The Catalyst Arrived Last Week; the Re-Rating Hasn’t. Under 3x Normalized FCF After the Hard Part Is Done – Full Oil Prices, Top-Up Payments Started, Share Price Still Asleep
ShaMaran: The Catalyst Has Arrived, the Re-Rating Hasn’t. Up to 120% Upside
ShaMaran Petroleum has just delivered the catalyst I wrote about a year ago. On October 15, ShaMaran announced that SOMO, Iraq’s state oil marketer, has allocated an additional cargo of oil to the international oil companies in Kurdistan. The extra barrels compensate the companies at full international prices and start paying the top-up receivables for export sales made between September and December 2025.
In plain words: Baghdad is now paying what it promised. The share price barely moved.
When the Iraq-Turkey pipeline reopened in September 2025, I argued the market didn’t understand the deal. The structure was complex: an interim payment first, a top-up later, and full market prices only after a consultant’s review. Many investors expected the price to double on day one and lost patience when it did not. Then 2026 brought the Iran war, and nobody wanted to own a Kurdistan producer.
My take: the hard part is done. The payment mechanism works, money is flowing, and the share price hasn’t caught up.
Introduction to ShaMaran Petroleum
ShaMaran Petroleum Ltd. (Oslo: SNM, Stockholm: SNM) is an independent oil company producing from two adjacent blocks in the Kurdistan Region of Iraq. It is part of the Lundin Group. The Lundin family is the largest shareholder, with around 25%, and also the largest bondholder.
In 2026, ShaMaran moved its corporate home from Canada to Bermuda and its primary listing from the TSX Venture Exchange to Euronext Growth Oslo. Management says the aim is to streamline future capital returns.
The Lundin family provides significant support. William Lundin, who sits on the board, bought shares in December 2024.
ShaMaran holds a 50% working interest in the Atrush Block and 18% in the Sarsang Block. Both are operated by HKN, the Ross Perot, Jr. company, which has strong ties to Kurdistan and to the Trump Administration. In 2025, ShaMaran’s net production averaged 20,900 barrels per day.
At around SEK 1.70 per share, ShaMaran’s market capitalisation is about $540 million. Net debt was $119 million as of August 5, 2026: the $143.8 million ShaMaran bond less $25 million of cash.
What did the 2025 deal promise?
The Iraq-Turkey pipeline closed in 2023 over a dispute between the Kurdistan Regional Government and Baghdad about who collects Kurdistan’s oil revenues. Under the September 2025 agreement, Kurdistan handed its oil revenues to Baghdad in exchange for its share of the federal budget.
The two sides do not trust each other, so they agreed an interim mechanism:
• The oil companies receive an initial payment of $16 per barrel, less a $2 transportation fee.
• An international consultant reconciles the companies’ invoices against their production sharing contracts.
• Once the review is complete, the companies receive top-up payments that bring them to their full contract entitlement at international prices.
Before the reopening, ShaMaran sold oil to local traders at $32–35 per barrel, and the Kurdistan government took about half. The promise was that ShaMaran would receive the full Brent-linked price, adjusted for quality and transport, roughly doubling its net price per barrel.
What has happened since?
• September 27, 2025: exports through the Iraq-Turkey pipeline restart.
• November 2025: ShaMaran’s first cargo is lifted from the Ceyhan terminal.
• Since then: payments have arrived about 30 days after each lifting, with no payment delays from SOMO, according to the company.
• Q2 2026: ShaMaran’s net realized oil price was $84.23 per barrel, up from $33.12 a year earlier. That is the international price, and it is exactly what the market doubted.
• The consultant’s review was extended several times, to March, June and finally September 2026. Management has since confirmed it is complete.
• October 15, 2026: SOMO allocates an extra cargo to start paying the top-ups on September–December 2025 sales.
The catalyst has happened. ShaMaran sells its oil at international prices, and Baghdad has started to pay the arrears.
The release does not give the amount. By my rough estimate, assuming about 20,000 net barrels per day over roughly three months and a top-up of about $16 per barrel, ShaMaran is owed in the region of $30 million. That is around a quarter of its net debt.
Why hasn’t the share price re-rated?
I see three reasons.
