2023
Annual Report
For the year ended December 31, 2023
Contents
MANAGEMENT DISCUSSION AND ANALYSIS
INTRODUCTION .................................................................................................................................................................................. 1
2023 HIGHLIGHTS .............................................................................................................................................................................. 2
• Corporate Highlights .................................................................................................................................................................... 2
• Financial Highlights ........................................................................................................................................................................ 2
• Operational Highlights .................................................................................................................................................................... 2
• 2024 Guidance ................................................................................................................................................................................ 3
• Subsequent Events .......................................................................................................................................................................... 3
OPERATIONS REVIEW ......................................................................................................................................................................... 4
• Business Overview ........................................................................................................................................................................... 4
• Operations Overview....................................................................................................................................................................... 5
FINANCIAL REVIEW ............................................................................................................................................................................ 7
• Financial Results.............................................................................................................................................................................. 7
• Capital Expenditures ..................................................................................................................................................................... 12
• Financial Position and Liquidity ..................................................................................................................................................... 13
• Off Balance Sheet Arrangements .................................................................................................................................................. 15
• Transactions with Related Parties ................................................................................................................................................. 15
• Outstanding Share Data, Share Units and Stock Options .............................................................................................................. 15
• Contractual Obligations and Commitments .................................................................................................................................. 16
• Critical Accounting Policies and Estimates .................................................................................................................................... 17
RESERVES AND RESOURCES ESTIMATES ............................................................................................................................................ 18
FINANCIAL INSTRUMENTS ................................................................................................................................................................ 20
RISKS AND UNCERTAINTIES .............................................................................................................................................................. 21
FORWARD-LOOKING INFORMATION ................................................................................................................................................. 22
RESERVES AND RESOURCES ADVISORY ............................................................................................................................................. 23
ADDITIONAL INFORMATION ............................................................................................................................................................. 23
SUPPLEMENTARY INFORMATION ..................................................................................................................................................... 23
FINANCIAL STATEMENTS
INDEPENDENT AUDITORS REPORT ...................................................................................................................................................... 24
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME ............................................................................................................... 30
CONSOLIDATED BALANCE SHEET ........................................................................................................................................................ 31
CONSOLIDATED STATEMENT OF CASH FLOW ...................................................................................................................................... 32
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ........................................................................................................................ 33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS .................................................................................................................... 34
Management’s Discussion and Analysis
For the three months ended and year ended December 31, 2023
INTRODUCTION
Management’s discussion and analysis (“MD&A”) of the financial and operating results of ShaMaran Petroleum Corp. (together with its
subsidiaries, “ShaMaran” or the “Company”) is prepared with an effective date of March 6, 2024, and is intended to provide an overview
of the Company’s operations, financial performance and current and future business opportunities. The MD&A should be read in
conjunction with the audited consolidated financial statements for the year ended December 31, 2023, together with the accompanying
notes (“Financial Statements”).
Company Overview
The Company is engaged in the business of oil and gas exploration and production and holds the following interests in production sharing
contracts:
•
•
27.6% participating interest in the Atrush Block in the Kurdistan Region of Iraq (“KRI”) through its wholly-owned subsidiary
General Exploration Partners, Inc. (“GEP”). Subject to closing of the transactions announced on January 22, 2024, GEP’s direct
working interest in the Atrush Block will increase to 50%.
18% participating interest (22.5% paying interest) in the Sarsang Block in the KRI through its wholly-owned subsidiary ShaMaran
Sarsang A/S. The Company announced closing the acquisition of TEPKRI Sarsang A/S (the “Sarsang Acquisition”), a wholly-
owned subsidiary of TotalEnergies S.E. (“TTE”), on September 14, 2022. The name of the company was subsequently changed
to ShaMaran Sarsang A/S.
ShaMaran’s common shares are listed on the TSX Venture Exchange in Canada and the NASDAQ First North Growth Market in Sweden.
The Company is incorporated and domiciled in British Columbia, Canada under the Business Corporations Act (British Columbia). The
address of its registered and records office is 1200-1075 West Georgia Street, Vancouver, BC V6E 3C9, Canada, and its business address
is 885 West Georgia Street, Suite 2000, Vancouver, BC V6C 3E8, Canada.
Basis of Preparation
The MD&A and the Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS
Accounting Standards”) as issued by the International Accounting Standards Board.
Unless otherwise stated herein all currency amounts indicated as “$” in this MD&A are expressed in United States dollars (“USD”).
1
Management’s Discussion and Analysis
For the three months ended and year ended December 31, 2023
2023 HIGHLIGHTS
2023 has been a challenging year with the Iraq-Turkey pipeline (“ITP”) remaining closed since March 25, 2023, resulting in ShaMaran and
other international oil companies (“IOCs”) with production in Kurdistan unable to export their crude oil via the ITP. Despite a number of
political pronouncements regarding the operational readiness of the pipeline on the Turkish side, it is still unclear when exports will
resume. The Company continues to work with the Association of the Petroleum Industry of Kurdistan (“APIKUR”) on achieving long-term
commercial solutions for future crude oil exports payments and recovery of overdue receivables for past oil sales. The Company and its
operating partners have focused on cost reductions and local sales since the ITP closure, and those measures will continue until the ITP
exports restart. Sarsang has consistently generated cash since starting local sales in April 2023. Atrush started selling locally in November
2023, and thereafter returned to generating cash. ShaMaran has reduced corporate costs and was able to further improve its liquidity
position through a bond waiver in July 2023 enabling the utilization of the Debt Service Retention Account (“DSRA”) to satisfy certain
debt obligations. In January 2024, the Company announced the acquisition of an additional working interest in Atrush and partnering
with HKN as the proposed new Atrush operator. This acquisition will increase ShaMaran’s working interest in Atrush from 27.6% to 50%,
and the Company expects that it will create opportunities for increased local sales from Atrush and for synergies between the two
adjoining blocks, Sarsang and Atrush.
Corporate Highlights:
•
•
•
The closure of the ITP since March 25, 2023, continues to have a material impact on ShaMaran’s operations and financial results.
The Company is actively engaging with the relevant parties to resume pipeline exports;
Production rates from the Sarsang Block were initially reduced following the ITP closure due to market demand constraints
when local sales commenced via trucking in April 2023, but production and sales in 2023 subsequently increased every quarter;
and
Production from the Atrush Block was shut-in following the ITP closure, due to a lack of trucking facilities, until sales started to
local refineries in November 2023 at reduced rates via pipeline flow reversal.
Financial Highlights:
USD Thousands
Revenue
Gross margin on oil sales
Net result
Cash flow from operations
EBITDAX
Three months ended December 31
Year ended December 31
2023
20,320
11,029
(904)
9,824
12,839
2022
53,173
15,194
12,347
12,551
39,624
2023
82,886
30,523
(26,706)
40,482
44,024
2022
176,665
105,941
114,959
105,283
140,060
• Q4 2023 oil sales to the Kurdistan local market averaged a net back price of $39.77/bbl and generated net revenues to the
Company of $20.3 million; net revenues for the full-year 2023 were $82.9 million, at an average net back price of $48.87/bbl
(including Q1 2023 ITP export sales);
•
•
ShaMaran generated $9.8 million of operating cash flow in Q4 2023 ($40.5 million in operating cash flow during the year)
primarily due to the strength of local sales from Sarsang and proactive cost-cutting at both the corporate and operating asset
levels; and
At December 31, 2023, the Company had cash of $71.7 million (including restricted cash of $22.8 million), and gross debt of
$293.1 million (including the $277.5 million bond and $15.6 million related-party loan). Net debt was $193 million (including
$28.4 million in ShaMaran 2025 bonds held by the Company).
Operational Highlights:
•
•
•
•
For 2023, total property gross production was 14.3 MMbbls, and total Company working interest production was 2.9 MMbbls;
As of December 31, 2023, Atrush has achieved cumulative production of approximately 70.5 MMbbls, and Sarsang has achieved
cumulative production of approximately 66.1 MMbbls since development commenced in both fields in 2013;
The Company's working interest of proved plus probable (“2P”) reserves 1 decreased by 2023 production of 2.9 MMbbls, from
68.3 MMbbls at December 31, 2022, to 65.4 MMbbls at December 31, 2023;
The Company's working interest 2C resource2 volumes remained constant from 41.5 MMbbls at December 31, 2022, to 41.5
MMbbls at December 31, 2023;
1 Reserves and contingent resources estimates were provided by McDaniel & Associates Consultants Ltd., 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.
2 Company’s working interest 2C resources are defined as the best estimate of working interest quantities of petroleum estimated, as of a given date, to be potentially
recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable
due to one or more contingencies.
2
Management’s Discussion and Analysis
For the three months ended and year ended December 31, 2023
•
•
Sarsang average gross production was 36.4 Mbopd during Q4 2023 and 29.6 Mbopd for the full-year 2023, with current gross
production around 38.0 Mbopd; and
Atrush average gross production was 9.0 Mbopd during Q4 2023 and 9.8 Mbopd for the full-year 2023, with current gross
production around 25.0 Mbopd.
2024 Guidance:
•
Due to the continued closure of the ITP and the unpredictability of the local sales market in Kurdistan, the Company has not
provided production guidance for 2024.
Subsequent Events:
•
The Company refers to its news release on January 22, 2024, regarding the signing of definitive agreements with TAQA
International B.V., a subsidiary of Abu Dhabi National Energy Company PJSC (“TAQA”), and HKN Energy IV, Ltd., an affiliate of
HKN Energy Ltd. (“HKN”), that upon completion will increase ShaMaran’s indirect ownership in the Atrush Block from 27.6% to
50% working interest. Assuming the transaction had closed on December 31, 2023, ShaMaran’s reserves and resource position
would be impacted as follows:
o
o
Company’s working interest 2P reserves would increase by 28% from 68.3 MMbbls at December 31, 2022, to
87.7 MMbbls as at December 31, 2023; and
Company’s working interest 2P reserves replacement ratio3 would be 769% 4 for 2023.
• On January 23, 2024, the Company announced that it intended to use part of its owned bonds to satisfy the $22.5 million bond
amortization amount due in January 2024. These bonds were retired in January 2024, leaving $5.9 million of Company owned
bonds remaining. After the bond amortization and interest payments at the end of January 2024, the Company had gross debt
of $271 million and net debt of $200 million (including restricted and unrestricted cash and company-owned bonds), in line
with the Company’s news release.
3 Company’s working interest 2P reserves replacement ratio is defined as the ratio of reserves additions to production during the year, including impacts of acquisitions and
dispositions.
4 Company’s working interest 2P reserve replacement ratio for the combined blocks has been calculated as follows:
No Acquisition
Acquisition Included
Extensions, MMstb
Improved Recovery, MMstb
Technical Revisions, MMstb
Acquisitions, MMstb
Total Adjustments, MMstb
2023 Production, MMstb
2P Replacement Ratio
-
-
-
-
-
2.9
-
-
-
-
22.3
22.3
2.9
769%
3
Management’s Discussion and Analysis
For the three months ended and year ended December 31, 2023
OPERATIONS REVIEW
Business Overview
The fourth quarter of 2023 saw a continuation of the challenges faced by Kurdistan oil producers since the closure of the ITP in
March 2023. The pipeline shutdown has lasted longer than generally expected, and the timing for resuming exports remains uncertain.
The Company understands that the Iraq federal government (“GOI”) and the Kurdistan Regional Government (“KRG”) are in active
discussions about a financial framework that will allow exports to resume via the ITP (while the Government of Turkey has indicated the
ITP readiness since October 2023). At Sarsang, production continued with sales to the local market on an ad hoc weekly basis in the fourth
quarter. At Atrush, production restarted in November 2023 with sales to a local refinery through reversal of the existing pipeline
infrastructure. All non-essential field operations, associated operating expenditures and the majority of capital expenditures have been
scaled back to a minimum at both the Atrush and Sarsang blocks in order to reduce costs while enabling both operators to safely meet
local sales demands. ShaMaran has also continued to review and reduce its corporate overhead to preserve liquidity while working
towards a long-term commercial solution to the pipeline export and payment situation.
The enactment of the Iraq federal budget for 2023-2025 in June 2023 has not yet improved the financial outlook for the KRG as issues
around implementation and payment of the KRG’s budget allocation need to be clarified. The Company expects that the main revenue
source for the KRG will remain oil sales, with any deficits or excess amounts being adjusted as part of the federal budget implementation
process. ShaMaran understands that budget amendment discussions between the KRG and the GOI are continuing.
The Company continues to work as part of APIKUR and believes that a reopening of the ITP for oil exports and a clear payment and
receivable recovery plan that is consistent with existing Production Sharing Contracts (“PSCs”) are necessary for the full resumption of
KRI oil production, and in the best interest of Iraq as a whole and the KRI.
For additional background and history on the Company’s Atrush and Sarsang interests, please refer to the Company’s Annual Information
Form for the year ended December 31, 2022, which
is available for viewing both on the Company’s website at
www.shamaranpetroleum.com and on SEDAR+ at www.sedarplus.ca under the Company’s profile.
4
Management’s Discussion and Analysis
For the three months ended and year ended December 31, 2023
Operations Overview
Reserves and Resources
On February 14, 2024, the Company reported estimated reserves and contingent resources for the Atrush and Sarsang fields as at
December 31, 2023, as reported by the Company’s independent reserves and resources evaluator, McDaniel & Associates Consultants
Ltd. (“McDaniel”).
For 2023, total property gross production was 14.3 MMbbls, and total Company working interest production was 2.9 MMbbls. As of
December 31, 2023, Atrush had achieved cumulative production of approximately 70.5 MMbbls, and Sarsang had achieved cumulative
production of approximately 66.1 MMbbls since development commenced in both fields in 2013.
The reduced field activity in 2023 resulted in:
•
•
Company’s working interest 2P reserves decreasing by 2023 production of 2.9 MMbbls, from 68.3 MMbbls at December
31, 2022, to 65.4 MMbbls at December 31, 2023; and
Company’s working interest 2C resource volumes remaining constant from 41.5 MMbbls at December 31, 2022, to 41.5 MMbbls
at December 31, 2023.
The Company refers to its news release on January 22, 2024, regarding the signing of definitive agreements that upon completion will
increase ShaMaran’s indirect ownership in the Atrush Block from 27.6% to 50% working interest. Assuming the transaction had closed on
December 31, 2023, ShaMaran’s reserves and resource position would be impacted as follows:
•
•
Company’s working interest 2P reserves would increase by 28% from 68.3 MMbbls at December 31, 2022, to 87.7 MMbbls as
at December 31, 2023; and
Company’s working interest 2P reserves replacement ratio would be 769% for 2023.
For more information on reserves and resources, please reference our Form 51-101 F1 Statement of Reserves Data and Other Oil and
Gas Information as at December 31, 2023, and available under the Company’s profile on SEDAR+ at www.sedarplus.ca.
Production
Average daily oil production – gross 100% field (Mbopd)
-
-
-
-
-
-
Atrush
Sarsang (from September 15, 2022)
Total
Oil sales – gross 100% field (Mbbl)
Atrush
Sarsang (from September 15, 2022)
Total
ShaMaran oil sales entitlement (Mbbl)
Atrush
Sarsang (from September 15, 2022)
Total
Three months ended Dec 31
Year ended Dec 31
2023
2022
2023
2022
9.0
36.4
45.4
829
3,519
4,348
110
401
511
32.7
43.0
75.7
3,004
3,959
6,963
398
447
845
9.8
29.6
39.4
35.9
12.2
48.1
3,557
13,098
10,852
4,448
14,409
17,546
471
1,225
1,696
1,739
494
2,232
27.6%
18%
At Atrush, shutdown of the ITP on March 25, 2023, prevented production until November 7, 2023, when local sales started at a reduced
rate through pipeline flow reversal. The 2023 average annual production was 9,745 bopd. Note that Atrush was producing at an average
rate of 35,600 bopd over the seven days prior to ITP shutdown. Following a period of curtailment to a maximum of 10,000 bopd for most
of December 2023 and January 2024, Atrush production increased to 20,000 bopd in February 2024.
The CK-19 production well, completed in January 2023, came online in February 2023. The CK-20 production well, drilled and
completed in March 2023, came online in November 2023 (following production restart). Both production wells delivered initial
production rates within the expected range.
5
Management’s Discussion and Analysis
For the three months ended and year ended December 31, 2023
At Sarsang, shutdown of the ITP had a lesser impact due to the ability to transport crude via trucking. Production continued at reduced
levels through 2023. The 2023 average annual production was 29,565 bopd. Note that Sarsang was producing at an average rate of 42,000
bopd over the seven days prior to ITP shutdown. Since the pipeline closure, well and processing capacity has been optimized to meet the
local sales demand and field cash generation with two of the four available facilities maintained online for an average production rate of
29,600 bopd during Q4 2023. Sarsang production remained steady at over 35,000 bopd in February 2024.
The STR-A2 production well, drilled in February 2023, was completed and came online during November 2023.
The ST-AW1 water disposal well was drilled and completed in April 2023. It is expected to become operational in March 2024.
Operational Outlook
As previously highlighted, ShaMaran has not provided operational guidance for 2024. The normal resumption of development and
operations in both assets is uncertain and subject to a number of criteria linked to the restart of the export pipeline and production
payments, including agreement with the KRG on payment of overdue amounts related to sales between October 2022 and March 2023.
ShaMaran assumes that local sales conditions prevail through 2024 with a return to development and full operation conditions as of
January 1, 2025, and those assumptions are reflected in the work plan and budgets for both assets during 2024.
