WesternZagros Resources Ltd.
TSX VENTURE : WZR

WesternZagros Resources Ltd.

September 15, 2011 05:30 ET

WesternZagros Announces First Contingent and Increased Prospective Resources at Sarqala

CALGARY, ALBERTA--(Marketwire - Sept. 15, 2011) -

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR DISSEMINATION IN THE UNITED STATES

WesternZagros Resources Ltd. (TSX VENTURE:WZR) ("WesternZagros" or the "Company") is pleased to announce that Sproule International Limited ("Sproule") has completed an independent audit of the Company's resource assessment for the Jeribe/Upper Dhiban reservoir interval of the Sarqala-1 well. Sarqala-1 is located in the Company's Garmian Block in the Kurdistan Region of Iraq and was drilled on the crest of the Sarqala structure. Consequently, the Company is now reporting, for the first time, contingent resources for Sarqala-1. The Company's mean estimate of gross contingent resources for this interval is 24 million barrels (MMBBL) of oil, or 31 million barrels of oil equivalent (MMBOE), as of September 7, 2011. This contingent resource number does not include the significant prospective resource potential on the flanks of the Sarqala structure deeper than the lowest known oil at 3,485 metres, nor the potential of an extension of this reservoir interval on the southwest flank of the structure. WesternZagros's total mean estimate of gross unrisked prospective oil resources for this interval increased to 198 MMBBL, or 250 MMBOE, as of September 7, 2011. Previously the gross unrisked prospective mean estimates in the Jeribe reservoir of Sarqala-1 were 101 MMBBL, or 137 MMBOE. Tables 1 and 2, below, provide the ranges of estimates.

Contingent resources were assigned over a 66 metre gross pay zone from the top of the reservoir down to 3,485 metres as determined by wireline logs and production testing. This is the same interval that resulted in a test of up to 9,444 barrels of oil per day as reported on June 7, 2011.

These recent resource numbers represent an increase in the combined mean estimate of gross unrisked prospective resources for the Jeribe/Upper Dhiban, Oligocene, Eocene and Cretaceous reservoir intervals in the Sarqala Structure to 296 MMBBL of oil, or 463 MMBOE (previously these estimates were 199 MMBBL of oil, or 350 MMBOE), as shown in Table 3, below. They also represent an increase in the combined mean estimate of gross unrisked prospective resources on the Company's two contract areas in Kurdistan to 2.289 billion BBL of oil, or 3.683 billion BOE (previously these estimates were 2.192 billion BBL oil, or 3.570 billion BOE).

"We continue to be encouraged by the steadily continuing rise in recoverable resource estimates and look forward to starting the extended test of the Sarqala-1 well in the near future. Not only does the confirmation of contingent resources at Sarqala also result in a significant increase in prospective resources, it substantially reduces the risk associated with them. This report further confirms the tremendous prospectivity of our blocks' assets," said Simon Hatfield, WesternZagros' Chief Executive Officer.

Sproule carried out an independent audit of the Sarqala resources in the Jeribe/Upper Dhiban interval in accordance with the current guidelines outlined in the Canadian Oil and Gas Evaluation Handbook ("COGE Handbook") and in accordance with National Instrument 51-101 Standards of Disclosure for Oil and Gas Activities ("NI 51-101"). Pursuant to the COGE Handbook, an audit is the process whereby an independent qualified reserves auditor carries out procedures designed to allow the independent qualified reserves auditor to provide reasonable assurance that a reporting issuer's reserves data (or specific parts thereof) have, in all material respects, been determined and presented in accordance with the COGE Handbook and are, therefore, free of material misstatement.

Table 1 and 2 below, provides summary estimates of the oil, and oil equivalent resources in all of the reservoirs included in this latest Sproule audit. A detailed table providing estimates of the gross unrisked prospective oil, associated gas, gas condensate and solution gas resources for the Jeribe/Upper Dhiban interval in the Sarqala-1 well is disclosed in the Company's Material Change Report dated September 14, 2011 which is available at www.sedar.com. Table 3 lists gross unrisked prospective resources for all potential reservoirs identified in the Sarqala structure. A detailed table providing estimates of the gross unrisked prospective oil, associated gas, gas condensate and solution gas resources for the Oligocene, Eocene and Cretaceous intervals in the Sarqala-1 well is disclosed in the Company's Material Change Report dated February 22, 2011 which is available at www.sedar.com.

