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Reserves / Resources

Updates to estimated reserves and contingent resources for the Atrush block as of December 31, 2015.The reserves and contingent resources estimates were provided by McDaniel & Associates Consultants Ltd. ("McDaniel"), the Company's independent qualified resources evaluator, and were prepared in accordance with standards set out in the Canadian National Instrument NI 51-101 and Canadian Oil and Gas Evaluation Handbook (COGEH).
  1. This estimate of remaining recoverable resources (unrisked) includes contingent resources that have not been adjusted for risk based on the chance of development. It is not an estimate of Volumes that may be recovered.
  2. boe may be misleading, particularly if used in isolation. A boe conversion ratio of 6 Mcf per 1 Bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.
The Company's crude oil reserves as of December 31, 2015 and the respective net present values of the reserves based on forecast prices and costs were estimated to be as follows, based on a Company working interest of 20.1 percent:

COMPANY ESTIMATED RESERVES (DILUTED)
AS OF DECEMBER 31, 2015

  Proved Developed Proved Undeveloped Total
Proved
Probable Total Proved & Probable Possible Total Proved, Probable & Possible
Light/Medium Oil (Mbbl)(1)
   Gross(2)  -    4,653  4,653  7,779  12,432  10,366  22,798
   Net(3)  -    3,265  3,265  4,191  7,456  3,167  10,623
Heavy Oil (Mbbl)(1)
   Gross(2)  -    2,287  2,287  2,394  4,681  3,108  7,789
   Net(3)  -    1,605  1,605  1,203  2,808  822  3,629
  1. The Atrush Field contains crude oil of variable density even within a single reservoir unit and as such the actual split between Light/Medium Oil and Heavy Oil is uncertain.
  2. Company gross reserves are based on the Company's 20.1 percent working interest share of the property gross reserves assuming the Government exercises its option to take a 25 percent working interest.
  3. Company net reserves are based on Company share of total Cost and Profit Revenues. Note, as the government pays income taxes on behalf of the Company out of the government's profit oil share, the net reserves were based on the effective pre-tax profit revenues by adjusting for the tax rate.
COMPANY ESTIMATED SHARE OF RESERVES NET PRESENT VALUES (DILUTED)(1)(2)(3)(4)(5)
AS OF DECEMBER 31, 2015

  Net Present Value (US $1,000) Discounted At
  0% 5% 10% 15% 20%
   Proved Developed Reserves  -    -    -    -    -  
   Proved Undeveloped Reserves  112,115  88,224  70,122  56,119  45,087
   Total Proved Reserves  112,115  88,224  70,122  56,119  45,087
   Probable Reserves  240,414  175,252  132,225  102,658  81,638
   Total Proved & Probable Reserves  352,529  263,476  202,348  158,777  126,725
   Possible Reserves  139,616  82,125  53,741  38,250  28,981
   Total Proved, Probable & Possible Reserves  492,145  345,602  256,088  197,027  155,705
  1. Based on a 20.1 percent Company working interest assuming the KRG exercises its option to take a 25 percent working interest.
  2. Based on forecast prices and costs at January 1, 2016
  3. Interest expenses and corporate overhead, etc. were not included.
  4. Possible delays in receiving revenue payments have not been incorporated.
  5. The net present values may not necessarily represent the fair market value of the reserves.
The reserves and net present values were estimated using forecast prices and costs. The sales oil price was based on the McDaniel January 1, 2016 Brent price forecast. All of the Atrush oil production is assumed to be exported via the Khurmala-Fishkabur pipeline to Turkey. A 37 kilometre pipeline is being built from the Atrush Field to a tie-in point on this export line and will be operated by the KRG. McDaniel estimates a discount to Brent crude oil to account for quality differential, marketing fees and pipeline tariff for export via Ceyhan in Turkey.

The Company's crude oil and natural gas contingent resources as of December 31, 2015 were estimated to be as follows:

COMPANY ESTIMATED CONTINGENT RESOURCES (DILUTED)(1)(2)
AS OF DECEMBER 31, 2015

  Low Estimate (1C) Best Estimate (2C) High Estimate (3C)
Light/Medium Oil (Mbbl)(3)      
   Gross(4)  16,050  17,980  19,895
Heavy Oil (Mbbl)(3)      
   Gross(4)  20,256  41,656  66,616
Natural Gas (MMcf)      
   Gross(4) 5,010 8,810 13,756

  1. Company Gross resources are based on a 20.1 percent working interest share of the property gross resources assuming the KRG exercises its option to take a 25 percent working interest.
  2. There is no certainty that it will be commercially viable to produce any portion of the resources.
  3. The Atrush Field contains crude oil of variable density even within a single reservoir unit and as such the actual split between Light/Medium Oil and Heavy Oil is uncertain.
  4. These are unrisked contingent resources that do not take into account the chance of development which is defined as the probability of a project being commercially viable. Quantifying the chance of development requires consideration of both economic contingencies and other contingencies, such as legal, regulatory, market access, political, social licence, internal and external approvals and commitment to project finance and development timing. As many of these factors are extremely difficult to quantify, the chance of development is uncertain and must be used with caution. The chance of development was estimated to be 80 percent for the Crude Oil and 5 percent for the Natural Gas.
The contingent resources represent the likely recoverable volumes associated with further phases of development after Phase 1. These are considered to be contingent resources rather than reserves due to the uncertainty over the future development plan which will depend in part on further field appraisal and Phase 1 production performance.

Prospective resources remain unchanged from previous years estimates dated December 31, 2013 and December 31, 2014.

The Atrush Block is operated by the Abu Dhabi National Energy Company PJSC ("TAQA") and is held 53.2% by TAQA, ShaMaran Petroleum Corp, through its wholly owned subsidiary General Exploration Partners, Inc. ("GEP") 26.8%, 20% Marathon Oil KDV B.V., (a wholly owned subsidiary of Marathon Oil Corporation (NYSE: MRO)), until such time that the Kurdistan Regional Government has completed the exercise of its right to acquire up to a 25% interest. Atrush reserves and resource estimates presented represent solely the view of ShaMaran and its experts.  
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