6
Management’s Discussion and Analysis
For the three months ended and year ended December 31, 2023
FINANCIAL REVIEW
Financial Results
Selected Quarterly Financial Information
The following is a summary of selected quarterly financial information for the Company:
USD Thousands
(except per share data)
Continuing operations:
Revenue
Cost of goods sold
Net Gain on Sarsang Acquisition
General and admin expense
Share-based payments
Depreciation and amortization
Credit loss provision
Finance cost
Finance income
Income tax expense
Net (loss) / income
Q4
2023
Q3
2023
Q2
2023
Q1
2023
Q4
2022
Q3
2022
Q2
2022
Q1
2022
20,320
(9,291)
(360)
(2,865)
(376)
(58)
(305)
12,644
6,542
43,380
53,173
39,812
44,844
38,836
(11,049)
(10,741)
(21,282)
(37,979)
(10,952)
(10,636)
(11,157)
-
-
360
9,229
50,852
-
-
(1,575)
(2,486)
(3,361)
(3,682)
(2,275)
(2,359)
(1,593)
(315)
(1,151)
(61)
(59)
(222)
(58)
(644)
(11,568)
(1,421)
(549)
(54)
127
(212)
(55)
(176)
(55)
(1,492)
(1,897)
(1,401)
(54)
(611)
(9,560)
(8,961)
(9,748)
(9,700)
(9,686)
(11,809)
(8,972)
(9,060)
1,691
(100)
(904)
1,774
(15)
2,042
(30)
1,923
(20)
1,848
(80)
2,601
(42)
435
(14)
139
(19)
(8,202)
(27,199)
9,599
12,347
66,428
21,170
15,080
EBITDAX
12,839
5,834
(4,876)
30,227
39,624
32,626
37,339
30,471
Net (loss)/income in $ per share
- Basic
- Diluted
-
-
(0.003)
(0.010)
(0.003)
(0.009)
0.003
0.003
0.004
0.004
0.024
0.023
0.009
0.008
0.007
0.006
EBITDAX5 is calculated as the net result before financial items, taxes, depletion of oil and gas properties, impairment costs, depreciation
and exploration expenses and adjusted for non-recurring profit/loss on sale of assets and other income. Explanations of the significant
variances between periods are provided in the following sections.
Summary of Principal Changes in the Fourth Quarter Financial Information
The $0.9 million net loss generated in Q4 2023 was primarily driven by the ITP shutdown, which resulted in lost revenue. The income and
expenses in the fourth quarter are explained in more detail in the following sections.
5 Non-IFRS Accounting Standards measures do not have any standardized meaning prescribed by IFRS Accounting Standards and are therefore unlikely to be comparable to
similar measures presented by other public companies. Non-IFRS Accounting Standards measures should not be considered in isolation or as a substitute for measures
prepared in accordance with IFRS Accounting Standards. The Company uses non-IFRS Accounting Standards measures to provide investors with supplemental measures.
7
Management’s Discussion and Analysis
For the three months ended and year ended December 31, 2023
Selected Annual Financial Information
The following is a summary of selected annual financial information for the Company:
USD Thousands
(except per share data)
For the year ended December 31,
Revenues
Cost of goods sold
Bargain purchase gain on acquisition
General and administrative expense
Share-based payments expense
Depreciation and amortization expense
Impairment
Credit loss provision
Finance income
Finance cost
Income tax expense
(Loss) / income for the year
(Loss) / income in $ per share:
Basic
Diluted
Financial position – net book value of principal items
Property plant & equipment
Loans and receivables
Cash and other assets
Other non-current assets
Total assets
Net borrowings
Other liabilities
Shareholders’ equity
2023
82,886
(52,363)
-
(10,287)
(2,064)
(236)
-
(13,938)
7,393
(37,932)
(165)
(26,706)
2022
2021
176,665
(70,724)
60,081
(9,909)
(2,338)
(218)
-
(3,873)
4,909
(39,479)
(155)
114,959
102,323
(52,434)
-
(7,836)
(1,627)
(219)
-
2,038
844
(29,627)
(79)
13,383
(0.01)
(0.01)
0.05
0.04
0.01
0.01
As at December 31,
2023
302,192
74,334
73,816
69
450,411
(238,746)
(72,234)
139,431
2022
302,384
88,279
107,819
211
498,693
(258,943)
(76,056)
163,694
2021
138,971
48,249
181,151
94
368,465
(280,999)
(68,928)
18,538
Common shares outstanding (x 1,000)
2,824,362
2,808,851
2,215,350
Summary of Principal Changes in Annual Financial Information
The net loss in 2023 of $26.7 million is attributable to a number of key drivers:
•
•
The ITP shutdown resulting in reduced oil sales at significantly lower oil prices;
A higher credit loss provision due to the uncertainty in timing of receipt of past receivables; and
• One-off general and administrative costs offsetting corporate cost reductions.
The income and expenses details and the principal changes in annual financial information are further explained in the sections below.
8
Management’s Discussion and Analysis
For the three months ended and year ended December 31, 2023
EBITDAX – Non-IFRS Accounting Standards Measures
USD Thousands
Revenues
Lifting costs
Other costs of production
General and administrative expense
Share-based payments
EBITDAX
Three months ended December 31
Year ended December 31
2023
20,320
(4,169)
(71)
(2,865)
(376)
12,839
2022
53,173
(9,242)
(76)
(3,682)
(549)
39,624
2023
82,886
(26,191)
(320)
(10,287)
(2,064)
44,024
2022
176,665
(24,150)
(208)
(9,909)
(2,338)
140,060
Gross margin on oil sales
USD Thousands
Revenue from oil sales
Lifting costs
Other costs of production
Depletion costs
Cost of goods sold
Gross margin on oil sales
Three months ended December 31
Year ended December 31
2023
20,320
(4,169)
(71)
(5,051)
(9,291)
11,029
2022
53,173
(9,242)
(76)
(28,661)
(37,979)
15,194
2023
82,886
(26,191)
(320)
(25,852)
(52,363)
30,523
2022
176,665
(24,150)
(208)
(46,366)
(70,724)
105,941
Revenue from oil sales relates to the Company’s entitlement share of oil sales from the Atrush and Sarsang blocks (Sarsang sales are
included from September 15, 2022). The decrease in revenues in 2023 compared to 2022 was driven by the ITP closure at the end of
Q1 2023. The revenue of $20.3 million in Q4 2023 relates to the local oil sales from Sarsang and Atrush. The oil prices for local sales are
in line with the local market and at a significant discount to international benchmark prices. The average net oil price for 2023 is $48.87
per barrel compared to the 2022 average net oil price of $79.14 per barrel after deducting the discount for oil quality and transportation
costs.
Lifting costs are comprised of the Company’s share of expenses related to the production of oil from the Atrush and Sarsang blocks,
including operation and maintenance of wells and production facilities, insurance and the respective operator’s related support costs as
charged to the Company. Lifting costs in the quarter are lower in Q4 2023 compared to Q4 2022 due to the ITP shutdown. Lifting costs
for the full-year of 2023 are higher due to the inclusion of Sarsang for the full-year, partially offset by reduced lifting costs due to the ITP
shutdown.
Other costs of production include the Company’s share of production bonuses and other costs prescribed under the Atrush and Sarsang
PSCs. These costs have remained in line for 2023.
Depletion costs have significantly decreased in 2023 due to no depletion costs for Atrush being recorded when the asset was not
producing and due to reduced sales. The depletion costs calculation is based on entitlement barrels sold.
Gross margin on oil sales was significantly lower in 2023 mainly due to the ITP being closed throughout most of the year and average oil
prices paid for local sales being significantly lower than international prices.
9
Management’s Discussion and Analysis
For the three months ended and year ended December 31, 2023
General and administrative expense
USD Thousands
Salaries and benefits
Legal, accounting and audit fees
Advisory and consulting fees
General and other office expenses
Listing costs and investor relations
Travel expenses
Corporate sponsorship
General and administrative expense
Non-recurring costs
Adjusted G&A
Three months ended December 31
Year ended December 31
2023
1,984
464
179
176
34
28
-
2,865
314
2,551
2022
2,592
276
295
313
40
125
41
3,682
284
3,398
2023
5,852
1,346
1,503
738
351
280
217
10,287
2,563
7,724
2022
5,072
966
1,965
844
413
408
241
9,909
1,428
8,481
The decrease in general and administrative expenses in Q4 2023 compared to Q4 2022 is mainly due to savings from cost-reduction
initiatives partially offset by one-off legal fees related to the Atrush acquisition. The increase in 2023 compared to 2022 is mainly due to
the inclusion of Sarsang, one-off costs relating to the departure of the former CEO and one-off business development legal and consulting
fees. The adjusted G&A shows the impact of the non-recurring costs on the quarter and full-year and more accurately reflects the benefits
of the Company’s ongoing cost reduction efforts.
Share-based payments expense
USD Thousands
Option expense
RSU expense
DSU (recovery) / expense
Total share-based payments
Three months ended December 31
Year ended December 31
2023
248
177
(49)
376
2022
279
154
116
549
2023
1,331
953
(220)
2,064
2022
1,039
951
348
2,338
The share-based payments expense relates to the vesting of stock options, granted deferred share units (“DSUs”) and restricted share
units (“RSUs”). At December 31, 2023, there were 80,863,000 outstanding stock options in total (December 31, 2022: 82,740,000),
24,600,002 RSUs (December 31, 2022: 22,123,339) granted to certain senior officers and other eligible persons of the Company and
16,584,721 DSUs (December 31, 2022: 11,814,611) granted to ShaMaran’s non-executive directors. DSUs are revalued at each quarter-
end, resulting in an increase or decrease depending on the share price. The decrease in these costs during 2023 versus 2022 is mainly
due to the reduction in the share price impacting the value of the DSU liability.
Also refer to the discussion under the “Outstanding Share Data, Share Units and Stock Options” section below.
10
Management’s Discussion and Analysis
For the three months ended and year ended December 31, 2023
Credit loss provision
USD Thousands
Credit loss provision
Three months ended December 31
Year ended December 31
2023
305
2022
(127)
2023
13,938
2022
3,873
ShaMaran has reassessed the expected credit losses of accounts receivable owed from the KRG at the end of the year. The Company
remains engaged with the KRG regarding the recovery of these amounts, but timing is uncertain. Therefore, the Company has reassessed
the credit loss provision and has compared the carrying value of the relevant trade receivables with the present value of the estimated
future cash flows based on reasonable scenarios and has weighted the expected recovery of these outcomes according to the relative
probability. A relative discount rate has been applied to reflect counterparty discounting and credit risk to provide a reasonable
approximation of the fair value of these trade receivables at December 31, 2023. The result of the Company’s assessment under IFRS 9-
Financial Instruments is a further $305 thousand adjustment to these trade receivables in the fourth quarter included in the statement of
comprehensive income. The Company expects to recover the full nominal value of such receivables, but a provision remains to reflect
credit risk.
Finance income
USD Thousands
Interest on Company-owned bonds
Interest on bank deposits
Net gain from settlement of debt
Total finance income
Finance cost
USD Thousands
Interest/amortization charges on bonds
Amortization of the related-party loan
Re-measurement of bond debt and Nemesia loan
Amortization of 2023 Bond transaction costs
Total borrowing costs
Foreign exchange loss
Re-measurement of contingent consideration
Other interest expenses
Lease interest expense
Unwinding discount on decommissioning provision
Total finance costs before borrowing costs
capitalized
Borrowing costs capitalized
Total finance cost
Three months ended December 31
Year ended December 31
2023
852
839
-
1,691
2022
921
927
-
1,848
2023
3,580
3,813
-
7,393
2022
2,367
1,404
1,138
4,909
Three months ended December 31
Year ended December 31
2023
9,418
550
-
-
9,968
252
98
69
3
(6)
10,384
(824)
9,560
2022
9,885
557
-
-
10,442
114
(101)
-
1
(138)
10,318
(632)
9,686
2023
38,707
2,128
-
-
40,835
251
43
69
11
(76)
41,133
(3,201)
37,932
2022
35,544
2,662
2,465
1,223
41,894
66
(101)
35
13
(964)
40,943
(1,464)
39,479
Interest and amortization charges during 2023 relate to the Company’s $300 million bond, which has a 4-year tenor due July 2025 and a
12% fixed, semi-annual coupon (the “2025 Bond”). The 2025 Bond was reduced to $277.5 million at the end of July 2023 when the first
$22.5 million amortization payment was made. In 2022, the Company paid interest on the initial 2025 Bond issue amount of $111.5 million
plus interest on $175 million of the ShaMaran bond issued in 2018 that carried a 12% fixed, semi-annual coupon and was due to mature
on July 5, 2023 (the “2023 Bond”).
11
Management’s Discussion and Analysis
For the three months ended and year ended December 31, 2023
Borrowing costs directly attributable to the preparation of development assets for their intended use have been capitalized together with
the related oil and gas assets. All other borrowing costs are recognized in the income statement in the period in that they are incurred.
For further information on the Company’s borrowings refer to the discussions in the sections below entitled “Borrowings” and “Loan
from related-party.”
Capital Expenditures
Capital Expenditures on Property, Plant & Equipment (“PP&E”)
The net book value of PP&E is principally comprised of development costs related to the Company’s share of the Atrush PSC and the fair
value of the Company’s share of the Sarsang PSC 2P reserves as estimated by the Company’s independent qualified reserves evaluator,
McDaniel, plus development costs related to the Company’s share of the Sarsang PSC since the acquisition. The movements in PP&E are
explained below:
Year ended December 31, 2023
Year ended December 31, 2022
Oil and gas
assets
Office
equipment
Total
Oil and gas
assets
Office
equipment
Total
USD Thousands
Opening net book value
Additions
Sarsang Acquisition
302,217
25,725
-
167
302,384
57
-
25,782
-
Depletion and depreciation expense
(25,851)
(123)
(25,974)
Net book value
302,091
101
302,192
138,804
31,291
178,487
(46,365)
302,217
167
138,971
67
-
(67)
167
31,358
178,487
(46,432)
302,384
During 2023, movements in PP&E were comprised of general additions of $25.8 million (2022: $31.4 million general additions plus
$178.5 million Sarsang Acquisition), which included capitalized borrowing costs of $3.2 million (2022: $1.5 million), net of depletion and
depreciation expense of $26.0 million (2022: $46.4 million) that resulted in a net decrease to PP&E assets of $0.2 million. Most of the
PP&E additions were carried out in Q1 2023, prior to the ITP closure, as the level of capital expenditure has been significantly reduced
since then.
Due to the closure of the ITP in 2023, the Company conducted impairment tests as of the reporting date to assess if the net book value
of its oil and gas assets was fully recoverable. The Company has identified two separate Cash Generating Units (“CGUs"), being its Atrush
and Sarsang assets. The impairment tests were based on the McDaniel production and cost profiles related to 2P reserves, the 2024
operating budgets, a future cost inflation factor of 2% per annum and a discount rate of 17% to calculate the net present value at
December 31, 2023, of the Company’s projected share of future cash flows from the Atrush and Sarsang 2P reserves. The assessment
concluded that there is no need for any impairment to PP&E.
The price assumptions used for the impairment assessment performed at December 31, 2023, are based on current local sales prices for
2024. Going forward, the sales prices use average Brent oil price assumptions based on the McDaniel forecast less an estimated discount
to Brent based on past precedent.
12
Management’s Discussion and Analysis
For the three months ended and year ended December 31, 2023
Financial Position and Liquidity
Accounts receivable
At December 31, 2023, the Company had receivables outstanding as below:
USD Thousands
Accounts receivable on oil sales
Credit Loss Provision – transportation costs
Credit Loss Provision
Total accounts receivable
For the year ended December 31
2023
95,474
(3,695)
(17,445)
74,334
2022
95,481
(3,695)
(3,507)
88,279
The accounts receivable on oil sales at December 31, 2023, mainly relates to deliveries from October 2022 through March 2023 on the
basis of the KBT pricing mechanism.
A full provision was made during 2022 to account for a possible increase in transportation and access fees of $3.7 million. According to
the KRG, these costs were added as a result of increased pipeline fees and other tariffs. This increase has yet to be agreed between the
parties and relates to oil sales prior to September 1, 2022.
As discussed earlier in the section “Credit loss provision,” the $17.4 million provision at December 31, 2023, relates to the Company’s
assessment of the trade receivables given the uncertainty of the timing of recovery of these receivables.
Borrowings
On July 16, 2021, the Company announced the successful placement of the 2025 Bond, which is partially amortized in instalments with
$22.5 million due every six months from July 2023, and the remaining balance due at maturity. The 2025 Bond was issued at a price of
98.5% of nominal value that was applicable to both new money under the Initial Issue Amount of $111.5 million in July 2021 and the
refinancing of $175 million of existing debt (the 2023 Bond) in September 2022.
Following the closing of the Sarsang Acquisition, the Company announced on September 27, 2022, that the Company’s 2023 Bond was
exchanged for its 2025 Bond at a 2% premium, in accordance with the 2025 Bond terms. The existing debt that was refinanced into the
new bond included $7.2 million of the total $22.8 million debt owed by the Company to Nemesia S.à.r.l. (“Nemesia”) with the $15.6 million
balance remaining on amended terms.
During 2021 and 2022, the Company purchased its own bonds in the market at commercially attractive rates. At December 31, 2023, the
Company held $28.4 million of its own 2025 Bond (2022 year-end: $30.7 million). After the balance sheet date, $22.5 million of these
bonds were retired in January 2024 to satisfy the amortization obligation.
On July 26, 2023, the Company announced that it had requested and received bondholder approval for a waiver to release cash from the
DSRA. The waiver allowed the Company to use restricted cash in the DSRA to pay the bond interest and amortization obligations due on
July 30, 2023. At December 31, 2023, the outstanding principal of the 2025 Bond was $277.5 million and $22.8 million of restricted cash
was held in the DSRA earning interest.
The movements in borrowings are explained below:
USD Thousands
Opening balance
Interest / amortization charges
Own bond amortization received / (purchases)
2025 Bond issued
Amortization of 2023 Bond transaction costs
2025 Bond discount
2025 Bond transaction costs
Bond amortization
Payments to bondholders – interest
Ending balance
Non-current portion – net borrowings
Current portion – amortization instalments
Current portion – accrued bond interest expense
For the year ended December 31
2023
269,145
38,707
2,303
-
-
-
-
(22,500)
(30,400)
257,255
193,746
45,000
18,509
2022
296,839
35,544
(27,717)
188,528
2,486
(4,092)
(6,261)
(175,000)
(41,182)
269,145
236,443
22,500
10,202
13
Management’s Discussion and Analysis
For the three months ended and year ended December 31, 2023
Loan from related-party
In July 2020, the Company announced a full drawdown of Nemesia’s liquidity guarantee for $22.8 million followed by the full and final
discharge of this liquidity guarantee by the Bond Trustee. In exchange for the drawdown of funds, the Company was required to issue
monthly to Nemesia 50,000 ShaMaran shares for each $500 thousand drawn-down and outstanding until the drawn amount was repaid
in full together with interest. In addition, the Company was required to accrue interest on the amount due to Nemesia at an annual rate
of 5%.
