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2018-03-12

SHAMARAN ANNOUNCES 2017 YEAR END FINANCIAL AND OPERATING RESULTS

R END FINANCIAL AND OPERATING RESULTS

VANCOUVER, BRITISH COLUMBIA - ShaMaran Petroleum Corp. ("ShaMaran" or the
"Company") (TSX VENTURE: SNM) (OMX: SNM) is pleased to announce its financial
and operating results for year ended December 31, 2017. Unless otherwise stated
all currency amounts indicated as “$” in this news release are expressed in
thousands of United States dollars.

Chris Bruijnzeels, President and CEO of ShaMaran, commented “2017 was a
defining year for ShaMaran with start of production in July 2017. I am
encouraged by the production performance and the continued payments from the
Kurdistan Regional Government which will allow us to continue investing in
Atrush and work towards defining the next phase of development.”

HIGHLIGHTS AND DEVELOPMENTS

Operations

-- Oil production on the Atrush Block commenced in July 2017. Average
production in the fourth quarter of 2017 was 21,700 barrels of oil per day
(“bopd”). To address certain production constraints the facilities were
shut down in the beginning of October. These constraints have now
successfully been resolved. In winter months the Atrush Production
Facilities are limited to processing approximately 27,000 bopd of the total
30,000 bopd capacity due to low ambient temperatures which reduces the
amount of heat otherwise available to process the oil to export
specifications.
-- 3.4 million barrels of oil
were produced and exported from Atrush for sale to the
Kurdistan Regional Government (“KRG”)
during the second half of 2017
resulting in an average production of 18.1 thousand barrels per day. The
Company’s entitlement share1
of 2017 exports was approximately 400 thousand barrels which were sold
at an average netback pric
e2
of $44.38 per barrel of oil. In the fourth quarter of 2017 oil was
exported and sold from Atrush
totalling 2.0 million barrels. The Company’s entitlement share of fourth
quarter exports was approximately 295 thousand barrels which were sold
at an average netback pric
e of $47.0 per barrel of oil.
-- The Company’s cash inflows from Atrush related activities are comprised of
three elements:
-- Entitlement share of Atrush PSC profit oil and cost oil: from
commencement of exports in July 2017 u
p to the date of the MD&A the Company has received payments totalling
$8.5 million which reflect its entitlement share of the $44.2 million in
total payments received by the Atrush Non-Government Contractors from
the KRG for July through November 2017 oil sales.
-- Atrush Exploration Costs receivable: over this same period the Company
collected a further $458 thousand of Atrush Exploration Cost receivables
from the KRG’s entitlement share of July through November 2017 oil
sales.
-- The Atrush Development Cost Loan and the Atrush Feeder Pipeline Cost
Loan (“the KRG Loans”),
In January 2018 the
Non-Government Contractors and the KRG agreed that substantially all the
first two instalments on the KRG Loans, which were due in November and
December of 2017, would be offset against amounts owed to the KRG for
security services which they provided for the Atrush operations, and an
Atrush production bonus. The KRG Loan balances collected by the Company
under the agreement was $2.6 million.
January 2018 and subsequent invoices are expected to be paid in line
with the current practice for crude oil sales payments. The January 2018
invoice is therefore expected to be paid in April 2018.
-- The Chiya Khere-7 (“CK-7”) well, which was spudded on September 17, 2017
reached a final depth of 1,861 metres in early November 2017. The reservoir
section was encountered approximately 114 metres shallower than prognosis
which had a positive impact of the Company’s 2P reserves reported as at
December 31, 2017. The well was drilled on time and under budget.
-- In February 2018 a new sales agreement was concluded between the Atrush
Non-Government Contractors and the KRG for the sale of Atrush oil whereby
the KRG will buy oil exported from the Atrush field by pipeline at the
Atrush block boundary based upon the Dated Brent oil price minus $15.73
($16.04 under the previous agreement) for quality discount and all local
and international transportation costs. This discount is based on the same
principles as other oil sales agreements in the Kurdistan Region of Iraq
and reflects a better API gravity than was assumed in the previous sales
agreement.

