Quarterly Highlights
Highlights
- A major oil discovery in the Atrush Block was announced by the Company on April 13, 2011. The Atrush 1 well flowed at rates totalling over 6,393 bopd of 26.5 API oil from three tests in the Middle and Upper Jurassic reservoirs and well analysis indicated that the intervals are capable of much higher rates when completed for production. The well was drilled in budget and on time to a total depth of 3,400 meters.
- The Appraisal Work Programme and Budget on the Atrush Block has been submitted to the KRG. The Programme consists of 3D seismic and a number of appraisal wells and studies. 3D seismic acquisition is in progress and the construction of the location for the Atrush-2 appraisal well is underway with drilling operations planned to commence in May 2012. Planning for an Early Production facility to conduct a long term test in the field is also underway.
- The Company's 100% owned subsidiary ShaMaran Petroleum BV entered into a production sharing contract ("PSC") on July 27, 2011 in respect of the Taza Block (formerly Block K42) in the Kurdistan Region of Iraq. ShaMaran holds a 20% working interest in the PSC, and Oil Search Iraq Limited ("OSIL") is the operator with a 60% working interest in the PSC. The Kurdistan Regional Government of Iraq ("KRG") holds a 20% working interest in the PSC with costs carried by ShaMaran and OSIL. Planning is underway for an exploration well with drilling operations expected to commence near the end of the second quarter of 2012.
- Operations were discontinued in December 2011 in Pulkhana after disappointing testing results from the Pulkhana 9 well. On January 17, 2012 the Company signed a final binding agreement with the KRG to relinquish to the KRG the 60% working interests previously held in each of the Arbat and Pulkhana Production Sharing Contracts.
- In February 2012 the Company received a Detailed Property Report ("the Report") from its third party auditors, McDaniel & Associates Consultants Ltd. The Report includes 124,782 Mboe as best estimate of Gross Estimated Contingent Resources and 87,910 Mboe as the unrisked best estimate of Gross Estimated Prospective Resources net to ShaMaran for the Company's two assets. These estimates are exclusive of amounts relating to the Pulkhana and Arbat Blocks which were relinquished in January 2012.
- Cash proceeds of $CAD 51.0 million were raised by the Company ($CAD 49.7 million net of issuance costs) through a private placement of 127.5 million common shares at $CAD 0.40 per share which was concluded on November 15, 2011. In May 2011 the Company raised cash proceeds of $CAD 50.4 million ($CAD 49.5 million net of issuance costs) through a private placement of 56 million common shares at $CAD 0.90 per share which was concluded on May 5, 2011.
- The cash balance of the Company was $49.1 million as at December 31, 2011.
The Company had at December 31, 2011 direct working interests in each of the Pulkhana Block, the Arbat Block and the Taza Block (formerly Block K42) and an indirect interest in the Atrush Block. All petroleum properties are located in Kurdistan within the northern extension of the Zagros Folded Belt. The area is currently undergoing a major exploration and development campaign by over 40 mid to large size international oil companies.
On January 17, 2012 ShaMaran signed a final binding agreement with the KRG to relinquish to the KRG the 60% working interests which it then held in each of the Arbat and Pulkhana Production Sharing Contracts ("PSC"). Under the terms of the agreement the PSC for each of the Pulkhana and Arbat blocks was terminated whereby ShaMaran's interests in both PSCs are relinquished. This asset realignment relieved the Company from the remaining work program obligations of Pulkhana and Arbat blocks, and allows ShaMaran to focus its activities and resources on the Atrush and Taza Blocks, which the Company considers to be their most prospective blocks.
Atrush Block
The Atrush Block is located approximately 85 km northwest of Erbil, the capital of the Kurdish administered part of Iraq, and is 269 square kilometers in area. The topography is similar to the Shaikan Block to the south which had a major discovery reported by Gulf Keystone Petroleum Ltd in January 2010. Immediately to the north of the Atrush Block is the Sarsang block where Hillwood International Energy also made an oil discovery in the Swara Tika-1 well. The structures located on the Block contain multiple stacked oil reservoirs in the Cretaceous, Jurassic and Triassic sections and due to a high-degree of fracturing are capable of high production rates.
In August 2010 the Company acquired a 33.5% shareholding in General Exploration Partners Inc ("GEP"). GEP is the operator of the Atrush Block PSC, holding an 80% working interest in the Block, with the remaining 20% third party interest ("TPI") being held by the KRG. In October 2010, Marathon Oil Corporation was assigned the 20% TPI.
Under the terms of PSC the KRG has the option of participating as a Contractor Entity with an undivided interest in the petroleum operations and all the other rights, duties, obligations and liabilities of the Contractor in the PSC, of up to 25% and not less than 5%. If this option is exercised, the government will become liable for their share of the petroleum costs incurred on or after the first commercial declaration date. Fiscal terms under the PSC include a 10% royalty, a variable profit split, based on a percentage share to the KRG and a capacity building payment equal to 30% of profit oil (produced oil, less royalty and cost oil) to be paid to the KRG. GEP has the right to recover costs using up to 40% of the available oil (produced oil less royalty oil) and 55% of the produced gas.
GEP acquired 143 km of 2D seismic data (covering the Atrush Block) data in 2008. The first exploration well on the Atrush Block was spudded on October 5, 2010 and a total depth of 3,400 meters was reached on January 21, 2011. A comprehensive well testing program consisting of ten drill stem tests (DSTs) commenced on January 30, 2011 and was completed on the April 3, 2011. Following notification to the KRG of a major Jurassic oil discovery on the April 4, 2011 the operator GEP submitted an Appraisal Work Program which consists of 3D seismic, appraisal wells and studies leading to the possible installation of an Early Production facility in 2012 to conduct a long term test in the field. 3D seismic acquisition operations commenced on the block in July 2011 and planning for the Atrush-2 well is currently in progress, with the well location under construction.
Taza Block (formerly Block K42)
Taza Block located is a 511 square kilometer exploration area located in the South of Kurdistan immediately northeast of the Pulkhana Block and on trend with the giant producing Jambur field situated to the north west of the Block. The producing Jambur field has estimated oil reserves in excess of one billion barrels and is connected to export infrastructure.
The Company's 100% owned subsidiary ShaMaran Petroleum BV entered into a production sharing contract ("PSC") on July 27, 2011 in respect of the Taza Block. ShaMaran holds a 20% working interest in the PSC, and Oil Search Iraq Limited ("OSIL") is the operator with a 60% working interest in the PSC. The Kurdistan Regional Government of Iraq ("KRG") holds a 20% working interest in the PSC with costs carried by ShaMaran and OSIL. The Company had previously been a party to an option agreement in respect of the Taza Block with the KRG and OSIL. ShaMaran and OSIL exercised their option to convert that agreement into the PSC.
The acquisition of 232 line-kilometers of 2D seismic data was concluded in May 2010 and identified a significant 90 square kilometer four-way dip closed structure, with structural relief of between 150 and 300m. This closure lies on the structural trend between the Jambur field and the Western Zagros Sarqala oil discovery to the south (with reported test rates of over 9,000 barrels of oil per day from the Jeribe formation). The Jeribe will be one of the main targets for the upcoming exploration well on the identified prospect which is in the planning phase with drilling operations expected to commence near the end of the second quarter of 2012.
Refer also to discussion under "Commitments" in this MD&A.
Pulkhana Block
Operations were discontinued in the Pulkhana block after disappointing test results from the Pulkhana 9 well. The Pulkhana Block PSC was fully relinquished to the KRG with an effective date of January 17, 2012.
The Pulkhana Block is a 529 square kilometer appraisal/development area located in southern Kurdistan.
Prior to relinquishing this PSC the Company was the operator of the project with a 60% undivided interest in the production sharing contract. Petoil Petroleum and Petroleum Products International Exploration and Production Inc. retained a 20% interest in the PSC and the KRG holds the remaining 20%. The Company was required to pay 100% of the minimum financial commitment in respect of the first exploration phase, following which the Company would pay 75% of the forward costs.
Pulkhana-9 was spudded by the Company on April 3, 2011 and a total depth of 2,333 meters was reached on July 23, 2011. A comprehensive testing program of six well tests ("DST") recovered oil from four separate reservoir intervals, including two new reservoirs that predrilling had not been recognized as having resource potential. Due to the inability to obtain sustained flow rates the Company opted to sidetrack the well targeting the lower two zones (Shiranish and Balambo formations) using open hole "barefoot" testing. The well was sidetracked successfully, however the targeted formations flowed only limited quantities of oil to surface during open hole testing.
Refer also to the discussion under "Commitments" in this MD&A.
Arbat Block
On January 17, 2012 the Company completed the relinquishment to the KRG of the Arbat Block PSC.
The Arbat Block (formerly Block G) is a 973 square kilometer exploration area located in eastern Kurdistan.
Prior to relinquishing this PSC the Company was the operator of the project and held a 60% undivided interest in the PSC with the KRG holding a 20% interest and the remaining 20% a third party interest which the KRG has the option to assign to a third party or parties. The Company was required to pay 100% of the minimum financial commitment in respect of the first exploration sub period or until such time as the KRG's reserved 20% interest has been sold following which the Company would pay 75% of the forward costs and receive a reimbursement for 25% of the costs incurred to that date.
Fiscal terms under the PSC include a 10% royalty, a variable profit split, based on a percentage share to the KRG and a capacity building payment equal to 20% of the Company's profit oil share (produced oil, less royalty and cost oil) to be paid to the KRG. The Company has the right to recover costs using up to 45% of the available crude oil (produced oil less royalty oil) and 53% of the produced gas.
During the year 2011 the Company had initiated planning for the first well and had initiated an infill 2D seismic program in an attempt to establish a second drillable prospect. As a result of the decision to relinquish the PSC the seismic program was terminated December 22, 2011.
2011 Third Quarter Highlights
Highlights
- A major oil discovery in the Atrush Block was announced by the Company on April 13, 2011. The Atrush 1 well flowed at rates totalling over 6,393 bopd of 26.5 API oil from three tests in the Middle and Upper Jurassic reservoirs and well analysis indicated that the intervals are capable of much higher rates when completed for production. The well was drilled in budget and on time to a total depth of 3,400 meters.