After closing of the Sarsang Acquisition and the bond conversion on September 27, 2022, $7.2 million of the existing $22.8 million debt
was converted into the new 2025 Bond. The balance of $15.6 million remains as the Nemesia loan with new terms. Repayment of the
loan is due on January 30, 2026, six months after maturity of the 2025 Bond. Claim for repayment is subordinated to all obligations under
the Company’s 2025 Bond terms. The interest-rate on the Nemesia loan was adjusted to match the interest-rate on the 2025 Bond of
12% (payable in cash semi-annually) plus an additional interest amount of 2% per annum payable in kind, and the monthly common share
allotment to Nemesia was eliminated. Following the amendments described above, the Nemesia loan accounting was changed
accordingly.
The 2023 movements in the liquidity guarantee loan balance are explained below:
USD Thousands
Opening balance
Amortization
Recognize Nemesia loan on new terms
Derecognize Nemesia loan on old terms
Payment to Nemesia – Interest
Ending balance
Liquidity and Capital Resources
USD Thousands
Selected liquidity indicators
Cash flow from operations
Working capital
Cash in bank
For the year ended December 31
2023
16,175
2,129
-
-
(1,581)
16,723
2022
21,748
2,662
15,600
(23,835)
-
16,175
For the year ended December 31
2023
2022
40,482
41,027
71,722
105,282
147,882
105,730
Cash flow from operations of $40.5 million for the year ended December 31, 2023, is down by $64.8 million from $105.3 million reported
in the same period of 2022, principally due to the delay in oil sales payments for the period October 2022 to March 2023 and reduced
revenues since the ITP closure.
Working capital at December 31, 2023, was positive $41.0 million compared to positive $147.9 million at December 31, 2022.
The decrease in working capital since December 31, 2022, is principally due to part of the Company’s receivables now being classified as
a non-current asset due to the uncertainty of timing of recovery and the decrease in the cash balance.
Cash in bank decreased by $34.0 million in 2023, as compared to a decrease of $66.0 million in 2022. The main components of the
movement in funds were as follows:
•
The operating activities of the Company in 2023 resulted in an increase of $40.5 million in the cash position (2022: increase of
$105.3 million), as explained above.
• Net cash out to investing activities in 2023 was $22.3 million (2022: cash outflows of $123.7 million). Cash out to investing activities
was comprised of $29.0 million for investments in the Atrush and Sarsang development work programs net of cash inflows of $6.7
million for interest received. 2022 cash outflow included the cash purchase of the Sarsang Acquisition of $110.4 million.
• Net cash outflows to financing activities in 2023 were $52.2 million (2022: cash outflows to $47.5 million) and comprised of $30.4
million of interest payments to ShaMaran bondholders, $1.6 million of interest payments to Nemesia for the loan and $20.2 million
of 2025 Bond amortization net payment.
The Financial Statements were prepared on the going concern basis, which assumes that the Company will be able to realize into the
foreseeable future its assets and liabilities in the normal course of business as they come due. Refer also to the discussion in the section
below on “Risks and Uncertainties.”
14
Management’s Discussion and Analysis
For the three months ended and year ended December 31, 2023
Off Balance Sheet Arrangements
The Company has no off-balance sheet arrangements.
Transactions with Related Parties
USD Thousands
Nemesia
Lundin Foundation
Orrön Energy AB
Namdo Management Services Ltd.
International Petroleum Corp.
Total
Purchase of services
during the year
2023
2,128
65
33
31
5
2,262
2022
2,435
-
-
32
-
2,467
Amounts owing
at the balance sheet dates
2023
1,123
-
-
-
31
1,154
2022
568
-
-
-
-
568
Nemesia is a company controlled by a trust settled by the estate of the late Adolf H. Lundin and is a shareholder and bondholder of the
Company. The Company has a loan from Nemesia and the obligation to accrue 12% annual interest payable in cash semi-annually plus an
additional interest amount of 2% per annum payable in kind based on the principal balance outstanding.
Lundin Foundation is a non-profit organization, of which the Company is a member, that provides services for Lundin Group companies.
Namdo Management Services Ltd, Orrön Energy AB and International Petroleum Corp are companies affiliated with shareholders of the
Company and have provided corporate administrative support services to the Company.
All transactions with related parties are in the normal course of business and are made on the same terms and conditions as with parties
at arm’s length.
Outstanding Share Data, Share Units and Stock Options
Common shares
The Company had 2,824,362,157 outstanding shares at December 31, 2023 (2,946,409,879 shares fully diluted) and 2,824,362,157
outstanding shares at the date of this MD&A.
Details of share issuance in 2023 are as follows:
•
•
•
11,880,002 RSUs vested in March 2023 in accordance with the Company’s Share Unit Plan and were issued to grantees.
The carrying value of the RSUs has been determined based on the Company’s average closing share price over the 5-day
period prior to the vesting date.
3,074,251 RSUs vested in May 2023 in accordance with the Company’s Share Unit Plan for employees end of service and
were issued to the grantees. The carrying value of the RSUs has been determined based on the Company’s average
closing share price over the 5-day period prior to the vesting date.
557,000 stock options were exercised in accordance with the Company’s plan and issued to a grantee.
Share units and Stock options
ShaMaran has established a deferred share unit plan (“the “DSU Plan”), a share unit plan (the “Share Unit Plan”) and a stock option plan
(the “Stock Option Plan”) whereby the Company may, from time to time, grant up to a total of 10% of the issued share capital to directors,
officers, employees or consultants. At December 31, 2023, a total of 122,047,723 shares, 4% of the issued share capital, had been granted
of the possible 282,436,215 shares that could be granted under the plans. Under the plans, the Company may also grant performance
share units (“PSUs”), RSUs or DSUs. As at December 31, 2023, and the date of this MD&A, there are no PSUs outstanding. The DSU Plan
exists for non-executive directors of the Company.
15
Management’s Discussion and Analysis
For the three months ended and year ended December 31, 2023
During 2023, the Company granted:
(i)
(ii)
(iii)
19,750,000 RSUs to certain senior officers and other eligible persons of the Company at a grant date share price of
CAD $0.063. In 2023, a total of 14,954,253 RSUs vested, and the same quantity of shares were issued to Share Unit Plan
participants, 2,319,084 RSUs were forfeited or expired due to the end of service of Share Unit Plan participants. The
Statement of Comprehensive Income includes RSU-related charges of $953 thousand (2022: $951 thousand) for the year
2023.
4,770,110 of DSUs to non-executive directors at a grant share price of CAD $0.05. The Statement of Comprehensive Income
includes DSU-related charges of $(220) thousand for the twelve months of 2023 (2022: $348 thousand). The carrying
amount of the DSU liability at December 31, 2023, is $565 thousand.
49,400,000 stock options to certain senior officers and other eligible persons of the Company at a strike price of CAD
$0.063. In 2023, a total of 50,720,000 were forfeited due to the end of service of grantees. The Statement of
Comprehensive Income includes option-related charges of $1,331 thousand (2022: $1,039 thousand) for the year 2023.
At December 31, 2023, there were 80,863,000 stock options outstanding under the Company’s employee incentive Stock Option Plan,
which represents 2.9% of the total shares outstanding at December 31, 2023. In the twelve months of 2023, 557,000 stock options were
exercised (year 2022: nil).
The Company has no warrants outstanding.
Movements in the Company’s outstanding options and share units in the year are explained below:
Number of
stock options
outstanding
82,740,000
49,400,000
(50,720,000)
(557,000)
-
Number of
RSUs
outstanding
22,123,339
19,750,000
(2,319,084)
-
(14,954,253)
80,863,000
24,600,002
63,939,995
80,863,000
-
-
Number of
DSUs
outstanding
11,814,611
4,770,110
-
-
-
16,584,721
11,814,611
16,584,721
At December 31, 2022
Granted in the year
Expired/forfeited in the year
Stock options exercised
RSUs vested
At December 31, 2023
Quantities vested and unexercised:
At December 31, 2022
At December 31, 2023
Contractual Obligations and Commitments
Production Sharing Contracts
The Company is responsible for its pro-rata share of petroleum costs incurred in executing the development and production work
programs on the Atrush and Sarsang blocks. ShaMaran also carries its pro-rata share of the KRG’s petroleum costs in the Sarsang Block.
As at December 31, 2023, the outstanding commitments of the Company were as follows:
USD Thousands
Atrush and Sarsang block development and PSC
Sarsang contingent consideration
Corporate office and other
Total commitments
2024
31,593
-
68
31,661
2025
166
-
-
166
2026
Thereafter
166
-
-
166
992
15,000
-
15,992
Total
32,917
15,000
68
47,985
For the year ended December 31,
Amounts relating to Atrush and Sarsang block developments represent the Company’s unfunded paying interest share of the proposed
2024 work program and other obligations under the PSCs. Spending has been reduced by the operators of both blocks due to the closure
of the ITP in March 2023.
The contingent consideration relates to the purchase consideration of the Sarsang Acquisition and is payable to the seller upon (i)
cumulative gross oil production from the Sarsang PSC reaching 130 MMbbls and (ii) subject to Brent crude oil prices averaging at least
$60/bbl for the preceding twelve-month period. The Company estimates the fair value of this contingent consideration at the end of each
quarter and treats any difference as a finance income/cost.
16
Management’s Discussion and Analysis
For the three months ended and year ended December 31, 2023
Critical Accounting Policies and Estimates
The Financial Statements of the Company have been prepared by Management using IFRS Accounting Standards. In preparing financial
statements, Management makes informed judgments and estimates that affect the reported amounts of assets and liabilities as at the
date of the Financial Statements and affect the reported amounts of revenues and expenses during the period. Specifically, estimates are
utilized in calculating depletion, asset retirement obligations, fair values of assets on acquisition of control, share-based payments,
amortization and impairment write-downs as required. Actual results could differ from these estimates, and differences could be material.
Significant Accounting Policies
There are no IFRS Accounting Standards or interpretations that have been issued effective for financial years beginning on or after January
1, 2023, that would have a material impact on the Company’s Financial Statements.
New Accounting Standards Issued but not yet applied
There are no new accounting standards that will come into effect for annual periods beginning on or after January 1, 2024, that would
be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.
Accounting for Oil and Gas Operations
The Company follows the successful efforts method of accounting for its oil and gas operations. Under this method, acquisition costs of
oil and gas properties, costs to drill and equip exploratory and appraisal wells that are likely to result in proved reserves and costs of
drilling and equipping development wells are capitalized and subject to annual impairment assessment.
Exploration well costs are initially capitalized and, if subsequently determined to have not found sufficient reserves to justify commercial
production, are charged to exploration expense. Exploration well costs that have found sufficient reserves to justify commercial
production, but whose reserves cannot be classified as proved, continue to be capitalized if sufficient progress is being made to assess
the reserves and economic viability of the well or related project.
Capitalized costs of proved oil and gas properties are depleted using the unit of production method based on estimated gross proved and
probable reserves of petroleum and natural gas as determined by independent engineers. Successful exploratory wells and development
costs and acquired resource properties are depleted over proved and probable reserves. Acquisition costs of unproved reserves are not
depleted or amortized while under active evaluation for commercial reserves. Costs associated with significant development projects are
depleted once commercial production commences. A revision to the estimate of proved and probable reserves can have a significant
impact on earnings as they are a key component in the calculation of depreciation, depletion and accretion.
Producing properties and significant unproved properties are assessed annually, or more frequently as economic events dictate, for
potential indicators of impairment. Economic events that would indicate impairment include:
• The period for which the Company has the right to explore in the specific area has expired during the period or will expire in the near
future and is not expected to be renewed;
• Substantive expenditure on further exploration for and evaluation of mineral resources in the specific area is neither budgeted nor
planned;
• Sufficient data exists to indicate that, although a development in the specific area is likely to proceed, the carrying amounts of
exploration and evaluation costs and oil and gas assets is unlikely to be recovered in full, from successful development or by sale;
• Extended decreases in prices or margins for oil and gas commodities or products; and
• A significant downwards revision in estimated volumes or an upward revision in future development costs.
For impairment testing, the assets are aggregated into CGU cost pools based on their ability to generate largely independent cash flows.
The recoverable amount of a CGU is the greater of its fair value less costs to sell and its value in use. Fair value is determined to be the
amount for which the asset could be sold in an arm’s length transaction. Value in use is determined by estimating the present value of
the future net cash flows expected to be derived from the continued use of the asset or CGU.
Where conditions giving rise to the impairment subsequently reverse, the effect of the impairment charge is also reversed as a credit to
the statement of comprehensive income net of any depletion and depreciation that would have been charged since the impairment.
In 2023, all of the Company’s development activities were conducted jointly with others.
17
Management’s Discussion and Analysis
For the three months ended and year ended December 31, 2023
RESERVES AND RESOURCE ESTIMATES
The Company engaged McDaniel to evaluate 100% of the Company’s reserves and resource data as at December 31, 2023. The
conclusions of this evaluation have been presented in a Detailed Property Report that has been prepared in accordance with standards
set out in the Canadian National Instrument NI 51-101 Standards for Oil and Gas Activities (“NI 51-101”) and COGEH Handbook (“COGEH”).
The Company’s crude oil reserves as at December 31, 2023, were based on the Company’s 27.6% working interest in the Atrush Block
and 18% working interest (22.5% paying interest) in the Sarsang Block and estimated to be as follows:
Company estimated reserves
As at December 31, 2023
Proved
Developed
Proved
Undeveloped
Total
Proved
Probable
Total
Proved &
Probable
Light/Medium Oil (Mbbl) (1)
Gross (2)
Net (3)
Heavy Oil (Mbbl) (1)
Gross (2)
Net (3)
Total Oil (Mbbl)
Gross
Net
21,253
11,280
2,919
1,607
24,172
12,887
10,280
4,276
1,468
668
11,748
4,944
31,533
15,556
26,485
7,914
58,018
23,470
4,387
2,275
3,009
1,040
7,396
3,314
35,920
17,831
29,494
8,954
65,414
26,784
Total Proved,
Probable &
Possible
93,670
32,782
11,328
4,594
104,998
37,376
Possible
35,651
9,312
3,932
1,280
39,583
10,592
Notes:
(1) The Atrush Field contains crude oil of variable density. Fluid type is classified according to COGEH: Light/Medium Oil is based on density less than 920 kg/m3,
and Heavy Oil is between 920 and 1000 kg/m3.
(2) Company gross reserves are based on the Company’s 27.6% working interest share of the property gross reserves in the Atrush Block plus an 18.0% working
interest share of the property gross reserves in the Sarsang Block.
(3) Company net reserves are based on Company share of total Cost and 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 revenues by adjusting for the tax rate.
The Company’s crude oil resources as at December 31, 2023, were estimated to be as follows:
Company estimated contingent resources (1) (2) (4) (5)
As at December 31, 2023
Light/Medium Oil (Mbbl) (3)
Gross (Development On Hold)
Gross (Development Not Viable)
Heavy Oil (Mbbl) (3)
Gross (Development On Hold)
Gross (Development Not Viable)
Gross Total
Low Estimate
(1C)
Best Estimate
(2C)
High Estimate
(3C)
Risked
Best Estimate
2,799
-
3,364
11,633
17,797
9,486
-
6,263
25,793
41,542
36,895
-
20,932
33,339
91,166
6,640
-
4,384
2,579
13,603
Notes:
(1) Company gross interest resources are based on a 27.6% working interest share of the property gross resources in the Atrush Block plus an 18.0% working
interest of the property gross resources in the Sarsang Block.
(2) There is no certainty that it will be commercially viable to produce any portion of the contingent resources.
(3) The Atrush Field contains crude oil of variable density. Fluid type is classified according to COGEH: Light/Medium Oil is based on a density less than 920 kg/m3,
and Heavy Oil is between 920 and 1000 kg/m3.
(4) The “Risked Best Estimate” contingent resources account for 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 license, 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 70%
for the Light/Medium and Heavy Crude Oil Development “On Hold” contingent resources and 10% for the Heavy Crude Oil Development “Not-Viable” contingent
resources.
(5) The contingent resources are sub-classified as “Development On Hold” and “Development Not Viable”.
Prospective resources have not been re-evaluated since December 31, 2013.
18
Management’s Discussion and Analysis
For the three months ended and year ended December 31, 2023
Risks in estimating resources
There are uncertainties inherent in estimating the quantities of reserves and resources, including factors that are beyond the control of
the Company. Estimating reserves and resources is a subjective process, and the results of drilling, testing, production and other new
data after the date of an estimate may result in revisions to original estimates.
Reservoir parameters may vary within reservoir sections. The degree of uncertainty in reservoir parameters used to estimate the volume
of hydrocarbons, such as porosity, net pay and water saturation, may vary. The type of formation within a reservoir section, including
rock type and proportion of matrix or fracture porosity, may vary laterally, and the degree of reliability of these parameters as
representative of the whole reservoir may be proportional to the overall number of data points (wells) and the quality of the data
collected. Reservoir parameters such as permeability and effectiveness of pressure support may affect the recovery process. Recovery of
reserves and resources may also be affected by the availability and quality of water, fuel gas, technical services and support, local
operating conditions, security, performance of the operating company and the continued operation of well and plant equipment.
Additional risks associated with estimates of reserves and resources include risks associated with the oil and gas industry in general, such
as normal operational risks during drilling activity, development and production; delays or changes in plans for development projects or
capital expenditures; the uncertainty of estimates and projections related to production, costs and expenses; health, safety, security and
environmental risks; drilling equipment availability and efficiency; the ability to attract and retain key personnel; the risk of commodity
price and foreign exchange rate fluctuations; the uncertainty associated with dealing with governments and obtaining regulatory
approvals; performance and conduct of the respective operator; and risks associated with international operations.