1. The Iran war buried the good news. After the Strait of Hormuz blockade began on February 28, ShaMaran shut in both blocks as a precaution on March 2. Sarsang was hit by drones on March 5 and April 1. Production restarted in late June, and Atrush quickly reached over 40,000 barrels per day, but operations were suspended again on July 20. ShaMaran’s net production fell from 22,700 barrels per day in Q2 2025 to 700 in Q2 2026.
2. The top-up announcement came without numbers. It says neither how much ShaMaran will receive nor when the rest will be paid. Investors do not pay for numbers they cannot model.
3. The capital returns have not arrived yet. A year ago, I expected ShaMaran to be net cash by mid-2026 and to start dividends or buybacks this year. The shut-ins postponed that. Net debt rose from $102 million at the end of 2025 to $119 million in August.
None of these changes the asset’s economics. They change the timing.
Where is production now?
ShaMaran’s last company update, in August, said both blocks were shut in with no certainty about how long. On August 30, Kurdistan’s natural resources minister said that all the region’s oilfields except Sarsang had restarted. ShaMaran has not published an operational update since. Sarsang’s return to full capacity depends on the damage assessment and on long-lead repair parts.
Atrush matters most. ShaMaran owns 50% of it, and its capacity has been debottlenecked to 40,000 barrels per day. At that rate, Atrush alone gives ShaMaran about 20,000 net barrels per day, roughly its full 2025 net production even without Sarsang.
What will the impact be on ShaMaran’s FCF?
ShaMaran is a very lean producer. Lifting costs are $3–5 per barrel, and maintenance capex is about $2 per barrel.
At around 20,000 net barrels per day and full international prices, I estimate normalized FCF at about $200 million a year with Brent in the low $70s, and more at higher oil prices. The top-up payments for September–December 2025 come on top of that.
What the market needs now is two or three clean quarters of production at international prices. Once it sees them, the FCF will show up in the reported numbers and will be hard to ignore.
What are the risks?
The risk profile has changed. A year ago, the main risk was that Baghdad would not pay. That risk has fallen: payments have run on time for a year, and the top-ups have started.
The main risk now is security. The Iran war showed that Kurdistan fields can be shut in for months and hit by drones. A renewed escalation would stop production again.
The US troops exited Iraq and Kurdistan by September 30th this year, so there is less reason for the drone attacks in Erbil by Iran and the Iraqi militia supported by Iran.
IOCs in Kurdistan have installed drone-detection radars to operate without putting field personnel at risk.
Other risks:
• The size and timing of the remaining top-up payments have not been disclosed.
• The interim arrangements still need to become a long-term agreement. The Iraq-Turkey pipeline agreement has been extended to July 2027.
• Net debt of $119 million is manageable, but it is higher than a year ago.
• The deal has the support of the Iraqi parliament and the US Government, but this remains a politically unstable region.
What is the valuation impact?
One year before the pipeline reopened, ShaMaran traded at 4x FCF. Today, at about $540 million, it trades below 3x my estimate of normalized FCF.
Historically, Kurdistan producers traded at a discount because investors feared Baghdad would never recognize their contracts. Baghdad has now gone further than recognizing them: it is paying full international prices and settling arrears. That discount should narrow.
If ShaMaran re-rates to 4x normalized FCF, the upside is close to 50%. At 6x, it is over 120%.
| FCF | P/FCF | Mkt cap | Share price | |
| $ million | $ million | SEK | ||
| Before reopening (Sept 2025) | 100 | 4 | 400 | 1.3 |
| Today (normalized FCF) | 200 | 2.7 | 540 | 1.7 |
| Re-rate | 200 | 4 | 800 | 2.5 |
| Re-rate | 200 | 5 | 1000 | 3.2 |
| Re-rate | 200 | 6 | 1200 | 3.8 |
| 2026 | 200 | 6 | 1200 | 3.8 |
Source: author’s calculations. Normalized FCF assumes about 20,000 net barrels per day at international prices and Brent in the low $70s.
Conclusion
The catalyst I wrote about has happened. ShaMaran sells its oil at international prices, Baghdad pays on time, and the top-up payments have started. The share price does not reflect that yet, because the Iran war and the shut-ins pushed the cash flows back.
I see this as a timing problem, not a broken thesis. Once production stabilizes and the top-up amounts become visible, I expect the market to value ShaMaran on its normalized FCF. Buybacks or dividends should follow, and the move to Oslo and Bermuda was made with exactly that in mind.
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