When we last caught up with
ShaMaran Petroleum Corp. (
TSX-V.SNM,
OTCMKTS: SNM,
Forum) back in
in April, the Company had made a major oil discovery on its Atrush Block and after a successful appraisal program, ShaMaran developed the field and put it into production in 2017 and is now the third largest producer in Kurdistan. Over 45 million barrels of oil has been produced to date.
Stockhouse Media’s Dave Jackson was joined, once again, by company President & CEO Dr. Adel Chaouch, to get shareholders and investors up-to-date on a number of exciting new company initiatives and what to expect looking forward with this unique oil and natural gas development and exploration company.
(Click image to play video)
TRANSCRIPT BELOW
SH: To start off, Dr. Chaouch, can you update our investor audience and your SNM shareholders on any new operational developments since we last chatted?
AC: Absolutely. We've been busy since last March. Actually, when I talked with you, we had announced our guidance for the year with a production range of between 39,000 and 44,000 barrels. I'm very pleased to report that we are on track. Our purpose for this year was to increase the production slowly since the pandemic. So we have been stepping up production quarter on quarter. First quarter of this year, we produced around 39,000 barrels per day. We're pleased to report at this point in time we are at around 42,000 barrels per day, and we are bringing more production online with our new well we just deployed a couple of weeks ago.
SH: Major news recently announced was the successful placement of a new US$300 million bond. What does this mean for company shareholders and potential investors in ShaMaran?
AC: Yes, we actually closed in July this very successful bond raise. We were over subscribed on this raise. It is a combination of two things: the current bonds that we have which stood at $180 million, will be converted into this new bond structure including the new raise of almost $120 million. Collectively it's $300 million with the intention that the new money will go towards allowing us to properly execute on this new acquisition that we are in the process of finalizing with TotalEnergies.
SH: You’ve also just signed an agreement with a subsidiary of TotalEnergies to acquire its affiliate Tepkri Sarsang A/S. Can you walk us through the deal?
AC: Absolutely and we are actually very excited by this deal. This is part of our vision from early this year when we thought the price of oil would recover significantly and we're pleased to see that has been the case. We took the opportunity by the fact that one of the super majors had a change of strategy to exit from this particular geographic location as well as changing its focus from being heavily in black oil and focusing on renewables. We directly reached out to TotalEnergies and we've been very pleased with the transaction and that they are now exiting Kurdistan from their Sarsang block. The block itself is adjacent to our current Atrush operations. Physically, the assets are literally within three kilometers from each other so there's quite a bit of a possible synergies between these two assets.
Sarsang is a block we've known for a while. We're very familiar with the activities and we are also very familiar with the operating company and it has been very successful there. So we are certainly pleased to join in the Sarsang partnership. The asset will transform ShaMaran on many levels. One of them is that it will allow us to diversify our production base. We will go from one producing field now to three producing fields and this is key here. A second element we are introducing is a new type of a crude even though it is from the same fractured carbonate this is a much lighter crude. So diversifying our sources of revenue, at a much lower discount to Brent. It physically brings in a number of new barrels to our production immediately with this transaction. We will increase our production by 50% and by the time we reach the same period this time next year in 2022, the production collectively for us between the two assets would double our current levels and it will basically take us over the 22,000 net barrel mark - hopefully sometime in the second part of 2022. It is also very exciting on many levels in terms of de-leveraging the financial risks, in terms of restructuring our debt and in terms of putting us on a different path to capitalize on further growth.
SH: Can you update our investor audience on the Atrush CK-17 Production Well in Kurdistan?
AC: This is one of our production wells we had planned to be drilled in 2020. Clearly last year, we suspended a number of our operations, and all capital activities. So we're very pleased that we have resumed our capital program. The well was deployed early April and we are very happy that it came online as expected and, we actually were ahead of budget, and it's providing an extra 2,000 barrels of oil per day - contributing to our plan to increase production quarter on quarter. It is another well that adds to the Jurassic production from Atrush field and it is now the 11th producing well on our site.
SH: You’ve also recently announced a nice 12-percent interest payment to bondholders. What can shareholders and investors glean from this?
AC: You're right. You don't see that anymore, but it is actually a continuation of the current bond program. So by virtue of the fact that we extended the base of our bonds, even though it is into a new structure, we have maintained the same interest for the coupon. We're pleased that this new bond raise was over-subscribed with a number of new investors joining our current base of investors, on the debt side. Certainly this demonstrates strong interest in the transformation of ShaMaran by the acquisition we're doing.
SH: We talked last time about the industry entering what’s been called an “oil super cycle.” How has ShaMaran seen the industry evolve in the region since we last talked?
AC: Dave, a lot of things have changed. I mean you've seen a significant rally of the oil price, barring the past few days, I think in our minds it might be a temporary halt or a correction here in the face of the covid variant and maybe you will probably see another increase again. We still have the view that we're going to see sustained oil prices for the near future, and we feel very well-positioned to capitalize on that in the very same way we did already this year with the transaction with TotalEnergies. We want to position ourselves for further opportunities as they materialize. We want to be one of the early movers when it comes to this context. So we want to share with our investors both current and hopefully new ones that we fully intend on following the trend of the super-cycle and hopefully take advantage of it.
SH: For our audience that might not be that familiar with the Iraqi-Kurdish petroleum exploration and production sector, can you give us a brief overview?
AC: Absolutely. With Kurdistan as the autonomous region of Iraq, of course it is in Iraq, the third largest OPEC producer. Kurdistan still stands as one of the frontier areas of oil and gas production. It sits on 45 billion barrels of potential reserves on what they call the very prolific Western Zagros fault. It is a complex geological structure. Of course, these are fractured carbonates so it's not for everybody. Companies and their teams have to have the know-how and have an understanding of how to deal with these types of reservoirs but those who have been involved have discovered a number of significant world-class fields, including Atrush field which are in as well as the Sarsang fields which we are entering. We have seen really in the past decade another oil rush, like you've seen in many other places, and I mentioned that in my previous conversations with you that I think Kurdistan will probably see a renewal and, in the years to come, with more oil to be found and also maturation of the current activities, ShaMaran will be there.
SH: Can you share some result highlights from your latest AGM in late June?
AC: We had the AGM on the 23rd of June 2021. Actually it went well. We had a number of proposals, including, for example, the reduction of our board size to be a little bit more flexible and very nimble and a number of other initiatives that were really supported by a great majority of our investors and investment base. I'm very pleased to report that the shareholders voted in excess of 90% in support of our activities and all of our proposals. I’m certainly pleased with the level of support we have behind us.
SH: Thanks again, Dr. Chaouch, for taking the time to speak with us again at Stockhouse. Is there anything further you would like to add?
AC: Thank you again for having me over here for this follow-up and it has been such a pleasure to speak with you again, Dave, and of course, a final message today to your investors and your investor base: I certainly welcome them to come and join us on this journey with the ShaMaran.
For more information, please visit
www.shamaranpetroleum.com
FULL DISCLOSURE: This is a paid article produced by Stockhouse Publishing.