The Company’s projects are in the development stage, and, as such, additional information must be obtained by further drilling and
testing to ultimately determine the economic viability of developing any of the contingent resources. There is no certainty that the
Company will be able to commercially produce any portion of its contingent resources. Any significant change, in particular if the
volumetric resource estimates were to be materially revised downwards in the future, could negatively impact investor confidence and
ultimately impact the Company’s performance, share price and total market capitalization.
The Company has engaged professional geologists and engineers to evaluate reservoir and development plans; however, process
implementation risk remains. The Company’s reserves and resource estimations are based on data obtained by the Company that has
been independently evaluated by McDaniel.
19
Management’s Discussion and Analysis
For the three months ended and year ended December 31, 2023
FINANCIAL INSTRUMENTS
The Company’s financial instruments currently consist of cash, cash equivalents, advances to joint operations, other receivables,
borrowings, related-party loans, accounts payable and accrued expenses, accrued interest on bonds, provisions for decommissioning
costs, and current tax liabilities. The Company classifies its financial assets and liabilities at initial recognition in the following categories:
• Financial Assets at Amortized Cost – Assets that are held for collection of contractual cash flows where those cash flows represent
solely payments of principal and interest. This includes the Company’s receivables that consist of fixed or determined cash flows
related solely to principal and interest amounts or contractual sales of oil. The Company’s intent is to hold these receivables until
cash flows are collected. Financial assets at amortized cost are recognized initially at fair value, net of any transaction costs incurred
and subsequently measured at amortized cost using the effective interest method. The Company recognizes a loss allowance for any
expected credit losses on a financial asset that is measured at amortized cost.
• Financial Assets at Fair Value through Profit or Loss (“FVTPL”) – Financial assets measured at FVTPL are assets that do not qualify as
financial assets at amortized cost or at fair value through other comprehensive income. The Company does not currently have any
financial assets measured at FVTPL.
• Financial Liabilities at Amortized Cost – Financial liabilities are measured at amortized cost using the effective interest method, unless
they are required to be measured at FVTPL, or the Company has opted to measure them at FVTPL. Borrowings and accounts payable
are recognized initially at fair value, net of any transaction costs incurred, and subsequently at amortized cost using the effective
interest method.
• Financial Liabilities at FVTPL – Financial liabilities measured at FVTPL are liabilities that include embedded derivatives and cannot be
classified as amortized cost. The Company does not currently have any financial liabilities measured at FVTPL.
With the exception of borrowings, accrued interest on bonds and provisions for decommissioning costs, which have fair value
measurements based on valuation models and techniques where the significant inputs are derived from quoted prices or indices, the fair
values of the Company’s other financial instruments did not require valuation techniques to establish fair values as the instrument was
either cash and cash equivalents or, due to the short-term nature, readily convertible to or settled with cash and cash equivalents.
The Company is exposed in varying degrees to a variety of financial instrument related risks that are discussed in the following sections:
Financial Risk Management Objectives
The Company’s Management monitors and manages the Company’s exposure to financial risks facing the operations. These financial risks
include market risk (including commodity price, foreign currency and interest-rate risks), credit risk and liquidity risk.
The Company does not presently hedge against these risks as the benefits of entering into such agreements is not considered to be
significant enough as to outweigh the significant cost and administrative burden associated with such hedging contracts.
Commodity price risk is a risk as the prices that the Company receives for its oil production may have a significant impact on the
Company’s revenues and cash flows provided by operations. During the year, the Company received oil sales revenues at a negotiated
local price that was considerably less than would otherwise have been received if the ITP was available for export and sales were made
at least at the KBT price. It is unclear when the ITP will re-open and a payment mechanism agreed so that export sales can resume at
international pricing.
The Company does not hedge against commodity price risk.
Foreign currency risk is a risk since all of the Company’s revenues and most of its purchases are denominated in USD, and therefore the
Company maintains a substantial portion of its cash and cash equivalents in the currency. Certain of its operations require the Company
to make purchases denominated in foreign currencies, which are currencies other than USD and correspond to the various countries in
which the Company conducts its business, such as CHF and CAD. As a result, the Company holds some cash and cash equivalents in foreign
currencies and is therefore exposed to foreign currency risk due to exchange-rate fluctuations between the foreign currencies and the
USD. The Company considers its foreign currency risk is limited because it holds relatively small amounts of foreign currencies at any
point in time and because its volume of transactions in foreign currencies is relatively low. Therefore, the Company does not hedge its
exposure to changes in foreign currency exchange rates.
Interest-rate risk is a risk due to the fluctuation in short-term interest-rates as the Company earns interest income at variable rates on
its cash and cash equivalents.
The Company’s policy on interest-rate management is to maintain a certain amount of funds in the form of cash and cash equivalents for
short-term liabilities and to have the remainder held on relatively short-term deposits.
ShaMaran is leveraged through bond financing and a related-party loan at the corporate level. However, the Company is not exposed to
interest-rate risks associated with its 2025 Bond or the Nemesia loan as these interest rates are fixed.
20
Management’s Discussion and Analysis
For the three months ended and year ended December 31, 2023
Credit risk is a risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company. The Company
is primarily exposed to credit risk on its cash and cash equivalents and receivables.
The Company manages credit risk by monitoring counterparty ratings and credit limits and by maintaining excess cash and cash
equivalents on account in instruments having a minimum credit rating of R-1 (mid) or better (as measured by Dominion Bond Rate
Services) or the equivalent thereof according to a recognized bond-rating service.
The carrying amounts of the Company’s financial assets recorded in the Financial Statements represent the Company’s maximum
exposure to credit risk.
Liquidity risk is a risk that the Company will have difficulties meeting its financial obligations as they become due. Like with many oil and
gas companies, the Company raises financing for its development activities in discrete tranches to finance its activities for limited periods.
The Company seeks to acquire additional funding as and when required. The Company anticipates making substantial capital expenditures
in the future for the development and production of oil and gas reserves, and, as the Company continues to develop projects, specific
financing, including the possibility of additional debt, may be required to enable future development to take place. The financial results
of the Company will impact its access to the capital markets necessary to undertake or complete future drilling and development
programs. There can be no assurance that debt or equity financing, or future cash generated by operations, would be available or
sufficient to meet these requirements or, if debt or equity financing is available, that it will be on terms acceptable to the Company.
The Company manages liquidity risk by maintaining adequate cash reserves and by continuously monitoring forecasted and actual cash
flows. Annual capital expenditure budgets are prepared, monitored and updated as necessary. In addition, the Company requires
authorizations for expenditures on both of its non-operating projects to further manage capital expenditures.
RISK AND UNCERTAINTIES
ShaMaran is engaged in the development and production of crude oil and natural gas, and its operations are subject to various risks and
uncertainties that include but are not limited to those listed below. Additional risks and uncertainties not presently known to the
Management of the Company or that Management of the Company presently deem to be immaterial may also impair the business and
operations of the Company and cause the price of the shares in the Company to decline. If any of the risks described below materialize,
the effect on the Company’s business, financial condition or operating results could be materially adverse.
Implementation of the 2023-2025 Federal Budget Law (“Federal Budget Law”)
As previously noted in the Company’s Q2 2023 MD&A, a three-year federal budget law was enacted in 2023, but provisions relating to
the KRG’s monthly budget allocations have not yet been implemented. The legal actions taken by the KRG have not resolved the impasse
over allocating and paying federal budget allocations to the KRG. As at the date of this MD&A, there have been numerous public reports
that discussions to agree on the implementation of the Federal Budget Law are on-going between the KRG and GOI, and the KRG has in
October 2023 delivered to officials in Baghdad the KRG’s first-half 2023 accounting of revenues and expenditures in order to assist in the
implementation of the monthly budget allocations from the GOI. It was expected that the passage of the Federal Budget Law, including
a production commitment from the KRG, would enable regular monthly budget transfers from Iraq to the KRG, as well as normalization
of relations between the region and the GOI. As at the date of this MD&A, these remain uncertainties. There continues to be no
guarantee, however, that these budget allocations, even if received in full and on time, would be sufficient to cover regular payments
per the PSC terms and of the outstanding payables to IOCs.
Continuing export pipeline shutdown
The ITP was closed on March 25, 2023, and remains shutdown as at the date of this MD&A. Discussions continue among the relevant
parties to resume oil exports via the ITP as soon as possible. In response to the situation, together with our operating partners in the
Atrush and Sarsang blocks, we are continuing to take actions to preserve liquidity through significant deferral of expenditures across the
business (see “Business Outlook”). The interruption to production and payments represents a continuing risk to the Company’s liquidity
position. In early October 2023, Turkish officials notified Iraqi officials that the ITP was technically ready for export of Iraq’s oil production
(including from the KRG). Despite various public statements that ITP exports will be restarting, there can be no certainty when exports
and payments will resume, and the Company is continually monitoring this matter.
Federal Supreme Court of Iraq ruling
As previously noted, the Federal Supreme Court of Iraq ruled in 2022 that the Kurdistan Region’s 2007 Oil and Gas Law is unconstitutional.
The ruling also instructed the Ministry of Oil (“MoO”) to take steps to implement the court’s decision, and court proceedings to invalidate
the production sharing contracts of certain IOC’s were launched in the Karkah Commercial Court in Baghdad. Neither the Company nor
any of its subsidiaries has at the date of this MD&A been served any court documentation regarding these actions by the MoO, and it is
the belief of the Company that no judgment in these cases has been enforced. It is also the understanding of the Company that there has
been dialogue between the KRG and the MoO on this issue, and, as at the date of the MD&A, any enforcement of any rulings in this
matter has been frozen. It is noted that all Kurdistan PSCs are governed by English law, and dispute/enforcement actions (if any) are
mandated as per Kurdistan PSC terms to be conducted in London under London International Court of Arbitration rules. The Company
continues to monitor the situation closely.
21
Management’s Discussion and Analysis
For the three months ended and year ended December 31, 2023
Russia-Ukraine and Gaza-Israel conflicts
The conflict between Russia and Ukraine continues to exacerbate the global oil market supply shortage. The profound effects of this crisis
are likely to be long lasting as consumers and producers alike reshape their thinking around access to resources and security of supply.
The Company notes the implications for commodity prices and potential interruptions of supply chains and third-party services from this
ongoing conflict. The Company is also monitoring international sanctions and trade control legislation in order to mitigate any potential
impact on the Company’s operations. Upon resumption of KRG purchases of oil from the Atrush and Sarsang blocks, the oil would be sold
at Ceyhan primarily in the Mediterranean crude market, and as such the Russia-Ukraine conflict could indirectly impact the Company’s
results. Russian sales of heavily discounted Urals crude barrels in the Mediterranean crude market resulted in lower realized prices for
the KRG’s crude, an impact that may continue in the future so long as KBT pricing is applied. At the date of this MD&A, it appears that
the State Organization for Marketing Oil (“SOMO”) may take over the sale of KRI oil production delivered at Ceyhan with Kirkuk blend
pricing, but the Russia-Ukraine conflict may continue to impact pricing.
The Gaza-Israel conflict has not appeared yet to have any impact on the Company’s operations in KRI, nor has it as at the date of the
MD&A had any direct impact on local sales pricing of Kurdistan oil.
For more information on risk factors that may affect the Company’s business, refer also to the discussion of risks under the “Reserves and
Resources” and “Financial Instruments” sections of this MD&A, as well as to the “Risk Factors” section of the Company’s 2022 Annual
Information Form.
DISCLOSURE CONTROLS AND INTERNAL CONTROL OVER FINANCIAL REPORTING
Disclosure controls and procedures have been designed to provide reasonable assurance that information required to be disclosed by
the Company in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed,
summarized and reported within the time periods specified in the securities legislation. Management, under the supervision of the Chief
Executive Officer and the Chief Financial Officer, is responsible for the design and operation of disclosure controls and procedures.
Design of internal controls over financial reporting is the responsibility of Management to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS Accounting
Standards. However, due to inherent limitations, internal control over financial reporting may not prevent or detect all misstatements
and fraud. There have been no material changes to the Company’s internal control over financial reporting during the three and twelve
month periods ended December 31, 2023, that have materially affected, or are reasonably likely to materially affect, the Company’s
internal control over financial reporting.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This report contains statements and information about expected or anticipated future events and financial results that are forward-
looking in nature and, as a result, are subject to certain risks and uncertainties, such as legal and political risk, civil unrest, general
economic, market and business conditions, the regulatory process and actions, technical issues, new legislation, competitive and
general economic factors and conditions, the uncertainties resulting from potential delays or changes in plans, the occurrence of
unexpected events and Management’s capacity to execute and implement its future plans.
Any statements that are contained in this report that are not statements of historical fact may be deemed to be forward-looking
information. Forward- looking information typically contains statements with words such as "may", "will", "should", "expect",
“assume”, "intend", "plan", "anticipate", "believe", "estimate", "projects", "potential", "scheduled", "forecast", "outlook", "budget" or
the negative of those terms or similar words suggesting future outcomes. The Company cautions readers regarding the reliance placed
by them on forward-looking information as by its nature, it is based on current expectations regarding future events that involve a
number of assumptions, inherent risks and uncertainties, which could cause actual results to differ materially from those anticipated by
the Company.
Actual results may differ materially from those projected by Management. Further, any forward-looking information is made only as
of a certain date and the Company undertakes no obligation to update any forward-looking information or statements to reflect events
or circumstances after the date on which such statement is made or reflect the occurrence of unanticipated events, except as may be
required by applicable securities laws. New factors emerge from time to time, and it is not possible for Management of the Company to
predict all of these factors and to assess in advance the impact of each such factor on the Company’s business or the extent to that any
factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking information.
22
Management’s Discussion and Analysis
For the three months ended and year ended December 31, 2023
RESERVES AND RESOURCE ADVISORY
ShaMaran’s reserve and contingent resource estimates are as at December 31, 2023, and have been prepared and audited in accordance
with 51-101 and the COGEH. Unless otherwise stated, all reserves estimates contained herein are the aggregate of “proved reserves” and
“probable reserves”, together also known as “2P reserves”. Possible reserves are those additional reserves that are less certain to be
recovered than probable reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of proved
plus probable plus possible reserves.
Contingent resources are those quantities of petroleum estimated, as at a given date, to be potentially recoverable from known
accumulations using established technology or technology under development but are not currently considered to be commercially
recoverable due to one or more contingencies. Contingencies may include factors such as economic, legal, environmental, political and
regulatory matters or a lack of markets. There is no certainty that it will be commercially viable for the Company to produce any portion
of the contingent resources.
Contingent resources are further categorised according to the level of certainty associated with the estimates and may be sub-classified
based on a project maturity and/or characterised by their economic status. There are three classifications of contingent resources: low
estimate, best estimate and high estimate. Best estimate is a classification of estimated resources described in the COGEH as the best
estimate of the quantity that will be actually recovered; it is equally likely that the actual remaining quantities recovered will be greater
or less than the best estimate. If probabilistic methods are used, there should be at least a 50 percent probability that the quantities
actually recovered will equal or exceed the best estimate.
The project maturity subclasses include development pending, development on hold, development unclarified and development not
viable. The contingent resources disclosed in this MD&A are classified as either development on hold or development not viable.
Development on hold is defined as a contingent resource where there is a reasonable chance of development, but there are major non-
technical contingencies to be resolved that are usually beyond the control of the operator. Development not viable is defined as a
contingent resource where no further data acquisition or evaluation is currently planned and hence there is a low chance of development.
BOEs 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.
This report contains an oil and gas metric, being 2P reserves replacement ratio, which does not have a standardized meaning or a standard
method of calculation and therefore such measure may not be comparable to similar measures used by other companies. This metric is
commonly used in the oil and gas industry and has been included herein to provide readers with an additional measure to evaluate the
ShaMaran’s performance; however, such measure is not a reliable indicator of the future performance of ShaMaran and future
performance may not compare to the performance in previous periods.
ADDITIONAL INFORMATION
Additional information related to the Company, including its 2022 Annual Information Form, is available on SEDAR+ at
www.sedarplus.ca under the Company’s profile and on the Company’s website at www.shamaranpetroleum.com.
ShaMaran plans to publish its financial statements for the three months ending March 31, 2024, on May 8, 2024.
OTHER SUPPLEMENTARY INFORMATION
Abbreviations
CAD
CHF
EUR
USD
Canadian dollar
Swiss franc
Euro
US dollar
Oil-related terms and measurements
bbl
boe
boepd
bopd
Mbbl
MMbbl
Mboe
Mboepd
Mbopd
Mcf
MMboe
Barrel (1 barrel = 159 litres)
Barrels of oil equivalent
Barrels of oil equivalent per day
Barrels of oil per day
Thousand barrels
Million barrels
Thousand barrels of oil equivalent
Thousand barrels of oil equivalent per day
Thousand barrels of oil per day
Thousand cubic feet
Million barrels of oil equivalent
23 Independent auditor’s report
To the Shareholders of ShaMaran Petroleum Corp.
Our opinion
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of ShaMaran Petroleum Corp. and its subsidiaries (together, the Company) as at
December 31, 2023 and 2022, and its financial performance and its cash flows for the years then ended in
accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board (IFRS Accounting Standards).
What we have audited
The Company’s consolidated financial statements comprise:
the consolidated statements of comprehensive income for the years ended December 31, 2023 and
2022;
the consolidated balance sheets as at December 31, 2023 and 2022;
the consolidated statements of cash flows for the years then ended;
the consolidated statements of changes in equity for the years then ended; and
the notes to the consolidated financial statements, comprising material accounting policy information
and other explanatory information.
Basis for opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of
the consolidated financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities
in accordance with these requirements.
PricewaterhouseCoopers SA, avenue Giuseppe-Motta 50, case postale, CH-1211 Genève 2, Switzerland
Téléphone: +41 58 792 91 00, Téléfax: +41 58 792 91 10, www.pwc.ch
PricewaterhouseCoopers SA is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity.
24 Material Uncertainty Related to Going Concern
We draw attention to note 2 in the consolidated financial statements, which describes events or conditions
that indicate the existence of a material uncertainty that may cast significant doubt about the Company's
ability to continue as a going concern. Our opinion is not modified in respect of this matter.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the consolidated financial statements for the year ended December 31, 2023. These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter
described in the Material uncertainty related to going concern section, we have determined the matters
described below to be the key audit matters to be communicated in our report.
