WesternZagros Resources Ltd.
TSX VENTURE : WZR

WesternZagros Resources Ltd.

November 14, 2013 07:30 ET

WesternZagros Announces Third Quarter 2013 Operational and Financial Results

CALGARY, ALBERTA--(Marketwired - Nov. 14, 2013) -

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

WesternZagros Resources Ltd. (TSX VENTURE:WZR) ("WesternZagros" or "the Company") continued to advance numerous exploration and appraisal initiatives on both its operated and non-operated ventures in the Kurdistan Region of Iraq during the third quarter of 2013. On its non-operated venture, the Kurdamir-3 well confirmed the presence of light oil deeper than previously tested at the Kurdamir-2 well, and affirmed the potential of the Kurdamir discovery. On its operated venture, WesternZagros is drilling ahead on two Garmian Block exploration and appraisal wells where testing is expected in the next one to two months. In addition, the Company acquired state of the art 3D seismic data over Kurdamir, Sarqala and the north of the Garmian Block. These data confirm that the Baram prospect is a stand-alone structure with increased potential for success. The 3D seismic data is also a critical tool to identify optimum drilling locations for future wells on both the Kurdamir and Sarqala discoveries. A summary of the activities, the financial statements the accompanying Management Discussion and Analysis ("MD&A") are available at www.westernzagros.com and on SEDAR at www.sedar.com.

Commenting on the third quarter results and subsequent events, WesternZagros's Chief Executive Officer Simon Hatfield said:

"We're pressing forward aggressively with two wells on the Garmian Block. Hasira-1 and Baram-1 have the potential to further increase production capability and contingent resources. Baram-1 well, spudded in August near the Kurdamir discovery, has the highest impact potential of our 2013 drilling program."

"At the same time, we are continuing our analysis of the Kurdamir discovery and incorporating the new information and lessons learned from the Kurdamir-3 well. This well has underscored the need to improve future cementing and acidizing operations; the need to utilize open hole testing whenever possible; the need to utilize 3D seismic data to target highly fractured areas for improved production rates, and the need to pursue horizontal drilling techniques to maximize well deliverability. In addition, the new formation water salinity data will enable us to better predict oil-water contacts on wireline logs in future wells."

Simon Hatfield further commented on the outlook for the remainder of 2013 and 2014:

"During the first half of 2013, we diligently prepared for an increased exploration and appraisal schedule that we began in the third quarter, and will continue through into 2014. We are well positioned as we advance WesternZagros's ambitious plans to deliver production and cash flow from our promising Kurdistan Region light oil discoveries."

"With the commissioning of the new Kurdistan Region oil export pipeline and the rapid development of domestic markets, WesternZagros is looking to declare commerciality on two oil fields - Sarqala this year and Kurdamir in 2014. We've identified four prospective exploration drilling targets in 2014, with Qulijan and Chwar anticipated to spud in first quarter 2014."

Third Quarter Operations Summary

Operated Joint Venture: Garmian Block

In the Garmian Block, WesternZagros is currently drilling ahead on two wells, Baram-1 and Hasira-1, with testing on both expected in the next one to two months. The Baram-1 well has the potential to substantiate gross unrisked contingent resources (mean estimate) of up to 300 million barrels of oil equivalent ("MMBOE"). At the Sarqala-1 well, extended well test ("EWT") production is ready to commence subject to Kurdistan Regional Government ("KRG") approval, and work continues for a planned workover to increase capacity from 5,000 to 10,000 barrels per day ("bbl/d"). WesternZagros is in discussion with its co-venturer, Gazprom Neft Middle East B.V. ("Gazprom Neft"), regarding the declaration of commerciality for the Sarqala discovery which is targeted by the end of 2013.

Baram-1 Well

  • The Baram-1 well was spudded on August 13, 2013 to explore the Oligocene reservoir.
  • Interpretation of the good quality new 3D seismic data indicates that the Baram structure is separated from the Kurdamir structure by a fault. This increases the geological chance of success of Baram-1 to 32%.
  • The well is currently at 3,088 metres and is expected to reach the planned total depth of 3,800 metres by the end of 2013.

