Corporate M&A

ShaMaran Acquires TotalEnergies' Sarsang Stake in Kurdistan

By Sakshi Jain
July 13, 2021
2 minutes read
Oil Derrick

Vancover-based ShaMaran Petroleum Corp. has entered into an agreement to acquire an 18% non-operated interest in the Sarsang PSC in the Kurdistan region of Iraq from TotalEnergies SE, for a total consideration of US$169.2 million (including working capital adjustments) plus certain contingent payments. Dallas-based HKN Energy Ltd. currently holds a 62% operated interest in the PSC, with the Kurdistan Regional Government (KRG) holding the remaining 20%.

Under the terms of the deal, ShaMaran will acquire the entire share capital of TEPKRI Sarsang AS from TotalEnergies E&P Danmark AS, a subsidiary of TotalEnergies, for an initial consideration of US$155 million, including an upfront cash payment of US$135 million payable upon closing, and an additional deferred consideration of US$20 million payable in the form of a 5.5% convertible promissory note issued to the subsidiary of TotalEnergies with a 12-months’ maturity from the date of closing. Adjusting for working capital adjustments of up to US$14.2 million (as of January 1, 2021), the total estimated transaction value is US$169.2 million.

In addition, ShaMaran will also pay a further contingent consideration of US$15 million if cumulative gross production from the Sarsang PSC reaches 130 million barrels of oil (MMbbls), and Brent crude oil prices average at least US$60 per barrel for a 12-month period.

The Sarsang PSC covers an area of 1,200 sq. km located in the Zagros basin in northern Iraq, and contains the Swara Tika and East Swara Tika oil fields. As of December 31, 2018, total proved plus probable (2P) reserves attributable to the block were approximately 380 MMbbls, and 2C contingent resources were approximately 427 MMbbls. The block currently produces around 28,000 barrels of oil per day (b/d).

“This is a strategic transaction for ShaMaran delivering value to equity and debt holders and strengthening the financial profile of the company. Upon completion, this acquisition will add immediate material production and cash flow to ShaMaran and will provide significant value enhancement. It demonstrates our continued commitment to Kurdistan and diversifies our existing production base,” said Dr. Adel Chaouch, President & CEO of ShaMaran.

Dual-listed on the TSX Venture Exchange and the NASDAQ First North Exchange in Stockholm, ShaMaran operates as a part of the Lundin Group of Companies. The company also currently holds a 27.6% interest in the Atrush block in Kurdistan.

Moelis & Co. is acting as financial advisor to ShaMaran on the transaction.

The completion of the transaction is subject to regulatory and exchange approvals in Canada, Kurdistan, and Sweden, and has an effective date of January 1, 2021.

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