Key audit matter
How our audit addressed the key audit matter
Impact of oil and gas reserves on net property,
plant and equipment (PP&E)
Our approach to addressing the matter included the
following procedures, among others:
Refer to note 1 – General information, note 4 –
Critical accounting judgments and key sources of
estimation uncertainty and note 13 – Property, plant
and equipment to the consolidated financial
statements.
The Company had $302.2 million of net PP&E in
the Atrush and Sarsang blocks as at December 31,
2023. Depletion expense for these assets was
$25.8 million for the year then ended. PP&E is
depleted using the unit-of-production method over
the estimated remaining life of proved and probable
reserves.
PP&E assets are grouped for recoverability
assessment purposes into cash generating units
(CGU). At each reporting period or when facts and
circumstances suggest that the carrying amount
may exceed its recoverable amount, management
assesses its CGUs for indicators of impairment that
suggest the carrying amount may exceed its
recoverable amount. Where such indicators are
identified, management determines the recoverable
The work of management’s experts was
used in performing the procedures to
evaluate the reasonableness of the proved
and probable oil and gas reserves used to
determine depletion expense and the
recoverable amount of PP&E in the Atrush
and Sarsang CGUs. As a basis for using
this work, the competence, capabilities and
objectivity of management’s experts was
evaluated, the work performed was
understood and the appropriateness of the
work as audit evidence was evaluated. The
procedures performed also included
evaluation of the methods and assumptions
used by management’s experts, tests of
the data used by management’s experts
and an evaluation of their findings.
Tested how management determined the
recoverable amount of the Atrush and
Sarsang CGUs and depletion expense,
which included the following:
25
amount. Impairment is identified by comparing the
recoverable amount of the CGU to its carrying
amount. Management used fair value less cost of
disposal to determine the recoverable amount of
the Atrush and Sarsang CGUs, which is based on
the discounted after-tax cash flows of proved and
probable oil and gas reserves. The proved and
probable oil and gas reserves are estimated by the
Company’s independent petroleum engineers
(management’s experts).
Significant assumptions used by management used
to determine the recoverable amount of the CGU
include the proved and probable oil and gas
reserves, future production, forecasts of oil and gas
prices, future development costs, future production
costs and the discount rate.
We considered this a key audit matter due to (i) the
significant judgment by management, including the
use of management’s experts, when developing the
expected future cash flows to determine the
recoverable amount and the proved and probable
oil and gas reserves; (ii) a high degree of auditor
judgment, subjectivity and effort in performing
procedures relating to the significant assumptions;
and (iii) the audit effort that involved the use of
professionals with specialized skill and knowledge
in the field of valuation.
Other information
Evaluated the appropriateness of the
methods used by management in
making these estimates.
Tested the data used in determining
these estimates.
Evaluated the reasonableness of
significant assumptions used by
management in developing the
underlying estimates, including:
o Future production, future development
costs and future production costs by
considering the past performance of
the Atrush and Sarsang CGUs, and
whether these assumptions were
consistent with evidence obtained in
other areas of the audit.
o Forecasts of oil and gas prices by
comparing those forecasts with other
reputable third-party industry forecasts.
o The discount rate, through the
assistance of professionals with
specialized skill and knowledge in the
field of valuation.
Recalculated the unit-of-production rates
used to calculate depletion expense for the
Atrush and Sarsang CGUs.
Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis and the information, other than the consolidated financial statements and our
auditor’s report thereon, included in the annual report.
Our opinion on the consolidated financial statements does not cover the other information and we do not
express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
26
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of management and those charged with governance for the
consolidated financial statements
Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS Accounting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s financial reporting
process.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as
a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards
will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
27
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditor’s report. However, future events or conditions may cause the Company to
cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the underlying
transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Company to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and performance of the group audit. We
remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in internal
control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current period and
are therefore the key audit matters. We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we
determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
28
The engagement partner on the audit resulting in this independent auditor’s report is Colin Johnson.
PricewaterhouseCoopers SA
Colin Johnson Dmytro Gotra
March 6, 2024
29 Consolidated Statement of Comprehensive Income
For the year ended December 31, 2023
Expressed in thousands of United States dollars
Note
2023
2022
For the year ended December 31,
Revenues
Cost of goods sold:
Lifting costs
Other costs of production
Depletion
Gross margin on oil sales
Depreciation and amortization expense
Share-based payments expense
General and administrative expense
Credit loss provision
Income from operating activities
Bargain purchase gain on acquisition
Finance income
Finance cost
Net finance cost
(Loss) / Income before income tax expense
Income tax expense
(Loss) / Income for the period
Other comprehensive income
Items that will not be reclassified to profit or loss:
Re-measurements on defined pension plan
Items that may be reclassified to profit or loss:
Currency translation differences
Total other comprehensive income
6
7
7
7
20
8
14
9
10
11
12
82,886
176,665
(26,191)
(320)
(25,852)
30,523
(236)
(2,064)
(10,287)
(13,938)
3,998
-
7,393
(37,932)
(30,539)
(26,541)
(165)
(26,706)
(47)
184
137
(24,150)
(208)
(46,366)
105,941
(218)
(2,338)
(9,909)
(3,873)
89,603
60,081
4,909
(39,479)
(34,570)
115,114
(155)
114,959
549
41
590
Total comprehensive (loss) / income for the period
(26,569)
115,549
(Loss) / income in dollars per share:
Basic
Diluted
(0.01)
(0.01)
0.05
0.04
The accompanying Notes are an integral part of these consolidated financial statements.
30
Consolidated Balance Sheet
As at December 31, 2023
Expressed in thousands of United States dollars
Note
2023
2022
ASSETS
Non-current assets
Property, plant and equipment
Accounts receivable
Other non-current assets
Current assets
Cash and cash equivalents, unrestricted
Accounts receivable
Cash and cash equivalents, restricted
Other current assets
TOTAL ASSETS
LIABILITIES
Non-current liabilities
Borrowings
Provisions
Loan from related party
Cash-settled deferred share units
Other non-current liabilities
Current liabilities
Borrowings
Accrued interest expense on bonds
Accounts payable and accrued expenses
Other current liabilities
EQUITY
Share capital
Share-based payments reserve
Cumulative translation adjustment
Accumulated deficit
TOTAL EQUITY AND LIABILITIES
13
14
14
16
16
18
17
20
16
16
15
19
302,192
35,421
69
337,682
48,881
38,913
22,841
2,094
112,729
450,411
193,746
27,839
16,723
565
405
239,278
45,000
18,509
8,047
146
71,702
671,136
12,041
205
(543,951)
139,431
450,411
302,384
-
211
302,595
69,273
88,279
36,457
2,089
196,098
498,693
236,443
32,926
16,175
785
454
286,783
22,500
10,202
15,286
228
48,216
670,250
10,621
21
(517,198)
163,694
498,693
The accompanying Notes are an integral part of these consolidated financial statements.
Signed on behalf of the Board of Directors
/s/Michael S. Ebsary
Michael S. Ebsary, Director
/s/Chris Bruijnzeels
Chris Bruijnzeels, Director
31
Consolidated Statement of Cash Flow
For the year ended December 31, 2023
Expressed in thousands of United States dollars
Note
Operating activities
(Loss) / Income for the period
Adjustments for non-cash related items:
Borrowing costs – net of amount capitalized
Depreciation, depletion and amortization expense
Share-based payment expense
Foreign exchange loss
Net gain from settlement of debt
Bargain purchase gain on Sarsang acquisition
Re-measurements on defined pension plan
Unwinding discount on decommissioning provision
Interest income
Changes in accounts receivable on oil sales
Changes in current tax liabilities
Changes in other current assets
Changes in pension liability
Changes in accounts payable and accrued expenses
Net cash inflows from operating activities
Investing activities
Interest received on cash deposits
Loans – payments received
Purchase of acquisition net of cash received
Purchase of intangible assets
Purchase of property, plant and equipment
Net cash outflows to investing activities
Financing activities
Own bond amortization received / (purchases)
Shares issued on Rights Offering
Rights offering transaction costs
2025 Bond transaction costs
Principal element of lease payments
Cash paid out on bond amortization
Payments to bondholders and related-party – interest
Net cash outflows to financing activities
Effect of exchange rate changes on cash and cash
equivalents
Change in cash and cash equivalents
Cash and cash equivalents, beginning of the year
Cash and cash equivalents, end of the year*
*Inclusive of restricted cash
11
10
9
18
16,17
The accompanying Notes are an integral part of these consolidated financial statements.
For the year ended December 31,
2023
(26,706)
37,758
26,088
2,026
251
-
-
(47)
(76)
(7,393)
13,945
(4)
(5)
(25)
(5,330)
40,482
6,714
-
(951)
(43)
(27,997)
(22,277)
2,303
-
-
-
(77)
(22,500)
(31,981)
(52,255)
42
(34,008)
105,730
71,722
22,841
2022
114,959
40,329
46,584
2,250
66
(1,138)
(60,081)
549
(964)
(3,771)
(48,843)
82
312
(598)
15,547
105,283
3,771
8,813
(110,437)
(2)
(25,839)
(123,694)
(27,456)
29,572
(2,067)
(6,261)
(85)
-
(41,182)
(47,479)
(46)
(65,936)
171,666
105,730
36,457
32
Consolidated Statement of Changes in Equity
For the year ended December 31, 2023
Expressed in thousands of United States
dollars
Share
capital
Share-
based
payments
reserve
Loan
Share
reserve
Cumulative
translation
adjustment
Accumulated
deficit
Total
Balance at January 1, 2022
640,521
9,446
2,490
(20)
(633,899)
18,538
Total comprehensive income for the year:
Income for the period
Other comprehensive income
Transactions with owners in their capacity as owners:
Share-based payments expense
(excluding DSU, Note 20)
Loan Shares issued
Shares issued on Rights Offering
Transaction costs
RSU Shares issued
1,297
29,571
(2,066)
927
29,729
-
-
1,175
-
-
-
-
1,175
-
-
-
(2,490)
-
-
-
(2,490)
Balance at December 31, 2022
670,250
10,621
Total comprehensive income / (loss) for the year:
Loss for the period
Other comprehensive income / (loss)
Transactions with owners in their capacity as owners:
Share-based payments expense
(excluding DSU, Note 20)
Options exercised
RSU Shares issued
-
-
-
-
-
-
38
848
886
-
-
1,420
-
-
1,420
-
-
-
-
-
-
-
-
Balance at December 31, 2023
671,136
12,041
The accompanying Notes are an integral part of these consolidated financial statements.
-
41
-
-
-
-
-
41
21
-
184
-
-
-
184
205
114,959
549
114,959
590
-
1,175
1,193
-
-
-
116,701
-
29,571
(2,066)
927
145,156
(517,198)
163,694
(26,706)
(47)
(26,706)
137
-
1,420
-
-
(26,753)
38
848
(24,263)
(543,951)
139,431
33
Notes to the Consolidated Financial Statements
For the year ended December 31, 2023
Expressed in thousands of United States dollars
1. General information
ShaMaran Petroleum Corp. (“ShaMaran” and together with its subsidiaries, the “Company”) is incorporated under the
Business Corporations Act, British Columbia, Canada. The address of the registered office is 1200-1075 West Georgia Street,
Vancouver, British Columbia V6E 3C9, Canada. The Company’s shares trade on the TSX Venture Exchange in Canada and
NASDAQ First North Growth Market in Sweden under the symbol “SNM”.
The Company is engaged in the business of oil and gas exploration and production and holds the following interests at
December 31, 2023:
•
•
27.6% non-operated participating interest in the Atrush Block production sharing contract (“Atrush PSC”) in the
Kurdistan Region of Iraq (“KRI”). The Atrush Block twenty-year development period commenced in Q4 2013 with
an automatic right to a five-year extension and the possibility to extend for an additional five years. Oil production
on the Atrush Block commenced in Q3 2017. See Note 25 for recent developments on the Atrush interest.
18% non-operated participating interest (22.5% paying interest) in the Sarsang production sharing contract
(“Sarsang PSC”) in the KRI. This interest is consolidated in the Company’s financial statements from
September 14, 2022, when ShaMaran closed the acquisition of TEPKRI Sarsang A/S, a subsidiary of TotalEnergies
S.E. (the “Sarsang Acquisition”). The Sarsang Block twenty-year development period commenced in Q2 2013 with
an automatic right to a five-year extension and the possibility to extend for an additional five years. Oil production
on the Sarsang Block commenced in Q1 2013.
2. Basis of preparation and going concern
a. Basis of preparation
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRS Accounting Standards”) as issued by the International Accounting Standards Board (“IASB”) and the IFRS
Interpretations Committee. The significant accounting policies of the Company have been applied consistently throughout
the year. The policies applied in these consolidated financial statements are based on IFRS Accounting Standards as of
March 6, 2024, the date these consolidated financial statements were approved and authorized for issuance by the
Company’s board of directors (“the Board”).
b. Going concern
These consolidated financial statements have been prepared on the going concern basis, which assumes that the Company
will be able to realize its assets and liabilities in the normal course of business as they come due in the foreseeable future.
The Company’s operations were heavily impacted by the closure of the Iraq-Turkey pipeline (“ITP”) on March 25, 2023, a
situation that continues as of the date of these financial statements. The Atrush Block had no production from late March
2023 until November 7, 2023, when production restarted at a reduced rate with sales to local refineries. The Sarsang Block,
after a brief shut-in during April 2023, continued producing at a reduced rate with additional oil storage capacity secured
late in April 2023 and sales to local refineries on an ad hoc basis. Turkish Officials stated that the ITP was ready to resume
operations as of October 4, 2023. The readiness and willingness of the Iraqi side to supply oil into the pipeline remains
subject to ongoing negotiations between the Government of Iraq, the Kurdistan Regional Government (“KRG”) and
International Oil Companies (“IOC’s”) operating in the Kurdistan region.
Since the ITP shutdown, the Company and its operating partners have engaged in a number of initiatives aimed at cutting
costs (both operating and capital expenditures) for the Company’s two assets. The Company is actively pursuing further
cost-reduction initiatives and encouraging its operating partners to increase local sales to improve liquidity. In 2023, the
Company successfully engaged with its bondholders to seek additional balance-sheet flexibility given the current pipeline
and payment situation, refer to Note 16.
34
Notes to the Consolidated Financial Statements
For the year ended December 31, 2023
Expressed in thousands of United States dollars
Uncertainty remains regarding the timing and viability of payments by the KRG for accounts receivable from past oil sales.
As a result, the Company has adjusted the credit loss provision to reflect this uncertainty, refer to Note 14 for additional
information. The Company (together with other IOC’s) is still discussing the appropriate recovery mechanism for these
receivables with the KRG, but full recovery is expected based on past precedents.
Considering the impact of all of the above, and including the current local sales commitments, the Company expects to have
sufficient cash in the next 12 months to fund its costs. However, if the ITP remains closed, local sales do not continue and
there is no recovery of the KRG receivables, the Company could require additional liquidity to fund the remaining 2025 Bond
obligations as of December 31, 2023, of $58.5 million interest and $277.5 million principal payments. The possibility that
the Company’s financial resources are potentially insufficient to meet its debt obligations indicates a material uncertainty
that may cast significant doubt over the Company’s ability to continue as a going concern. Therefore, the Company might
be unable to realize its assets and discharge its liabilities in the normal course of business. These consolidated financial
statements do not include the adjustments that would result if the Company is unable to continue as a going concern.
3.
Significant accounting policies
a. Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries and entities
controlled by the Company that apply accounting policies consistent with those of the Company. Control is achieved where
the Company has the power to govern the financial and operating policies of an investee entity to obtain benefits from its
activities. Subsidiaries are fully consolidated from the date on which control is obtained by the Company and are de-
consolidated from the date that control ceases.
Intercompany balances and unrealized gains and losses on intercompany transactions are eliminated upon consolidation.
b.
Interest in joint operations
A joint operation is a contractual arrangement whereby the Company and other parties undertake an economic activity that
is subject to joint control.
Where the Company undertakes its activities under joint operation arrangements directly, the Company’s share of jointly
controlled operations and any liabilities incurred jointly with other joint operations are recognized in the financial
statements of the relevant company and classified according to their nature.
Liabilities and expenses incurred directly in respect of interests in jointly controlled operations are accounted for on an
accrual basis. Income from the sale or use of the Company’s share of the output of jointly controlled operations and its
share of the joint operations are recognized when it is probable that the economic benefit associated with the transactions
will flow to/from the Company and the amount can be reliably measured.
c.
Business combinations
The acquisition method of accounting is used to account for business combinations. The consideration transferred is
measured at the aggregate of the fair values at the date of acquisition of assets given, liabilities incurred or assumed, and
equity instruments issued by the Company in exchange for control of the acquiree. Acquisition-related costs are expensed
as incurred. The identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3
Business Combinations are recognized at their fair value at the acquisition date.
If the Company acquires control of an entity in more than one transaction, the related investment held by the Company
immediately before the last transaction when control is acquired is considered sold and immediately repurchased at the
fair value of the investment on the date of acquisition. Any difference between the fair value and the carrying amount of
the investment results in income or loss recognized in the statement of comprehensive income, refer to Note 9.
35
Notes to the Consolidated Financial Statements
For the year ended December 31, 2023
Expressed in thousands of United States dollars
d.
Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of the Company’s subsidiaries are measured using the currency of the
primary economic environment in which the subsidiary operates (the “functional currency”). The functional and
presentation currency of the Company is the United States dollar (“USD”).
The results and financial position of subsidiaries that have a functional currency different from the presentation currency
are translated into the presentation currency as follows:
Assets and liabilities are translated at the closing exchange rate at the date of that balance sheet.
Income and expenses are translated at the average exchange rate for the period in which they were incurred as a
reasonable approximation of the cumulative effect of rates prevailing on transaction dates.
All resulting exchange differences are recognized in other comprehensive income as part of the cumulative translation
reserve.
Transactions and balances
Transactions in currencies other than the functional currency are recorded in the functional currency at the exchange rates
prevailing on the dates of the transactions or valuation where items are re-measured. At each balance sheet date, monetary
assets and liabilities that are denominated in foreign currencies are translated at the rates prevailing at the balance sheet
date. Exchange differences are recognized in the statement of comprehensive income during the period in which they arise.
e.