Hasira-1 Well

  • The Hasira-1 well was spudded on June 6, 2013, with the dual objectives of being a low risk appraisal well for the Jeribe reservoir on the Sarqala discovery and an exploration well for the deeper Oligocene formation. The Oligocene exhibited oil shows during the drilling of Sarqala-1, but was not able to be evaluated at the time.
  • Hasira-1 is currently at 3,919 metres after setting casing just above the Jeribe reservoir.
  • The well is expected to reach total depth of 4,100 metres in the Oligocene reservoir by early 2014.
  • The Jeribe reservoir has the potential for 25-50 MMBOE of gross unrisked prospective resources (mean estimate) while the deeper Oligocene reservoir has the potential for 50-250 MMBOE of gross unrisked prospective resources (mean estimate).
  • The well is expected to be completed in either in the Jeribe or the Oligocene reservoir, depending on testing results.

Sarqala-1 EWT

  • The Sarqala-1 EWT is expected to recommence upon approval from the KRG.
  • Engineering work continues for a workover planned in the first half of 2014 in order to test the ultimate potential deliverability of the Jeribe reservoir in the Sarqala-1 well. Long lead items have been delivered and a workover rig is being tendered.
  • The Sarqala-1 workover could increase production capability from 5,000 to 10,000 bbl/d.
  • Preliminary engineering design is advancing on the Sarqala first phase central processing facility with a 20,000 bbl/d capacity.
  • A dedicated team has been formed by WesternZagros and Gazprom Neft for the phased development of the Sarqala discovery.
  • Discussions continue with the KRG to advance plans to use natural gas from the Garmian Block. Gas utilization studies are ongoing and include the following options: supply of gas via a pipeline for domestic consumption, gas re-injection to maximize oil recovery, and gas as fuel for temporary and permanent power generation.

Seismic Acquisition

  • Acquisition of 3D seismic over the northern portion of the Garmian block commenced on August 6, 2013, in order to better define the areal extent of the Baram and Qulijan structures. It was completed on September 9, 2013, on time and under budget.
  • Processing of the seismic is anticipated to be completed in Q1 2014. This data will allow future appraisal wells to be more accurately located to target reservoir fracturing for higher well deliverability.
  • The analysis of a separate 3D seismic survey over the southern portion of the Garmian block, including the Sarqala, Mil Qasim and Zardi Complex structures, is underway with completion anticipated by the end of 2013.
  • WesternZagros expects to benefit enormously from this investment in seismic data. This data will be used to improve the Company's understanding of fracturing within the reservoirs in these structures, and to better define the Jeribe, Oligocene, Eocene and Cretaceous reservoirs and optimize the number and placement of future development wells.
  • Processing and interpretation of an additional 2D seismic program over the Chwar and Alyan structures has been completed.

