VANCOUVER, BC, Nov. 5, 2020 /CNW/ - ShaMaran Petroleum
Corp. ("ShaMaran" or the "Company") (TSXV: SNM) (OMX:
SNM) today released its financial and operating results
and related management discussion and analysis for the three and
nine months ended September 30, 2020.
All currency amounts indicated as "$" in this news release are
expressed in United States
dollars. View PDF version
ShaMaran President and CEO, Dr. Adel
Chaouch commented, "With the support of our stakeholders
this quarter we have been able to conclude the measures taken to
successfully resolve ShaMaran's liquidity shortfall of earlier this
year and secure additional stability for the Company. Our revenues
and operational cash flows are up thanks to stronger oil prices and
the concerted efforts of the partnership to deliver sustained
pre-COVID levels of Atrush production. We have also implemented
prudent measures to scale back development spending and maintain
the optimality to quickly ramp back up under the right
conditions. We remain committed in our efforts to strengthen
the Company in the face of the negative impacts of what has become
an extended pandemic. While markets will need more time to find
firm footing, I am optimistic about ShaMaran's future, buoyed by
the positive developments, continued strong production and improved
results of this quarter."
THIRD QUARTER 2020 HIGHLIGHTS AND KEY EVENTS
Financial
Liquidity shortfall successfully resolved and strengthened
liquidity position:
- On July 5, 2020 the Company and
Nordic Trustee AS, acting as trustee on behalf of the bondholders,
agreed on amended bond terms which successfully addressed the
Company's financial covenant breach and the liquidity shortfall.
Notably the Company drew $22.8
million in cash from Nemesia S.à.r.l. ("Nemesia"), a company
controlled by a trust settled by the estate of the late
Adolf H. Lundin, under the terms of
a Liquidity Guarantee provided to the trustee on behalf of the
bondholders by Nemesia. This has allowed for full payment to
bondholders of the July 2020 interest
payment and added $11.4 million of
cash pledged to the bondholders for future bond obligations.
Consistent oil sales and entitlement payments:
- The Kurdistan Regional Government of Iraq ("KRG") has in the following month paid
for oil deliveries and invoiced entitlements from March to
September 2020.
- The KRG has communicated its commitment to future payment of
$41.7 million owed to the Company for
$34 million of deliveries from
November 2019 to February 2020 and an additional $7.7 million of Atrush Exploration Costs
receivable invoiced over the same period. The Company remains
actively engaged with the KRG to progress resolving this
matter.
Operations
Strong Atrush production:
- Continued high level of production in Q3 2020 with an average
daily production of 46.1 Mbopd compared to a similar level in Q2
2020 production of 46.9 Mbopd. The 2020 sustained high level of
production is due to stable contributions from 2019 wells,
increased processing capacity at the Early Production Facility
("EPF") as well operational resilience due to early and effective
responses to operational challenges posed by the Global COVID-19
pandemic.
- Produced 39% more oil in Q3 2020 compared to Q3 2019 production
(46.1 Mbopd vs. 33.2 Mbopd), due to the increased processing
capacities installed in September
2019 and additional contributions from new wells, and was
within the 2020 production guidance range of 44,000 to 50,000
bopd.
Significant decrease in lifting cost per
barrel:
- The average lifting cost per barrel of oil produced from Atrush
in the third quarter was $3.97 per
barrel which was significantly down 48% from $7.62 per barrel in Q3 2019 and down 26% from
$5.36 per barrel in Q2 2020. The
significant reduction from Q3 2019 was mainly due to making
redundant certain additional costs which were incurred in Q3 2019
related to the management of salt issues, water handling and well
workovers, and to spreading certain fixed operating costs over a
larger production volume in Q3 2020 which was 39% higher than Q3
2019.
Responsible spending:
- The Company and the operator, TAQA Atrush BV, have agreed and
implemented responsible measures to scale back Atrush development
spending for 2020 from a planned $131
million to the current latest estimate of $33 million while retaining the flexibility to
ramp up development with strengthening oil prices.
Improving operational cash flows:
- The Company generated $4.5
million in cash from operations, and $9.0 million excluding adjustments for working
capital items, in the third quarter of 2020 compared with
$1.6 million, and negative
$1.5 million excluding working
capital items in the previous quarter. The higher cash generation
was mainly due to improved oil prices and reduced lifting
costs.