Table 1
Garmian Block
Gross Unrisked Contingent Resources
(1)
Jeribe/Upper Dhiban, Sarqala Structure
Oil, Gas and Condensate (As of September 7, 2011)
Prospect Reservoir Hydrocarbon Type Low Estimate
P90(5
) Best Estimate
P50(6
) High Estimate
P10(7
) Mean Estimate (8 )
MMbbl MMbbl MMbbl MMbbl
Sarqala Jeribe / Upper Dhiban Oil 9 21 44 24
MMBOE(9 ) 31
Jeribe/Upper Dhiban Total Mean Oil Only 24
Jeribe/Upper Dhiban Total Mean MMBOE 31

Table 2
Garmian Block
Gross Unrisked Prospective Resources
(3,4)
Jeribe/Upper Dhiban, Sarqala Structure
Oil, Gas and Condensate (As of September 7, 2011)
Prospect Reservoir Hydrocarbon Type Low Estimate
P90(5
) Best Estimate
P50(6
) High Estimate
P10(7
) Mean Estimate (8 )
MMbbl MMbbl MMbbl MMbbl
Sarqala Structure Below Lowest Known Oil Jeribe/Upper Dhiban Oil 17 49 125 63
MMBOE(9 ) 80
Sarqala Potential Extension
Southwest Flank Jeribe/Upper Dhiban
Oil 14 87 304 135
MMBOE 170
Jeribe/Upper Dhiban Total Mean Oil Only 198
Jeribe/Upper Dhiban Total Mean MMBOE 250

Table 3
Garmian Block
Gross Unrisked Prospective Resources
(3),(4)
Sarqala Structure
Oil, Gas and Condensate (As of September 7, 2011)
(2)
Prospect Reservoir Hydrocarbon Type Low Estimate
P90(5
) Best Estimate
P50(6
) High Estimate
P10(7
) Mean Estimate (8 )
MMbbl MMbbl MMbbl MMbbl
Sarqala Jeribe / Upper Dhiban Oil 31 136 429 198
MMBOE(9 ) 250
Sarqala Oligocene(2 ) Oil 18 41 87 48
MMBOE 21 54 117 63
Sarqala Eocene(2 ) Oil 4 27 109 44
MMBOE 16 88 303 130
Sarqala Cretaceous(2 ) Oil 0.5 4 14 6
MMBOE 4 14 44 20
Sarqala Total Mean Oil Only – Gross Unrisked Prospective Resources 296
Sarqala Total Mean MMBOE – Gross Unrisked Prospective Resources 463

Notes:

  1. Contingent Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingent resources have an associated chance of development (economic, regulatory, market and facility, corporate commitment or political risks). These estimates have not been risked for the chance of development. There is no certainty that the contingent resources will be developed and, if they are developed, there is no certainty as to the timing of such development or that it will be commercially viable to produce any portion of the contingent resources. In this case, the Contingent resources are the gross volumes estimated for the Lower Miocene Jeribe/Upper Dhiban carbonate reservoirs at Sarqala-1 well, down to the lowest known oil from wireline log data at 3,485 metres subsea, without any adjustments for working interest or encumbrances.
  1. Other than the prospective resources for the Oligocene, Eocene and Cretaceous reservoirs at the Sarqala-1 well which are as at February 18, 2011, as previously disclosed in the Company's material change report dated February 22, 2011, which is available at www.sedar.com.
  1. The prospective resources are the undiscovered potentially recoverable gross volumes estimated for the indicted reservoirs, without any adjustments for working interest or encumbrances. Prospective resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have both an associated chance of discovery (geological chance of success) and a chance of development (economic, regulatory, market and facility, corporate commitment or political risks). The chance of commerciality is the product of these two risk components. There is no certainty that any portion of the prospective resources will be discovered. If a discovery is made, there is no certainty that it will be developed or, if it is developed, there is no certainty as to the timing of such development or that it will be commercially viable to produce any portion of the prospective resources. Prospective resources are undiscovered resources that indicate development potential in the event the discovery is commercial and should not be construed as reserves or contingent resources.
  1. The anticline structure contains both contingent and prospective resources, above and below the lowest known oil respectively. Prospective resources are also interpreted to extend southwest in the southwest flank area of the anticline. Prospective resources in the anticline are better imaged on seismic and therefore have lower risk than the prospective resources in the southwest flank area. Prospective resources volumes reported in Table 2 cannot be summed with the contingent resources in Table 1.
  1. Low Estimate is considered to be a conservative estimate of the quantity that will actually be recovered. It is likely that the actual remaining quantities recovered will exceed the low estimate. If probabilistic methods are used, there should be at least a 90 percent probability (P90) that the quantities actually recovered will equal or exceed the low estimate.
  1. Best Estimate is considered to be the best estimate of the quantity that will actually be recovered. It is equally likely that the actual remaining quantities recovered will be greater of less than the best estimate. If probabilistic methods are used, there should be at least a 50 percent probability (P50) that the quantities actually recovered will equal or exceed the best estimate.
  1. High Estimate is considered to be an optimistic estimate of the quantity that will actually be recovered. It is unlikely that the actual remaining quantities recovered will exceed the high estimate. If probabilistic methods are used, there should be at least a 10 percent probability (P10) that the quantities actually recovered will equal or exceed the high estimate.
  1. Mean Estimate is the average from the probabilistic assessment.
  1. Barrels of oil equivalent (BOEs) may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1 bbl has been used and is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead.