2014 Potential Exploration Targets

  • Under the Garmian PSC, the exploration period expires on December 31, 2014. Any prospects not drilled, tested and declared commercial by that date are required to be relinquished and the acreage returned to the KRG. The Company and its co-venturer, Gazprom Neft, have identified four potential exploration prospects for exploration drilling in 2014: Qulijan, Chwar, Qula, and Alyan.
  • The Qulijan and Chwar prospects will be drilled in the first quarter of 2014, which target 86 million and 25 million barrels of gross unrisked prospective resources (mean estimate) of oil, respectively.
  • The Qulijan prospect has been approved by the co-venturers as the remaining exploration commitment well and is anticipated to be spudded in Q1 2014. The well site has been prepared and long lead items ordered.
  • The Company is considering its options with regards to its participation in the exploration drilling of the other three prospects. Under the Joint Operating Agreement with Gazprom Neft ("JOA"), a party has the ability to fully fund an exploration well if the other party elects not to participate (the "non-consenting party"). The non-consenting party is able to re-establish its rights in the exploration well, up until a declaration of commerciality is made, by reimbursing the other party for its share of the back-costs of the operation plus an agreed upon premium.
  • The Company has decided not to participate in the exploration drilling at Chwar based upon both the risk/reward profile of Chwar and the Company's existing financial resources. Gazprom Neft has committed to fund the entire costs of drilling the Chwar prospect utilizing the terms of the JOA. The Chwar well is anticipated to spud in Q1 2014 and test the Jeribe-Dhiban and Mio-Oligocene reservoirs. Well site preparations are underway and long lead items ordered. The Chwar well will be operated by WesternZagros, and WesternZagros will have the ability to reinstate its rights to the prospect if a material discovery is made as outlined above.
  • The Company and its co-venturer are conducting technical evaluations of the Qula Prospect on the southeast and the Alyan Prospect on the western portion of the Garmian Block. Qula is in close proximity to the neighbouring Chia Surkh oil discovery. The Alyan Prospect is a moderate risk opportunity targeting the Jeribe and Oligocene reservoirs. Potential drilling locations have been identified and the Company is proceeding with the drilling designs for both wells.
  • Gazprom Neft has expressed interest in fully funding both Qula and Alyan under the provisions of the JOA, subject to the conclusions of the technical evaluations and the ability to drill and test the wells prior to the expiry of the exploration period.
  • Based on the conclusion of the technical evaluations of these prospects, the Company will make a determination whether to fund its share in the drilling of these wells or to allow Gazprom Neft to fully fund the wells with the Company retaining its rights to the prospects if a material discovery is made as described above.

Non-Operated Joint Venture: Kurdamir Block

The Kurdamir-3 well tested light oil at a deeper depth than previously tested and confirmed the Kurdamir Oligocene discovery to be a giant field containing a mean estimate of 717 million barrels of oil equivalent of gross unrisked contingent resources of oil, gas and condensate including a mean estimate of 390 million barrels of gross unrisked contingent resources of oil. The previously drilled Kurdamir-2 well is being prepared for an EWT to better define the reservoir and oil characteristics of the field. WesternZagros is working with the operator, Talisman (Block K44) B.V. ("Talisman"), towards a declaration of commerciality for the Kurdamir discovery in the second quarter of 2014. This will be followed by a development plan for the combined mean estimate of one billion BOE of unrisked gross contingent resources estimated to be recoverable from the Oligocene and Eocene reservoirs.

Kurdamir-3 Well

  • Talisman has completed testing operations in the Oligocene reservoir of the Kurdamir-3 appraisal well. Based on the well results, The Company's management does not anticipate a material change to the contingent resources of Kurdamir.
  • Four drill stem tests ("DST") were conducted in the lower part of the Oligocene reservoir, which exhibited poorer reservoir characteristics (including fewer fractures) than previous Kurdamir wells:
    • DST #1 was conducted over an interval of 12 metres, between -2,162 and -2,174 metres subsea ("mSS"), across a fracture zone below the base of the reservoir with the objective of proving new lowest known oil. The zone produced a limited amount of oil and spent acid.
    • DST #2 was conducted over four intervals from -2,000 to -2,105 mSS. After acidizing the zones, the well produced 38-degree API oil at low rates with an average water cut of 65 percent.
    • DST #3 was conducted over an interval between -1,960 and -1,980 mSS and flowed 37 degree API light oil at a rate of 633 bbl/d with an average water cut of 55 percent.
    • DST #4 was conducted over an interval between -1,925 and -1,941 mSS and flowed 885 bbl/d of 37 degree API light oil with an average water cut of 55 percent.
  • The results DST #3 and DST #4 confirm the presence of light oil, with an oil-water contact at a depth of at least -2,049 mSS, which is a minimum of 33 metres deeper than the lowest known oil in the Kurdamir-2 well.
  • The gas-to-oil ratio was approximately 1,000 to 1,100 standard cubic feet per barrel, indicating that the oil leg is likely in connection with the gas cap on the crest of the structure.
  • Third party analysis concluded that problems with cement bond integrity resulted in water channeling upwards to DST intervals #3 and #4 from the deeper DST #2. DST #2 straddled an oil-water contact while petrophysical analysis of the DST #3 and DST #4 intervals did not indicate the presence of movable formation water.
  • The findings of Kurdamir-3 will be provided to the Company's independent resource evaluators to confirm the internal evaluations which support that there is no material change to the contingent resource estimates.
  • The 3D seismic data acquired over Kurdamir will greatly enhance the ability to identify structural features and areas that have higher fracture density in order to determine future drilling locations. Horizontal drilling techniques are being considered for future operations to increase connectivity with fractures and maximize the deliverability of light oil from future wells.
  • A dedicated team has been formed by WesternZagros and Talisman for the phased development of the Kurdamir discovery.
  • Discussions are ongoing with the KRG to advance plans to use natural gas from the Kurdamir Block.
  • Gas utilization studies are ongoing and include the following options: supply of gas via a pipeline for domestic consumption, gas re-injection to maximize oil recovery, and gas as fuel for temporary and permanent power generation.