Reliable COVID-19 procedures:
- The comprehensive COVID-19 action plan, implemented in
February 2020, continues with
overriding objectives of ensuring personnel safety and wellbeing as
well as assuring efficient business continuity. The policies and
procedures are being continually refined and improved as Atrush
transitions to the "new normal" COVID-19 operating
environment.
Corporate
Engagement with stakeholders:
- Dr. Adel Chaouch, President and
CEO of ShaMaran, presented to shareholders and investors at a
virtual town hall meeting on Thursday
September 24, 2020 underlining managements' commitment to
transparency and stakeholder engagement as a conduit for providing
feedback fundamental on the path to value creation.
SELECTED OPERATING AND FINANCIAL INFORMATION
The following table includes selected operating and
financial information of the Company for the periods indicated. A
further discussion of the Company's operating and financial
information are included in the interim consolidated financial
statements for the three and nine months ended September 30, 2020 and the related Management's
Discussion and Analysis report. These documents are available on
the Company's website at www.shamaranpetroleum.com or on SEDAR
at www.sedar.com.
|
Three months ended September 30
|
Three months ended
June 30
|
|
2020
|
2019
|
2020
|
Production
information
|
|
|
|
Atrush average daily
oil production - gross 100% field (Mbopd)
|
46.1
|
33.2
|
46.9
|
ShaMaran's entitlement
in Atrush oil sales (Mbbls)
|
563
|
405
|
533
|
Financial
information (in USD Thousands)
|
|
|
|
Revenue
|
15,358
|
18,804
|
7,393
|
Gross margin on oil
sales
|
3,952
|
5,156
|
(6,169)
|
EBITDAX
|
8,707
|
9,424
|
(1,882)
|
Net finance
cost
|
4,654
|
5,404
|
5,468
|
Loss for the
period
|
(2,733)
|
(2,420)
|
(14,631)
|
Cash inflow from
operations
|
4,487
|
9,048
|
1,162
|
Cash in bank
|
22,432
|
20,027
|
5,524
|
Positive / (negative)
working capital
|
29,909
|
45,770
|
(13,532)
|
Total
liabilities
|
232,920
|
216,992
|
224,056
|
Atrush production for the quarter was up 39%
compared to Q3 2019 mainly due to:
- Additional production from new wells Chiya Khere-6, Chiya
Khere-10, Chiya Khere-11, Chiya Khere-12, Chiya Khere-13 and Chiya
Khere-15;
- Debottlenecking of Atrush production facility; and
- Expansion of the EPF.
Production was very stable during Q3 2020 with overall uptime
exceeding 98%.
Revenue from Atrush oil sales relates to the
Company's entitlement share of oil sales from Atrush. There
was a significant positive impact to revenue in the third quarter
of 2020 compared to the second quarter of 2020 mainly due to the
strengthening of oil prices. Revenues in Q3 2020 were
$8 million higher than in Q2 2020 due
to a $13.39 higher average realized
price with no material impact due to lower average daily production
by 750 bopd over the period, as this was offset by higher
entitlement barrels received in the quarter related to a correction
in quantity of barrels invoiced. The decrease in revenues between
the third quarter of 2020 and 2019 was driven by lower average net
oil prices between the periods but somewhat offset by higher
average daily production (46.1Mbopd vs 33.2Mbopd). Third quarter
2020 production was sold at an average net oil price of
$27.26 per barrel after deducting
$15.78 per barrel average discount
for oil quality and transportation costs which compares,
respectively, to $46.43 and
$15.43 for oil sales made in the
third quarter of 2019. The higher Atrush production
resulted in increased revenues of $7.4
million (39%) which was offset by $10.8 million of negative impact on revenues due
to sales of oil at a lower average price by $19.17 per barrel.
Gross margin on oil sales was higher between Q2 2020
and Q3 2020 by $10.1 million due to
$8.0 million of additional revenues
as explained above as well as $2.1
million decrease in lifting and depletion costs
combined. The decreased lifting cost was mainly attributable
to stability in operations leading to a general reduction in cost
of repair and maintenance on the Atrush producing wells and
facilities. Depletion cost decrease is due mainly to the
reduction in capital spent on development between the
periods. Gross margin in Q3 2020 relative to the same
quarter last year was lower by $1.2
million mainly due to the decrease in revenues related to
lower oil prices and higher depletion costs driven by 39% higher
production between the periods. The higher production did
contribute positively to oil sales revenue helping to offset the
negative impact of lower oil prices on the gross margin as did
significantly lower lifting costs per barrel.