Property, plant and equipment
Oil and gas assets
Oil and gas assets are comprised of development and production costs for areas where technical feasibility and commercial
viability have been established and include any exploration and evaluation assets transferred after conclusion of appraisal
activities, as well as costs of development drilling, completion, gathering and production infrastructure, directly attributable
overheads, borrowing costs capitalized and the cost of recognising provisions for future restoration and decommissioning.
Oil and gas costs are accumulated separately for each contract area.
Depletion of oil and gas assets:
Oil and gas assets are depleted using the unit of production method based on proved and probable (“2P”) reserves using
estimated future prices and costs and accounting for future development expenditures necessary to bring those reserves
into production. The reserves correspond to the Company’s entitlement to oil under the terms of the PSC.
Other property, plant and equipment
Other property, plant and equipment (“PP&E”) include expenditures that are directly attributable to the acquisition of an
asset. Subsequent costs are included in the assets’ carrying value or recognized as a separate asset as appropriate only
when it is probable that future economic benefits associated with the item will flow to the Company, and the cost can be
measured reliably.
Repairs and maintenance costs are charged to the statement of comprehensive income during the period in which they are
incurred.
The carrying amount of an item of PP&E is derecognized on disposal or when no future economic benefits are expected
from its use or disposal. The gain or loss arising on the disposal or retirement of an asset is determined as the difference
between the sales proceeds and the carrying amount of the asset and is recognized in the statement of comprehensive
income during the period.
36
Notes to the Consolidated Financial Statements
For the year ended December 31, 2023
Expressed in thousands of United States dollars
Other property, plant and equipment assets are carried at cost less accumulated depreciation and any recognized
impairment loss and are depreciated on a straight-line basis over their expected useful economic lives as follows:
Furniture and office equipment: 5 years.
Computer equipment:
3 years.
f.
Impairment of non-financial assets
Oil and gas assets are assessed for impairment when facts and circumstances suggest that the carrying amount may exceed
its recoverable amount. Such indicators include:
Extended decreases in prices or margins for oil and gas commodities or products.
A significant downwards revision in estimated volumes or an upward revision in future development costs.
For impairment testing, the assets are aggregated into cash generating unit (“CGU”) cost pools based on their ability to
generate largely independent cash flows. The recoverable amount of a CGU is the greater of its fair value less cost of disposal
and its value in use. Fair value is determined to be the amount for which the asset could be sold in an arm’s-length
transaction. Value in use is determined by estimating the present value of the future net cash flows expected to be derived
from the continued use of the asset or CGU.
Where conditions giving rise to the impairment subsequently reverse, the effect of the impairment charge is also reversed
as a credit to the statement of comprehensive income net of any depreciation that would have been charged since
the impairment.
g.
Financial instruments
Financial assets and liabilities are recognized in the Company’s balance sheet when the Company becomes a party to the
contractual provisions of the instrument. Financial assets are derecognized when the contractual rights to cash flows from
the assets expire or the Company transfers the financial asset and substantially all the risks and rewards of ownership.
Gains and losses on derecognition are generally recognized in the consolidated statement of income. The Company
derecognizes financial liabilities when the Company’s obligations are discharged, cancelled or expelled. The difference
between the carrying amount of the financial liability derecognized and the consideration paid and payable, including any
non-cash assets transferred or liabilities assumed, is recognized in the consolidated statement of income.
Classification and measurement
The Company classifies its financial assets and liabilities at initial recognition in the following categories:
Financial Assets at Amortized Cost – Assets that are held for collection of contractual cash flows where those cash flows
represent solely payments of principal and interest. This includes the Company’s receivables that consist of fixed or
determined cash flows related solely to principal and interest amounts or contractual sales of oil. The Company’s intent
is to hold these receivables until cash flows are collected. Financial assets at amortized cost are recognized initially at
fair value, net of any transaction costs incurred, and subsequently measured at amortized cost using the effective
interest method. The Company recognizes a loss allowance for any expected credit losses on a financial asset that is
measured at amortized cost.
Financial Assets at Fair Value through Profit or Loss (“FVTPL”) – Financial assets measured at FVTPL are assets that do
not qualify as financial assets at amortized cost or at fair value through other comprehensive income. The Company
does not currently have any financial assets measured at FVTPL.
Financial Liabilities at Amortized Cost – Financial liabilities are measured at amortized cost using the effective interest
method, unless they are required to be measured at FVTPL, or the Company has opted to measure them at FVTPL.
Borrowings and accounts payable are recognized initially at fair value, net of any transaction costs incurred, and
subsequently at amortized cost using the effective interest method.
Financial Liabilities at FVTPL – Financial liabilities measured at FVTPL are liabilities that include embedded derivatives
and cannot be classified as amortized cost. The Company does not currently have any financial liabilities measured at
FVTPL.
37
Notes to the Consolidated Financial Statements
For the year ended December 31, 2023
Expressed in thousands of United States dollars
Impairment of financial assets
The Company measures impairment of financial assets based on expected credit losses (“ECL”). Where financial assets have
a significant financing component, they are assessed and a lifetime ECL is determined, measured and recognized at the date
of initial recognition of the receivables. For its receivables, the Company applies the simplified approach to providing for
ECLs. In estimating the lifetime ECL provision, the Company considers historical industry default rates, as well as the history
of its customer.
h.
Cash and cash equivalents
Cash and cash equivalents are comprised of cash on hand and demand deposits and other short-term liquid investments
that are readily convertible to a known amount of cash within three months or less from the acquisition date. Restricted
cash is cash held in a trust account for a specific purpose and is therefore not available for general business use. Additional
disclosure related to the Company’s restricted cash is included in Note 16.
i.
Borrowings
Borrowings are recognized initially at fair value, net of any transaction costs incurred. Borrowings are subsequently carried
at amortized cost using the effective interest rate method.
General and specific borrowing costs directly attributable to the acquisition or construction of qualifying assets are
capitalized together with the qualifying assets. Once a qualified asset is fully prepared for its intended use and is producing,
borrowing costs are no longer capitalized. All other borrowing costs are recognized in profit or loss in the period in which
they are incurred.
j.
Taxation
Income tax expense comprises current income tax and deferred income tax. Current income tax is the expected tax payable
on the taxable income for the period. It is calculated based on the tax laws enacted or substantively enacted at the balance
sheet date and includes any adjustment to tax payable in respect of previous years.
Deferred income tax is the tax recognized in respect of temporary differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax bases and is accounted for using the balance sheet liability
method. Deferred income tax liabilities are generally recognized for all taxable temporary differences, and deferred income
tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible
temporary differences can be utilized. Deferred income tax is not recorded if it arises from the initial recognition of an asset
or liability in a transaction other than a business combination that, at the time of the transaction, affects neither
the accounting profit nor loss.
Deferred income tax liabilities are recognized for taxable temporary differences arising on investments in subsidiaries and
associates and interests in joint ventures except where the Company can control the reversal of the temporary difference,
and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred income tax is calculated at the tax rates that are expected to apply in the year when the deferred tax liability is
settled, or the asset is realized. Deferred tax is charged or credited in the statement of comprehensive income except when
it relates to items charged or credited directly to equity in which case the deferred tax is also recognized directly in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against
current tax liabilities, and when they relate to income taxes levied by the same taxation authority, and the Company intends
to settle its current tax assets and liabilities on a net basis.
Income tax arising from the Company’s activities under production sharing contracts is settled by the KRG at no cost and on
behalf of the Company. However, the Company is not able to measure with sufficient accuracy the tax that has been paid
on its behalf, and consequently revenue is not reported gross of income tax paid.
38
Notes to the Consolidated Financial Statements
For the year ended December 31, 2023
Expressed in thousands of United States dollars
k.
Provisions
Provisions are recognized when the Company has a present obligation, legal or constructive, due to a past event when it is
probable that the Company will be required to settle the obligation, and a reliable estimate can be made of the obligation.
The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at
the balance sheet date, accounting for the risks and uncertainties surrounding the obligation. When a provision is measured
using the cash flow estimates to settle the present obligation, its carrying amount is the present value of those cash flows.
l.
Decommissioning and site restoration
Provisions for decommissioning and site restoration are recognized when the Company has a present legal or constructive
obligation to dismantle and remove production, storage and transportation facilities and to carry out site restoration work.
The provision is calculated as the net present value of the Company’s share of the expenditure expected to be incurred at
the end of the producing life of each field using a discount rate that reflects the market assessment of the time value of
money at that date. Unwinding of the discount on the provision is charged to the statement of comprehensive income
within finance costs during the period. The amount recognized as the provision is included as part of the cost of the relevant
asset and is charged to the statement of comprehensive income in accordance with the Company’s policy for depreciation
and amortization.
Changes in the estimated timing of decommissioning and site restoration cost estimates are dealt with prospectively by
recording an adjustment to the provision and a corresponding adjustment to the relevant asset.
m. Pension obligations
The Company’s Swiss subsidiary, ShaMaran Services SA, has a defined benefit pension plan that is managed through a
private pension plan. Independent actuaries determine the cost of the defined benefit plan on an annual basis, and
ShaMaran Services SA pays the annual insurance premium. The pension plan provides benefits coverage to the employees
of ShaMaran Services SA in the event of retirement, death or disability. ShaMaran Services SA and its employees jointly
finance retirement and risk benefits. Employees of ShaMaran Services SA pay 40% of the savings, risk and cost contributions,
and ShaMaran Services SA contributes the difference between the total of all required pension plan contributions and the
total of all employees’ contributions.
The pension disclosure has been omitted from these consolidated financial statements as the gross and net balances are
not considered material.
n.
Share capital
Common shares are classified as equity. Incremental costs directly attributable to the issue of new shares or share options
are shown in equity as a deduction, net of tax, from the proceeds.
39
Notes to the Consolidated Financial Statements
For the year ended December 31, 2023
Expressed in thousands of United States dollars
o.
Share-based payments
The Company issues equity-settled, share-based payments to certain directors, employees and third parties. The fair value
of the equity-settled, share-based payments is measured at the date of grant. The total expense is recognized over the
vesting period, which is the period where all conditions to entitlement are to be satisfied. The cumulative expense
recognized for equity-settled, share-based payments at each balance sheet date represents the Company’s best estimate
of the number of equity instruments that will ultimately vest. The charge or credit for the period and the corresponding
adjustment to contributed surplus during the period represents the movement in the cumulative expense recognized for
all equity instruments expected to vest. The fair value of equity-settled, share-based payments is determined using the
Black-Scholes option pricing model.
p. Revenue recognition
Sales of oil production:
Revenue for sales of oil is recognized when the significant risks and rewards of ownership are deemed to have been
transferred to the buyer, the amount can be measured reliably, and it is assessed as probable that economic benefit
associated with the sale will flow to the Company. This occurs when oil reaches the delivery point enroute to the KRG’s
main export pipeline, or when oil loaded onto a buyer’s truck crosses the field boundary.
Revenue is recognized at fair value, which is comprised of the Company’s entitlement production due under the terms of
the Atrush and Sarsang Joint Operating Agreements and the Atrush and Sarsang PSCs that have two principal components:
cost oil, the mechanism by which the Company recovers qualifying costs it has incurred in exploring and developing an
asset; and profit oil, the mechanism through which profits are shared between the Company, its partners and the KRG. The
Company pays capacity building payments on profit oil that are due for payment once the Company has received the related
profit-oil proceeds. Profit-oil revenue is reported net of any related capacity building payments. The revenue for local sales
is recognized using the same method.
The Company’s oil sales made to the KRG are under the terms of the most recently effective sales agreements that reflect
a benchmark rate less estimated oil quality adjustments and all local and international transportation costs. The Company’s
oil sales made to local buyers are under the terms of a local sales agreement with an agreed oil price and volume
nomination. The Company’s single performance obligation in its contracts with its customers is the delivery of crude oil at
a pre-determined price, and control is transferred to the buyer at the agreed delivery point when the revenue is recognized.
Interest income:
Interest income is recognized using the effective interest method. The effective interest rate exactly discounts estimated
future cash payments or receipts through the expected life of the financial instrument or, when appropriate, a shorter
period to the net carrying amount of the financial asset or financial liability.
q.
Changes in accounting policies
There are no IFRS Accounting Standards or interpretations that have been issued effective for financial years beginning on
or after January 1, 2023, that would have a material impact on the Company’s consolidated financial statements.
r.
Accounting standards issued but not yet applied
There are no new accounting standards that will come into effect for annual periods beginning on or after January 1, 2024,
that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable
future transactions.
40
Notes to the Consolidated Financial Statements
For the year ended December 31, 2023
Expressed in thousands of United States dollars
4.
Critical accounting judgments and key sources of estimation uncertainty
In the application of the Company’s accounting policies, which are described in Note 3, management has made judgments,
estimates and assumptions about the carrying amounts of the assets, liabilities, revenues, expenses and related disclosures.
These estimates and associated assumptions are based on historical experience, current trends and other factors that
management believes to be relevant at the time these consolidated financial statements were prepared. Actual results may
differ as future events and their effects cannot be determined with certainty, and such differences could be material.
Management reviews the accounting policies, underlying assumptions, estimates and judgments on an on-going basis to
ensure that the financial statements are presented fairly in accordance with IFRS Accounting Standards.
The following are the critical judgments and estimates that management has made in the process of applying the Company’s
accounting policies in these consolidated financial statements:
(a) Revenue Recognition
As explained in Note 3(p), the Company recognizes revenues when oil reaches the delivery point on the basis that control
is deemed to have passed to the buyer, and that the transaction price has been agreed upon. The conclusion that the
economic benefits will flow to the Company at this point is a significant judgment and is based on management’s evaluation
that it is probable that the Company will collect the consideration from the KRG and/or local buyers in exchange for oil
deliveries.
(b) Oil and gas reserves and resources
The business of the Company is the exploration and development of oil and gas reserves in Kurdistan. Estimates of
commercial oil and gas reserves are used in the calculations for impairment, depletion and amortization and
decommissioning provisions. Changes in estimates of oil and gas reserves resulting in different future production profiles
will affect the discounted cash flows used for impairment testing purposes, the anticipated date of site decommissioning
and restoration and the depletion charges based on the unit of production method.
(c) Recoverability of receivables
The Company has reported non-current and current receivables comprised of the Company’s share of Atrush and Sarsang
oil sales to the KRG and local refineries.
The recovery of the receivable amounts from the KRG depends on several factors, including the continued production and
exports of oil from the Atrush and Sarang blocks, the financial environment in Kurdistan and global oil prices. Under the
terms of the relevant agreements, the receivable balances are recoverable in several ways, including by cash settlement
and/or through payment in kind of oil production.
(d)
Impairment of assets
IAS 36 Impairment of Assets require that a review for impairment be carried out if events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Refer to Note 13.
Future cash flow estimates that are used to calculate the fair value of the Company's CGUs are based on expectations about
future operations, primarily comprising of estimates about production and export volumes, oil prices, operating costs,
abandonment costs and capital expenditures. Changes in such estimates could impact recoverable values
(e) Decommissioning and site restoration provisions
The Company recognizes a provision for decommissioning and site restoration costs expected to be incurred to remove and
dismantle production, storage and transportation facilities and to carry out site restoration work. The provisions are
estimated taking into consideration existing technology and current prices after adjusting for expected inflation and
discounted using rates reflecting current market assessments of the time value of money and, where appropriate, the risks
specific to the liability. The Company makes an estimate based on its experience and historical data. Refer also to Note 18.
41
Notes to the Consolidated Financial Statements
For the year ended December 31, 2023
Expressed in thousands of United States dollars
5. Business and geographical segments
The Company operates in one business segment, oil and gas exploration and production, in one geographical segment, the
KRI. As a result, in accordance with IFRS 8: Operating Segments, the Company has presented its financial information
collectively for one operating segment.
6. Revenues
As discussed in Note 2b, the ITP has been closed since March 25, 2023. The revenues recorded since this date relate entirely
to oil sold to local refineries from the Sarsang Block since April 2023 and from the Atrush Block since November 2023. These
sales are ad hoc and vary in quantity from week to week but are expected to continue on an ad hoc basis until ITP exports
resume. Prices for crude oil sales to local refineries are in line with the local market and at a significant discount to
international benchmark prices.
Gross oil sales in 2023 were 14.4 million barrels (“MMbbls”) (2022: 17.6 MMbbls), and the Company’s entitlement share
was approximately 1.7 MMbbls (2022: 2.2 MMbbls), which was sold with an average netback price of $48.87 per barrel
(2022: $79.14). During the first 3 months of 2023, the Company used export prices based on KBT oil price for recording the
revenue for both assets with a discount for estimated oil quality adjustments and all local and international transportation
costs.
The comparative revenues in 2022 relate mainly to the Company’s entitlement share of oil from Atrush as the Sarsang
Acquisition closed on September 14, 2022.
Refer also to Note 14.
7.
Cost of goods sold
Lifting costs are comprised of the Company’s share of expenses related to the production of oil from the Atrush and Sarsang
blocks, including operation and maintenance of wells and production facilities, insurance, and the respective operator’s
related support costs as charged to the Company. The increase in 2023 lifting costs compared to 2022 was mainly due to
the inclusion of Sarsang lifting costs for the full-year, partially offset by reduced lifting costs due to the ITP closure.
Other costs of production include the Company’s share of production bonuses and its share of other costs prescribed under
the PSCs.
Oil and gas assets are depleted using the unit of production method based on 2P reserves using estimated future prices and
costs and accounting for future development expenditures necessary to bring those reserves into production. As there was
no production in the second or third quarters of 2023 at Atrush, there was no depletion charge recorded during these
quarters for the Atrush Block.
Refer also to Notes 6 and 13.
8. General and administrative expense
General and administrative expenses principally include the Company’s cost of technical and administrative personnel,
travel, office, business development and stock exchange listing and regulatory related costs.