- The Appraisal Work Programme & Budget on the Atrush Block has been submitted to the KRG. The Programme consists of 3D seismic and a number of appraisal wells and studies. 3D seismic acquisition is in progress and the construction of the location for the Atrush-2 appraisal well has commenced. Planning for an Early Production facility is also underway.
- Pulkhana-9 completed well testing and recovered oil from the Shiranish, Jaddala & Euphrates formations. Due to mechanical issues experienced during testing, a geological sidetrack is underway to allow the openhole testing of the two Cretaceous reservoirs (Shiranish & Balambo) which had good hydrocarbon indications. The workover on the Pulkhana-8 well is on-going.
- The Company's 100% owned subsidiary ShaMaran Petroleum BV entered into a production sharing contract ("PSC") on July 27, 2011 in respect of the Taza Block (formerly Block K42) in the Kurdistan Region of Iraq. ShaMaran holds a 20% working interest in the PSC, and Oil Search Iraq Limited ("OSIL") is the operator with a 60% working interest in the PSC. The Kurdistan Regional Government of Iraq ("KRG") holds a 20% working interest in the PSC with costs carried by ShaMaran and OSIL. Planning is underway for an exploration well to be drilled in 2012.
- The Company commenced the acquisition of 2D seismic data on the Arbat Block. The Company will acquire 183 line kilometres of data on the north side of the Block with the objective of defining a closure on a significant lead. The program is expected to be concluded by end of this year.
- Cash proceeds of $CAD 51.0 million were raised by the Company through a private placement of 127.5 million common shares at $CAD 0.40 per share which was concluded on 15, 2011. A 4% finders' fee is payable in cash on a portion of the private placement.
- Cash proceeds of $CAD 50.4 million ($CAD 49.5 million net of issuance costs) were raised by the Company through a private placement of 56 million common shares at $CAD 0.90 per share which was concluded on May 5, 2011.
- Cash balance of the Company was $26.8 million as at September 30, 2011.
The Company has direct working interests in each of the Pulkhana Block, the Arbat Block and the Taza Block (formerly Block K42) and has an indirect interest in the Atrush Block. All petroleum properties are located in Kurdistan within the northern extension of the Zagros Folded Belt. The area is currently undergoing a major exploration and development campaign by over 40 mid to large size international oil companies.
Atrush Block
The Atrush Block is a 269 square km exploration area in the north of Kurdistan located between the major Shaikan discovery announced by Gulf Keystone Petroleum Ltd. in January 2010 and the HKN Energy Swara Tika discovery. The structures contain multiple stacked oil reservoirs in the Cretaceous, Jurassic and Triassic sections and due to a high-degree of fracturing are capable of high production rates.
In August 2010 the Company acquired a 33.5% shareholding in General Exploration Partners Inc ("GEP"). GEP is the operator of the Atrush Block PSC, holding an 80% working interest in the Block, with the remaining 20% third party interest ("TPI") being held by the KRG. In October 2010, Marathon Oil Corporation was assigned the 20% TPI.
Under the terms of PSC the KRG has the option of participating as a Contractor Entity with an undivided interest in the petroleum operations and all the other rights, duties, obligations and liabilities of the Contractor in the PSC, of up to 25% and not less than 5%. If this option is exercised, the government will become liable for their share of the petroleum costs incurred on or after the first commercial declaration date. Fiscal terms under the PSC include a 10% royalty, a variable profit split, based on a percentage share to the KRG and a capacity building payment equal to 30% of profit oil (produced oil, less royalty and cost oil) to be paid to the KRG. GEP has the right to recover costs using up to 40% of the available oil (produced oil less royalty oil) and 55% of the produced gas.
The first exploration well on the Atrush Block was spudded on October 5, 2010 and a total depth of 3,400 meters was reached on January 21, 2011. A comprehensive well testing program consisting of ten drill stem tests (DSTs) commenced on January 30, 2011 and was completed on the April 3, 2011. Following notification to the KRG of a major Jurassic oil discovery on the April 4, 2011 the operator GEP submitted an Appraisal Work Program which consists of 3D seismic, appraisal wells and studies leading to the possible installation of an Early Production facility in 2012. 3D seismic acquisition operations commenced on the block in July 2011 and planning for the Atrush-2 well is currently in progress, with the well location under construction.
Pulkhana Block
The Pulkhana Block is a 529 square kilometer appraisal/development area located in southern Kurdistan. In 1956 the Pulkhana-5 discovery well entered two fractured carbonate reservoirs (Euphrates & Shiranish) and flow tested over 2,900 barrels of oil per day.
The Company is the operator of the project with a 60% undivided interest in the production sharing contract. Petoil Petroleum and Petroleum Products International Exploration and Production Inc. retains a 20% interest in the PSC and the KRG holds the remaining 20%. The Company is required to pay 100% of the minimum financial commitment in respect of the first exploration phase, following which the Company will pay 75% of the forward costs.
Fiscal terms under the PSC include a 10% royalty, a variable profit split, based on a percentage share to the KRG and a capacity building payment equal to 20% of the Company's profit oil share (produced oil, less royalty and cost oil) to be paid to the KRG. The Company has the right to recover costs using up to 40% of the available crude oil (produced oil less royalty oil) and 50% of the produced gas. In April 2010 the Company completed the acquisition of 291.4 line kilometers of two dimensional (2D) seismic data in the Pulkhana Block.
Pulkhana-9 was spudded by the Company on April 3, 2011 and a total depth of 2,333 meters was reached on July 23, 2011. Oil indications have been seen in all of the targeted Pulkhana reservoirs. A comprehensive well testing program confirmed oil in the known predrill reservoirs (Euphrates & Shiranish) as well as tested oil from the Jaddala reservoir. In addition, two further intervals were determined to be hydrocarbon and remain prospective pending further testing (Dhiban & Balambo).
The Company has received KRG approval to contract the existing Sakson 101 rig for an additional two firm and two option wells. The rig will be moved directly to Pulkhana-10 once operations on Pulkhana-9 have been completed. The Romfor 22 rig has been contracted for the Pulkhana-8 re-entry which is currently underway. Pulkhana-11 is in the planning stage.
In addition the Company is progressing with the feasibility study and design for the Pulkhana Early Production Facility ("EPF") planned to be installed in 2012.
In August 2012 the Company will then have the option to continue on to a further two year exploration phase and if development is warranted a development period of up to 20 years with an automatic right to a five year extension.
Arbat Block
The Arbat Block (formerly Block G) is a 973 square kilometer exploration area located in eastern Kurdistan. The Block contains both surface anticlines and subsurface structures all identified by recent field work and 2D seismic. The Block also has a number of oil seeps several of which were discovered during the 2010 seismic operations.
The Company is the operator of the project and holds a 60% undivided interest in the PSC, the KRG holds a 20% interest and the remaining 20% is a third party interest which the KRG has the option to assign to a third party or parties. The Company is required to pay 100% of the minimum financial commitment in respect of the first exploration sub period or until such time as the KRG's reserved 20% interest has been sold following which the Company will pay 75% of the forward costs and receive a reimbursement for 25% of the costs incurred to that date.
Fiscal terms under the PSC include a 10% royalty, a variable profit split, based on a percentage share to the KRG and a capacity building payment equal to 20% of the Company's profit oil share (produced oil, less royalty and cost oil) to be paid to the KRG. The Company has the right to recover costs using up to 45% of the available crude oil (produced oil less royalty oil) and 53% of the produced gas.
In October 2010 the Company completed the acquisition of 429.1 kilometer of 2D seismic data on the Arbat Block. Construction for the Arbat-A well location has been approved by the KRG and will commence shortly. The well is situated approximately 3km north of Arbat town and is expected to start drilling in 2012. The proposed infill 2D seismic program received MNR approval and mobilization commenced in October with due completion of acquisition by year end. The survey has been designed to better define several significant leads in the block as potential drilling prospects for the Company's second obligation well.
Taza Block (formerly Block K42)
Taza Block is a 511 square kilometer exploration area located in the South of Kurdistan immediately northeast of the Pulkhana Block, and is on trend with the giant producing Jambur field situated to the north west of the Block. The producing Jambur field has estimated oil reserves in excess of one billion barrels and is connected to export infrastructure.
The Company's 100% owned subsidiary ShaMaran Petroleum BV entered into a production sharing contract ("PSC") on July 27, 2011 in respect of the Taza Block. ShaMaran holds a 20% working interest in the PSC, and Oil Search Iraq Limited ("OSIL") is the operator with a 60% working interest in the PSC. The Kurdistan Regional Government of Iraq ("KRG") holds a 20% working interest in the PSC with costs carried by ShaMaran and OSIL. The Company had previously been a party to an option agreement in respect of the Taza Block with the KRG and OSIL. ShaMaran and OSIL exercised their option to convert that agreement into the PSC.
Fiscal terms of the PSC include a 10% royalty, a variable profit split, based on a percentage share to the KRG, a capacity building value equal to 20% of the Company's share of profit petroleum (produced oil, less royalty and cost oil) to be paid to the KRG. The Company has the right to recover petroleum costs using up to 40% of the available crude oil (produced oil less royalty oil) and 50% of the produced gas.
The acquisition of 232 line-kilometres of 2D seismic data was concluded in May 2010 and identified a significant 90 square kilometre four-way dip closed structure, with structural relief of between 100 & 300m. This closure lies on the structural trend between the Jambur field and the Western Zagros Sarqala oil discovery to the south (with reported test rates of over 9,000 barrels of oil per day from the Jeribe formation). The Jeribe will be one of the main targets for the upcoming exploration well on the identified prospect which is in the planning phase and is expected to be drilled in 2012.
