At today´s SpareBank conference – there was a Kurdistan panel. The most interesting and the most exposed to the reopening of the Kudistan pipeline is the Lundin company Shamaran Petroleum. The pipeline reopening is pushed hard by Trump and could happen as early as next month. I enclose below my notes from the SpareBank conference on Shamaran:
Summary of the ShaMaran CEO Garrett Sonden’s presentation at the Sparebank conference
- ShaMaran is a Lundin Group company; The Lundin family is the largest shareholder (~30%) and the largest bondholder.
- • Lundin provide Shamaran significant support – William Lundin, who is on our board, bought ShaMaran shares in December 2024
- We produce over 100 million USD in Free Cash Flow per year, even with our current local sales at ~50% discount to global market prices.
- If the pipeline reopens, our FCF should at least double
- Our market capitalisation is almost 400 million USD
- We have a net debt of 130 million USD, which we are reducing at ~25 million USD per quarter
- We have repaid over 100 million USD of debt in the last 13 months, and if the pipeline reopens, our debt repayments will accelerate.
- If the pipeline reopens, we can soon start dividends and/or share buybacks.
- The market does not give us any credit for our receivables. We have over 80 million USD receivables at September 30, 2024, which we believe we will collect 100% from the Kurdish government over time.
- We have two producing assets in Kurdistan. Both assets are operated by the Ross Perot, Jr. company, HKN. The Perot family has a prominent Texas-based business with strong ties to Kurdistan.
- We doubled our working interest production in the last year to over 20k barrels per day.
- We are getting good payment terms from the local sales – we have no receivables, and purchases are often prepaid.
- Most prominent players left Kurdistan, but we still see a good consolidation opportunity among the smaller players in the region.
- We are the only one with a mandate to explore consolidation in Kurdistan, and we have a track record of making three acquisitions over the last six years.
- Our stock is very liquid – 90% of the trades occur in Stockholm, with 1 mln USD average daily trading volume.
My take on valuation:
- Sparebank analysts at the start of the presentation mentioned that after the pipeline reopens, the stocks should trade at PE of 3-6.
- He believes the pipeline should be in operation early in the 2H25. The Bloomberg article below would indicate an earlier reopening.
- For simplicity, lets take FCF as Earnings.
- The stock now trades at 4 times FCF.
- Assuming the stock will trade at 3 times FCF after the pipeline reopens, the market capitalisation would increase by 50% to over 600 million USD at 3 times FCF. This means the share price should be 2.2 SEK, a 50% upside from the current share price.
- If the pipeline reopens and Shamaran continues trading at 4 times FCF, the share price will double to 3 SEK.
- IF the higher end of the analyst’s PE range was achieved, the company would be trading at 6 times 200 mln FCF, which is 1.2 bln. That would correspond to 4.5 SEK per share.
Latest ShaMaran presentation from the Sparebank conference:
Presentations and Videos | ShaMaran Petroleum Corp.
Latest articles on the pipeline reopening situation
Exclusive: U.S. piles pressure on Iraq to resume Kurdish oil exports, sources say | Reuters
KRG says Baghdad needs to resolve two matters… | Rudaw.net
Disclosure:
The goal of the blog is to provide investment ideas for further research. I/we have a beneficial position in the shares discussed above either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. The article does not represent investment advice. Please do your own research before making any investment action.
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