WesternZagros Resources Ltd.
TSX VENTURE : WZR

WesternZagros Resources Ltd.

June 06, 2012 17:17 ET

WesternZagros's Kurdamir-2 Well More than Doubles Oil Resource Potential in the Eocene Reservoir

CALGARY, ALBERTA--(Marketwire - June 6, 2012) -

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WesternZagros Resources Ltd. (TSX VENTURE:WZR) ("WesternZagros" or "the Company") today announces an update of the Company's ongoing exploration and appraisal program, and a substantially revised Prospective Resource Assessment of the Eocene reservoir for Kurdamir. The Eocene reservoir is the second of the three targeted reservoirs in the Kurdamir-2 well (currently drilling). The revised assessment is based upon the Kurdamir-2 well encountering an interpreted oil bearing, fractured Eocene reservoir section with a gross thickness of 275 metres. The revised resource estimate is confirmed in an independent audit carried out by Sproule International Limited ("Sproule").

Headlines:

  • The Company reported a substantial increase in the mean estimate of gross unrisked prospective resources ("Mean Prospective Resources") in the Eocene reservoir at Kurdamir. The revised Mean Prospective Resource is now 278 MMbbl of oil as of June 1, 2012 compared to 124 MMbbl reported previously.
  • The Kurdamir-2 well is currently drilling ahead at 3,427 metres. The 9-5/8 inch casing was cemented successfully at 3,140 metres. Wireline logs were successfully run across the Eocene interval for the first time, as this was not possible in the Kurdamir-1 well. The analysis of the wireline logs has resulted in the Company substantially increasing its Eocene prospective resource assessment.
  • After eight months on extended well test, Sarqala-1 has produced approximately one million barrels ("MMbbl") of light oil.

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

"The petroleum potential of our exploration blocks, which has always been highly promising, continues to exceed our expectations particularly at Kurdamir. Doubling our resource estimates in the Eocene reservoir, after tripling our estimates in the first reservoir target, the Oligocene, bodes well for the potential in the third reservoir target in the Cretaceous still ahead of us."

Operational Update

In the Kurdamir-2 well, after an intermediate casing was set in the Aaliji seal at 3,140 metres, drilling continues at the current depth of 3,427 metres, with the approximate total depth anticipated to be 4,072 metres. Under the Kurdamir Production Sharing Contract ("PSC") commitments, the Kurdamir-2 well is required to be drilled by June 30, 2012 which will then be followed by a testing program of indicated pay intervals of the Cretaceous reservoir. In addition, the Company is working with the operator, Talisman (Block K44) B.V. ("Talisman") to examine options for cased hole testing of the 118 metres of gross oil pay in the Oligocene and the 275 metres of gross oil pay in the Eocene. The co-venturers are also planning a 3D seismic program over the Kurdamir structure and a further appraisal well (Kurdamir-3) to assess the ultimate size of the Oligocene and Eocene reservoirs.

After eight months on extended well test, the Jeribe and Upper Dhiban Formations in Sarqala-1 have produced approximately one million barrels ("MMbbl") of light oil. The Company is in discussions with the Ministry of Natural Resources of the Kurdistan Regional Government with respect to a declaration of commerciality and the submission of a development plan for Sarqala. A planned wireline program commenced on May 28, 2012 to remove the pressure gauges in the well and prepare the well for continued production. During the attempted removal of the gauges, the subsurface valve malfunctioned. The Company is currently securing specialized equipment to remediate the issue. It is anticipated that this intervention could take a minimum of one month to complete.

Revised Resource Assessment: Kurdamir-2 Well Eocene Reservoir

During the drilling of the Kurdamir-2 well an interpreted oil bearing, fractured Eocene reservoir section with gross thickness of 275 metres was encountered similar to the Eocene reservoir section encountered in Kurdamir-1. A petrophysical interpretation of the Kurdamir-2 wireline logs through the Eocene reservoir has been completed and this, together with mud gas data, hydrocarbon shows from cuttings, correlation to the Kurdamir-1 well and revised seismic mapping, have resulted in a revised prospective resource assessment. Similar to the Oligocene reservoir, the lowest known oil in Kurdamir-2 is interpreted to indicate that the oil column extends significantly deeper than the limit of four-way closure of the Kurdamir structure, as mapped on seismic. This indicates that the Eocene reservoir is involved in a much larger trap which also likely extends off the Kurdamir Block onto the adjacent blocks. Based upon both this new information and the fact that no formation water was encountered while drilling this Eocene reservoir section, the revised assessment for Mean Prospective Resources has increased from 124 MMbbl of oil to 278 MMbbl of oil on the Kurdamir Block as of June 1, 2012.

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.

Table 1, below, provides an estimate of the gross unrisked prospective oil, and oil equivalent, resources in the Eocene reservoir on the Kurdamir Block including this latest Sproule audit.

Table 1

Gross Unrisked
Low
Estimate
(3)
Best
Estimate
(4)
High
Estimate
(5)
Mean
Estimate
(6)
Prospective Resources(1),(2) Prospect Reservoir Hydrocarbon P90 P50 P10 Mean
Kurdamir Block Oil, Gas Type MMbbl MMbbl MMbbl MMbbl
and Condensate Kurdamir Tertiary Eocene Oil 68 228 547 278
As of June 1, 2012 MMBOE(7) 87 308 793 392

Notes to Tables 1,
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 http://www.sedar.com/.
2. 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.
3. 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.
4. 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 or 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.
5. 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.
6. Mean Estimate is the average from the probabilistic assessment.
7. 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. The oil equivalent total includes the oil prospective resource reported above, plus solution gas prospective, associated gas, and the associated condensate.

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 prospective resources and contingent resources for various prospects on the Company's Kurdamir and Garmian blocks, 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 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 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.

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