42
Notes to the Consolidated Financial Statements
For the year ended December 31, 2023
Expressed in thousands of United States dollars
9. Bargain purchase gain on acquisition
On September 14, 2022, the Company announced the closing of the Sarsang Acquisition. The Company purchased 100% of
the shares of TEPKRI Sarsang A/S, now ShaMaran Sarsang A/S, which holds an 18% non-operated participating interest
(22.5% paying interest) in the Sarsang PSC in Kurdistan. The difference between the total purchase consideration and the
net assets and liabilities acquired resulted in a bargain purchase gain of $60.08 million, recognized in the statement of
comprehensive income for 2022.
10. Finance income
Interest on Company-owned bonds
Interest on bank deposits
Net gain on settlement of debt
Total finance income
Refer also to Note 16.
11. Finance cost
Interest/amortization charges on bonds
Amortization of the related-party loan
Re-measurement of bond debt and Nemesia loan
Amortization of 2023 Bond transaction costs
Total borrowing costs
Foreign exchange loss
Other interest expenses
Re-measurement of contingent consideration
Lease interest expense
Unwinding discount on decommissioning provision
Total finance costs before borrowing costs capitalized
Borrowing costs capitalized
Total finance cost
For the year ended December 31,
2023
3,813
3,580
-
7,393
For the year ended December 31,
2023
38,707
2,128
-
-
40,835
251
69
43
11
(76)
41,133
(3,201)
37,932
2022
2,367
1,404
1,138
4,909
2022
35,544
2,662
2,465
1,223
41,894
66
35
(101)
13
(964)
40,943
(1,464)
39,479
Interest and amortization charges during 2023 relate to the Company’s $300 million bond, which has a 4-year tenor due
July 2025 and a 12% fixed, semi-annual coupon (the “2025 Bond”). The 2025 Bond was reduced to $277.5 million at the end
of July 2023 when the first $22.5 million amortization payment was made. In 2022, the Company paid interest on the initial
2025 Bond issue amount of $111.5 million plus interest on $175 million of the ShaMaran bond issued in 2018 that carried
a 12% fixed, semi-annual coupon and was due to mature on July 5, 2023 (the “2023 Bond”).
Refer to Notes 16 and 17 regarding the 2023 Bond transaction costs and related-party loan, and also to Note 18 regarding
the contingent consideration and decommissioning provision.
Borrowing costs directly attributable to the preparation of development assets for their intended use have been capitalized
together with the related oil and gas assets. The increase in 2023 is due to the full-year inclusion of Sarsang-related
borrowing costs. All other borrowing costs are recognized in the income statement in the period in which they are incurred.
43
Notes to the Consolidated Financial Statements
For the year ended December 31, 2023
Expressed in thousands of United States dollars
12. Taxation
(a)
Income tax expense
The current tax expense is incurred on the profits of the Swiss administrative company and the intercompany transactions
of the Danish company. The Company is not required to pay any cash corporate income taxes on its activities in Kurdistan,
as disclosed in Note 3(j).
There were no deferred tax assets recognized for losses incurred during the period as it is currently not probable that they
will be recovered in subsequent years.
(b)
Tax losses carried forward
The Company has tax losses and costs that are available to apply to future taxable income as follows:
Canadian losses from operations
Canadian exploration expenses
Canadian unamortized share issue costs
U.S. Federal losses from operations
U.S. Federal tax basis in excess of carrying values of properties
Total tax losses carried forward
For the year ended December 31,
2023
169,486
2,464
3
-
-
171,953
2022
169,213
2,464
36
173,480
3,654
348,847
The Canadian losses from operations may be used to offset future Canadian taxable income and will expire over the period
from 2030 to 2043. The Canadian exploration expenses may be carried forward indefinitely to offset future taxable Canadian
income. Canadian unamortized share issue costs may offset future taxable Canadian income from years 2024 to 2026.
The US company, Bayou Bend Petroleum U.S.A. Ltd, was dissolved in October 2023. Therefore, the US tax losses are no
longer available to the Company.
The Company has not recognized deferred tax assets amounting to approximately $46 million (2022: $84 million) as it is
not probable that these amounts will be realized.
44
Notes to the Consolidated Financial Statements
For the year ended December 31, 2023
Expressed in thousands of United States dollars
13. Property, plant and equipment
At January 1, 2022
Cost
Accumulated depletion and depreciation
Net book value
For the year ended December 31, 2022
Opening net book value
Additions
Sarsang Acquisition
Depletion and depreciation expense
Net book value
At December 31, 2022
Cost
Accumulated depletion and depreciation
Net book value
For the year ended December 31, 2023
Opening net book value
Additions
Depletion and depreciation expense
Net book value
At December 31, 2023
Cost
Accumulated depletion and depreciation
Net book value
Oil and gas
assets
Computer
equipment
Furniture
and office
equipment
249,203
(110,399)
138,804
138,804
31,291
178,487
(46,365)
302,217
458,982
(156,765)
302,217
302,217
25,725
(25,851)
302,091
484,707
(182,616)
302,091
133
(63)
70
70
54
-
(28)
96
173
(77)
96
96
57
(86)
67
140
(73)
67
210
(113)
97
97
13
-
(39)
71
221
(150)
71
71
-
(37)
34
241
(207)
34
Total
249,546
(110,575)
138,971
138,971
31,358
178,487
(46,432)
302,384
459,376
(156,992)
302,384
302,384
25,782
(25,974)
302,192
485,088
(182,896)
302,192
PP&E is principally comprised of development costs related to the Company’s share of the Atrush PSC and the fair value of
the Company’s share of the Sarsang PSC 2P reserves as estimated by the Company’s independent qualified reserves
evaluator, McDaniel & Associates Consultants Ltd. (“McDaniel”), plus development costs related to the Company’s share of
the Sarsang PSC since the acquisition.
During 2023, movements in PP&E were comprised of general additions of $25.8 million (2022: $31.4 million general
additions plus $178.5 million Sarsang Acquisition), which
included capitalized borrowing costs of $3.2 million
(2022: $1.5 million), net of depletion and depreciation expense of $26.0 million (2022: $46.4 million), that resulted in a net
decrease to PP&E assets of $0.2 million. Most of the PP&E additions were carried out in the first quarter of 2023, prior to
the ITP closure.
Due to the closure of the ITP in 2023, the Company conducted impairment tests as of the reporting date to assess if the net
book value of its oil and gas assets was fully recoverable. The Company has identified two separate CGUs, being its Atrush
and Sarsang assets. The impairment tests were based on the McDaniel production and cost profiles related to 2P reserves,
the 2024 operating budgets, a future cost inflation factor of 2% per annum and a discount rate of 17% to calculate the net
present value at December 31, 2023, of the Company’s projected share of future cash flows from the Atrush and Sarsang
2P reserves. The assessment concluded that there is no need for any impairment to PP&E.
The price assumptions used for the impairment assessment performed at December 31, 2023, are based on current local
sales prices for 2024. Going forward, the sales prices use average Brent oil price assumptions based on the McDaniel forecast
less an estimated discount to Brent based on past precedent.
Refer also to Notes 4 and 7.
45
Notes to the Consolidated Financial Statements
For the year ended December 31, 2023
Expressed in thousands of United States dollars
14. Accounts receivable
At December 31, 2023, the Company had receivables outstanding as follows:
Accounts receivable on oil sales
Credit Loss Provision – transportation costs
Credit Loss Provision
Total accounts receivable, net of provisions
Current portion
Non-current portion
For the year ended December 31,
2023
95,474
(3,695)
(17,445)
74,334
38,913
35,421
2022
95,481
(3,695)
(3,507)
88,279
88,279
-
The accounts receivable on oil sales at December 31, 2023, mainly relates to deliveries to the KRG from October 2022
through March 2023 on the basis of the KBT pricing mechanism. The Company continues to discuss the recovery of these
receivables with the KRG, but timing is uncertain (refer to Note 2b). Therefore, the Company has reassessed the credit loss
provision and has compared the carrying value of the relevant trade receivables with the present value of the estimated
future cash flows based on reasonable scenarios and has weighted the expected recovery of these outcomes according to
the relative probability. A relevant discount rate has been applied to reflect counterparty discounting and credit risk to
provide a reasonable approximation of the fair value of these trade receivables at December 31, 2023. The result of the
Company’s assessment under IFRS 9 is a further $13.9 million adjustment to these trade receivables in 2023 included in the
statement of comprehensive income. The portion of these receivables that is estimated to be received post-year-end 2024
are classified as non-current due to uncertainty in timing of recovery.
A full provision was made during 2022 to account for a possible increase in transportation and access fees of $3.7 million.
According to the KRG, these costs were added as a result of increased pipeline fees and other tariffs. This increase has yet
to be agreed between the parties and relates to oil sales prior to September 1, 2022.
Refer also to Note 6.
15. Accounts payable and accrued expenses
Payables to joint operations partners
Accrued expenses
Trade payables
Total accounts payable and accrued expenses
For the year ended December 31,
2023
5,997
1,129
921
8,047
2022
11,049
3,333
904
15,286
The payables to joint operations partners decreased in 2023 due to reduced levels of activity in both blocks. Payables to
both operators are up to date at December 31, 2023.
46
Notes to the Consolidated Financial Statements
For the year ended December 31, 2023
Expressed in thousands of United States dollars
16. Borrowings
On July 16, 2021, the Company announced the successful placement of the 2025 Bond, which is partially amortized in
instalments with $22.5 million due every six months from July 2023, and the remaining balance due at maturity.
The 2025 Bond was issued at a price of 98.5% of nominal value that was applicable to both new money under the Initial
Issue Amount of $111.5 million in July 2021 and the refinancing of $175 million of existing debt (the 2023 Bond) in
September 2022.
Following the closing of the Sarsang Acquisition, the Company announced on September 27, 2022, that the Company’s
2023 Bond was exchanged for its 2025 Bond at a 2% premium, in accordance with the 2025 Bond terms. The existing debt
that was refinanced into the new bond included $7.2 million of the total $22.8 million debt owed by the Company to
Nemesia S.à.r.l. (“Nemesia”), with the $15.6 million balance remaining on amended terms. Refer to Note 17 for additional
information.
During 2021 and 2022, the Company purchased its own bonds in the market at commercially attractive rates.
At December 31, 2023, the Company held $28.4 million of its own 2025 Bond (2022 year-end: $30.7 million). After the
balance sheet date, $22.5 million of these bonds were retired in January 2024 to satisfy the amortization obligation.
On July 26, 2023, the Company announced that it had requested and received bondholder approval for a waiver to release
cash from the 2025 Bond Debt Service Retention Account (“DSRA”). The waiver allowed the Company to use restricted cash
in the DSRA to pay the bond interest and amortization obligations due on July 30, 2023. At December 31, 2023, the
outstanding principal of the 2025 Bond was $277.5 million, and $22.8 million of restricted cash was held in the DSRA earning
interest. At the date of these financial statements, the 2025 Bond amount is $255 million, due to the $22.5 million
amortization payment made in January 2024, and $22.8 million is held as restricted cash in the DSRA.
The movements in borrowings are explained as follows:
For the year ended December 31,
Opening balance:
Interest/amortization charges
Own bond amortization received/ (purchases)
2025 Bond issued
Amortization of 2023 Bond transaction costs
2025 Bond discount
2025 Bond transaction costs
Bond amortization
Payments to bondholders – interest
Ending balance
Non-current portion – net borrowings
Current portion - amortization instalments
Current portion – accrued bond interest expense
Refer also to Note 11.
2023
269,145
38,707
2,303
-
-
-
-
(22,500)
(30,400)
257,255
193,746
45,000
18,509
2022
296,839
35,544
(27,717)
188,528
2,486
(4,092)
(6,261)
(175,000)
(41,182)
269,145
236,443
22,500
10,202
47
Notes to the Consolidated Financial Statements
For the year ended December 31, 2023
Expressed in thousands of United States dollars
17. Loan from related-party
In July 2020, the Company announced a full drawdown of Nemesia’s liquidity guarantee for $22.8 million followed by the
full and final discharge of this liquidity guarantee by the Bond Trustee. In exchange for the drawdown of funds, the Company
was required to issue monthly to Nemesia 50,000 ShaMaran shares for each $500 thousand drawn-down and outstanding
until the drawn amount was repaid in full together with interest (the “Loan Shares”). In addition, the Company was required
to accrue interest on the amount due to Nemesia at an annual rate of 5%.
After closing the Sarsang Acquisition and the bond conversion on September 27, 2022 (refer to Note 16), $7.2 million of the
existing $22.8 million debt was converted into the new 2025 Bond. The balance of $15.6 million remains as the Nemesia
loan with new terms. Repayment of the loan is due on January 30, 2026, six months after maturity of the 2025 Bond. Claim
for repayment is subordinated to all obligations under the Company’s 2025 Bond terms. The interest rate on the Nemesia
loan was adjusted to match the interest rate on the 2025 Bond of 12% (payable in cash semi-annually) plus an additional
interest amount of 2% per annum payable in kind, and the monthly common share allotment to Nemesia was eliminated.
Following the amendments described above, the Nemesia loan accounting was changed accordingly.
The 2023 movements in the liquidity guarantee loan balance are explained as follows:
Opening balance
Amortization
Recognize Nemesia loan on new terms
Derecognize Nemesia loan on old terms
Payment to Nemesia – Interest
Ending balance
Refer also to Notes 11, 16 and 17.
18. Provisions
Opening balance
Changes in estimates and obligations incurred
Unwinding discount on decommissioning provision
Changes in discount and inflation rates
Total decommissioning and site restoration provisions
Contingent consideration
Total provisions
For the year ended December 31,
2023
16,175
2,129
-
-
(1,581)
16,723
For the year ended December 31,
2023
22,077
469
(76)
(5,885)
16,585
11,254
27,839
2022
21,748
2,662
15,600
(23,835)
-
16,175
2022
18,984
9,779
(964)
(5,722)
22,077
10,849
32,926
The decommissioning and site restoration provision relates to the Company’s share of future costs in respect of the
Company’s 27.6% interest in the Atrush Block and 18% interest (22.5% paying interest) in the Sarsang Block. The provision
assumes these works will commence in 2032 for Atrush and in 2039 for Sarsang.
The contingent consideration relates to the purchase consideration of the Sarsang Acquisition and is payable to the seller
upon (i) cumulative gross oil production from the Sarsang PSC reaching 130 MMbbls and (ii) subject to Brent crude oil prices
averaging at least $60/bbl for the preceding twelve-month period. The Company estimates the fair value of this contingent
consideration at the end of each quarter and treats any difference as a finance income/cost.
48
Notes to the Consolidated Financial Statements
For the year ended December 31, 2023
Expressed in thousands of United States dollars
19. Share capital
The Company is authorized to issue an unlimited number of common shares with no par value. The Company’s issued share
capital is as follows:
At January 1, 2022
Loan Shares issued
RSU Shares issued
DSU Shares issued
Right Offering Shares issued, net of issuance costs
At December 31, 2022
RSU Shares issued
Option Shares issued
At December 31, 2023
Number of shares
Share capital
2,215,349,663
22,572,000
11,119,995
1,566,832
558,242,414
2,808,850,904
14,954,253
557,000
2,824,362,157
640,521
1,297
816
111
27,505
670,250
848
38
671,136
As described in Note 17, the Company was required under the old Nemesia loan terms to issue to Nemesia 50,000 ShaMaran
shares for each $500 thousand drawn-down per month until the drawn amount was repaid, resulting in a total of 22,572,000
Loan Shares being issued in 2022 through September 27, 2022.
On May 25, 2022, in connection with an offering of rights to shareholders of record on April 13, 2022, to purchase additional
common shares in the Company (“Common Shares”) at a subscription price of CAD 0.06825 per share (the “Rights
Offering”), the Company issued an aggregate of 558,242,414 Common Shares, resulting in total gross proceeds of
$30.15 million.
During 2023, a total of 14,954,253 Restricted Share Units (“RSUs”) vested and 557,000 stock options were exercised in
accordance with the Company’s Share Unit Plan (2022: 11,119,995 RSUs, 1,566,832 Deferred Share Units (“DSUs”) and nil
options), and 15,511,253 of the Company’s shares were issued to plan participants. The carrying value of the RSU shares
has been determined based on the Company’s average closing share price over the five-day period prior to the vesting date.
Refer also to Note 20.
Earnings per share
The earnings per share amounts were as follows:
Net income, in dollars
Weighted average number of shares outstanding during the year
Weighted average diluted number of shares outstanding during the year
Basic income per share, in dollars
Diluted income per share, in dollars
For the year ended December 31,
2023
(26,706,000)
2,820,794,284
2,942,842,006
(0.01)
(0.01)
2022
114,959,000
2,581,563,233
2,698,241,183
0.05
0.04
49
Notes to the Consolidated Financial Statements
For the year ended December 31, 2023
Expressed in thousands of United States dollars
20. Share-based payments expense
The Company has established share unit plans and a share purchase option plan whereby a committee of the Company’s
Board may, from time to time, grant up to a total of 10% of the issued share capital to directors, officers, employees or
consultants. At December 31, 2023, a total of 122,047,723 shares (4% of issued share capital) had been granted of the
possible 282,436,215 shares that could be granted under the plans. The number of shares issuable under these plans at any
specific time to any one recipient shall not exceed 5% of the issued and outstanding common shares of the Company. Under
the plans, the Company may grant options, performance share units (“PSU”), RSUs and DSUs.
In 2023, the Company granted 49,400,000 stock options, 19,750,000 RSUs and 4,770,110 DSUs (2022: a total of 20,750,000
stock options, 10,890,000 RSUs and 2,287,620 DSUs were granted).
In 2023, a total of 14,954,253 RSUs vested, and 557,000 stock options were exercised, the same quantity of shares were
issued to plan participants, and 50,720,000 options and 2,319,084 RSUs were forfeited due to the end of service of plan
participants (2022: 10,869,995 RSUs vested, the same quantity of shares were issued to plan participants, and 2,879,486
DSUs were exercised, of which 1,566,832 were redeemed in shares and the rest in cash).
