Shamaran Third Quarter 2019 Financial and Operating Results

Source Press Release
Company ShaMaran Petroleum Corp. 
Tags Capital Spending, Strategy - Corporate, Financial & Operating Data
Date November 05, 2019

ShaMaran Petroleum Corp. ("ShaMaran" or the "Company") (TSX Venture: SNM) (Nasdaq First North Growth Market: SNM) today released its financial and operating results and related management discussion and analysis for the three and nine months ended September 30, 2019. All currency amounts indicated as "$" in this news release are expressed in United States dollars

In the third quarter and period subsequent Atrush delivered significant production growth ahead of schedule that will increase future cash flow. Atrush reached a milestone, producing over 1 million barrels of oil per month, met its 2019 exit-rate production target and commissioned a new production facility," said ShaMaran President and CEO Dr. Adel Chaouch. "Expanding Atrush production and increasing our working interest in Atrush to 27.6%, after consolidating ownership from four to three partners in May 2019, provides a strong and stable foundation to fund organic growth and act on new opportunities as they present themselves."

THIRD QUARTER 2019 HIGHLIGHTS AND SIGNIFICANT SUBSEQUENT EVENTS

  • Achieved significant production milestone: During July 2019, the Atrush monthly production exceeded one million barrels of oil for the first time since oil production commenced. At the date of this news release over 20 million barrels of oil have been exported from the Atrush field.

  • Reached exit-rate production ahead of schedule: Current production rate is over 45,000 bopd, meeting exit-rate target of 45,000 barrels of oil per day ("bopd") to 50,000 bopd two months ahead of schedule.

  • Annual average production delivered as planned: Atrush's production guidance for 2019 is 30,000 to 35,000 bopd. Average production for Q3 2019 was 33,167 bopd. Subsequent to third quarter, October 2019 average production was 38,040 bopd. Average daily oil production at Q3 has increased from 20,366 bopd in 2018 to 29,274 bopd in 2019. Compared to the year previous, average daily oil production increased 53% for the quarter (33,167 bopd vs. 21,675 bopd) and 44% for the nine months ended September 30 (29,274 bopd vs. 20,344 bopd).

  • Increased well capacity through to remainder of year: Atrush well capacity has been increased by 21,000 bopd during 2019, of which 10,500 bopd came online in Q3 through the completion of the Chiya Khere-12 and Chiya Khere-13 wells.

  • Increased processing capacity in lockstep with production growth: Atrush processing capacity has been increased by 20,000 bopd to 50,000 bopd, meeting guidance. An Early Production Facility at the Chamanke-E drilling pad was commissioned on schedule in Q3, accounting for 10,000 bopd of the new processing capacity.

  • Continued to self-fund Atrush development with stable cash inflows:
    • The Company received $19.1 million in Q3 2019 for its entitlement share of the Atrush Production Sharing Contract profit oil and cost oil for April through to June 2019 oil sales.
    • The Company received $2.8 million in Q3 2019 of Atrush Exploration Costs receivable on April through to June 2019 oil sales.
    • The Company received $5.4 million in Q3 2019 in payments of principal plus interest on the Atrush Development Cost Loan and the Atrush Feeder Pipeline Cost loans for invoices from July to September 2019. Subsequent to the balance sheet date the remaining amounts have been collected and both loans have now been fully repaid.

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 for these periods are included in the unaudited condensed interim consolidated financial statements for the three and nine months ended September 30, 2019 and the related Management's Discussion and Analysis report. These documents are available on the Company's website at  or on SEDAR at  .

  Three months ended
September 30 
Nine months ended
September 30 
  2019  2018  2019  2018 
Production information         
Atrush average daily oil production - gross 100% field (Mbopd)  33.2  21.7  29.3  20.4 
ShaMaran working interest in Atrush average daily oil          
production (Mbopd)  9.2  4.4  6.9  4.1 
Atrush oil sales - gross 100% field (Mbbl)  3,051  1,998  7,992  5,559 
ShaMaran entitlement of Atrush oil sales (Mbbl)  405  223  942  1,000 
Financial information (unaudited) USD Thousands         
Revenue  18,804  13,240  45,946  55,069 
Gross margin on oil sales  5,156  6,295  9,758  28,966 
Profit from operating activities  2,884  5,509  3,505  26,308 
Net finance cost  5,290  8,217  19,163  14,576 
Net gain on Atrush Acquisition  750 
(Loss)/income for the period  (2,420)  (2,720)  (14,983)  11,693 
Cash flow from operations  9,048  11,358  12,747  40,685 
Cash in bank      20,027  84,674 
Positive / (negative) working capital      45,770  114,703 
Total liabilities      216,992  257,508 

Atrush continues to grow incrementally as planned with production in Q3 2019 53% higher than year previous due to:

  • Resolution of processing constraints associated with salt production.

  • Additional production from new wells Chiya Khere-6, Chiya Khere-7, Chiya Khere-10, Chiya Khere-11, CK-12, and CK-13.

  • Installation and operations of a temporary Heavy Oil Extended Well Testing facility at the Chamanke-C drilling location.

  • Debottlenecking of the Atrush Permanent Facilities.

ShaMaran's production entitlement of Atrush oil sales has not increased for the nine months 2019 compared to year previous. This is due to the production entitlement for the first six months of 2018 being inflated due to the priority arrangement with TAQA Atrush B.V., operator of the Atrush Block, for sharing initial exploration cost oil (the "priority arrangement") which concluded in June 2018.

Revenue from oil sales in Q3 2019 of $18.8 million was higher compared to $13.2 million reported in Q3 2018 due to the higher production entitlement share, however the increase was offset by the significant decrease in average netback price which was approximately 28.6% lower. The priority arrangement was primarily responsible for the uplift in the Company's production entitlement share and revenues in the nine months of 2018 compared to the same period in 2019.

The decrease in gross margin on oil sales in Q3 2019 compared to Q3 2018 was driven by lifting costs related mainly to the costs of the CK-8 well and CK-5 well workovers incurred in the period and higher other costs of production related to the HOEWT. The large variance between the nine months is mainly due to the 2018 uplift in entitlement share as discussed above.

The decrease in finance cost between Q3 2019 and Q3 2018 is due to less bonds outstanding over the period and a decrease in capitalized borrowing costs due to a significant number of development projects having been completed for their intended use. 

Cash flow from operations was slightly lower in Q3 2019 compared to Q3 2018 mainly due to lower gross margin on oil sales and increased general and administration costs. 

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 2:30 p.m. Pacific Time on November 5, 2019.

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