2011 Second Quarter Highlights
Highlights
- A major oil discovery in the Atrush Block was announced by the Company on April 13, 2011. The Atrush 1 well flowed at rates totalling over 6,393 bopd of 26.5 API oil from three tests in the Middle and Upper Jurassic reservoirs and well analysis indicated that the intervals are capable of much higher rates when completed for production. The well was drilled in budget and on time to a total depth of 3,400 meters.
- Pulkhana 9 was spudded by the Company on April 3, 2011 and a total depth of 2,333 meters was reached on July 23, 2011. Oil indications have been seen in all of the four targeted Pulkhana reservoirs. A comprehensive well testing program which could include up to five tests has commenced and is expected to be completed in early September 2011.
- The Company's 100% owned subsidiary ShaMaran Petroleum BV entered into a production sharing contract ("PSC") on July 27, 2011 in respect of the Taza Block (formerly Block K42) in the Kurdistan Region of Iraq. ShaMaran holds a 20% working interest in the PSC, and Oil Search Iraq Limited ("OSIL") is the operator with a 60% working interest in the PSC. The Kurdistan Regional Government of Iraq ("KRG") holds a 20% working interest in the PSC with costs carried by ShaMaran and OSIL.
- The Appraisal Work Program on the Atrush Block has been submitted to the KRG. The program consists of 3D seismic, a number of wells and studies leading to the possible installation of an Early Production facility in 2012. 3D seismic acquisition operations commenced on the block in July 2011 and planning for the Atrush-2 well is currently in progress.
- Trading of the common shares of the Company on the NASDAQ OMX First North Exchange (Stockholm) commenced at the market opening on June 22, 2011.
- Cash proceeds of $CAD 50.4 million ($CAD 49.5 million net of issuance costs) were raised by the Company through a private placement of 56 million common shares at $CAD 0.90 per share which was concluded on May 5, 2011.
- Cash balance of the Company was $72.0 million as at June 30, 2011.
The Company has direct working interests in each of the Pulkhana Block, the Arbat Block and the Taza Block (formerly Block K42) and has an indirect interest in the Atrush Block. All petroleum properties are located in Kurdistan within the northern extension of the Zagros Folded Belt. The area is currently undergoing a major exploration and development campaign by over 30 mid to large size international oil companies
Atrush Block
The Atrush Block is a 269 square km exploration area in the north of Kurdistan located immediately north and adjacent to the major Shaikan discovery announced by Gulf Keystone Petroleum Ltd. in January 2010. The Atrush Block is also adjacent to and on trend with the recent Bijeel oil discovery to the east, operated by Kalegran Limited (MOL). The 2D seismic data over the Atrush Block indicates that the Atrush structure is similar to the Shaikan structure. The Shaikan discovery was announced as multiple stacked oil reservoirs in the Cretaceous, Jurassic and Triassic sections and tested individually at flow rates up to 7,000 bopd.
In August 2010 the Company acquired a 33.5% shareholding in General Exploration Partners Inc ("GEP"). GEP is the operator of the Atrush Block PSC, holding an 80% working interest in the Block, with the remaining 20% third party interest ("TPI") being held by the KRG. In October 2010, Marathon Oil Corporation was assigned the 20% TPI.
Under the terms of PSC the KRG has the option of participating as a Contractor Entity with an undivided interest in the petroleum operations and all the other rights, duties, obligations and liabilities of the Contractor in the PSC, of up to 25% and not less than 5%. If this option is exercised, the government will become liable for their share of the petroleum costs incurred on or after the first commercial declaration date. Fiscal terms under the PSC include a 10% royalty, a variable profit split, based on a percentage share to the KRG and a capacity building payment equal to 30% of profit oil (produced oil, less royalty and cost oil) to be paid to the KRG. GEP has the right to recover costs using up to 40% of the available oil (produced oil less royalty oil) and 55% of the produced gas.
The first exploration well on the Atrush Block was spudded on October 5, 2010 and a total depth of 3,400 meters was reached on January 21, 2011. A comprehensive well testing program consisting of ten drill stem tests (DSTs) commenced on January 30, 2011 and was completed on the April 3, 2011. Following notification to the KRG of a major Jurassic oil discovery on the April 4, 2011 the operator GEP submitted an Appraisal Work Program which consists of 3D seismic, appraisal wells and studies leading to the possible installation of an Early Production facility in 2012. 3D seismic acquisition operations have commenced on the block in July 2011 and planning for the Atrush-2 well is currently in progress.
Pulkhana Block
The Pulkhana Block is a 529 square kilometer appraisal/development area located in southern Kurdistan. In 1956 the Pulkhana 5 discovery well entered two fractured carbonate reservoirs and flow tested over 2,900 barrels of oil per day.
The Company is the operator of the project with a 60% undivided interest in the production sharing contract. Petoil Petroleum and Petroleum Products International Exploration and Production Inc. retains a 20% interest in the PSC and the KRG holds the remaining 20%. The Company is required to pay 100% of the minimum financial commitment in respect of the first exploration phase, following which the Company will pay 75% of the forward costs.
Fiscal terms under the PSC include a 10% royalty, a variable profit split, based on a percentage share to the KRG and a capacity building payment equal to 20% of the Company's profit oil share (produced oil, less royalty and cost oil) to be paid to the KRG. The Company has the right to recover costs using up to 40% of the available crude oil (produced oil less royalty oil) and 50% of the produced gas. In April 2010 the Company completed the acquisition of 291.4 line kilometers of two dimensional (2D) seismic data in the Pulkhana Block.
Pulkhana 9 was spudded by the Company on April 3, 2011 and a total depth of 2,333 meters was reached on July 23, 2011. Oil indications have been seen in all of the four targeted Pulkhana reservoirs. A comprehensive well testing program has commenced and is expected to be completed in early September 2011.
The Company has received KRG approval to contract the existing Sakson 101 rig for an additional two firm and two option wells. The rig is going to be moved directly to Pulkhana-10 once operations on Pulkhana-9 have been completed. The Company has also signed a Letter of Intent (subject to inspection) for a rig to workover the legacy Pulkhana-8 well which is likely to commence in September.
In addition the Company is progressing with the feasibility study and design for the Pulkhana Early Production Facility ("EPF") planned to be installed in the year 2012. The first 3 wells (Pulkhana 8, 9 and 10) will be connected to the EPF, with the possibility to expand as future development wells are drilled.
In August 2012 the Company will then have the option to continue on to a further two year exploration phase and if development is warranted a development period of up to 20 years with an automatic right to a five year extension.
Arbat Block
The Arbat Block (formerly Block G) is a 973 square kilometer exploration area located in eastern Kurdistan. The Block contains both surface anticlines and subsurface structures all identified by recent field work and 2D seismic. The Block also has a number of oil seeps several of which were discovered during the 2010 seismic operations.
The Company is the operator of the project and holds a 60% undivided interest in the PSC, the KRG holds a 20% interest and the remaining 20% is a third party interest which the KRG has the option to assign to a third party or parties. The Company is required to pay 100% of the minimum financial commitment in respect of the first exploration sub period or until such time as the KRG's reserved 20% interest has been sold following which the Company will pay 75% of the forward costs and receive a reimbursement for 25% of the costs incurred to that date.
Fiscal terms under the PSC include a 10% royalty, a variable profit split, based on a percentage share to the KRG and a capacity building payment equal to 20% of the Company's profit oil share (produced oil, less royalty and cost oil) to be paid to the KRG. The Company has the right to recover costs using up to 45% of the available crude oil (produced oil less royalty oil) and 53% of the produced gas.
In October 2010 the Company completed the acquisition of 429.1 kilometer of 2D seismic data on the Arbat Block. Construction for the Arbat-A well location has been approved by the KRG and will commence shortly. The well is to be situated approximately 3km north of Arbat town and is expected to start drilling before year end. The Company is preparing to go to tender for an infill 2D seismic program to better define several significant leads in the block as potential drilling prospects for the Company's second obligation well.
Taza Block (formerly Block K42)
Taza Block is a 511 square kilometer exploration area located in the South of Kurdistan immediately northeast of the Pulkhana Block, and is on trend with the giant producing Jambur field situated to the north west of the Block. The producing Jambur field has estimated oil reserves in excess of one billion barrels and is connected to export infrastructure.
The Company's 100% owned subsidiary ShaMaran Petroleum BV entered into a production sharing contract ("PSC") on July 27, 2011 in respect of the Taza Block. ShaMaran holds a 20% working interest in the PSC, and Oil Search Iraq Limited ("OSIL") is the operator with a 60% working interest in the PSC. The Kurdistan Regional Government of Iraq ("KRG") holds a 20% working interest in the PSC with costs carried by ShaMaran and OSIL. The Company had previously been a party to an option agreement in respect of the Taza Block with the KRG and OSIL. ShaMaran and OSIL exercised their option to convert that agreement into the PSC.
Fiscal terms of the PSC include a 10% royalty, a variable profit split, based on a percentage share to the KRG, a capacity building value equal to 20% of the Company's share of profit petroleum (produced oil, less royalty and cost oil) to be paid to the KRG. The Company has the right to recover petroleum costs using up to 40% of the available crude oil (produced oil less royalty oil) and 50% of the produced gas.
The acquisition of 232 line-kilometres of 2D seismic data was concluded in May 2010 and identified a significant 90 square kilometre four-way dip closed structure, with structural relief of between 100 & 300m. This closure lies on the structural trend between the Jambur field and the recently announced Western Zagros Sarqala oil discovery to the south with reported test rates of over 9,000 barrels of oil per day from the Jeribe formation. The Jeribe will be one of the main targets for the upcoming exploration well on the identified prospect which is expected to be drilled in 2012.
2011 First Quarter Highlights
Highlights
- A major oil discovery in the Atrush Block was announced by the Company on April 13, 2011. The Atrush 1 well flowed at rates totalling over 6,393 bopd of 26.5 API oil from three tests in the middle and upper Jurassic reservoirs and well analysis indicated that the intervals are capable of much higher rates when completed for production. The well was drilled in budget and on time to a total depth of 3,400 meters.
