WesternZagros Resources Ltd.

TSX VENTURE : WZR


WesternZagros Resources Ltd.

February 13, 2014 07:30 ET

WesternZagros Files Declaration of Commerciality for Garmian Block, Confirms Kurdamir as a Giant Field, and Provides Baram-1 and Hasira-1 Update

CALGARY, ALBERTA--(Marketwired - Feb. 13, 2014) -

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

WesternZagros Resources Ltd. (TSX VENTURE:WZR) ("WesternZagros" or "the Company") has completed a revised resources assessment of its Kurdamir Oligocene reservoir in the Kurdistan Region of Iraq and there are no material changes. On the Garmian Block, declaration of commerciality has been filed, the Baram-1 exploration well has discovered light oil, albeit in low permeability reservoir, and the Hasira-1 well has thus far confirmed the extension of the Sarqala oil discovery in the Jeribe reservoir.

Operational updates on the Kurdamir and Garmian Blocks include:

  • Independently audited revised assessments of gross unrisked mean contingent and prospective resources for the Oligocene reservoir in the Kurdamir Block are materially unchanged following the Kurdamir-3 well results.
  • The Company has filed a declaration of commerciality of the Sarqala Discovery and is advancing development plans with the Kurdistan Regional Government.
  • The Baram-1 well discovered a gross interval of 73 metres of light oil in the Oligocene reservoir and this indicates a gross hydrocarbon column in excess of 500 metres if it extends to the crest of the Baram structure. The well will be suspended pending further evaluation.
  • The Hasira-1 well confirmed light oil in the Jeribe reservoir and the well is preparing to drill ahead into the deeper Oligocene reservoir.
  • A 30 day extended well test in the Kurdamir-2 well is scheduled for March to better assess the Oligocene reservoir performance.
  • A workover of the Sarqala-1 well is scheduled for March to increase the production capability above the current capacity of 5,000 barrels of oil per day.

"The revised assessment, once again, confirms that the Kurdamir Discovery is a giant field containing contingent resources of almost a billion barrels of oil equivalent, a significant oil and gas resource," said Simon Hatfield, WesternZagros's Chief Executive Officer. "We look forward to submitting a declaration of commerciality on the Kurdamir Block and moving towards development of this exceptional resource."

"On the Garmian block, we're encouraged that the Baram-1 well discovered light oil in the Oligocene. We are evaluating the Baram-1 test results, logs, and core data and integrating with the 3D seismic data to assess the potential of the discovery. We are also encouraged that Hasira-1 has confirmed the extension of the Sarqala oil discovery in the Jeribe reservoir. The Hasira-1 well will now drill into the Oligocene and we are looking forward to the results. "

"The development of the Garmian Block is advancing as we have filed the declaration of commerciality, based on the Sarqala Discovery, with the Kurdistan Regional Government. This is the first step in taking WesternZagros from a frontier explorer to a cash flow-generating company. As the Kurdistan Region moves towards crude oil exports through the newly constructed pipeline, we foresee our high quality, light oil as a valued component to the Kurdish export blend."

Revised Resources Estimate - Kurdamir Block

WesternZagros has re-evaluated the contingent and prospective resource estimates for the Oligocene reservoir in the Kurdamir structure based on new information obtained from the drilling of the Kurdamir-3 appraisal well and the interpretation of 3D seismic data. The revised resources assessment has been audited by our independent reserves evaluator, Sproule International Limited ("Sproule"), as of February 10, 2014 resulting in no material change.

The revised mean estimate of gross unrisked contingent resources ("Mean Contingent Resources") rose to 750 million barrels of oil equivalent ("MMBOE") as compared to 717 MMBOE in the last resource estimate of February 8, 2013 (the "2013 Assessment"), an increase of 5 percent. On an oil basis, the Mean Contingent Resources are now 386 million barrels of oil ("MMbbl") versus 390 MMbbl in the 2013 Assessment, an adjustment of less than one percent. The combined Mean Contingent Resources estimates for the Oligocene and Eocene reservoirs in the Kurdamir Block are now 976 MMBOE and 541 MMbbl of oil.

