expressed in thousands of United States Dollars)
For the year ended December 31,
2017 2016
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Operating activities
Loss for the year (11,499) (9,156)
Adjustments for:
Interest expense on borrowings - net 12,089 5,518
Depreciation, depletion and amortisation
expense 7,654 45
Foreign exchange loss 102 -
Share based payments expense 11 249
Unwinding discount on decommissioning
provision 4 68
Actuarial (loss) / gain on pension plan (13) 15
Interest income (1,649) (484)
Changes in pension liability 37 (18)
Changes in other current assets 12 (24)
Changes in current tax liabilities - (31)
Changes in accounts payable and accrued
expenses (1,607) (3,126)
Changes in accounts receivables on
Atrush oil sales (13,957) -
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Net cash outflows to operating activities (8,816) (6,944)
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Investing activities
Loans and receivables - payments received 2,806 -
Interest received on cash deposits 107 44
Purchases of intangible assets (82) (7)
Purchase of property, plant and equipment (8,621) (32,073)
Loans and receivables - payments issued (10,914) (4,769)
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Net cash outflows to investing activities (16,704) (36,805)
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Financing activities
Proceeds from shares issued 27,281 -
Share issue related transaction costs (922) -
Proceeds from shares issued - 17,000
Bond transaction costs - (777)
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Net cash inflows from financing activities 26,359 16,223
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Effect of exchange rate changes on cash
and cash equivalents 1 21
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Change in cash and cash equivalents 840 (27,505)
Cash and cash equivalents, beginning of
the year 4,416 31,921
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Cash and cash equivalents, end of the year 5,256 4,416
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The increase by $0.8 million in the cash position of the Company in 2017 was due to cash inflows of $26.4 million in net proceeds from the sale of the Company's shares in a private placement completed in January 2017, $6.7 million from operating activities after G&A and other cash expenses, and $2.8 million of loan repayments which were offset by negative cash adjustments of $15.5 million on accounts receivables, payables and other working capital items, and cash outflows of $8.7 million on Atrush development activities and $10.9 million on loans provided to the KRG.
OTHER
This information in this release is subject to the disclosure requirements of ShaMaran Petroleum Corp. under the EU Market Abuse Regulation and the Swedish Securities Market Act. This information was publicly communicated on March 9, 2018 at 2:30 p.m. Vancouver time.
ABOUT SHAMARAN
ShaMaran Petroleum Corp. is a Kurdistan focused oil development and exploration company with a 20.1% direct interest in the Atrush oil discovery. The Atrush Block is currently undergoing an appraisal and development campaign.
ShaMaran is a Canadian oil and gas company listed on the TSX Venture Exchange and the NASDAQ Stockholm First North Exchange (Sweden) 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. Pareto Securities AB is the Company's Certified Advisor on NASDAQ Stockholm First North.
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 also 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", "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 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.
Reserves and resources: ShaMaran Petroleum Corp.'s reserve and contingent resource estimates are as at December 31, 2017, and have been prepared and audited 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 ("COGE Handbook"). Unless otherwise stated, all reserves estimates contained herein are the aggregate of "proved reserves" and "probable reserves", together also known as "2P reserves". Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved plus probable plus possible reserves.
Contingent resources: Contingent resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political and regulatory matters or a lack of markets. There is no certainty that it will be commercially viable for the Company to produce any portion of the contingent resources.
BOEs: BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf per 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.
(1) The Company's entitlement share includes an adjustment for the exploration cost sharing arrangement between TAQA and GEP.
(2) This includes a discount to Dated Brent for oil quality and all local and international transportation costs.
(3) This estimate of remaining recoverable resources (unrisked) includes contingent resources that have not been adjusted for risk based on the chance of development. It is not an estimate of volumes that may be recovered.
Contacts:
Chris Bruijnzeels
President and CEO
ShaMaran Petroleum Corp.
+41 22 560 8605
chris.bruijnzeels@shamaranpetroleum.com
Sophia Shane
Corporate Development
ShaMaran Petroleum Corp.
+1 604 689 7842
sophias@namdo.com
www.shamaranpetroleum.com
Robert Eriksson
Investor Relations, Sweden
ShaMaran Petroleum Corp.
+46 701 112615
reriksson@rive6.ch