Seismic Acquisition

  • The Kurdamir 3D seismic survey started in January 2013 and was completed in July 2013. The goal was to more clearly define the Oligocene, Eocene and Cretaceous reservoirs.
  • Processing and interpretation of the data is currently underway with completion anticipated in Q1 2014. Analysis of the 3D seismic data will help define future Kurdamir well locations targeting fractured areas within the reservoir to maximize deliverability.

Financial Position

  • At September 30, 2013, WesternZagros had $124.7 million in working capital, excluding a $13.0 million deposit held in trust for a drilling contract.
  • The Company is well positioned for its currently planned activities.

Outlook

In accordance with the Kurdamir and Garmian PSCs, the end of the exploration periods are September 1, 2014 and December 31, 2014, respectively. Upon declaration of commerciality of a discovery, the development periods begin. A declaration of commerciality is required to be made prior to the expiration of the exploration period.

On the Kurdamir Block, the Company's focus will be to commence development of the approximately one billion BOE of unrisked gross contingent resources combined mean estimate ("Gross Mean Contingent Resources") discovered to date. Further analysis will be completed on the prospective resources to determine how best to proceed to delineate these discoveries.

On the Garmian Block, the Company's focus will be to commence development of the Company's Sarqala discovery and to complete the remaining exploration drilling. This will include the completion of drilling and testing of the Baram prospect (mean estimate of approximately 0.5 billion BOE gross unrisked prospective resources) and the Hasira well, which has a dual objective of appraising the Jeribe reservoir discovered by the Sarqala-1 well and exploring the potential of the deeper Oligocene reservoir. These wells are planned for the fourth quarter of 2013 and the first quarter of 2014, respectively. In addition, WesternZagros's work program on the Garmian Block over the next 15 months will include exploration activities to drill the highest ranked prospects prior to the end of the exploration period. This ranking will be based on the results of the North and South Garmian Seismic Programs (2D and 3D), the 2013 drilling results from the Company's planned wells on the Garmian and Kurdamir Blocks and other operators' well results on neighbouring blocks. Potential exploration prospects in 2014 include Qulijan, Qula, Chwar, and Alyan. At the same time, the Company is progressing with its respective co-venturers regarding timing of declaring commerciality and submitting development plans over the next six months.

Kurdamir Block

The Company continues to work with the operator, Talisman, to integrate the Kurdamir-3 results and recently acquired 3D seismic data as it appraises the oil and gas field. The joint venture is also preparing Kurdamir-2 for extended well tests and will conduct further rigless testing at Kurdamir-3.