The result of the movements in 2023 are charges to the Statement of Comprehensive Income for options of $1,331 thousand
(2022: $1,039 thousand), for RSUs $953 thousand (2022: $951 thousand) and for DSUs $(220) thousand
is $565 thousand
(2022: $348 thousand). The carrying amount of the DSU
(December 31, 2022: $785 thousand).
liability at December 31, 2023,
A summary of movements in the Company’s outstanding options and share units is below:
At December 31, 2022
Granted in the year
Expired/forfeited in the year
Stock options exercised
RSUs vested
At December 31, 2023
Quantities vested and unexercised:
At December 31, 2022
At December 31, 2023
Weighted average remaining contractual life of
options:
At December 31, 2022
At December 31, 2023
Number of
stock options
outstanding
82,740,000
49,400,000
(50,720,000)
(557,000)
-
Number of
RSUs
outstanding
22,123,339
19,750,000
(2,319,084)
-
(14,954,253)
80,863,000
24,600,002
-
-
63,939,995
80,863,000
2.3 years
3.5 years
Number of
DSUs
outstanding
11,814,611
4,770,110
-
-
-
16,584,721
11,814,611
16,584,721
The Company recognizes compensation expense on stock options granted to both employees and non-employees using the
fair value method at the date of grant. The share-based payments expense for these options is calculated using the Black-
Scholes option pricing model.
Option pricing models require the input of highly subjective assumptions, including the expected price volatility. Changes
in the subjective input assumptions can materially affect the fair value estimate, and therefore the existing models do not
necessarily provide a reliable single measure of the fair value of the Company’s stock options.
50
Notes to the Consolidated Financial Statements
For the year ended December 31, 2023
Expressed in thousands of United States dollars
21. Financial instruments
Financial assets
The financial assets of the Company on the balance sheet dates were as follows:
Accounts receivable ⁵
Cash and cash equivalents, unrestricted ²
Cash and cash equivalents, restricted ²
Other receivables ²
Total financial assets
Fair value
hierarchy ⁶
Level 3
Level 1
Level 1
Level 2
Carrying and fair values ¹
At December 31, 2023
At December 31, 2022
74,334
48,881
22,841
1,789
147,845
88,279
69,273
36,457
1,485
195,494
Financial assets classified as other receivables are initially recognized at fair value and are subsequently measured at
amortized cost using the effective interest method less any provision for impairment.
Financial liabilities
The financial liabilities of the Company on the balance sheet dates were as follows:
Borrowings ³
Accrued interest on bonds
Related-party loan ⁴
Accounts payable and accrued expenses ²
Current tax liabilities
Total financial liabilities
Fair value
hierarchy ⁶
Level 2
Level 1
Level 2
Level 2
Level 2
Carrying values
At December 31, 2023
238,746
18,509
16,723
8,047
86
282,111
At December 31, 2022
258,943
10,202
16,175
15,286
90
300,696
Financial liabilities are initially recognized at the fair value of the amount expected to be paid and are subsequently
measured at amortized cost using the effective interest rate method.
¹ The carrying amount of the Company’s financial assets approximate their fair values at the balance sheet dates.
² No valuation techniques have been applied to establish the fair value of these financial instruments as they are either cash
and cash equivalents, correspond to payment terms fixed by contract or, due to the short-term nature, are readily
convertible to or settled with cash and cash equivalents.
³ The Company estimates the fair value of its net borrowings (the gross outstanding amount of the 2025 Bond less Company-
owned 2025 Bonds) at the balance sheet date is $225.4 million (December 31, 2022: $259.9 million) based on recent
trades of the Company’s bonds and indicative pricing provided by brokers.
⁴ The Company estimates the fair value of its related-party loan at the balance sheet date is $15.6 million based on its
nominal value (December 31, 2022: $15.6 million).
⁵ Provisions have been made to the accounts receivable, refer to Note 14 for additional information.
⁶ Fair value measurements
IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date and establishes a fair value hierarchy of three levels
to classify the inputs to valuation techniques used to measure fair value:
Level 1: fair value measurements are based on unadjusted quoted market prices;
Level 2: fair value measurements are based on valuation models and techniques where the significant inputs are derived
from quoted prices or indices; and
Level 3: fair value measurements are derived from valuation techniques that include inputs that are not based on
observable market data.
51
Notes to the Consolidated Financial Statements
For the year ended December 31, 2023
Expressed in thousands of United States dollars
Capital risk management
The Company manages its capital to ensure that entities within the Company will be able to continue as a going concern
while maximising return to shareholders. The capital structure of the Company consists of cash and cash equivalents and
equity, comprising issued share capital, reserves and retained earnings as disclosed in the consolidated statement of
changes in equity. The Company had debt relating to borrowings and accrued interest of $284.3 million as at
December 31, 2023 (2022: $295.7 million).
Financial risk management objectives
The Company’s management monitors and manages the Company’s exposure to financial risks facing the operations. These
financial risks include market risk (including commodity price, foreign currency and interest-rate risks), credit risk and
liquidity risk.
The Company does not presently hedge against these risks as the benefits of entering into such agreements is not
considered to be significant enough as to outweigh the significant cost and administrative burden associated with such
hedging contracts.
Commodity price risk
The prices that the Company receives for its oil and gas production may have a significant impact on the Company’s revenues
and cash flows provided by operations. World prices for oil and gas are characterised by significant fluctuations that are
determined by the global balance of supply and demand and worldwide political developments. The price received for the
Company’s oil and gas production in Kurdistan is dependent upon the KRG and its ability to export production outside of
Iraq. A decline in the price of ICE Brent Crude oil and KBT Crude oil, a reference in determining the price at which the
Company can sell future oil production, could adversely affect the amount of funds available for capital reinvestment
purposes, as well as the Company’s value in use calculations for impairment test purposes. Refer also to Note 4(d). The
majority of 2023 revenue is from local oil sales where the prices for crude oil sales to local refineries are in line with the
local market and at a significant discount to international benchmark prices.
The Company does not hedge against commodity price risk.
Foreign currency risk
All of the Company’s revenues and most of the purchases are denominated in USD and therefore the Company maintains a
substantial portion of its cash and cash equivalents in the currency. Certain of its operations require the Company to make
purchases denominated in foreign currencies, which are currencies other than USD and correspond to the various countries
in which the Company conducts its business, such as Swiss Francs (“CHF”) and Canadian dollars (“CAD”). As a result, the
Company holds some cash and cash equivalents in foreign currencies and is therefore exposed to foreign currency risk due
to exchange-rate fluctuations between the foreign currencies and the USD. The Company considers its foreign currency risk
is limited because it holds relatively small amounts of foreign currencies at any point in time and because its volume of
transactions in foreign currencies is relatively low. Therefore, the Company does not hedge its exposure to changes in
foreign currency exchange rates.
The carrying amounts of the Company’s principal monetary assets, liabilities and equity denominated in foreign currency at
the reporting date are as follows:
Canadian dollars in thousands (“CAD 000”)
Swiss francs in thousands (“CHF 000”)
Assets
December 31,
2023
402
775
2022
91
591
Liabilities
December 31,
2022
2023
149
1,264
28
2,143
Equity
December 31,
2023
2022
295,308
-
242,605
-
52
Notes to the Consolidated Financial Statements
For the year ended December 31, 2023
Expressed in thousands of United States dollars
Foreign currency sensitivity analysis
The Company is exposed to movements in CHF and CAD against the USD, the presentation currency of the Company.
Sensitivity analyses have been performed to indicate how the profit or loss would have been affected by changes in the
exchange rates between the USD, CHF and CAD. The analysis below is based on a strengthening of the CHF and CAD by 10%
against the USD, the three currencies in which the Company has assets, liabilities and equity at the end of respective period.
A movement of 10% reflects a reasonable sensitivity when compared to historical movements over a three- to five-year
timeframe. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts
their translation at the period-end for a 10% change in foreign currency rates.
A positive number in the table below indicates an increase in profit where the USD weakens 10% against the CHF or CAD
based on assets, liabilities and equity held in CHF or CAD by the Company at the balance sheet dates. For a 10%
strengthening of the USD against the CHF or CAD, there would be an equal and opposite impact on the profit or loss.
Statement of comprehensive income – CAD
Statement of comprehensive income – CHF
Interest-rate risk
Assets
Liabilities
2023
25
125
2022
5
78
2023
(9)
(203)
2022
(2)
(282)
Equity
2023
2022
(18,311)
-
(14,281)
-
The Company earns interest income at variable rates on its cash and cash equivalents and is therefore exposed to interest-
rate risk due to a fluctuation in short-term interest rates.
The Company’s policy on interest rate management is to maintain a certain amount of funds in the form of cash and cash
equivalents for short-term liabilities and to have the remainder held on relatively short-term deposits.
The Company is highly leveraged though financing at the project level, for the continuation of the Atrush and Sarsang
projects, and at the corporate level due to the 2025 Bond. However, the Company is not exposed to interest-rate risks
associated with the bonds or the Nemesia loan as the coupon and interest rate are fixed.
Credit risk
Credit risk is the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company.
The Company is primarily exposed to credit risk on its cash and cash equivalents, oil receivables and other receivables.
The Company manages credit risk by monitoring counterparty ratings and credit limits and by maintaining excess cash and
cash equivalents on account in instruments having a minimum credit rating of R-1 (mid) or better (as measured by Dominion
Bond Rate Services), or the equivalent thereof according to a recognized bond-rating service.
The carrying amounts of the Company’s financial assets recorded in the consolidated financial statements represent the
Company’s maximum exposure to credit risk.
Liquidity risk
Liquidity risk is the risk that the Company will have difficulties meeting its financial obligations as they become due. Like
many oil and gas exploration companies, the Company raises financing for its exploration and development activities in
discrete tranches to finance its activities for limited periods. The Company seeks to acquire additional funding as and when
required. The Company anticipates making substantial capital expenditures in the future for the acquisition, exploration,
development and production of oil and gas reserves, and, as the Company continues to develop projects, specific financing,
including the possibility of additional debt, may be required to enable future development to take place. The financial results
of the Company will impact its access to the capital markets necessary to undertake or complete future drilling and
development programs. There can be no assurance that debt or equity financing, or future cash generated by operations,
would be available or sufficient to meet these requirements, or, if debt or equity financing is available, that it will be on
terms acceptable to the Company.
53
Notes to the Consolidated Financial Statements
For the year ended December 31, 2023
Expressed in thousands of United States dollars
The Company manages liquidity risk by maintaining adequate cash reserves and by continuously monitoring forecasted and
actual cash flows. Annual capital expenditure budgets are prepared, which are regularly monitored and updated as
necessary. In addition, the Company requires authorisations for expenditure on both operating and non-operating projects
to further manage capital expenditures.
The maturity profile of the Company’s financial liabilities is indicated by their classification in the consolidated balance sheet
as “current” or “non-current”.
The remaining maturities of financial liabilities are shown in the table below:
Less than one year
76,950
4,227
2,050
1,872
85,099
From one to three years
259,050
-
-
19,493
278,543
Total
336,000
4,227
2,050
21,365
363,642
Borrowings
Payables to joint operations partner
Trade payables and accrued expenses
Loan from related-party
Total
Refer to Notes 15, 16 and 17.
22. Commitments and contingencies
At December 31, 2023, the outstanding commitments of the Company were as follows:
Atrush and Sarsang block development and PSC
Sarsang contingent consideration
Corporate office and other
Total commitments
For the year ended December 31,
2024
31,593
-
68
31,661
2025
166
-
-
166
2026
Thereafter
166
-
-
166
992
15,000
-
15,992
Total
32,917
15,000
68
47,985
Amounts relating to Atrush and Sarsang block developments represent the Company’s unfunded paying interest share of
the proposed 2024 work program and other obligations under the PSCs. Spending has been reduced by the operators of
both blocks due to the closure of the ITP in March 2023, refer also to Note 2b.
For further information regarding the Sarsang contingent consideration, refer to Note 18.
54
Notes to the Consolidated Financial Statements
For the year ended December 31, 2023
Expressed in thousands of United States dollars
23.
Interests in joint operations and other entities
Interests in joint operation – Atrush Block Production Sharing Contract
At December 31, 2023, ShaMaran holds a 27.6% participating interest in the Atrush PSC through General Exploration
Partners, Inc (“GEP”). TAQA Atrush B.V. (“TABV”) is the Operator of the Atrush Block with a 47.4% direct interest, and the
KRG holds a 25% direct paying interest. TABV, the KRG and GEP together are “the Contractors” to the Atrush PSC. See Note
25 for recent developments on the Atrush interest.
Under the terms of the Atrush PSC, the development period is for 20 years with an automatic right to a five-year extension
and the possibility to extend for an additional five years. All qualifying petroleum costs incurred by the Contractors shall be
recovered from a portion of available petroleum production, defined under the terms of the Atrush PSC. All modifications
to the Atrush PSC are subject to the approval of the KRG. The Company is responsible for its pro-rata share of the costs
incurred in executing the development work program on the Atrush Block, which commenced on October 1, 2013.
Interests in joint operation – Sarsang Production Sharing Contract
ShaMaran holds a 18% participating interest (22.5% paying interest) in the Sarsang PSC through ShaMaran Sarsang A/S. HKN
Energy Ltd. (“HKN”) is the Operator of the Sarsang Block with a 62% direct interest (77.5% paying interest), and the KRG
holds a 20% direct carried interest. HKN, the KRG and ShaMaran Sarsang A/S together are “the Contractors” to the Sarsang
PSC.
Under the terms of the Sarsang PSC, the development period is for 20 years with an automatic right to a five-year extension
and the possibility to extend for an additional five years. All qualifying petroleum costs incurred by the Contractors shall be
recovered from a portion of available petroleum production, defined under the terms of the Sarsang PSC. All modifications
to the Sarsang PSC are subject to the approval of the KRG. The Company is responsible for its pro-rata share of the KRG’s
and its own pro-rata share of the costs incurred in executing the development work program on the Sarsang Block,
which commenced on June 30, 2013.
Refer also to Note 7 and 18.
Information about subsidiaries
The consolidated financial statements of the Company include:
Subsidiary
General Exploration Partners, Inc.
ShaMaran Sarsang A/S
ShaMaran Services S.A.
Bayou Bend Petroleum U.S.A. Ltd
0781756 B.C. Ltd
Principal activities
Oil exploration and
production
Oil exploration and
production
Technical and admin.
services
Petroleum activities
Petroleum activities
Country of
Incorporation
Cayman Islands
Denmark
Switzerland
United States
Canada
% Equity interest as at
31 Dec 2023
31 Dec 2022
100
100
100
0
0
100
100
100
100
100
Bayou Bend Petroleum U.S.A. Ltd and 0781756 B.C. Ltd were dissolved during October 2023.
55
Notes to the Consolidated Financial Statements
For the year ended December 31, 2023
Expressed in thousands of United States dollars
24. Related-party transactions
Transactions with corporate entities
Nemesia
Lundin Foundation
Orron Energy AB
Namdo Management Services Ltd
International Petroleum Corp
Total
Purchase of services
during the year
2023
2,128
65
33
31
5
2,262
2022
2,435
-
-
32
-
2,467
Amounts owing
at the balance sheet dates
2023
1,123
-
-
-
31
1,154
2022
568
-
-
-
-
568
Nemesia is a company controlled by a trust settled by the estate of the late Adolf H. Lundin and is a shareholder and
bondholder of the Company. The Company has a loan from Nemesia and the obligation to accrue 12% annual interest
payable in cash semi-annually plus an additional interest amount of 2% per annum payable in kind based on the principal
balance outstanding. Refer also to Note 17.
Lundin Foundation is a non-profit organization, of which the Company is a member of, that provides services for Lundin
Group companies.
Namdo Management Services Ltd, Orron Energy AB and International Petroleum Corp are companies affiliated with
shareholders of the Company and have provided corporate administrative support services to the Company.
All transactions with related parties are in the normal course of business and are made on the same terms and conditions
as with parties at arm’s length.
Refer also to Note 11.
Key management compensation
The Company’s key management was comprised of its directors and executive officers who have been remunerated as
follows:
Management short-term benefits
Management salaries
Management share-based payments
Director fees
Management pension benefits
Director share-based payments
Total
For the year ended December 31,
2023
1,952
1,591
1,431
274
214
(235)
5,227
2022
1,785
974
1,863
258
167
580
5,627
Short-term employee benefits include departure costs, non-equity incentive plan compensation and other short-term
benefits. Share-based payments compensation represents the portion of the Company’s share-based payments expense
incurred during the year attributable to the key management, accounted for in accordance with IFRS 2 ‘Share-Based
Payments’.
56
Notes to the Consolidated Financial Statements
For the year ended December 31, 2023
Expressed in thousands of United States dollars
25. Subsequent Events
On January 22, 2024, the Company announced the signing of definitive agreements with TAQA International B.V., a
subsidiary of Abu Dhabi National Energy Company PJSC (“TAQA”), and HKN Energy IV, Ltd., an affiliate of HKN, that upon
completion will increase ShaMaran’s indirect ownership in the Atrush Block from 27.6% to 50% working interest.
57
NON-EXECUTIVE DIRECTORS
CORPORATE OFFICE
Chris Bruijnzeels
Director, Chairman
Michael S. Ebsary
Director
Keith C. Hill
Director
William A.W. Lundin
Director
OFFICERS
Garrett Soden
Director, President and Chief Executive Officer
Elvis Pellumbi
Chief Financial Officer
Alex C. Lengyel
Chief Commercial Officer and
Corporate Secretary
INVESTOR RELATIONS
Robert Eriksson
Suite 2000 – 885 West Georgia Street
Vancouver, British Columbia V6C 3E8
Canada
Telephone: +1 604 689 7842
Website: www.shamaranpetroleum.com
OPERATIONS and ADMINISTRATIVE OFFICE
5 Chemin de la Pallanterie
1222 Vésenaz
Switzerland
Telephone: +41 22 560 8600
REGISTERED and RECORDS OFFICE
1200-1075 West Georgia Street
Vancouver, British Columbia V6E 3C9
Canada
INDEPENDENT AUDITORS
PricewaterhouseCoopers SA
Geneva, Switzerland
TRANSFER AGENT
Computershare Trust Company of Canada
Vancouver, Canada
STOCK EXCHANGE LISTINGS
Toronto: TSX Venture Exchange
Stockholm: NASDAQ First North
Growth Market
Trading Symbol: SNM