The revised mean estimate of gross unrisked prospective resources ("Mean Prospective Resources") for the Oligocene reservoir at Kurdamir is now 1,084 MMbbl of oil, effectively unchanged from the 2013 Assessment of 1,076 MMbbl of oil.

Tables 1(a) and 1(b), shown further below, provide the revised estimates of the gross unrisked recoverable contingent and prospective resources for the Oligocene reservoir of the Kurdamir structure as audited by Sproule as of February 10, 2014. The tables also include the unchanged resource estimates for the Eocene and Cretaceous reservoirs. Further details in respect of the re-evaluation of the contingent and prospective resources for the Kurdamir Oligocene reservoir on the Kurdamir Block are disclosed in the Company's Material Change Report, dated February 13, 2014, which is available at www.westernzagros.com and on SEDAR at www.sedar.com.

Sproule carried out its independent audits 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. Pursuant to the COGE Handbook, an audit is the process whereby an independent qualified reserves auditor carries out procedures designed to allow the 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.

Baram-1 Well - Garmian Block

The Baram-1 well targeted a prospect with the potential of approximately 300 MMBOE of gross prospective resources in the Oligocene reservoir. An open-hole test of this reservoir at Baram has confirmed a gross interval of 73 metres of light oil that flowed 42 degree API oil and water at an approximate rate of 600 barrels per day. The wireline log and test data obtained indicate the test was conducted across an oil water contact in low permeability reservoir. Despite the indications of low permeability in the reservoir, the position of the interpreted oil water contact indicates the presence of a gross hydrocarbon column in excess of 500 metres if it extends to the crest of the Baram structure. The well will be suspended while the Company integrates the wireline log and test results with the 3D seismic interpretation across the structure. Based on the result of this analysis, the Company will make a determination on whether to pursue additional appraisal operations on Baram.

Hasira-1 Well - Garmian Block

The Hasira-1 well has two objectives, an appraisal of the Sarqala-1 discovery in the Jeribe reservoir and the exploration of the deeper Oligocene reservoir. The well is targeting gross prospective resources of 25 to 50 MMBOE in the Jeribe and 25 to 50 MMBOE in the Oligocene. Wireline log interpretations and an open-hole test in the Jeribe reservoir has confirmed the presence of oil and similar reservoir properties as observed in Sarqala-1. The open-hole test flowed oil to surface. However, due to mechanical issues, the test was prematurely suspended before the well had cleaned up. The mechanical issues have been resolved, casing has been set across the Jeribe interval, and the well is now preparing to drill ahead to the deeper Oligocene reservoir. Upon reaching total depth, a testing program will be determined for the Oligocene reservoir. Additional testing in the Jeribe may be conducted subject to the Oligocene test results.

Tables 1(a) and 1(b)

Table 1(a)
Gross Unrisked Contingent Resources (1),(2)
Kurdamir Block Oil, Gas and Condensate
Oligocene Reservoir
as of Feb 10, 2014 Eocene Reservoir as of Feb 8, 2013
Low Estimate(5) Best Estimate(6) High
Estimate(7)
Mean Estimate(8)
Prospect Reservoir Hydrocarbon P90 (1C) P50 (2C) P10 (3C) Mean
Type MMbbl/Bcf MMbbl/Bcf MMbbl/Bcf MMbbl/Bcf
Kurdamir Tertiary Oligocene Oil 220 366 576 386
Solution Gas 211 380 626 404
Associated Gas(4) 999 1414 1926 1443
Condensate 34 55 80 56
MMBOE(9) 456 720 1081 750
Kurdamir Tertiary Eocene Oil 69 138 263 155
Solution Gas 115 245 480 280
Associated Gas 90 130 180 130
Condensate 2 3 5 3
MMBOE 105 204 378 226
Kurdamir Total Mean MMbbl Oil Only - Gross Unrisked Contingent Resources 541
Kurdamir Total Mean MMBOE - Gross Unrisked Contingent Resources 976