- Pulkhana 9 was spudded by the Company on April 3, 2011 with a planned total depth of approximately 2,700 meters. The well targets the proven Euphrates/Upper Jaddala and Shiranish oil reservoirs, as well as evaluating a further potential reservoir in the Lower Jaddala.
- Cash proceeds of $CAD 50.4 million ($CAD 49.1 million net of issuance costs) were raised by the Company through a private placement of 56 million common shares at $CAD 0.90 per share which was concluded on May 5, 2011.
- McDaniel & Associates Consultants Ltd, the Company's independent qualified resource evaluator, provided the Company with a Detailed Property Report ("the Report") in March 2011 which was based on information prior to the appraisal drilling of Pulkhana and results from the Atrush-1 well. The Report includes 82,461,000 boe as best estimate of Company Gross Estimated Contingent Resources and 287,555,000 boe as the unrisked best estimate of Company Gross Estimated Prospective Resources for all four of the Company's assets.
- Cash balance of the Company was $51.3 million as at March 31, 2011.
The Company has direct working interests in each of the Pulkhana Block, the Arbat Block and Block K42 and has an indirect interest in the Atrush Block. All petroleum properties are located in Kurdistan within the northern extension of the Zagros Folded Belt. The area is currently undergoing a major exploration and development campaign by over 30 mid to large size international oil companies.
Atrush Block
The Atrush Block is a 269 square km exploration area in the north of Kurdistan located immediately north and adjacent to the major Shaikan discovery announced by Gulf Keystone Petroleum Ltd. in January 2010. The Atrush Block is also adjacent to and on trend with the recent Bijeel oil discovery to the east, operated by Kalegran Limited (MOL). The 2D seismic data over the Atrush Block indicates that the Atrush structure is similar to the Shaikan structure. The Shaikan discovery was announced as multiple stacked oil reservoirs in the Cretaceous, Jurassic and Triassic sections and tested individually at flow rates up to 7,000 bopd.
In August 2010 the Company acquired a 33.5% shareholding in General Exploration Partners Inc ("GEP"). GEP is the operator of the Atrush Block PSC, holding an 80% working interest in the Block, with the remaining 20% third party interest ("TPI") being held by the KRG. In October 2010, Marathon Oil Corporation was assigned the 20% TPI.
The first exploration well on the Atrush Block was spudded on October 5, 2010 and a total depth of 3,400 meters was reached on January 21, 2011. A comprehensive well testing program consisting of ten drill stem tests (DSTs) commenced on January 30, 2011 and was completed on the 3rd April 2011. GEP notified the KRG of a major Jurassic oil discovery on the April 4, 2011 and is currently engaged in compiling the Discovery Report and Appraisal Work Program & Budget as required by the PSC. Tendering is underway for three dimensional (3D) seismic acquisition over the discovery which will commence in 2011 and the operator is in the early planning phase of the first appraisal well.
Under the terms of PSC the KRG has the option of participating as a Contractor Entity with an undivided interest in the petroleum operations and all the other rights, duties, obligations and liabilities of the Contractor in the PSC, of up to 25% and not less than 5%. If this option is exercised, the government will become liable for their share of the petroleum costs incurred on or after the first commercial declaration date. Fiscal terms under the PSC include a 10% royalty, a variable profit split, based on a percentage share to the KRG and a capacity building payment equal to 30% of profit oil (produced oil, less royalty and cost oil) to be paid to the KRG. GEP has the right to recover costs using up to 40% of the available oil (produced oil less royalty oil) and 55% of the produced gas.
Refer also to discussion under "Commitments" in the MD&A.
Pulkhana Block
The Pulkhana Block is a 529 square kilometer appraisal/development area located in southern Kurdistan. In 1956 the Pulkhana 5 discovery well entered two fractured carbonate reservoirs and flow tested over 2,900 barrels of oil per day.
In April 2010 the Company completed the acquisition of 291.4 line kilometers of two dimensional (2D) seismic data in the Pulkhana Block. On April 3, 2011 the Company spudded its first well, the Pulkhana 9 appraisal well, with a planned total depth of approximately 2,700 meters targeting the proven Euphrates/Upper Jaddala and Shiranish oil reservoirs, as well as evaluating further potential reservoirs in the Jeribe & Lower Jaddala. ShaMaran also has Ministry of Natural Resources ("MNR") approval for the Pulkhana-10 appraisal well. The Company is tendering for a workover rig for the planned third quarter workover of Pulkhana-8 and at the same time progressing with the feasibility study and design for the Pulkhana Early Production Facility ("EPF") planned to be installed by the end of the year 2011. The first 3 wells (Pulkhana 8, 9 and 10) will be connected to the EPF, with the possibility to expand as future development wells are drilled.
In August 2012 the Company will then have the option to continue on to a further two year exploration phase and if development is warranted a development period of up to 20 years with an automatic right to a five year extension.
The Company is the operator of the project with a 60% undivided interest in the production sharing contract. Petoil Petroleum and Petroleum Products International Exploration and Production Inc. retains a 20% interest in the PSC and the KRG holds the remaining 20%. The Company is required to pay 100% of the minimum financial commitment in respect of the first exploration phase, following which the Company will pay 75% of the forward costs. Fiscal terms under the PSC include a 10% royalty, a variable profit split, based on a percentage share to the KRG and a capacity building payment equal to 20% of the Company's profit oil share (produced oil, less royalty and cost oil) to be paid to the KRG. The Company has the right to recover costs using up to 40% of the available crude oil (produced oil less royalty oil) and 50% of the produced gas.
Refer also to the discussion under "Commitments" in the MD&A.
Arbat Block
The Arbat Block (formerly Block G) is a 973 square kilometer exploration area located in eastern Kurdistan. The Block contains both surface anticlines and subsurface structures all identified by recent field work and 2D seismic. The Block also has a number of oil seeps several of which were discovered during the seismic operations now complete.
In October 2010 the Company completed the acquisition of 429.1 kilometer of 2D seismic data on the Arbat Block in eastern Kurdistan. The Company has received MNR approval for the location of the first commitment exploration well (designated Arbat-A). Tendering and preparations are underway to enable drilling to commence by the end of the year 2011.
The Company is the operator of the project and holds a 60% undivided interest in the PSC, the KRG holds a 20% interest and the remaining 20% is a third party interest which the KRG has the option to assign to a third party or parties. The Company is required to pay 100% of the minimum financial commitment in respect of the first exploration sub period or until such time as the KRG's reserved 20% interest has been sold following which the Company will pay 75% of the forward costs and receive a reimbursement for 25% of the costs incurred to that date.
Fiscal terms under the PSC include a 10% royalty, a variable profit split, based on a percentage share to the KRG and a capacity building payment equal to 20% of the Company's profit oil share (produced oil, less royalty and cost oil) to be paid to the KRG. The 20% capacity building payment is a result of an amendment made to the PSC in August 2010, relieving the Company of its previous contractual requirement to issue 35 million common shares of the Company to the KRG. The Company has the right to recover costs using up to 45% of the available crude oil (produced oil less royalty oil) and 53% of the produced gas.
Refer also to discussion under "Commitments" in the MD&A.
Block K42
Block K42 is a 505 square kilometer exploration area located in the South of Kurdistan immediately northeast of the Pulkhana Block, and is on trend with the Jambur field situated to the north west of the Block. The producing Jambur field has estimated oil reserves in excess of one billion barrels and is connected to export infrastructure.
The Company is a party to the K42 Option Agreement between the KRG and Oil Search (Iraq) Limited ("OSIL") which allows an option to the Company and OSIL to enter into a PSC with the KRG, the terms of which have been agreed in principle, relating to the exploration and development of petroleum resources in the Block K42.
In accordance with the Block K42 PSC OSIL is the operator and collectively with the Company represent the "Contractor". This K42 Option Agreement requires the Contractor to conduct certain seismic services, including the acquisition of 200 kilometers of seismic surveying, within the option period of 18 months commencing November 1, 2009. The option to enter into a PSC may be exercised by providing written notice to the KRG. The Contractor is to pay 100% of all the costs incurred during the option period, 25% of which are to be paid by the Company. Upon exercise of the option the Company would acquire not less than an undivided 20% interest in the PSC in respect of the Block K42 contract area, with OSIL holding a 60% interest and the KRG holding the remaining 20%.
The Company has fulfilled all its obligations under the Option Agreement by acquiring and processing 232 line kilometers of 2D seismic data in Block K42 in May 2010. This resulted in the identification of a significant 4-way dip-closed prospect. The Company has exercised its option to enter into a Production Sharing Contract and approval from the KRG is now pending.
Refer also to discussion under "Commitments" in the MD&A.
2010 Annual Highlights
Highlights
- In April 2010 the Company completed the acquisition of 291.4 km of 2D seismic data in the Pulkhana Block. The seismic campaign was completed on schedule and within budget.
- Seismic acquisition of 232 km of 2D seismic data in Block K42 was concluded in May 2010. Processing and interpretation of the data was completed at the end of the year 2010 and resulted in the identification of a significant 4-way dip-closed prospect.
- In August 2010, the Company acquired a 33.5% stake in General Exploration Partners Inc, a company which holds an 80% working interest in the Atrush Block Oil and Gas Exploration Area in Kurdistan. As a result ShaMaran has a 26.8% indirect interest in the Atrush Block.
- In August 2010, the Company executed agreements to amend the Pulkhana Block 10 and the Arbat Block Production Sharing Contracts ("PSCs"), which waive the Company of its previous contractual requirement to issue 150 million common shares to the Kurdistan Regional Government of Iraq ("KRG") in exchange for 20% of the Company's profit oil share (produced oil, less royalty and cost oil) from the two PSCs as capacity building payments to the KRG.
- The Company raised $47.8 million net cash proceeds through a private placement of 111 million common shares in September 2010.
- In October 2010, the Company completed the acquisition of 429.1 km of two dimensional ("2D") seismic data on the Arbat Block in eastern Kurdistan.