EBITDAX is a non-IFRS measure of the Company's
earnings before interest, tax, depreciation, amortisation, and
exploration expense and is calculated as the net result before
financial items, taxes, depletion of oil and gas properties,
impairment costs, depreciation and exploration expenses and
adjusted for non-recurring profit/loss on sale of assets and other
income. The higher EBITDAX in Q3 2020 by $10.6 million from Q2 2020 is principally due to
additional revenues relating to improved oil prices and reductions
in lifting cost per barrel as has been discussed in the sections
above. The EBITDAX for Q3 2020 is $0.7
million lower than in Q3 2019 mainly due to lower average
oil prices between these periods the effects of which were offset
in part by additional revenues generated by higher production and
decreased lifting costs.
Net loss of $2.7
million in Q3 2020 was primarily driven by a reduced revenue
base, owing to lower Brent oil prices in the quarter, which was
consumed by cost of sales, general and admin expenses and financing
costs in the period. The net loss in Q3 2020 was lower by
$11.9 million than as reported for Q2
2020 mainly due to positive impact of stronger oil prices on
revenues as well as reductions in lifting and depletion costs, as
discussed above. Further positive effects were reductions
between the periods of general and administrative ("G&A")
expenses and finance costs, respectively, by $0.8 million and $0.8
million. The reduction in G&A expenses relates to
the conclusion of consulting and legal work principally undertaken
in the second quarter relating to refinancing activities which
culminated with amended bond terms as announced by the Company in
July 2020. The lower financing costs relates principally to a
one-time gain of $1.5 million
recorded by the Company in revaluing its bond obligations, as
required by accounting standards, following the amendment to bond
terms whereas additional debt service costs related to the related
party loan with Nemesia arising from the draw down of $22.8 million has in part offset the revaluation
gain. The increase by $0.3
million in the Q3 2020 loss over the amount reported in the
third quarter of 2019 is due to the lower gross margin between the
periods with offsetting positive effect mainly due to the one-time
revaluation gain, as has been discussed above.
Cash flow from operations of $4.5
million for Q3 2020 was up significantly from $1.2 million reported in Q2 2020 principally due
to the effects of stronger oil prices and reduced lifting costs
which were offset by the negative impact on cash from working
capital items mainly related to the pay down of accounts payable
balances between the quarters. Operational cash flows dropped by
$4.6 million between Q3 2019 and Q3
2020 despite higher production between the periods, mainly due to
weaker average oil prices realized.
OUTLOOK
Operations
The updated guidance for 2020 is as follows:
- Atrush field gross average daily production is expected to
range from 44,000 bopd to 50,000 bopd. Final 2020 production will
depend principally on well, facility and export pipeline uptimes
and any unanticipated complications arising from the COVID-19
pandemic.
- Average lifting costs are estimated to range from $4.50 per barrel to $5.10 per barrel (from previous guidance range of
$5.50 per barrel to $6.70 per barrel).
- Atrush gross capital expenditures for 2020 are estimated at
$28 million ($8 million net to ShaMaran) for previously
commenced facility improvements and planning, including the design
of facilities designed to eliminate gas flaring at Atrush, an
important initiative in environmentally responsible
operations.
- The KRG has committed to paying for monthly production and
entitlements invoiced each following month starting with
March 2020. The KRG has honored the
commitment with most recent invoice payment of $5.4 million for September deliveries received on
October 29, 2020.
Business
The Company has taken swift and decisive action to scale back
development yet retain the flexibility to ramp development back up
pending further strengthening of the underlying macro economic
factors. The Company continues to work with Atrush partners to plan
for the continued development of the significant Atrush resource
base with measures to update the Field Development Plan having
commenced. At the same time the Company continues to investigate
and screen opportunities with a view to extending value for
stakeholders.
OTHER
This information is information that ShaMaran Petroleum Corp 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, at 5:30 p.m. Eastern Time on November 5, 2020.
The Company plans to publish on March 3,
2021 its financial statements for the three and twelve
months ended December 31, 2020.
ABOUT SHAMARAN
ShaMaran is a Canadian oil and gas company with Kurdistan-focus holding, through its
wholly-owned subsidiary General Exploration Partners. Inc., a 27.6%
interest in the Atrush oil block
ShaMaran is listed on the TSX Venture Exchange and the NASDAQ
First North Growth Market (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. Pareto Securities AB is the Company's Certified Advisor on
NASDAQ First North Growth Market, +46 8 402 5000,
certifiedadviser.se@paretosec.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, 2019 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.
SOURCE ShaMaran Petroleum Corp.