WesternZagros Resources Ltd.
TSX VENTURE : WZR

WesternZagros Resources Ltd.

August 01, 2012 12:00 ET

WesternZagros Welcomes Gazprom Neft as the Third Party Participant in the Garmian Block

CALGARY, ALBERTA--(Marketwire - Aug. 1, 2012) -

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

WesternZagros Resources Ltd. (TSX VENTURE:WZR) ("WesternZagros" or "the Company") announces that it has been informed by the Kurdistan Regional Government ("KRG") that Gazprom Neft Middle East B.V. ("Gazprom Neft B.V."), has been assigned as the Third Party Participant ("TPP") for the Garmian Production Sharing Contract ("Garmian PSC"). WesternZagros is the operator of the Garmian Block, which contains the producing Sarqala-1 oil well, the Mil Qasim discovery and several promising but undrilled exploration prospects. Gazprom Neft B.V., is a wholly owned subsidiary of JSC Gazprom Neft, which is the oil producing affiliate of OAO Gazprom. JSC Gazprom Neft is headquartered in St. Petersburg, Russia, and is majority owned by OAO Gazprom.

Headlines:

  • The KRG has chosen Gazprom Neft B.V. to be the Third Party Participant in the Garmian Block, with a 40 percent interest in the Garmian PSC. WesternZagros maintains its 40 percent interest.
  • WesternZagros will receive an approximate amount of $83 million in back costs from Gazprom Neft B.V. in connection with the TPP assignment, with the net amount retained by WesternZagros being $56 million after reconciliation with the KRG.
  • Operatorship will remain with WesternZagros until the commencement of the development period under the PSC.
  • WesternZagros and Gazprom Neft B.V. will each fund 50 percent of costs on the Garmian Block effective from June 1, 2012.

Simon Hatfield, WesternZagros's Chief Executive Officer, commented:

"We look forward to advancing our Garmian exploration and appraisal program, where we have had excellent success to date, with our new co-venturer. Gazprom Neft brings extensive technical and operational expertise in crude oil production, refining and marketing. The significant interest the KRG received in the Garmian third party interest opportunity and the participation of a major player like Gazprom Neft validates the potential of our assets and the growing international interest in the Kurdistan Region of Iraq."

WesternZagros executed the Garmian PSC with the KRG on July 25, 2011 following the subdivision of the original larger exploration block into the Garmian and Kurdamir Blocks. The Garmian PSC provided the KRG the right to assign up to a 40 percent interest in the Garmian PSC to a third party participant. These rights have now been exercised and the KRG has assigned a 40 percent interest to Gazprom Neft B.V. through an amendment to the Garmian PSC (the "Amended Garmian PSC"). WesternZagros will continue to hold a 40 percent participating interest and the KRG will hold the remaining 20 percent. Operatorship of the Garmian Block will remain with WesternZagros until the commencement of the development period as per the terms of the Amended Garmian PSC. At such time, operatorship will transfer to Gazprom Neft B.V.

Completion of the TPP assignment is subject to certain payments being made to WesternZagros no later than August 9, 2012. Under the terms of the Amended Garmian PSC, WesternZagros will receive approximately $83 million from Gazprom Neft B.V., representing 50 percent of the expenditures incurred by the Company on the Garmian Block to May 31, 2012. In addition, Gazprom Neft B.V. will fund 50 percent of all subsequent costs incurred on the Garmian Block. The Amended Garmian PSC also provides for an approximately $27 million reconciliation with the KRG.

Gazprom Neft B.V. is a wholly owned subsidiary of JSC Gazprom Neft, headquartered in St. Petersburg, Russia. JSC Gazprom Neft, in turn, is a more than 95% owned subsidiary of OAO Gazprom, headquartered in Moscow. JSC Gazprom Neft is a vertically integrated oil company and one of the largest and fastest growing oil producers in Russia. Operations are focused on the exploration, development, production and sale of crude oil and gas, as well as oil refining and the marketing of petroleum products. JSC Gazprom Neft operates in the largest oil and gas regions in Russia and has oil production operations in a number of other countries including Iraq and Venezuela. It refines more than 80% of the oil it produces which is in terms of value an optimal level between production and processing. JSC Gazprom Neft is the fifth largest Russian oil company by crude oil production and is ranked in the top twenty globally, with oil equivalent production in excess of one billion tonnes.

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 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 amounts to be received from the TPP assignment, future funding commitments and future operatorship, and the timing 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, completion of the TPP assignment in accordance with the terms of the Amended Garmian PSC, 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, failure of the completion conditions of the Amended Garmian PSC to be met, 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 26, 2012 (the "AIF"), which is available on SEDAR at www.sedar.com.

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

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE

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