- The first exploration well on the Atrush Block was spudded on October 5, 2010, and a total depth of 3,400 meters was reached on January 21, 2011. A comprehensive well testing program was commenced on January 30, 2011 with drill stem tests planned for ten (10) potential hydrocarbon zones. The Company will make a further announcement at the conclusion of all testing expected to be in the second week of April 2011.
- In March 2011 the Company received a Detailed Property Report ("the Report") from its third party auditors, McDaniel & Associates Consultants Ltd. The Report includes 82,461 Mboe as best estimate of Gross Estimated Contingent Resources and 287,555 Mboe as the unrisked best estimate of Gross Estimated Prospective Resources net to ShaMaran for all four of the Company's assets. These estimates are based on information prior to the appraisal drilling of Pulkhana and results from the Atrush-1 well.
- On April 3, 2011 the Company spudded its first well, Pulkhana 9, with a planned total depth of approximately 2,700 meters and targets the proven Euphrates/Upper Jaddala and Shiranish oil reservoirs, as well as evaluating a further potential reservoir in the Lower Jaddala.
- Cash balance of the Company was $58.7 million as at December 31, 2010.
The Company has direct working interests in each of the Pulkhana Block, the Arbat Block and Block K42 and has an indirect interest in the Atrush Block. All petroleum properties are located in Kurdistan within the northern extension of the Zagros Folded Belt. The area is currently undergoing a major exploration and development campaign by over 30 mid to large size international oil companies.
Pulkhana Block
The Pulkhana Block is a 529 square km appraisal/development area located in southern Kurdistan. In 1956 the Pulkhana 5 discovery well entered two fractured carbonate reservoirs and successfully flow tested to surface a cumulative rate of over 2,900 barrels of oil per day.
The Company completed the acquisition of 291.4 km of 2D seismic data in April 2010. The seismic campaign was completed on schedule and within budget. Processing and interpretation of the seismic data was completed in July 2010 in preparation for drilling a well on this Block. The seismic program was successful in delineating the structure of the Pulkhana oilfield.
On April 3, 2011 the Company spudded its first well, Pulkhana 9, which will be drilled approximately 2.8 km northwest of Pulkhana 5. Planned total depth is approximately 2,700 meters and the well is targeting the proven Euphrates/Upper Jaddala and Shiranish oil reservoirs, as well as evaluating a further potential reservoir in the Lower Jaddala.
ShaMaran plans to drill 3 wells in the first exploration phase of three years in order to confirm the size and economic viability of the development of the Pulkhana field. The Company will then have the option to continue on to a further two year exploration phase and, if development is warranted, a development period of up to 20 years with an automatic right to a five year extension.
The Company is the operator of the project with a 60% undivided interest in the production sharing contract. Petoil Petroleum and Petroleum Products International Exploration and Production Inc. retains a 20% interest in the PSC and the KRG holds the remaining 20%. The Company is required to pay 100% of the minimum financial commitment in respect of the first exploration phase, following which the Company will pay 75% of the forward costs. Fiscal terms under the PSC include a 10% royalty, a variable profit split, based on a percentage share to the KRG and a capacity building payment equal to 20% of the Company's profit oil share (produced oil, less royalty and cost oil) to be paid to the KRG. The 20% capacity building payment is a result of an amendment made to the PSC in August 2010, relieving the Company of its previous contractual requirement to issue 150 million common shares of the Company to the KRG. The Company has the right to recover costs using up to 40% of the available crude oil (produced oil less royalty oil) and 50% of the produced gas.
Arbat Block
The Arbat Block (formerly Block G) is a 973 square km exploration area located in eastern Kurdistan. The Block contains both surface anticlines and subsurface structures all identified by recent field work and 2D seismic. The Block also has a number of oil seeps, several of which were discovered during the seismic operations now complete.
The Company completed the acquisition of 429.1 km of 2D seismic data in October 2010. The seismic campaign was completed on schedule and within budget. Processing and interpretation of the seismic data was completed in December 2010, and the Company has received Ministry of Natural Resources ("MNR") approval for the location of the first commitment exploration well (designated Arbat-A). Tendering and preparations are now underway to enable drilling scheduled to commence in the 4th quarter of this year.
The Company is the operator of the project and holds a 60% undivided interest in the production sharing contract, the KRG holds a 20% interest and the remaining 20% is a third party interest which the KRG has the option to assign to a third party or parties. The Company is required to pay 100% of the minimum financial commitment in respect of the first exploration sub period or until such time as the KRG's reserved 20% interest has been sold, following which the Company will pay 75% of the forward costs and receive a reimbursement for 25% of the costs incurred to that date. Fiscal terms under the PSC include a 10% royalty, a variable profit split, based on a percentage share to the KRG and a capacity building payment equal to 20% of the Company's profit oil share (produced oil, less royalty and cost oil) to be paid to the KRG. The 20% capacity building payment is a result of an amendment made to the PSC in August 2010, relieving the Company of its previous contractual requirement to issue 150 million common shares of the Company to the KRG. The Company has the right to recover costs using up to 45% of the available crude oil (produced oil less royalty oil) and 53% of the produced gas.
Block K42
Block K42 is a 505 square km exploration area located in the South of Kurdistan immediately northeast of the Pulkhana Block, and is on trend with the Jambur field situated to the north west of the Block. The producing Jambur field has estimated oil reserves in excess of one billion barrels and is connected to export infrastructure.
A campaign to acquire 232.0 km of 2D seismic data on this Block was completed in May 2010. Processing and interpretation of the seismic data was completed in December 2010. The seismic program resulted in the identification of a significant 4-way dip-closed prospect.
The Company is a party to the K42 Option Agreement between the KRG and Oil Search (Iraq) Limited ("OSIL"), which allows an option to the Company and OSIL to enter into a PSC with the KRG, the terms of which have been agreed in principal, relating to the exploration and development of petroleum resources in the Block K42 contract area located in Kurdistan.
In accordance with the Block K42 PSC, OSIL is the operator and, collectively with the Company, represent the "Contractor". This K42 Option Agreement requires the Contractor to conduct certain seismic services, including the acquisition of 200 kilometers of seismic surveying, within the option period of 18 months commencing November 1, 2009. The option to enter into a PSC may be exercised by providing written notice to the KRG. The Contractor is to pay 100% of all the costs incurred during the option period, 25% of which are to be paid by the Company.
Upon exercise of the option, the Company would acquire not less than an undivided 20% interest in the production sharing contract in respect of the Block K42 contract area, with OSIL holding a 60% interest and the KRG holding the remaining 20%. If either the Company or OSIL elect not to exercise its option in respect of the Contract the other party has the option of acquiring the exiting party's rights and obligations.
Atrush Block
The Atrush Block is a 269 square km exploration area in the north of Kurdistan located immediately north and adjacent to the major Shaikan discovery announced by Gulf Keystone Petroleum Ltd. in January 2010. The Atrush Block is also adjacent to and on trend with the recent Bijeel oil discovery to the east, operated by Kalegran Limited (MOL). The 2D seismic data over the Atrush Block indicates that the Atrush structure is similar to the Shaikan structure. The Shaikan discovery was announced as multiple stacked oil reservoirs in the Cretaceous, Jurassic and Triassic sections and tested individually at flow rates up to 7,000 bopd.
In August 2010 the Company acquired a 33.5% shareholding in General Exploration Partners Inc ("GEP"). GEP is the operator of the Atrush Block PSC, holding an 80% working interest in the Block, with the remaining 20% third party interest ("TPI") being held by the KRG. In October 2010, Marathon Oil Corporation was assigned the 20% TPI.
The Atrush 1 exploration well was spudded on October 5, 2010 and completed drilling to a total depth of 3,400 meters on January 21, 2011. Hydrocarbons shows with oil returns over shakers were recorded while drilling the Cretaceous and the Jurassic, and the RFT pressures taken in the 12-1/4" hole section appear to show a common oil gradient within three of the Jurassic intervals. A comprehensive well testing program was commenced on January 30, 2011 with Drill Stem Tests planned for ten (10) potential hydrocarbon zones. The Company will make a further announcement at the conclusion of all testing, expected to be in the second week of April 2011.
Under the terms of PSC, the KRG has the option of participating as a Contractor Entity with an undivided interest in the petroleum operations and all the other rights, duties, obligations and liabilities of the Contractor in the PSC, of up to 25% and not less than 5%. If this option is exercised, the government will become liable for their share of the petroleum costs incurred on or after the first commercial declaration date. Fiscal terms under the PSC include a 10% royalty, a variable profit split, based on a percentage share to the KRG and a capacity building payment equal to 30% of profit oil (produced oil, less royalty and cost oil) to be paid to the KRG. GEP has the right to recover costs using up to 40% of the available oil (produced oil less royalty oil) and 55% of the produced gas.
2010 Third Quarter Highlights
Highlights
- In August 2010, the Group acquired a 33.5% stake in General Exploration Partners Inc, a company which holds an 80% working interest in the Atrush Block Oil and Gas Exploration Area in Kurdistan.
- In August 2010, the Group executed agreements to amend the Pulkhana Block 10 and the Arbat Block Production Sharing Contracts ("PSCs"), which waive the Company of its previous contractual requirement to issue 150 million common shares to the Kurdistan Regional Government of Iraq ("KRG") in exchange for 20% of the Group's profit oil share (produced oil, less royalty and cost oil) from the two PSCs as capacity building payments to the Government.
- The Company raised $47.8 million net cash proceeds through a private placement of 111 million common shares.
- The first exploration well on the Atrush Block was spudded on October 5, 2010, which is targeting the same reservoir sections as the recent major oil discovery by Gulf Keystone Petroleum Ltd, in the adjacent Shaikan structure.
- In October 2010, the Group completed the acquisition of 429.1 km of two dimensional ("2D") seismic data on the Arbat Block in eastern Kurdistan, having already acquired seismic earlier this year on its Pulkhana and K42 Blocks.
- Site preparation is underway for the first well in the Pulkhana Block, with a spud date planned for the first quarter of 2011. The Company has taken a one rig slot assignment for the Sakson PR3 drilling rig which is currently being operated by Niko Resources Ltd in Kurdistan.
