ShaMaran released its financial results for the third quarter of 2010.
Third Quarter Highlights
In September 2010 the Company raised $47.8 million net cash proceeds through a private placement of 111 million common shares, maintaining a strong financial position at the end of the third quarter with a cash balance of $70.0 million, working capital of $46.9 million, and no debt.
In August 2010, ShaMaran acquired a 33.5% stake in General Exploration Partners Inc ("GEP"), in exchange for cash payments of $24.3 million, shares of the Company worth $5.0 million, and deferred consideration of $15.8 million. GEP holds an 80% working interest in the Atrush Block Oil and Gas Exploration Area in Kurdistan.
In August 2010, ShaMaran executed agreements to amend the Pulkhana Block 10 and the Arbat Block Production Sharing Contracts ("PSCs"), which waive the Company of its previous contractual requirement to issue 150 million common shares to the Kurdistan Regional Government of Iraq ("KRG") in exchange for 20% of ShaMaran's profit oil share (produced oil, less royalty and cost oil) from the two PSCs as capacity building payments to the Government. As a result of the amendments the Company released the $61.3 million provision to issue shares, which was included under shareholders' equity on the balance sheet, with a corresponding reduction in the same amount to the capitalized cost of property plant and equipment.
The first exploration well on the Atrush Block was spudded on October 5, 2010, which is targeting the same reservoir sections as the recent major oil discovery by Gulf Keystone Petroleum Ltd, in the adjacent Shaikan structure.
In October 2010, ShaMaran completed the acquisition of 429.1 km of two dimensional ("2D") seismic data on the Arbat Block in eastern Kurdistan, having already acquired seismic earlier this year on its Pulkhana and K42 Blocks.
McDaniel & Associates ("McDaniel"), appointed by the Board as Third Party Auditors for ShaMaran's assets in Kurdistan, completed their evaluations as of 30th June 2010. Mean Petroleum Initially In Place ("Mean PIIP") for Pulkhana (including both discovered and undiscovered petroleum) is estimated by McDaniel to 443.9 Million Barrels ("MMBBL"). Contingent Reserves for Pulkhana have been estimated to be a mean of 157.6 MMBBL with a high of 328.4 MMBBL. The evaluation is based on the new 2D seismic data acquired in 2010 and historical well data. All resource figures are Gross (100%).
Site preparation is underway for the first well in the Pulkhana Block, with a spud date planned for the first quarter of 2011. The Company has taken a one rig slot assignment for the Sakson PR3 drilling rig which is currently being operated by Niko Resources Ltd in Kurdistan.