WesternZagros Resources Ltd.
TSX VENTURE : WZR

WesternZagros Resources Ltd.

April 23, 2012 07:30 ET

WesternZagros's Kurdamir-2 Well Discovers a Giant Oil Field in the Oligocene Reservoir

CALGARY, ALBERTA--(Marketwire - April 23, 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") is pleased to announce that the mean estimate of gross unrisked contingent resources ("Mean Contingent Resources") has increased to 147 million barrels of recoverable oil (corresponding to 464 million barrels of mean estimated gross discovered oil initially in place) and the mean estimate of gross unrisked prospective resources ("Mean Prospective Resources") has increased to 1.2 billion barrels of recoverable oil (corresponding to 3.6 billion barrels of mean estimated gross undiscovered oil initially in place) for the Oligocene reservoir in the Kurdamir Block. These results follow the major oil discovery at the Kurdamir-2 exploration well in the Kurdistan Region of Iraq. The significant increase in both Mean Contingent and Prospective Resources is due to the fact that Kurdamir-2 encountered a 118 meter light oil column with no indications of a water leg at the Kurdamir-2 location, proving that the oil leg in the Oligocene reservoir on the flank of the Kurdamir structure is involved in a much larger trap than was previously interpreted. The updated resource estimates are confirmed in an independent audit carried out by Sproule International Limited ("Sproule").

"We are delighted with these results as we have found what this company was created to find, and the reason we entered Kurdistan. The Kurdamir structure is proving to be one of the top oil discoveries of the decade and this is a company maker for us," said Simon Hatfield, WesternZagros's Chief Executive Officer. "The oil reservoir of the Kurdamir structure extends further than the area previously assessed and we have not yet found its limits. In addition there is still more news to come on this well as we drill deeper into the Eocene and Cretaceous reservoirs and conduct further testing of the Oligocene oil leg in the coming months."

Contingent Resources

The Company reports an increase of approximately 400 percent of the Mean Contingent Resources in the Oligocene reservoir in the Kurdamir Block to 147 million barrels of oil ("MMbbl"). When gas and condensate are included the Mean Contingent Resources equal 384 million barrels of oil equivalent ("MMBOE"), as shown in Table 1(a) below. For completeness, the corresponding petroleum initially-in-place estimates are also included in Table 1(b) below.

Prospective Resources

The Company also reports an increase of approximately 300 percent in the Mean Prospective Resources for the Oligocene reservoir in the Kurdamir Block to 1.2 billion barrels of oil ("Bbbl"), or 1.4 billion barrels of oil equivalent ("billion BOE") when gas and condensate are included, as shown in Table 1(c) below. For completeness, the corresponding petroleum initially-in-place estimates are also included in Table 1(d) below.

The Kurdamir-2 exploration well is currently drilling through the Eocene reservoir at a depth of approximately 3,114 metres and is encountering numerous oil shows. Operations, to date, remain on time and budget. WesternZagros anticipates that the deeper Eocene and Cretaceous reservoirs will be drilled and evaluated by the end of the second quarter of 2012. The Company is working with the operator, Talisman (K44) B.V. ("Talisman"), to examine additional testing options focused on the full 118 metres of gross oil pay in the Oligocene after the well has met the PSC commitments. The co-venturers are also planning a 3D seismic program and a further appraisal well to help determine the ultimate size of the Oligocene reservoir.

WesternZagros will host a conference call on Monday, April 23, 2012 to discuss the Sproule audited resource estimates. The investment community is invited to participate in the conference call, which will begin at 7:00 A.M. Mountain Standard Time (9:00 AM Eastern Standard Time). The news release announcing the Sproule audit results, updated Corporate Presentation and the Sproule Audit Letter will be posted to the Company website, www.westernzagros.com prior to the conference call. You may participate in the call by telephone at 416-340- 2217 or toll free at 1-866-696-5910 (pass code: 7276755).

A replay of the conference call will be available on the Company website, www.westernzagros.com, following the call. Also, a replay may be accessed by telephone at 905-694-9451 / 800-408-3053 (pass code: 7476696).

Sproule carried out its independent audit 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 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.

Tables 1(a) and 1(c), below, provide estimates of the gross unrisked contingent and prospective oil, and oil equivalent resources in all of the Kurdamir reservoirs, including this latest Sproule audit of the Oligocene reservoir.

Tables 1(b) and 1(d), below, provide estimates of the gross unrisked discovered (oil and gas) and undiscovered (oil) initially-in-place, included in this latest Sproule audit of the Oligocene reservoir of the Kurdamir structure.