- Cash balance of the Company was $70.0 million as at September 30, 2010.
The Group has direct working interests in each of the Pulkhana Block, the Arbat Block and Block K42 and has an indirect interest in the Atrush Block. All petroleum properties are located in Kurdistan within the northern extension of the Zagros Folded Belt. The area is currently undergoing a major exploration and development campaign by over 30 mid to large size international oil companies.
Pulkhana Block
The Pulkhana Block is a 529 square km appraisal/development project which in 1956 flowed over 2,900 barrels of oil per day from a well which entered two fractured carbonate reservoirs.
The Company completed the acquisition of 291.4 km of 2D seismic data in April 2010. The seismic campaign was completed on schedule and within budget. Processing and interpretation of the seismic data was completed in July 2010 in preparation for drilling a well on this Block. Procurement activity and site preparation is underway, with a spud date planned for the first quarter of 2011.
The planned well, Pulkhana 9, has been approved by the Ministry of Natural Resources, and will be drilled approximately 2.8 km north west of the 1956 Pulkhana 5 discovery well. Planned total depth is approximately 2,700 meters and the well is targeting the proven Euphrates/Upper Jaddala and Shiranish oil reservoirs, as well as evaluating a further potential reservoir in the Lower Jaddala.
ShaMaran plans to drill 3 wells in the first exploration phase of three years in order to confirm the size and economic viability of the development of the Pulkhana field. The Company will then have the option to continue on to a further two year exploration phase and, if development is warranted, a development period of up to 20 years.
The Company is the operator of the project with a 60% undivided interest in the production sharing contract. Petoil Petroleum and Petroleum Products International Exploration and Production Inc. retains a 20% interest in the PSC and the KRG holds the remaining 20%. The Company is required to pay 100% of the minimum financial commitment in respect of the first exploration phase, following which the Company will pay 75% of the forward costs. Fiscal terms under the PSC include a 10% royalty, a variable profit split, based on a percentage share to the KRG and a capacity building payment equal to 20% of the Company's profit oil share (produced oil, less royalty and cost oil) to be paid to the KRG. The 20% capacity building payment is a result of an amendment made to the PSC in August 2010, relieving the Company of its previous contractual requirement to issue 150 million common shares of the Company to the KRG. The Company has the right to recover costs using up to 40% of the available crude oil (produced oil less royalty oil) and 50% of the produced gas.
Arbat Block
The Arbat Block (formerly Block G) is a 973 square km exploration block located adjacent to the Miran Block of Heritage Oil Plc. The Block contains both surface anticlines and subsurface structures all identified by recent field work and 2D seismic. The Block also has a number of oil seeps, several of which were discovered during the seismic operations now complete.
The Company completed the acquisition of 429.1 km of 2D seismic data in October 2010. The seismic campaign was completed on schedule and within budget. Processing and interpretation of the seismic data is now underway, with drilling of the first well on this Block planned for the fourth quarter of 2011.
The Company is the operator of the project and holds a 60% undivided interest in the production sharing contract, the KRG holds a 20% interest and the remaining 20% is a third party interest which the KRG has the option to assign to a third party or parties. The Company is required to pay 100% of the minimum financial commitment in respect of the first exploration sub period or until such time as the KRG's reserved 20% interest has been sold, following which the Company will pay 75% of the forward costs and receive a reimbursement for 25% of the costs incurred to that date. Fiscal terms under the PSC include a 10% royalty, a variable profit split, based on a percentage share to the KRG and a capacity building payment equal to 20% of the Company's profit oil share (produced oil, less royalty and cost oil) to be paid to the KRG. The 20% capacity building payment is a result of an amendment made to the PSC in August 2010, relieving the Company of its previous contractual requirement to issue 150 million common shares of the Company to the KRG. The Company has the right to recover costs using up to 45% of the available crude oil (produced oil less royalty oil) and 53% of the produced gas.
Block K42
Block K42 is located immediately northeast of the Pulkhana Block and is on trend with the Jambur field situated to the north west of the Block.
A campaign to acquire 232.0 km of 2D seismic data on this Block was completed in May 2010. Processing and interpretation of the seismic data is currently underway, and is expected to be completed by the end of the year.
The Company is a party to the K42 Option Agreement between the KRG and Oil Search (Iraq) Limited ("OSIL"), which allows an option to the Company and OSIL to enter into a PSC with the KRG, the terms of which have been agreed in principal, relating to the exploration and development of petroleum resources in the Block K42 contract area located in Kurdistan.
In accordance with the Block K42 PSC, OSIL is the operator and, collectively with the Company, represent the "Contractor". This K42 Option Agreement requires the Contractor to conduct certain seismic services, including the acquisition of 200 kilometers of seismic surveying, within the option period of 18 months commencing November 1, 2009. The option to enter into a PSC may be exercised by providing written notice to the KRG. The Contractor is to pay 100% of all the costs incurred during the option period, 25% of which are to be paid by the Company.
Upon exercise of the option, the Company would acquire not less than an undivided 20% interest in the production sharing contract in respect of the Block K42 contract area, with OSIL holding a 60% interest and the KRG holding the remaining 20%. If either the Company or OSIL elect not to exercise its option in respect of the Contract the other party has the option of acquiring the exiting party's rights and obligations.
Atrush Block
In August 2010 the Group acquired a 33.5% shareholding in General Exploration Partners Inc ("GEP"). GEP is the operator of the Atrush Block PSC, holding an 80% working interest in the Block, with the remaining 20% third party interest ("TPI") being held by the KRG. In October 2010, Marathon Oil Corporation was assigned the 20% TPI.
The Atrush Block is located immediately north and adjacent to the major Shaikan discovery announced by Gulf Keystone Petroleum Ltd. in January 2010. The 2D seismic data over the Atrush Block indicates that the Atrush structure is similar to the Shaikan structure. The Shaikan discovery was announced as multiple stacked oil reservoirs in the Cretaceous, Jurassic and Triassic sections. The Atrush Block is also adjacent to and on trend with the recent Bijeel oil discovery to the east, operated by Kalegran Limited (MOL).
The Atrush 1 exploration well was spudded on October 5, 2010 and will be drilled to a planned depth of 3,100 meters. The well is prognosed to encounter the same reservoir sections as Shaikan and will also test the structural extension of the Shaikan discovery into the Atrush Block as indicated from the 2D seismic data. Of the ten expected target reservoirs in Atrush 1, nine were confirmed to be oil‐bearing in Shaikan, while the Lower Kurra Chine encountered high pressure gas. There is also additional upside potential in the shallower Cretaceous Qamchuga formation, and the deeper Permian section (not reached in Shaikan), which is also indicated by seismic data to have closure in the Atrush Block.
Under the terms of PSC, the KRG has the option of participating in the PSC with an undivided interest, of up to 20% and not less than 5%, in the petroleum operations and all the other rights, duties, obligations and liabilities associated with the PSC. If this option is exercised, the government will become liable for their share of the petroleum costs incurred on or after the first commercial declaration date. Fiscal terms under the PSC include a 10% royalty, a variable profit split, based on a percentage share to the KRG and a capacity building payment equal to 30% of profit oil (produced oil, less royalty and cost oil) to be paid to the KRG. GEP has the right to recover costs using up to 40% of the available oil (produced oil less royalty oil) and 55% of the produced gas.
2010 Second Quarter Highlights
Highlights
- In August 2010, the Group executed agreements to amend the Pulkhana Block 10 and the Arbat Block Production Sharing Contracts ("PSCs"), which relieve the Company of its previous contractual requirement to issue 150 million common shares to the Kurdistan Regional Government of Iraq ("KRG") and requires the Group to contribute 20% of its profit oil share from the two PSCs as capacity building payments to the Government.
- In April 2010 the Company completed the acquisition of 291.4 km of two dimensional ("2D") seismic data in the Pulkhana Block. The seismic campaign was completed on schedule and within budget. Processing and interpretation of the data is now complete and the location for the first exploration/appraisal well has been selected.
- Seismic acquisition of 232 km of 2D seismic data in Block K42 was concluded in May 2010. Processing and interpretation of the data has commenced and is expected to be completed by the end of the year.
- At the end of June 2010, the Company commenced the acquisition of 350 km of 2D seismic data on the Arbat Block. The acquisition is expected to be completed in early October 2010.
- Procurement activity is underway for the first well in the Pulkhana Block, with a spud date planned for the fourth quarter of this year. Approval has been received from the Ministry of Natural Resources, KRG, for the well location, planned total depth and the data acquisition programme.
- Cash balance of the Company was $52.8 million as at June 30, 2010.
- Mr. Pradeep Kabra, President and Chief Executive Officer, was appointed as a director of the Company in April 2010.
The Group has working interests in each of the Pulkhana Block, the Arbat Block and Block K42 petroleum properties, all located in Kurdistan within the northern extension of the Zagros Folded Belt. The area is underexplored and is currently undergoing a major exploration and development campaign by over 30 mid to large size international oil companies.
Pulkhana Block
The Pulkhana Block is an appraisal/development project of a field which was discovered in 1956 and flowed over 2,900 barrels of oil per day from a well which entered two fractured carbonate reservoirs.
The Company completed the acquisition of 291.4 km of 2D seismic data in April 2010. The seismic campaign was completed on schedule and within budget. Processing and interpretation of the seismic data was completed in July 2010 in preparation for drilling a well on this Block. Procurement activity is underway, with spud planned for the fourth quarter of this year.
The planned well, Pulkhana 9, has been approved by the Ministry of Natural Resources, and will be drilled approximately 2.8 km north west of the 1956 Pulkhana 5 discovery well. Planned total depth is approximately 2,700 meters and is targeting the proven Euphrates/Upper Jaddala and Shiranish oil reservoirs, as well as evaluating a further potential reservoir in the Lower Jaddala.
ShaMaran plans to drill 3 wells in the first exploration phase of three years in order to confirm the size and economic viability of the development of the Pulkhana field. The Company will then have the option to continue on to a further two year exploration phase and, if development is warranted, a development period of up to 20 years.
