WesternZagros Resources Ltd.
TSX VENTURE : WZR

WesternZagros Resources Ltd.

November 06, 2013 05:15 ET

WesternZagros's Kurdamir-3 Well Tests Further Oil; Supports Field Commerciality

CALGARY, ALBERTA--(Marketwired - Nov. 6, 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") has completed testing operations in the Oligocene reservoir of the Kurdamir-3 appraisal well on the Kurdamir oil and gas discovery in the Kurdistan Region of Iraq. Although the testing operations took longer than anticipated due to mechanical difficulties, the results of the third and fourth drill stem tests (DST #3 and DST #4) confirm the presence of light oil, with an oil-water contact at a depth of at least -2,049 metres subsea ("mSS"), which is a minimum of 33 metres deeper than the lowest known oil at -2,016 metres from the Kurdamir-2 well. The results continue to confirm the scale of the Kurdamir oil discovery. Following the testing of Kurdamir-2, the Company's independent resource evaluators confirmed that the Kurdamir Oligocene reservoir holds a mean estimate of 390 million barrels of gross unrisked contingent resources of oil, and an additional 327 million barrels of oil equivalent of gross unrisked contingent resources of gas and condensate. Although the Company has yet to present the latest findings to its independent resource evaluators, internal evaluations support that the most likely outcome will result in no material change to the current contingent resource estimates.

"Based on the Kurdamir-3 results and the other appraisal activities on the Kurdamir Block to date, we are working towards filing a Declaration of Commerciality for the Kurdamir discovery with the Kurdistan Regional Government ("KRG"). We are planning to file the development plan with the KRG in 2014 upon integration of the well results with the interpretation of the recently-shot 3D seismic program, and the results of an extended well test planned for Kurdamir-2," said Simon Hatfield, Chief Executive Officer of WesternZagros.

The earlier Kurdamir-1 exploration well discovered a significant volume of natural gas above an oil column in the Oligocene. Subsequently, the Kurdamir-2 appraisal well defined the oil column from -1,838 mSS down to a lowest known oil at -2,016 mSS. Now the Kurdamir-3 appraisal well tests, pressure data and log data have resulted in an interpreted oil-water contact to be at least-2,049 mSS.

DST #3 and DST #4 both flowed 37 degree API oil at rate of 633 barrels of oil per day ("bbl/d") and 885 bbl/d respectively. 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. The total fluid volumes flowed in each test contained approximately 55 percent water. Well log data and fluid composition supports that the water was a contaminant in the tests and was sourced from deeper than the tested intervals via channels in the cement behind well casing. Flow rates were lower than expected due to the lower density of fractures encountered in the Oligocene reservoir at Kurdamir-3 in comparison with Kurdamir 1 and 2.

Expert analysis by a third party has concluded that due to problems with cement bond integrity there was water channeling upwards through the cement in the well bore annulus that connects DST intervals #3 and #4 to the deeper DST #2 interval. DST #2 straddled the oil-water contact and tested both oil and water. The petrophysical analysis of the DST #3 and DST #4 intervals does not indicate the presence of movable formation water. This further supports that the source of the water in the DST #3 and #4 is from deeper within the DST #2 interval.

The Company will be working with its independent resource evaluators to further refine its contingent and remaining prospective resources estimates.

The Company is actively evaluating horizontal well options for future operations which are expected to maximize the deliverability of light oil from the field. Analysis of the 3D seismic data will assist in locating future Kurdamir wells in areas of the Oligocene reservoir likely to have higher fracture density.

Focus will now turn to additional appraisal and development drilling. As a first step in this process, the Operator is in discussion with the KRG to conduct an extended well test on the Kurdamir-2 well. This is anticipated to commence in Q1 2014.

"Our Kurdistan appraisal and development plans show enormous promise and with the expected opening of a new export pipeline by 2014, WesternZagros is well positioned to commence development to help fulfill the Kurdistan Region's stated goal of exporting 300,000 barrels of oil in the near term and 1 million barrels by 2015," Hatfield said.

CONFERENCE CALL

WesternZagros will host a live audio conference call on Wednesday, November 6, 2013 to discuss the Kurdamir-3 testing results. The investment community is invited to participate in the conference call, which will begin at 12:00 P.M. Mountain Standard Time (MST) (2:00 PM EST / 7:00 PM GMT). You may participate in the call by telephone at 416-340-2216 or toll free at 1-866-223-7781.

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/ 1-800-408-3050 and entering the passcode: 2197761.

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, 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. 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, timely receipt of all necessary stock exchange approvals, 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 ("AIF") which is available on SEDAR at www.sedar.com.

In addition, statements relating to "contingent 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. "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 contingent resources 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 contains 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, the mean estimates of contingent resources which are presented herein are the average from the probabilistic assessment that was completed for the Oligocene reservoir. Readers should refer to the AIF for a detailed breakdown of the high (P10), low (P90) and best (P50) estimates for the reservoir assessment.

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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