VANCOUVER, BC, July 12, 2021 /CNW/ - ShaMaran Petroleum
Corp. ("ShaMaran" or the "Company") (TSXV: SNM) Nasdaq First
North Growth Market: SNM) is pleased to announce that it has
signed an agreement with a subsidiary of TotalEnergies S.E.
("TotalEnergies") to acquire its affiliate (TEPKRI Sarsang A/S)
holding an 18% non-operated participating interest in the Sarsang
Production Sharing Contract (the "Sarsang PSC") in the Kurdistan
Region of Iraq (the "Acquisition")
for an initial consideration of USD 155
million plus working capital adjustments amounting to
USD 14.2 million as of January 1, 2021. 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.
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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.
OTHER
This information is information that ShaMaran is obliged to make
public pursuant to the EU Market Abuse Regulation. This
information was submitted for publication, through the agency of
the contact persons set out below, on July
12, 2021 at 5:30 p.m. Eastern
Time.
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 (Stockholm), +46 8402 5000,
certifiedadviser.se@paretosec.com
For the Acquisition representing ShaMaran, Pareto Securities AS
has been engaged as manager and bookrunner for the bond and equity
financings. Also in connection with the Acquisition for
ShaMaran, Moelis & Company UK LLP is acting as M&A
financial advisor and Arkwright London is acting as bond
advisor.
This news release does not constitute an offer to sell or the
solicitation of an offer to buy any securities of the Company in
any jurisdiction. There shall be no offer or sale of, or
solicitation of an offer to buy, any securities referred to herein
in any jurisdiction in which such offer, sale or solicitation would
be unlawful.
The new bond and share subscription rights referred to herein,
and any shares issuable upon exercise of such subscription rights,
have not been and will not be registered under the United States
Securities Act of 1933, as amended (the "1933 Act"), or any state
securities laws, and may not be directly or indirectly offered,
sold, resold or exercised, as applicable, in the United States or to, or for the account or
benefit of, any U.S. person (as those terms are defined in
Regulation S under the 1933 Act) unless they are registered under,
or the transaction is exempt from the registration requirements of,
the 1933 Act and applicable state securities laws.
Nemesia currently holds a USD 22.8 million loan due
from the Company which accrues interest at 5% per annum and
entitles Nemesia to receive a monthly allotment of 2,280,000
ShaMaran common shares. In connection with the contemplated
exchange by Nemesia of USD 7.2 million of the loan into
the proposed new bond, (i) the interest rate on the remaining
USD 15.6 million loan will be adjusted to match the
interest rate on the new bond, which sum will be payable in cash
plus an additional interest amount of 2% per annum payable in kind,
and (ii) the monthly ShaMaran common share allotment will be
eliminated. The contemplated exchange of part of the
Company's existing debt of USD 22.8
million owed to Nemesia into the new bond and the amendments
to such loan described above will constitute a "related party
transaction" for ShaMaran within the meaning of Multilateral
Instrument 61-101 of the Canadian Securities Administrators ("MI
61-101"), as Nemesia is a related party of the Company.
Unless an exemption applies, MI 61-101 requires that an
issuer obtain a formal valuation and "minority approval" by
disinterested shareholders for a related party transaction.
The proposed debt exchange and loan amendments are exempt from the
formal valuation and minority approval requirements of MI 61-101
pursuant to sections 5.5(a) and 5.7(a) thereof, on the basis of the
fair market value of the subject matter of, or consideration for,
the transaction being less than 25% of the Company's equity market
capitalization, as calculated in accordance with MI 61-101.
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 herein is made
only as of the date of this news release, and the Company
undertakes no obligation to update any forward-looking information
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.
Without limiting the foregoing, this news release contains
forward-looking information pertaining to: completion of the
processing facility expansion at Swara Tika field, the expected
timing thereof and its effect on future production; expected field
operating expenditures; the cash flow and production impact of the
Acquisition for the Company; connection of the Sarsang block to the
Atrush feeder pipeline and effect on export market access; the
intended debt and equity financings, including anticipated terms,
refinancing existing debt into the new bond, and effecting the
proposed equity issue by way of a rights offering; and closing of
the Acquisition. There is no assurance that the forward-looking
information contained herein will prove to be correct or that the
expectations and assumptions upon which they are based will occur
or be realized. Statements herein containing forward-looking
information are not guarantees of future performance or promises of
future outcomes. Actual results or events will differ, and the
differences may be material and adverse to the Company.
ABOUT SHAMARAN
ShaMaran is a Kurdistan focused
oil development and exploration company which currently 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 Acquisition will 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"
and is part of the "Lundin Group of Companies".
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SOURCE ShaMaran Petroleum Corp.