The Company is the operator of the project with a 60% undivided interest in the petroleum operations. Petoil retains a 20% interest and the KRG holds the remaining 20%. The Company is required to pay 100% of the minimum financial commitment in respect of the first exploration phase, following which the Company will pay 75% of the forward costs. Fiscal terms under the PSC include a 10% royalty and a variable profit split based on a profitability factor to the KRG. The Company has the right to recover costs using up to 40% of the produced oil and 50% of the produced gas. Refer also to the discussion under "Commitments" in the MD&A.
Arbat Block
The Arbat Block (formerly Block G) is a 973 square km exploration block located adjacent to the Miran Block of Heritage Oil Plc and is part of the same structural trend that contains the Miran West discovery. The Block contains both surface anticlines and subsurface structures all identified by recent field work, which are being confirmed by ongoing seismic work. The Block also has a number of oil seeps, several of which were discovered during the seismic operations now in progress.
The seismic campaign commenced at the end of June 2010 and is expected to be concluded in early October 2010. Processing and interpretation will then follow, and is planned to be complete by the end of the year.
The Company is the operator of the project and holds a 60% undivided interest in the petroleum operations, the KRG holds a 20% interest and the remaining 20% is a third party interest which the KRG has the option to assign to a third party or parties. The Company is required to pay 100% of the minimum financial commitment in respect of the first exploration sub period or until such time as the KRG's reserved 20% interest has been sold, following which the Company will pay 75% of the forward costs and receive a reimbursement for 25% of the costs incurred to that date. Fiscal terms under the PSC include a 10% royalty and a variable profit split based on a profitability factor to the KRG. The Company has the right to recover costs using up to 45% of the produced oil and 53% of the produced gas. Refer also to the discussion under "Commitments" in the MD&A.
Block K42
Block K42 is located immediately northeast of the Pulkhana Block and is on trend with the Jambur field situated to the north west of the Block. It is an exploration block with no surface mapped prospects.
A campaign to acquire 232 km of 2D seismic data on this Block was completed in May 2010. Processing and interpretation of the seismic data is currently underway, and is expected to be completed by the end of the year.
The Company is a party to the K42 Option Agreement between the KRG and Oil Search (Iraq) Limited ("OSIL"), which allows an option to the Company and OSIL to enter into with the KRG a PSC, the terms of which have been agreed in principal, relating to the exploration and development of petroleum resources in the Block K42 contract area located in Kurdistan.
In accordance with the Block K42 PSC, OSIL is the operator and, collectively with the Company, represent the "Contractor". This K42 Option Agreement requires the Contractor to conduct certain seismic services, including the acquisition of 200 kilometers of seismic surveying, within the option period of 18 months commencing October 1, 2009. The option to enter into a PSC may be exercised by providing written notice to the KRG. The Contractor is to pay 100% of all the costs incurred during the option period, 25% of which are to be paid by the Company.
Upon exercise of the option, the Company would acquire not less than an undivided 20% interest in the petroleum operations in respect of the Block K42 contract area, with OSIL holding a 60% interest and the KRG holding the remaining 20%. If either the Company or OSIL elect not to exercise its option in respect of the Contract the other party has the option of acquiring the exiting party's rights and obligations.
2010 First Quarter Highlights
- The Company completed in April 2010 the acquisition of 291.4 km of 2D seismic data in the Pulkhana Block. The seismic campaign was completed on schedule and within budget. Processing and interpretation of the data has commenced and will be carried out over the next few months in preparation for drilling.
- Seismic acquisition of 200 km of 2D seismic data in Block K42 commenced in early May, with seismic acquisition in the Arbat block scheduled to begin thereafter.
- Procurement activity is underway for the first well in the Pulkhana Block, with spud date planned for the fourth quarter of this year.
- Cash balance of the Company was $62.6 million as at March 31, 2010.
- Mr. Pradeep Kabra was nominated as a director of the Company in April 2010.
The Group has working interests in each of the Pulkhana Block, the Arbat Block and Block K42 petroleum properties, all located in Kurdistan. These petroleum properties lie within the northern extension of the Zagros Folded Belt which is estimated to contain up to 45 billion of Iraq's 115 billion barrels of known reserves. The Kirkuk field lies within this fold belt trend and is one of the world's largest, containing reserves of over 20 billion barrels of oil. The area is underexplored and is currently undergoing a major exploration and development campaign by over 30 mid to large size international oil companies.
Pulkhana Block
The Company completed in April 2010 the acquisition of 291.4 km of two dimensional seismic data. The seismic campaign was completed on schedule and within budget. Processing and interpretation of the seismic data has commenced and will be carried out over the next few months in preparation for drilling a well on this Block. Procurement activity has commenced for the well, which has a spud date planned for the fourth quarter of this year.
ShaMaran plans to drill 3 wells in the first exploration phase of three years in order to confirm the size and economic viability of the development of the Pulkhana field. The Company will then have the option to continue on to a further two year exploration phase and, if development is warranted, a development period of up to 20 years.
The Company is the operator of the project with a 60% undivided interest in the petroleum operations. Petoil retains a 20% interest and the KRG holds the remaining 20%. The Company is required to pay 100% of the minimum financial commitment in respect of the first exploration phase, following which the Company will pay 75% of the forward costs. Fiscal terms under the PSC include a 10% royalty and a variable profit split based on a profitability factor to the KRG. The Company has the right to recover costs using up to 40% of the produced oil and 50% of the produced gas.
The Pulkhana Block is an appraisal/development project of a field which was discovered in 1956 and flowed over 2900 barrels of oil per day from a well which entered two fractured carbonate reservoirs.
Arbat Block
Under the terms of the Arbat PSC, the Company is obliged to acquire 350 km of 2D seismic data and drill 2 wells in the first exploration phase of three years. The seismic campaign is scheduled to commence in June 2010.
The Arbat Block (formerly Block G) is located adjacent to the Miran Block of Heritage Oil Plc. This 973 square km exploration block is part of the same structural trend that contains the Miran West discovery, and includes five surface anticlines identified by recent field work.
The Company is the operator of the project and holds a 60% undivided interest in the petroleum operations, the KRG holds a 20% interest and the remaining 20% is a third party interest which the KRG has the option to assign to a third party or parties. The Company is required to pay 100% of the minimum financial commitment in respect of the first exploration sub period or until such time as the KRG's reserved 20% interest has been sold, following which the Company will pay 75% of the forward costs and receive a reimbursement for 25% of the costs incurred to that date. Fiscal terms under the PSC include a 10% royalty and a variable profit split based on a profitability factor to the KRG. The Company has the right to recover costs using up to 45% of the produced oil and 53% of the produced gas.
Block K42
A campaign to acquire 200 km of two dimensional seismic data on this Block commenced at the end of April 2010. The campaign is expected to be completed in June of this year.
Block K42 is located immediately north of the Pulkhana Block and is on trend with the Jambur field situated to the north west of the Block. It is an exploration block with no seismic or surface mapped prospects. Recent field work indicates the possibility of two leads in the Block.
The Company is a party to the K42 Option Agreement between the KRG and Oil Search (Iraq) Limited ("OSIL"), which allows an option to the Company and OSIL to enter into with the KRG a PSC, the terms of which have been agreed in principal, relating to the exploration and development of petroleum resources in the Block K42 contract area located in Kurdistan.
In accordance with the Block K42 PSC, OSIL is the operator and, collectively with the Company, represent the "Contractor". This K42 Option Agreement requires the Contractor to conduct certain seismic services, including the acquisition of 200 kilometers of seismic surveying, within the option period of 18 months commencing October 1, 2009. The option to enter into a PSC may be exercised by providing written notice to the KRG. The Contractor is to pay 100% of all the costs incurred during the option period, 25% of which are to be paid by the Company.
Upon exercise of the option, the Company would acquire not less than an undivided 20% interest in the petroleum operations in respect of the Block K42 contract area, with OSIL holding a 60% interest and the KRG holding the remaining 20%. If either the Company or OSIL elect not to exercise its option in respect of the Contract the other party has the option of acquiring the exiting party's rights and obligations.
2009 Annual Highlights
Operating
The sale of substantially all of the Company's oil and gas properties located in the United States in the Gulf of Mexico was completed in the second quarter of 2009.
Agreements for three separate petroleum properties located in Kurdistan were signed on August 28, 2009, whereby the Company will pursue petroleum exploration and development operations governed by production sharing contracts ("PSCs") signed with the KRG. Entry into the PSCs was approved by the Company's shareholders and the TSX Venture Exchange on October 16, 2009.
The Company is currently in the pre-production stages of its exploration and development campaign corresponding to the three petroleum properties located in Kurdistan. At the date of this MD&A, the Company was in the process of acquiring 2D seismic data in the Pulkhana Block petroleum property.
Financial
The issuance of 140 million common shares of the Company generated net proceeds of Cdn $99,696,000 during the month of October, 2009.
The Company completed in October 2009 all of its Capacity Building and Signature Support payments due to the KRG as required under its Production Sharing Contracts (PSC).
Cash balance of the Company was $63.5 million as at December 31, 2009.
Corporate
Changes to executive management of the Company were effected in December 2009 in order to strengthen core operations and retain individuals with the relevant depth of oil and gas experience required to conduct oil and gas operations in Kurdistan. Refer to the discussion in this MD&A under "Changes in Directors and Officers".
Petroleum Property Acquisitions in Kurdistan
During the year 2009 the Company acquired working interests in each of the Pulkhana Block, the Arbat Block and Block K42 petroleum properties, all located in south eastern Kurdistan.
These petroleum properties lie within the northern extension of the Zagros Folded Belt which is estimated to contain up to 45 billion of Iraq's 115 billion barrels of known reserves. The Kirkuk field lies within this fold belt trend and is one of the world's largest, containing reserves of over 20 billion barrels of oil. The area is underexplored and is currently undergoing a major exploration and development campaign by over 30 mid to large size international oil companies. Iraqi- Kurdistan is one of few regions in the prolific Middle East oil province where international operators have access to production sharing contracts which allow them to share the upside potential with host governments.