This resource disclosure coincides with the filing on SEDAR at www.sedar.com of a material change report, which includes the following additional information: the risks and level of uncertainty associated with the discovery and recovery of the resources, the risks and uncertainties relating to the development of any discovered resources, the significant positive and negative factors relevant to the estimates and the specific contingencies which prevent the classification of the foregoing contingent resources as reserves.

The combined mean estimate presented above for the gross unrisked prospective resources on the Company's two blocks is a summation of mean estimates from a number of the Company's prospects in addition to Sarqala, with each mean estimate being the average from the probabilistic assessment that was completed for each of the individual reservoirs within such prospects. The Company's previous material change reports filed on SEDAR at www.sedar.com contain the low, best and high estimates for each individual reservoir and additional detail on the information used in the resource assessments and include the risks and level of uncertainty associated with the recovery and development of the resources and the significant positive and negative factors relevant to the estimates. The prospective resource estimates for the Tertiary Oligocene reservoir at the Kurdamir-1 well are as previously disclosed in the material change report dated December 16, 2010. The prospective resource estimates for the Tertiary Eocene and Cretaceous reservoirs at the Kurdamir-1 well and the Upper Fars reservoir at Mil Qasim are as previously disclosed in the material change report dated January 17, 2011. The prospective resource estimates for the Oligocene, Eocene, and Cretaceous reservoirs at Qulijan and the Oligocene and Eocene reservoirs at Baran are as previously disclosed in the material change report dated February 22, 2011. The prospective resource estimates for the reservoirs at Bawanoor, Tilako, Zardi, Segrdan, Chwar, Alyan and the Upper Fars Fault Trap Play are as previously disclosed in the material change report dated July 19, 2011.

About WesternZagros Resources Ltd.

WesternZagros is an international natural resources company engaged in acquiring properties and exploring for, developing and producing crude oil and natural gas in Iraq. WesternZagros, through its wholly-owned subsidiaries, holds two Production Sharing Contracts with the Kurdistan Regional Government in the Kurdistan Region of Iraq. WesternZagros' shares trade in Canada on the TSX Venture Exchange under the symbol "WZR".

This news release contains certain forward‐looking information relating, but not limited, to operational information, future drilling and development plans and the timing associated therewith. Forward-looking information typically contains statements with words such as "anticipate", "estimate", "expect", "potential", "could", or similar words suggesting future outcomes. The Company cautions readers not to place undue reliance on forward‐looking information as by its nature, it is based on current expectations regarding future events that involve a number of assumptions, inherent risks and uncertainties, which could cause actual results to differ materially from those anticipated by WesternZagros. In addition, the forward‐looking information is made as of the date hereof, and the Company assumes no obligation to update or revise such to reflect new events or circumstances, except as required by law.

Forward‐looking information is not based on historical facts but rather on management's current expectations and assumptions regarding, among other things, plans for and results of drilling activity and testing programs, future capital and other expenditures (including the amount, nature and sources of funding thereof), continued political stability, and timely receipt of any necessary government or regulatory approvals. Although the Company believes the expectations and assumptions reflected in such forward‐looking information are reasonable, they may prove to be incorrect. Forward‐looking information involves significant known and unknown risks and uncertainties. A number of factors could cause actual results to differ materially from those anticipated by WesternZagros including, but not limited to, risks associated with the oil and gas industry (e.g. operational risks in exploration; inherent uncertainties in interpreting geological data; changes in plans with respect to exploration or capital expenditures; interruptions in operations together with any associated insurance proceedings; the uncertainty of estimates and projections in relation to costs and expenses and health, safety and environmental risks), the risk of commodity price and foreign exchange rate fluctuations, the uncertainty associated with negotiating with foreign governments and risk associated with international activity. For further information on WesternZagros and the risks associated with its business, please see the Company's Annual Information Form dated April 11, 2011, which is available on SEDAR at www.sedar.com.

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