The Company's portion of planned expenditures for the remainder of 2013 includes approximately $7 million for the Kurdamir-3 testing program (including the costs of DST#3 and #4) and other Kurdamir-3 related costs, $6 million for the other Kurdamir appraisal activities, including preparation for a Kurdamir-2 extended well test, ongoing seismic processing and interpretation costs, preparation and planning for declaration of commerciality and field development, and $3 million for supervision, local office costs and other Kurdamir PSC-related costs.

Garmian Block

Sarqala-1 Extended Well Test ("EWT")

WesternZagros expects to recommence the EWT at Sarqala upon KRG approval to gain additional information in order to appraise the discovery for future development. Upon receipt of KRG approval, and the procurement of a suitable rig and tubular equipment, the Company also plans to complete a workover of the Sarqala-1 well in the first half of 2014 in order to allow future EWT production capability to increase beyond the current 5,000 bbl/d. Long lead items have been ordered and tendering for a rig is outstanding for this workover.

  • The Company and its co-venturers continue discussions with the KRG to advance plans for the utilization of natural gas from both the Garmian and Kurdamir Blocks.
  • Gas utilization studies are ongoing and include the following options: supply of gas via a pipeline for domestic consumption, gas re-injection to maximize oil recovery, and gas as fuel for temporary and permanent power generation.

Hasira-1 Exploration and Appraisal Well

The Hasira-1 appraisal and exploration well was spudded on June 6, 2013. The well is planned to drill to a total depth of approximately 4,100 metres in the Oligocene reservoir. WesternZagros plans to complete the well either in the Jeribe or the Oligocene reservoir depending on drilling and testing results. Hasira-1 is anticipated to be completed in late fourth quarter 2013 or early first quarter 2014.

Baram-1 Exploration Well

The Baram-1 well was spudded on August 13, 2013 to explore the Oligocene reservoir. The Company expects the well to reach the planned total depth of 3,800 metres by the end of 2013. Baram-1 is anticipated to be completed in late fourth quarter 2013. The completion of either Baram-1 or Hasira-1 in 2013 would fulfill the Company's obligations under the second exploration sub-period of the Garmian PSC, prior to any extension of such sub-period.

Garmian Seismic Programs

Processing and interpretation of the 2D data over the Chwar and Alyan structures has been completed. The 3D data over the Sarqala, Mil Qasim and Zardi complex structures is currently underway with completion anticipated by end 2013. The survey included 325 square kilometres of 3D seismic and 60 kilometres of 2D seismic. Analysis of the 3D seismic data will be used to optimize the number and placement of future appraisal wells, improve the Company's understanding of fracturing within these structures, and to better define the Jeribe, Oligocene, Eocene and Cretaceous reservoirs.

Together with well results, interpretation and integration of the recently acquired 3D seismic over the northern portion of the Garmian block, anticipated to be in Q1 2014, will assist the Company when planning to file the development plan with the KRG also in 2014.

2014 Potential Exploration Targets

Under the Garmian PSC, the exploration period expires on December 31, 2014. Any prospects not drilled, tested and declared commercial by that date are relinquished and the acreage returned to the KRG. The Company and its co-venturer, Gazprom Neft, have identified four potential exploration wells on the Garmian Block, which are Qulijan, Chwar, Qula, and Alyan.

The Qulijan prospect has been approved by the co-venturers as the remaining exploration commitment well and is anticipated to be spudded in Q1 2014. This well will target 86 million barrels of gross unrisked prospective resources (mean estimate) of oil. The well site has been prepared and long lead items ordered.

The Company is considering its options with regards to its participation in the exploration drilling of the remaining prospects. Under the joint operating agreement with Gazprom Neft ("JOA"), a party has the ability to fully fund an exploration well if the other party elects not to participate (the "non-consenting party"). The non-consenting party retains its ability to re-establish its rights in the exploration well under the JOA up until a declaration of commerciality is made by reimbursing the other party for its original share of the costs of the operation had it participated, plus an agreed upon premium.