Pulkhana Block
The Pulkhana block was one of the original four PSCs awarded in 2003. It was acquired by Petoil Petroleum and Petroleum Products International Exploration and Production Inc ("Petoil"), a Turkish company, and ratified by the Iraq Federal government prior to the Oil and Gas Law Of The Kurdistan Region - Iraq, which was passed in 2007. It is an appraisal/development project of a field which was discovered in 1956 and flowed over 2900 barrels of oil per day from a well which entered two fractured carbonate reservoirs.
The Company is currently in the process of acquiring 250 km of two dimensional seismic data, and plans to drill 3 appraisal wells in the first 3 year exploration sub-period in order to confirm the size and economic viability of the development of the Pulkhana field. The Company will then have the option to continue on to a further two year exploration sub-period and, if development is warranted, a development period of up to 20 years.
The Company is the operator of the project with a 60% undivided interest in the petroleum operations. Petoil retains a 20% interest and the KRG holds the remaining 20%. The Company is required to pay 100% of the minimum financial commitment in respect of the first exploration subperiod, following which the Company will pay 75% of the forward costs. Fiscal terms under the PSC include a 10% royalty and a variable profit split based on a profitability factor to the KRG. The Company has the right to recover costs using up to 40% of the produced oil and 50% of the produced gas.
Capacity building bonuses (social responsibility) of $42.5 million were paid to the KRG on October 23, 2009 and 65 million common shares of ShaMaran are pending to be issued to the KRG, as part of the Company's cost of acquisition and social responsibility to the Kurdistan Region. In addition, the Company paid $15 million on October 23, 2009 to Petoil under the terms of a participation agreement, and is required to carry their costs in respect of the first exploration sub-period.
Arbat Block
The Arbat Block (formerly Block G) is located adjacent to the Miran Block of Heritage and Block 9 recently signed by Talisman Energy Corp. This 973 sq. km exploration block is part of the same structural trend that contains the Miran West discovery of Heritage Oil Plc, and includes five surface anticlines identified by recent field work.
Under the terms of the Arbat PSC, which was also originally approved as part of the Pulkhana approval, the Company is obliged to acquire 350 km of 2D seismic data and drill 2 wells in the first 3 year exploration sub-period.
The Company is the operator of the project and holds a 60% undivided interest in the petroleum operations, the KRG holds a 20% interest and the remaining 20% is a third party interest which the KRG has the option to assign to a third party or parties . The Company is required to pay 100% of the minimum financial commitment in respect of the first exploration sub period or until such time as the KRG's reserved 20% interest has been sold, following which the Company will pay 75% of the forward costs and receive a reimbursement for 25% of the costs incurred to that date. Fiscal terms under the PSC include a 10% royalty and a variable profit split based on a profitability factor to the KRG. The Company has the right to recover costs using up to 45% of the produced oil and 53% of the produced gas.
Capacity building bonuses of $20 million were paid to the KRG on October 23, 2009 and 35 million common shares of ShaMaran are pending to be issued to the KRG.
Block K42
Block K42 is located immediately north of the Pulkhana Block and is on trend with the Jambur field situated to the north west of the Block. It is an exploration block with no seismic or surface mapped prospects. Recent field work indicates the possibility of two buried folds in the Block.
The Company is a party to the K42 Option Agreement between the KRG and Oil Search (Iraq) Limited ("OSIL"), which allows an option to the Company and OSIL to enter into with the KRG a PSC, the terms of which have been agreed in principal, relating to the exploration and development of petroleum resources in the Block K42 contract area located in Kurdistan.
In accordance with the Block K42 PSC, OSIL is the operator and, collectively with the Company, represent the "Contractor". This K42 Option Agreement requires the Contractor to conduct certain seismic services, including the acquisition of 200 kilometers of seismic surveying, within the option period of 18 months commencing October 1, 2009. The option to enter into a PSC may be exercised by providing written notice to the KRG. The Contractor is to pay 100% of all the costs incurred during the option period, 25% of which are to be paid by the Company.
Upon exercise of the option, the Company would acquire not less than an undivided 20% interest in the petroleum operations in respect of the Block K42 contract area, with OSIL holding a 60% interest and the KRG holding the remaining 20%. If either the Company or OSIL elect not to exercise its option in respect of the Contract the other party has the option of acquiring the exiting party's rights and obligations.
Capacity building bonuses of $5 million were paid to the KRG on October 23, 2009. Should the option to enter into a PSC with the KRG be exercised, an additional $20 million is to be paid by the Company to the KRG at that time.
2009 Third Quarter Highlights
- During the quarter, the Company announced the acquisition of three large oil and gas projects in Kurdistan, Iraq transitioning itself to a Kurdistan focused oil development and exploration vehicle. To reflect this new direction, the Company changed its name from Bayou Bend Petroleum Ltd. to ShaMaran Petroleum Corp. ShaMaran is an ancient Kurdish deity representing wisdom and the guardian of secrets.
- Iraqi-Kurdistan lies within the northern extension of the Zagros Folded Belt and is estimated to contain up to 45 billion of Iraq’s 115 billion barrels of reserves. The Kirkuk field lies within this Fold Belt trend and is one of the world’s largest, containing reserves of over 20 billion barrels of oil. The area is highly underexplored and is currently undergoing a major exploration and development campaign by over 30 mid to large size international oil companies. Iraqi-Kurdistan is one of few regions in the prolific Middle East oil province where international operators have access to production sharing contracts which allow them to share the upside potential with host governments.
- The Company’s initial three projects in the region are the Pulkhana development/appraisal block and the Arbat and K42 exploration blocks. These projects are nearby and on trend with recent discoveries made by Genel Energi/Addax Petroleum (Taq Taq field), Heritage Oil Plc (Miran field) and others.
- The Pulkhana block is an appraisal/development project of a field which was discovered in 1959 and flowed over 2900 barrels of oil per day from one well which entered two fractured carbonate reservoirs. The Company is the operator of the project with a 60% working interest. Petoil (a Turkish company) has a 20% interest and the KRG holds the remaining 20%. A 250 km 2D seismic program is planned with an appraisal drilling program to follow.
- The Arbat project is a large exploration block (1,000 square kilometers) with several identified leads. Surface anticlines and sub-thrust traps are two major play types known on the block. The Company holds a 60% working interest in the block and operatorship with the remaining 40% held by the Kurdistan Regional Government (“KRG”). Initially, a 350 kilometer 2D seismic is planned followed by an exploration drilling program.
- Block K42 is an exploration block with currently no seismic or surface mapped prospects and represents a low entry cost seismic option. It is on trend with the major 1.1 billion barrel Jambur oil and gas field. The Block is currently operated by Oil Search (Iraq) holding a 60% interest with Shamaran holding the remaining 40%.
- The Company completed a CDN$105 million private placement financing through the issuance of 140 million subscription receipts at a price of $0.75. Each Subscription Receipt was exchangeable into one common share of the Company without further payment upon shareholder approval, which was received on October 16, 2009
- The Company has added to its management team the following:
- Pradeep Kabra, Chief Operating Officer
- Over 22 years experience in the oil industry including senior operational and international new venture management positions at Addax Petroleum, Lundin Oil and International Petroleum. Prior to his joining ShaMaran, Mr. Kabra was working as the General Manager Kurdistan in Addax Petroleum and was involved in the development of the Taq Taq field. He was also the director of Taq Taq Operating Company Limited, the operator of the Taq Taq / Kewa Chirmila PSC in Kurdistan.
- John Ashbridge, Vice President Exploration
- Over 20 years experience in oil and gas exploration, development and production having started his career with BP Exploration followed by senior technical positions with Occidental and Elf Aquitaine (now Total). Since joining the Lundin Group in 2005, he has led efforts to build new business opportunities in the North Sea, Africa and the Middle East, notably resulting in the addition of Africa Oil Corporation to the Group. For the last three years, Mr. Ashbridge has been developing opportunities and establishing contacts for the Lundin Group to invest in Iraqi and other Middle Eastern countries.
- Ian Gibbs, Chief Financial Officer
- Ian Gibbs is a Canadian Chartered Accountant and a graduate of the University of Calgary where he obtained a bachelor of commerce degree. Ian Gibbs has held a variety of prominent positions within the Lundin Group of Companies; most recently as CFO of Tanganyika Oil where he played a pivotal role in the recent $2 billion sale of the company to Sinopec International Petroleum. Prior to Tanganyika Oil, Mr. Gibbs was CFO of Valkyries Petroleum which was the subject of an $800 million takeover.
- J. Cameron Bailey, Director
- Mr. Bailey is a Chartered Financial Analyst and holds a Bachelor of Commerce degree from the University of Calgary. He has worked in the energy investment business, specifically investment banking for the past 19 years. He is the founder of, and has organized, the initial public offerings for a number of oil and gas exploration, production and oilfield services companies.
- Alexandre Schneiter, Director
- Mr. Schneiter has worked within the Lundin Group of Companies since 1993 and is currently Executive Vice President and Chief Operating Officer of Lundin Petroleum AB. As COO, he leads an experienced team of oil and gas professionals who are responsible for Lundin Petroleum's worldwide exploration and production operations. Over the years, Mr. Schneiter has been instrumental in the discovery of several major oil fields for the Lundin Group, including, among others, in Libya, Sudan and Malaysia.
- In summary, the Board of Directors and Senior Management are:
- Keith Hill, Chairman and President and Director
- John Ashbridge, VP Exploration
- Pradeep Kabra, Chief Operating Officer
- Ian Gibbs, Chief Financial Officer
- Cameron Bailey, Director
- Gary Guidry, Director
- Alexandre Schneiter, Director
- Brian Edgar, Director
Looking Forward
Kurdistan is an emerging major oil region. Reserve estimates for the region are very high yet it remains under-developed and under-explored. There is enormous opportunity in Kurdistan and a significant work program is planned over the next several months including seismic and drilling preparation.
