Canada NewsWire
VANCOUVER, May 8, 2019
VANCOUVER, May 8, 2019 /CNW/ - ShaMaran Petroleum Corp. ("ShaMaran" or the "Company") (TSX VENTURE: SNM) (OMX: SNM) is pleased to announce its financial and operating results for the three months ended March 31, 2019. Unless otherwise stated all currency amounts indicated as "$" in this news release are expressed in thousands of United States dollars.
HIGHLIGHTS
Chris Bruijnzeels, President and CEO of ShaMaran, commented "I am excited to see Atrush producing at a level of 30Mbopd. We now are looking forward to the AT-3 performance during the Heavy Oil Extended Well Test. We are on target with drilling and procurement of the early production facilities to increase our production to 50 Mbopd in the second half of 2019. We are very pleased to be near to the conclusion of the acquisition of an additional interest in Atrush. The parties to the agreements are working diligently on closing which we expect imminently."
Operations
Financial and Corporate
1 | The Exploration Costs Receivable is related to the repayment of certain development costs that ShaMaran paid on behalf of the KRG which, for purposes of repayment, are governed under the Atrush PSC and the related Facilitation Agreement and are deemed to be Exploration Costs. |
Reserves and Resources
OUTLOOK
Operations
The Company provides the following guidance for 2019:
Following the 2019 drilling program, the extended well testing in AT-3 and increased production, the Company expects to further assess the significant undeveloped Atrush resource base with the potential to grow to approximately 100.0 Mbopd production. Management expects that investment decisions for further phases of development can be made by mid-2020.
Financing and corporate
2 | 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. |
FINANCIAL RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2019
Atrush production operations and work on the Atrush development program continued throughout the first three months of 2019.
Financial Results
The net loss was primarily driven by the gross margin on Atrush oil sales and was offset by finance cost, the substantial portion of which was expensed borrowing costs on the Company's bonds.
First quarter 2018 revenues were inflated due to the once-off reconciliation of a commercial arrangement between ShaMaran and TAQA. The Company's entitlement share of Atrush oil production in the first two quarters of 2018 included an adjustment for the exploration cost sharing arrangement between TAQA and GEP. TAQA and GEP had under the Atrush JOA agreed a priority arrangement for sharing their combined initial $49.9 million share of exploration cost oil revenues such that TAQA received the initial $10.8 million and GEP received the next $39.1 million. Thereafter cost oil revenues for these two parties has been determined by their relative participating interests in the Atrush PSC. The Company's entitlement share of oil sold in 2018 reflects a full recovery of the $39.1 million. The Company estimates that the commercial arrangement resulted in a total net uplift in entitlement revenues of approximately $23 million.
Finance cost in the first quarter included an exceptional $2.8 million of total non-cash bond re-measurement and transaction amortization costs as required under accounting standard IFRS 9 Financial Instruments.
Condensed Interim Statement of Comprehensive Income
(Unaudited, expressed in thousands of United States Dollars)
For the three months ended March 31, | |||||
2019 | 2018 | ||||
Revenues | 12,071 | 26,501 | |||
Cost of goods sold: | |||||
Lifting costs | (4,226) | (2,426) | |||
Other costs of production | (680) | (202) | |||
Depletion | (5,401) | (9,540) | |||
Gross margin on oil sales | 1,764 | 14,333 | |||
General and administrative expense | (1,580) | (925) | |||
Depreciation and amortisation expense | (2) | (4) | |||
Income from operating activities | 182 | 13,404 | |||
Finance income | 408 | 443 | |||
Finance cost | (9,067) | (4,230) | |||
Net finance cost | (8,659) | (3,787) | |||
(Loss)/income before income tax expense | (8,477) | 9,617 | |||
Income tax expense | (18) | (16) | |||
(Loss)/income for the period | (8,495) | 9,601 | |||
Other comprehensive income | |||||
Items that may be reclassified to profit or loss: | |||||
Currency translation differences | (3) | 18 | |||
Total other comprehensive (loss)/income | (3) | 18 | |||
Total comprehensive (loss)/income for the period | (8,498) | 9,619 | |||
Condensed Interim Consolidated Balance Sheet
(Unaudited, expressed in thousands of United States Dollars)
At March 31, 2019 | At December 31, 2018 | |||
Assets | ||||
Non-current assets | ||||
Property, plant and equipment | 194,584 | 195,908 | ||
Intangible assets | 67,619 | 67,829 | ||
Loans and receivables | 20,525 | 25,184 | ||
282,728 | 288,921 | |||
Current assets | ||||
Cash and cash equivalents, unrestricted | 37,822 | 24,586 | ||
Cash and cash equivalents, restricted | 53 | 67,884 | ||
Loans and receivables | 33,835 | 36,099 | ||
Other current assets | 2,265 | 2,286 | ||
73,975 | 130,855 | |||
Total assets | 356,703 | 419,776 | ||
Liabilities and equity | ||||
Current liabilities | ||||
Accrued interest expense on bonds | 5,447 | 14,080 | ||
Accounts payable and accrued expenses | 4,931 | 3,875 | ||
Current tax liabilities | 22 | 16 | ||
10,400 | 17,971 | |||
Non-current liabilities | ||||
Borrowings | 189,448 | 236,717 | ||
Provisions | 9,686 | 9,559 | ||
Pension liability | 1,318 | 1,330 | ||
200,452 | 247,606 | |||
Total liabilities | 210,852 | 265,577 | ||
Equity | ||||
Share capital | 637,688 | 637,538 | ||
Share based payments reserve | 6,495 | 6,495 | ||
Cumulative translation adjustment | (15) | (12) | ||
Accumulated deficit | (498,317) | (489,822) | ||
Total equity | 145,851 | 154,199 | ||
Total liabilities and equity | 356,703 | 419,776 |
Total assets decreased in the first three months of 2019 by $63.1 million with a corresponding decrease in borrowings and related accrued interest by $55.9 million and increases in accounts payable and accrued expenses by $1.0 million, pension and other non-current liabilities by $0.1 million, share capital by $0.2 million and the accumulated deficit by $8.5 million related to the loss incurred in the period.
