Dr. Adel Chaouch reports

SHAMARAN REPORTS STRONG FIRST QUARTER RESULTS

Shamaran Petroleum Corp. today released its financial and operating results and related management's discussion and analysis (MD&A) for the three months ended March 31, 2023.

Dr. Adel Chaouch, president and chief executive officer of Shamaran, commented: "The first quarter of 2023 represented a significant step up in activity levels across both assets as together with our partners we continue to increase the value from our producing assets. Two new production wells drilled in Atrush are expected to materially increase field production and the activities at Sarsang will further increase production and optimize facility performance during 2023 (new production and water disposal wells and debottlenecking of production facilities). Based on these significant investments at the start of 2023 Shamaran was on track to deliver another strong set of results for the year.

"The interruption to pipeline exports at the end of the quarter means that our plans to hook up the new wells and continue our development activities for the remainder of the year are currently on hold, alongside the guidance for the rest of 2023. We hope for a swift resumption of production and exports, as well as a resolution of the payments situation, so that we can get back to delivering strong results and increasing value for all of our stakeholders."

Corporate highlights

• Steady production, revenues and profitability as the addition of Sarsang barrels more than offset the realized price decline versus Q1 2022;
• Strong operational activity during the quarter on both Atrush and Sarsang:
  • Significant drilling activity on both assets, aiming to increase Atrush production back up toward processing capacity limits, and in Sarsang to sustain current plateau rates;
  • Further debottlenecking and optimization of facilities in both fields, aimed at increasing oil and water handling, which in turn increases utilization and lowers lifting costs;
  • Start of gas flaring reduction project at Atrush and feasibility studies for a Sarsang gas solution.
• Material impact on operations and financial results linked to external events:
  • On Feb. 6, 2023, the Iraq-Turkey pipeline (ITP) temporarily suspended exports for one day following an earthquake in southern Turkey;
  • On March 25, 2023, officials from the Turkish government ordered the ITP to be shut down for Kurdish oil exports. The company is aware that discussions for the reopening of the ITP to Kurdistan oil exports are continuing among the relevant parties.

• Increased Q1 2023 oil sales to $43.4-million, 12 per cent more than Q1 2022;
• Reported an EBITDAX (earnings before interest, taxes, depreciation and amortization, and exploration expense) of $30.2-million in Q1 2023, similar to the EBITDAX of Q1 2022;
• Payments have been received to date for oil sales through to September, 2022, for both Atrush and Sarsang, with $37.1-million being received in the quarter. The company (together with other international oil companies (IOCs)) remains in discussions with the KRG about the appropriate recovery mechanism for the overdue receivables, however in line with precedents full recovery is expected.

Operational highlights:

• Grew the company's gross 2P reserves by 225 per cent from 30.4 MMbbl (million barrels of oil) at Dec. 31, 2021, to 68.3 MMbbl at Dec. 31, 2022, which resulted in a Shamaran record high 2P net reserves replacement ratio of 950 per cent and extended the company's 2P Reserves Life Index to nearly 12 years;
• Reported Q1 2023 gross average production of approximately 66.8 Mbopd, resulting in 14.9 Mbopd net to Shamaran;
• Drilled one additional production well (ST-A2) and one water disposal well (ST-AW1) during Q1 2023 in the Sarsang block. Both wells are expected in operation during Q2 2023;
• Drilled two additional Atrush production wells in Q1 2023 (CK-19 and CK-20). CK-19 came on line in February, 2023, contributing to an increase in field production exit rates for Q1 2023. Subject to resumption of pipeline exports and normal field operations, the second well, CK-20, is expected to come on line in Q2, 2023;
• Continued implementation of Atrush capacity enhancement (ACE) project and debottlenecking of Sarsang newly commissioned processing facility;
• Ordering of long lead items for Atrush gas solution project, intended to be completed during 2023, leading to a significant reduction of diesel consumption in the field and routine gas flaring.

Subsequent events:

• Following the closure of the ITP for Kurdistan oil exports, the company's operating partners are significantly deferring planned capital expenditures to focus on only safety critical and firm contractual commitments, which are expected to result in a significant reduction of monthly cash outflows for the business in the second quarter. This is expected to be a temporary measure until the resumption of pipeline exports and field operations and importantly, regular payments for oil sales and repayment of receivables due to IOCs.
• Based upon the public statements of officials from the KRG, the Kurdistan Ministry of Natural Resources and Iraq's Ministry of Oil and discussions that senior management of the company has had with relevant officials, the company continues to believe that the ITP shutdown will be temporary and that the KRG will be permitted to resume exports and payments. Together with the company's partners in the Atrush block and Sarsang block the company is prudently taking actions to preserve liquidity through significant reduction of expenditures across the business.
• Capex is planned to be cut by over 50 per cent of the original budget by both operators until production and payments are resumed.
• Due to such reduction in activity levels until ITP exports and field operations resume the company is suspending the guidance provided for FY 2023. The company continues to closely monitor the situation and will update the market as appropriate.

About Shamaran Petroleum Corp.

Shamaran is a Kurdistan-focused oil development and exploration company which holds a 27.6-per-cent interest, through its wholly owned subsidiary, General Exploration Partners Inc., in the Atrush block and also holds an 18-per-cent interest (22.5-per-cent paying interest), through its wholly owned subsidiary ShaMaran Sarsang A/S, in the Sarsang block.

We seek Safe Harbor.