Corporate

-- On January 30, 2017 the Company completed the issue of 360 million common
shares of ShaMaran on a private placement basis (the “Private Placement”)
at a price per share of CAD 0.10 (equal to SEK 0.67) which resulted in
gross proceeds to the Company of $27.3 million ($26.4 million net of
transaction related costs). Zebra Holdings and Investments SARL, Lorito
Holdings SARL and Lundin Petroleum BV, the Company’s major shareholders,
subscribed for 43,463,618 shares, 16,984,621 shares and 17,800,000 shares,
respectively, in the Private Placement.
-- On
February 15, 2018 the Company reported estimated reserves and contingent
resources for the Atrush field as at December 31, 2017. Total Field Proven
plus Probable (“2P”) Reserves on a property gross basis for Atrush
increased from 85.1 MMbbl reported as at December 31, 2016 to 102.7 MMbbl
which, when 2017 Atrush production of 3.4 MMbbl is included, represents an
increase of 25 percent. Total Field Unrisked Best Estimate Contingent Oil
Resources (“2C”)3
on a property gross basis for Atrush was approximately the same as the 2016
estimate at 296 MMbbl. Total discovered oil in place in the Atrush Block is
a low estimate of 1.5 billion barrels,
a best estimate of 2.1 billion barrels and
a high estimate of 2.9 billion barrels.

OUTLOOK

Operations

-- Production guidance for Atrush gross in 2018 is 25,000 to 30,000 bopd
with lifting costs for the year forecasted at $6.8/bbl.
-- Capital expenditure
guidance
is
$1
9.6
million
(20.1% working interest in Atrush) which includes
:

-- identify and install additional heat sources ahead of the next winter
months;
-- continue with program to identify debottleneck opportunities to further
increase production capacity beyond 30,000 bopd;
-- testing and completion of the CK-7 well;
-- install the CK-7 flow line and bring CK-7 into production;
-- drilling, testing and completion of
Chiya Khere
(“CK-10”), a sixth development well;
-- drilling and completion of
Chiya Khere
(“CK-9”), a dedicated water disposal well; and
-- conducting extended testing of the CK-6 well which is located on the
eastern side of the Atrush Block and which is outside the 2P reserve area
of Atrush. This would involve the installation of temporary production
facilities near the Chamanke–C well pad and the delivery by truck of oil to
the main Phase 1 Production Facilities.

-- Following the results of the CK-7 and CK-10 wells, the extended well
testing in CK-6 and sustained production from the Phase 1 Production
Facilities the Company expects to further assess the significant
undeveloped Atrush resource base with the potential to grow organically to
approximately 100,000 bopd production.

1. The Company’s entitlement share includes an adjustment for the exploration
cost sharing arrangement between TAQA and GEP.

2. This includes a discount to Dated Brent for oil quality and all local and
international transportation costs.

3. This estimate of remaining recoverable resources (unrisked) includes
contingent resources that have not been adjusted for risk based on the chance
of development. It is not an estimate of volumes that may be recovered.

FINANCIAL AND OPERATING RESULTS FOR THE YEAR ENDED DECEMBER 31, 2017

Oil production commenced on July 3, 2017 from the Atrush Block located in the
Kurdistan Region of Iraq and work continued on the Atrush development program
throughout the year 2017.

Financial Results

The Company has reported in 2017 a net loss of $11.5 million which was
primarily driven by finance cost, the substantial portion of which was expensed
borrowing costs on the Company’s bonds, and routine general and administrative
expenses. These charges have been offset by the gross margin on Atrush oil
sales, interest income on Atrush cost loans and interest on cash held in short
term deposits.

Statement of Comprehensive Income

(Audited, expressed in thousands of United States Dollars)

For the year ended
December 31,
2017 2016
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

Revenues 17,689 -
Cost of goods sold:
Lifting costs (5,547) -
Other costs of production (834) -
Depletion (7,628) -
--------------------------------------------------------------------------------
Gross margin on oil sales 3,680 -
Service fee income - 120
Share based payments expense (11) (249)
Depreciation and amortisation expense (26) (45)
General and administrative expense (4,511) (3,811)
Loss from operating activities (868) (3,985)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

Finance income 1,649 484
Finance cost (12,195) (5,586)
--------------------------------------------------------------------------------
Net finance cost ...

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