The Company has decided not to participate in the exploration drilling at Chwar based upon both the risk/reward profile of Chwar and the Company's existing financial resources. Gazprom Neft has committed to fund the entire costs of drilling the Chwar prospect utilizing the terms of the JOA. The Chwar well is anticipated to spud in Q1 2014 and test the Jeribe-Dhiban and Mio-Oligocene reservoirs, targeting 25 million barrels of gross unrisked prospective resources (mean estimate) of oil. Well site preparations are underway and long lead items ordered. The Chwar well will be operated by WesternZagros, and WesternZagros will have the ability to reinstate its rights to the prospect if a material discovery is made.

The Company and its co-venturer are conducting technical evaluations of the Qula Prospect on the southeast and the Alyan Prospect on the western portion of the Garmian Block. Qula is in close proximity to the neighbouring Chia Surkh oil discovery. The Alyan Prospect is a moderate risk opportunity targeting the Jeribe and Oligocene reservoirs. Potential drilling locations have been identified and the Company is proceeding with the drilling designs for both wells. Gazprom Neft has expressed interest in fully funding these prospects under the provisions of the JOA, subject to the conclusions of the technical evaluations and the ability to drill and test the wells prior to the expiry of the exploration period. Based on the conclusion of the technical evaluations of these prospects, the Company will make a determination whether to participate in the initial drilling of these possible wells or to allow Gazprom Neft to fully fund the wells while retaining the ability to reinstate its rights to the prospects if a material discovery is made.

The Company's portion of planned expenditures related to Garmian Block activities for the remainder of 2013 include $12 million for the Hasira-1 well, $12 million for the Baram-1 well, $7 million in planning and long leads for Qulijan, $4 million for the Sarqala planning and predevelopment and EWT activities, $2 million for other exploration costs and seismic processing and interpretation costs, $2 million for supervision, local office costs and other Garmian PSC-related costs, and $4 million for other Corporate costs.

This news release contains certain forward‐looking information relating, but not limited, to operational information, future drilling and testing plans, seismic programs and the timing and costs associated therewith. Forward-looking information typically contains statements with words such as "anticipate", "plan", "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 March 22, 2013, which is available on SEDAR at www.sedar.com.

In addition, statements relating to "resources" contained herein are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions that the resources described can be economically produced in the future. Terms related to resource classifications referred to herein are based on the definitions and guidelines in the Canadian Oil and Gas Evaluation Handbook which are as follows. "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, facility, corporate commitment or political risks). The chance of commerciality is the product of these two risk components. The estimates referred to herein have not been risked for either the chance of discovery or the chance of development. 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. "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). The estimates referred to herein have not been risked for the chance of development.
There is no certainty that the contingent resources will be developed and, if 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. All resource estimates presented are gross volumes for the indicated reservoirs, without any adjustment for the Company's working interest or encumbrances. A barrel of oil equivalent (BOE) is determined by converting a volume of natural gas to barrels using the ratio of 6 million cubic feet (Mcf) to one barrel. BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf:1 BOE is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value. The Company's Statement of Oil and Gas Information contained in its Annual Information Form dated March 22, 2013 ("AIF") filed on SEDAR at www.sedar.com contains additional detail with respect to the resource assessments and includes the significant risks and uncertainties associated with the estimates and the recovery and development of the resources, and, in respect of contingent resources, the specific contingencies which prevent the classification of the resources as reserves. In addition, combined mean estimates of resources which are presented in this MD&A are an arithmetic sum of the mean estimates for individual reservoirs and each such individual mean estimate is the average from the probabilistic assessment that was completed for the reservoir. Readers should refer to the AIF for a detailed breakdown of the high (P10), low (P90) and best (P50) estimates for each of the individual reservoir assessments.

WESTERNZAGROS RESOURCES WAS RECOGNIZED AS A TSX VENTURE 50® COMPANY IN 2012 AND 2013. TSX VENTURE 50 IS A TRADE-MARK OF TSX INC. AND IS USED UNDER LICENSE.

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