Property, plant & equipment assets decreased during the 3 months of 2019 by $1.3 million which was due to depletion and depreciation costs of $5.4 million net of additions of $4.0 million in Atrush development costs and $0.1 million in capitalised borrowing costs. The decrease in intangible assets by $210 thousand during the first quarter of 2019 resulted from the release of an overestimate for Atrush insurance. Loans and receivables decreased by $6.9 million due to collecting $3.7 million of Atrush Development Cost and Feeder Pipeline Cost loans and $0.7 million of Atrush Exploration Cost Receivables, and a draw-down of $2.5 million of accounts receivables on Atrush oil sales.
Condensed Interim Consolidated Cash Flow Statement
(Unaudited, expressed in thousands of United States Dollars)
For the three months ended March 31, | |||||||
2019 | 2018 | ||||||
Operating activities | |||||||
(Loss)/income for the period | (8,495) | 9,601 | |||||
Adjustments for: | |||||||
Borrowing costs – net of amount capitalised | 9,057 | 4,156 | |||||
Depreciation, depletion and amortisation expense | 5,403 | 9,544 | |||||
Unwinding discount on decommissioning provision | 10 | 5 | |||||
Foreign exchange (gain)/loss | (5) | 70 | |||||
Interest income | (403) | (443) | |||||
Changes in accounts receivables on Atrush oil sales | 2,460 | (12,544) | |||||
Changes in accounts payable and accrued expenses | 1,056 | (2,848) | |||||
Changes in other current assets | 21 | (88) | |||||
Changes in current tax liabilities | 6 | 9 | |||||
Changes in pension liability | - | 1 | |||||
Net cash inflows from operating activities | 9,110 | 7,463 | |||||
Investing activities | |||||||
Loans and receivables – payments received | 4,650 | 540 | |||||
Interest received on cash deposits | 216 | 8 | |||||
Insurance credit for intangible assets | 209 | - | |||||
Purchases of intangible assets | - | (61) | |||||
Loans and receivables – payments issued | - | (394) | |||||
Purchase of property, plant and equipment | (3,820) | (1,449) | |||||
Net cash inflows from / (outflows to) investing activities | 1,255 | (1,356) | |||||
Financing activities | |||||||
Payments to bondholders - interest | (14,950) | - | |||||
Bonds retired | (50,000) | - | |||||
Net cash outflows to financing activities | (64,950) | - | |||||
Effect of exchange rate changes on cash and cash equivalents | (10) | (13) | |||||
Change in cash and cash equivalents | (54,595) | 6,094 | |||||
Cash and cash equivalents, beginning of the year | 92,470 | 5,256 | |||||
Cash and cash equivalents, end of the period | 37,875 | 11,350 |
The decrease by $54.6 million in the cash position of the Company in the first three months of 2019 was due to cash inflows of $5.3 million from operating activities after G&A and other cash expenses, $3.8 million of positive cash adjustments on accounts receivables payables and other working capital items and $4.9 million of principal and interest payments on KRG loans, deposits and the Exploration Cost Receivables which were offset by cash outflows of $50 million on retirement of bonds, $15 million on bond coupon interest payments and $3.6 million on Atrush development activities.
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 8:00 p.m. Toronto Time on May 8, 2019.
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. As announced in ShaMaran's April 3, 2019 news release, the Company has signed agreements with Marathon Oil KDV B.V. and TAQA Atrush B.V to increase the Company's interest in the Atrush Block to 27.6%. Currently, certain conditions to close remain outstanding.
ShaMaran 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. Pareto Securities AB is the Company's Certified Advisor on NASDAQ First North, +46 8 402 5000, [email protected].
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).
The Company plans to publish on August 7, 2019 its financial and operational results for the six months ended June 30, 2019.
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, 2018, 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.
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