ShaMaran Petroleum has announced its financial and operating results for the nine months ended September 30, 2016. Unless otherwise stated all currency amounts indicated as “$” in this news release are expressed in thousands of United States dollars.
On November 7, 2016 the Assignment, Novation and Fourth Amendment Agreement to the PSC (the “4th PSC Amendment”) and Atrush Facilitation Agreement were concluded between TAQA Atrush, the Operator of the Atrush Block; General Exploration Partners (GEP), a wholly owned subsidiary of ShaMaran; Marathon Oil KDV (MOKDV); and the Kurdistan Regional Government (KRG); resulting in participating interests in the Atrush Block PSC of TAQA at 39.9%, the KRG at 25%, GEP at 20.1% and MOKDV at 15%.
In addition these agreements include the terms for repayment to the Non-Government Contractors for costs which they have agreed to pay for on behalf of the KRG, including those relating to the Feeder Pipeline.
Construction of the 30,000 bopd Atrush Phase 1 Production Facility (“Production Facility”) is complete and commissioning is in progress. The Atrush-2 (“AT-2”) and Atrush-4 (“AT-4”) wells were successfully completed in the second and third quarters of this year. All four wells intended for production are now completed, connected to the Production Facility and ready for start-up. Work on the pipeline being constructed between the Production Facility and the block boundary (the “Spur Pipeline”) is expected to be completed in the fourth quarter of 2016.
Work has now commenced on the final 35km section of pipeline which will run from the Atrush block boundary to the tie-in point on the main export pipeline (the “Feeder Pipeline”) and is subject to the terms of an Engineering, Procurement and Construction (“EPC”) contract between TAQA and KAR Company (“KAR”) which became effective on November 7, 2016.
The length and complexity of the commercial discussions associated with the EPC contract, the 4th PSC Amendment, and the Atrush Facilitation Agreement have brought the commencement of the Atrush Feeder Pipeline closer to the winter season which means there is an increased risk to the schedule. While completion in the first quarter of 2017 is still the target and a possibility, it is probable that first production from Atrush will be further delayed to the second quarter of 2017.
As a result the Company estimates that it will require approximately $20 million of additional funding which the Company expects will be made available by increasing GEP’s Super Senior Bond through facilities provided for in GEP’s April 2016 financing arrangement.