Low Best High Mean
Estimate(7 ) Estimate(8 ) Estimate(9 ) Estimate(10 )
Prospect Reservoir Hydrocarbon P90 P50 P10 Mean
Table 1(a) Type MMbbl/Bcf MMbbl/Bcf MMbbl/Bcf MMbbl/Bcf
Gross Unrisked
Contingent Resources (1),(2)
Kurdamir Tertiary Oligocene Oil 39 124 282 147
Kurdamir Block Oil,
Gas and Condensate
Solution Gas 90 170 350 200
As of Apr 20, 2012 Associated Gas(6 ) 635 965 1,380 990
Condensate 21 37 58 39
Kurdamir Total Mean MMBOE(11) - Gross Unrisked Contingent Resources 384
Low Best High Mean
Estimate(7 ) Estimate(8 ) Estimate(9 ) Estimate(10 )
Prospect Reservoir Hydrocarbon P90 P50 P10 Mean
Table 1(b) Type MMbbl/Bcf MMbbl/Bcf MMbbl/Bcf MMbbl/Bcf
Gross Discovered Petroleum (Oil and Gas) Kurdamir Tertiary Oligocene Oil
Initially-In-Place
266 442 695 464
Initially in Place (1),(4) Kurdamir Block Solution Gas
Initially-In-Place
350 570 870 590
As of Apr 20, 2012 Gas
Initially-In-Place
935 1,400 1,975 1,435
Low
Estimate(7
) Best
Estimate(8
) High
Estimate(9
) Mean
Estimate(10
)
Prospect Reservoir Hydrocarbon P90 P50 P10 Mean
Table 1(c) Type MMbbl MMbbl MMbbl MMbbl
Gross Unrisked Prospective Resources(1),(3)
Kurdamir Block Oil, Gas and Condensate
Kurdamir Tertiary Oligocene Oil 289 996 2,208 1,150
As of Apr 20, 2012 MMBOE(11 ) 402 1,222 2,667 1,413
Low Best High Mean
Estimate(7 ) Estimate(8 ) Estimate(9 ) Estimate(10 )
Prospect Reservoir Hydrocarbon P90 P50 P10 Mean
Table 1(d) Type MMbbl/Bcf MMbbl/Bcf MMbbl/Bcf MMbbl/Bcf
Gross Undiscovered Petroleum (Oil)
Initially in Place (Unrisked) (1),(5) Kurdamir Block Kurdamir Tertiary Oligocene Oil
Initially-In-Place
1,900 3,468 5,533 3,622
As of Apr 20, 2012 Solution Gas
Initially-In-Place
2,475 4,455 6,995 4,625

Notes to Tables 1(a), 1(b), 1(c) and 1(d):

(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, see the Company's Annual Information Form dated March 26, 2012 available at www.sedar.com.

(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 material change reports dated April 23, 2012, which is available at www.sedar.com, 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. In this case, 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) Discovered Petroleum Initially-In-Place (equivalent to discovered resources) is that quantity of petroleum that is estimated, as of a given date, to be contained in known accumulations on Company lands. The petroleum type for this property is crude oil and natural gas. The recoverable portion of discovered petroleum initially in place includes production, reserves, and contingent resources; the remainder is unrecoverable (see Table 1(a); there are no reserves or production for this reservoir).

(5) Undiscovered Petroleum Initially-In-Place (equivalent to undiscovered resources) is that quantity of petroleum that is estimated, as of a given date, to be contained in accumulations yet to be discovered on Company lands. The petroleum type for this property is crude oil and natural gas. The recoverable portion of undiscovered petroleum initially-in-place is referred to as prospective resources; the remainder is unrecoverable (see Table 1(c)). These are the gross undiscovered initially-in-place volumes estimated for the Oligocene carbonate reservoir in the Kurdamir structure below the lowest known oil. The undiscovered petroleum initially-in-place has not been risked for chance of discovery.

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

(7) 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.

(8) 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.

(9) 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.

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

(11) 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 (the "Material Change Report"), which includes the following additional information: mean estimates of the gross unrisked contingent resources and prospective resources for various prospects on the Company's Garmian block, the specific contingencies which prevent the classification of contingent resources for the Kurdamir and Garmian blocks as reserves, 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, and the significant factors relevant to the estimates.

The Kurdamir-2 exploration well was spudded on October 25, 2011 and is operated by Talisman. The well is located approximately two kilometres northeast of the Kurdamir-1 discovery well and is targeting the Oligocene, Eocene and Cretaceous reservoirs on the flank of the structure where the combined potential oil interval is likely at maximum thickness. WesternZagros and Talisman each have a 40 percent working interest in the Kurdamir Block with the Kurdistan Regional Government ("KRG") holding the remaining 20 percent.

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'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 operational information, future drilling and testing plans, 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, 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 26, 2012 (the "AIF"), which is available on SEDAR at www.sedar.com.

In addition, statements relating to "contingent resources" and "prospective 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.

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

Contact Information

  • WesternZagros Resources Ltd.
    Greg Stevenson
    Chief Financial Officer
    (403) 693-7007

    WesternZagros Resources Ltd.
    Tony Kraljic
    VP Business Development
    (403) 693-7011

    WesternZagros Resources Ltd.
    Lisa Harriman
    Manager of Investor Relations
    (403) 693-7017
    investorrelations@westernzagros.com
    www.westernzagros.com