Table 1(b)Gross Unrisked Prospective Resources (1), (3)Kurdamir Block Oil, Gas and CondensateOligocene Reservoiras of Feb 10, 2014 Eocene and Cretaceous Reservoirsas of Feb 8, 2013 Low
Estimate
(5)
Best
Estimate
(6)
High
Estimate
(7)
Mean
Estimate
(8)
Prospect Reservoir Hydrocarbon P90 P50 P10 Mean
Type MMbbl MMbbl MMbbl MMbbl
Kurdamir Tertiary Oligocene Oil 552 1004 1739 1084
Solution Gas 549 1033 1838 1129
MMBOE(9) 644 1176 2045 1272
Kurdamir Tertiary Eocene Oil 31 91 202 107
Solution Gas 50 160 350 185
MMBOE 39 118 260 138
Kurdamir Cretaceous Oil 38 108 243 130
Solution Gas 75 225 525 275
Associated Gas 65 140 260 155
Condensate 2 4 8 4
MMBOE 63 173 382 206
Kurdamir Total Mean MMbbl Oil Only - Gross Unrisked Prospective Resources 1321
Kurdamir Total Mean MMBOE - Gross Unrisked Prospective Resources 1616

Notes to Tables 1(a) and 1(b):

(1) The resources presented are the gross volumes estimated for the indicated reservoirs without any adjustments for the Company's working interest or encumbrances. For a description of the production sharing terms under the PSCs (as defined below), see the Company's Annual Information Form dated March 22, 2013 ("AIF") under the heading "PSC Overview and Commitments - Revenue."

(2) 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. The Company's AIF under the heading "Resources Information" contains additional detail on the specific contingencies which prevent the classification of these contingent resources as reserves.

(3) 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. These estimates have not been risked for the chance of discovery or for 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. 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.

(4) The gross unrisked contingent resources for gas reflect reductions for condensate recovery, surface losses, and fuel gas.

(5) 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.

(6) 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.

(7) 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.

(8) Mean Estimate is the average from the probabilistic assessment.

(9) Barrels of oil equivalent (BOEs) may be misleading, particularly if used in isolation. A BOE volume 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. Given that the value ratio based on the current price of oil as compared to gas is significantly different from the energy equivalency of 6:1, this conversion ratio may be misleading as an indication of value.

About WesternZagros Resources Ltd.

WesternZagros is an international natural resources company focused on acquiring properties and exploring for, developing and producing crude oil and natural gas in Iraq. WesternZagros, through its wholly-owned subsidiaries, holds a 40 percent working interest in two Production Sharing Contracts with the Kurdistan Regional Government in the Kurdistan Region of Iraq. WesternZagros's 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 future drilling and appraisal plans, the timing associated therewith, future production potential and resources. 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. Readers are also cautioned that disclosed test rates and results are not necessarily indicative of long-term performance or of ultimate recovery. 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, the risk of adverse determinations by governmental authorities, the risk of arbitrating and enforcing claims against entities that may claim sovereignty and other risks associated with international activity and foreign governmental sovereignty over the areas in which the Company's operations are conducted. For further information on WesternZagros and the risks associated with its business, please see the Company's Annual Information Form dated March 22, 2013 ("AIF") 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 contingent resources 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. The 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 thousand 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 the AIF and its material change report dated February 13, 2014 contain additional detail with respect to the Company's resource assessments and includes the significant risks and uncertainties associated with the estimates and the recovery and development of the resources, and the specific contingencies which prevent the classification of the contingent resources as reserves. In addition, total or combined mean estimates of resources which are presented herein 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 and the material change report for a detailed breakdown of the high (P10), low (P90) and best (P50) estimates for each of the individual reservoir assessments.

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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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