Atrush Block in Iraq set for first production in 2015 (Company)

Atrush Block in Iraq set for first production in 2015 (Company)

With an oversubscribed $150 million senior secured debt package locked-up and the approval for Phase 1 development of the Atrush block by the Kurdistan Regional Government (KRG), ShaMaran Petroleum (SNM:TSX), is set to re-rate given their ability to finance the development of the huge block.  The company released its Q3 2013 financial and operating results last night which highlighted the de-risking that has occurred within the company over the last year.  The Atrush block is estimated to produce 30,000boepd beginning in 2015 which would equate to over 6,000boepd net to SNM given their 20.1% working interest in the block (operated by 39.9% partner Abu Dhabi National Energy, 15% Marathon Oil and the remaining to the KRG).  Production was bumped back slightly from the second half of 2014 to early 2015, but with the recent $150 million financing, SNM should be fully financed into first production.

On June 23, 2013, the Atrush-3 appraisal well reached its target depth of approximately 1.8km which is within the potential phase 2 development area.  This well confirmed lowest known oil at depths that are consistent with previous wells and hit the extension of the oil-bearing Jurassic-age Barsarin-Sargelu-Alan-Mus formations.  This well is located 6.5km east of Atrush-2 well.

Current gross 2C reserves grew 35% over 2012 from 465 million boes to over 627 million boes by the end of 2012.  This represents current 2C reserves net to SNM of roughly 126 million boes.  These estimates were confirmed by the recent success at the Atrush-3 well which encountered hydrocarbons at a similar depth to the Atrush-2 well.  SNM and its partners should be able to book 2P reserves at year-end 2013.

The partnership is currently drilling the Atrush-4 phase 1 development well which spudded on October 20.  The well is targeting a depth of almost 2.5km and will take roughly 70 days if things go well (which is expected) which should provide positive news flow in early 2014.

SNM left the quarter with over $14 million in cash on the books which didn't include to $150 million in debt.  With the funding overhang lifted and the company set to book 2P reserves at year-end combined with management's consistent performance (and Lundin Family backing), SNM has significantly de-risked the Atrush block this year and should be rewarded by investors.

Here's the 1-year chart:

SNM Chart

Read: ShaMaran Q3 2013 Financial and Operating Results