WesternZagros Resources Ltd.

TSX VENTURE : WZR


WesternZagros Resources Ltd.

January 28, 2013 07:30 ET

WesternZagros's Kurdamir Contingent Resources Jump to Over 1 Billion Barrels of Oil Equivalent

CALGARY, ALBERTA--(Marketwire - Jan. 28, 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") is pleased to announce a fourfold increase in the Company's contingent resource estimates at the giant oil discovery on the Kurdamir Block in the Kurdistan Region of Iraq. The total mean estimate of gross unrisked contingent resources ("Mean Contingent Resources") at Kurdamir has increased to 590 million barrels of oil ("MMbbl") in the Oligocene and Eocene reservoirs. When gas and condensate are included the Mean Contingent Resources exceed 1 billion barrels of oil equivalent as shown in Table A below. These estimates were audited by independent reserves evaluator, Sproule International Limited ("Sproule").

Simon Hatfield, WesternZagros's Chief Executive Officer commented,

"There's a saying in the oil industry: big fields get better with time, and Kurdamir is proof of that. The Kurdamir structure has the potential to be the largest light oil field discovered in Kurdistan, with the possibility that it extends on to our neighbouring Garmian Block. We're therefore highly motivated to drill the Kurdamir-3 well on the Kurdamir Block and the Baram-1 well on the Garmian Block this year to further delineate this giant discovery."

Table A: Mean estimates of the gross unrisked contingent and prospective oil and oil equivalent resources in the Kurdamir Block as of January 23, 2013. The resources presented are the gross volumes estimated for the indicated reservoirs without any adjustments for the Company's working interest or encumbrances.

Kurdamir Block Reservoir
Category Oligocene Eocene Cretaceous Category Total
Contingent Resources Oil (MMbbl) 435 155 590
Contingent Resources Oil & Gas (MMBOE) 786 226 1012
Prospective Resources Oil (MMbbl) 939 107 130 1176
Prospective Resources Oil & Gas (MMBOE) 1139 138 206 1483

The Mean Contingent Resources in the Oligocene reservoir at Kurdamir have increased to 435 MMbbl of oil from the previously announced 147 MMbbl. When gas and condensate are included the Mean Contingent Resources in the Oligocene equal 786 million barrels of oil equivalent ("MMBOE").

This assessment also recognizes contingent resources in the Eocene reservoir on the Kurdamir Block for the first time. Mean Contingent Resources for the Eocene are 155 MMbbl of oil. When gas and condensate are included, the Mean Contingent Resources equal 226 MMBOE.

The corresponding mean estimate of gross discovered petroleum initially-in-place ("Mean Discovered In-Place Resources") increases to 2 billion barrels of oil. When gas and condensate are included, the Mean Discovered In-Place Resources equal 2.8 billion barrels of oil equivalent.

The mean estimate of gross unrisked prospective resources ("Mean Prospective Resources") for the Oligocene, Eocene and Cretaceous reservoirs combined is now 1.2 billion barrels of oil on the Kurdamir Block. When gas and condensate are included the Mean Prospective Resources equal 1.5 billion barrels of oil equivalent. As expected, these prospective resources have decreased from those previously announced primarily due to conversion from the prospective to the contingent category.

This is the fourth successive independently audited upward revision of contingent resources since the Kurdamir Discovery was announced in November 2009. The Company does not assess contingent resources for the Cretaceous reservoir due to insufficient confidence from test data.

Based on reservoir data obtained from the Kurdamir testing program and independent engineering assessments, the Company predicts that sustainable production rates of 7,000 to 11,000 barrels of oil per day are possible for individual wells in the Oligocene reservoir utilizing horizontal drilling and completions technology. These sustainable production rates would follow higher initial flow rates. Horizontal wells will also minimize gas production from the oil leg where it underlies the gas cap.

The operator, Talisman (Block K44) B.V. ("Talisman"), is currently preparing to drill the Kurdamir-3 appraisal well in order to continue delineating the field. The anticipated spud date is early February 2013. In addition, the Company is currently preparing to drill the Baram-1 exploration well on the Garmian Block (see Figure 1). The Baram-1 well has the potential to prove the extension of the Kurdamir Discovery onto the Garmian Block. A 3D seismic program on the Kurdamir Block is also underway. 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.

To view Figure 1: Kurdamir Discovery: Top Oligocene Depth Structure Map, please visit the following link: http://media3.marketwire.com/docs/849402_map.pdf.

WesternZagros will host a webcast on Tuesday, January 29, 2013, to discuss the Sproule audited resource estimates. The investment community is invited to participate in the webcast, which will begin at 9:00 A.M. Mountain Standard Time. Access to the webcast is available at http://www.gowebcasting.com/4147. A replay of the webcast will be available on the Company website, www.westernzagros.com, following the presentation.

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 recoverable contingent and prospective oil, and oil equivalent resources for the Oligocene, Eocene and Cretaceous reservoirs included in this latest Sproule audit.

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, Eocene and Cretaceous reservoirs of the Kurdamir structure.

Table 1(a)
Gross Unrisked Contingent Resources(1),(2)
Kurdamir Block Oil, Gas and Condensate
As of Jan 23, 2013
Low
Esti-
mate
(7)
Best
Esti-
mate
(8)
High
Esti-
mate
(9)
Mean
Esti-
mate
(10)
Prospect Reservoir Hydrocarbon P90 (1C) P50 (2C) P10 (3C) Mean
Type MMbbl/
Bcf
MMbbl/
Bcf
MMbbl/
Bcf
MMbbl/
Bcf
Kurdamir Tertiary Oligocene Oil 240 410 667 435
Solution Gas 310 525 835 555
Associated Gas(6) 860 1220 1690 1250
Condensate 30 49 72 50
MMBOE(11) 465 750 1160 786
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 590
Kurdamir Total Mean MMBOE - Gross Unrisked Contingent Resources 1012
Table 1(b)
Gross Discovered Petroleum (Oil and Gas) Initially in Place (Unrisked) (1),(4)
Kurdamir Block
As of Jan 23, 2013
Low
Esti-
mate
(7)
Best
Esti-
mate
(8)
High
Esti-
mate
(9)
Mean
Esti-
mate
(10)
Prospect Reservoir Hydrocarbon P90 P50 P10 Mean
Type MMbbl/
Bcf
MMbbl/
Bcf
MMbbl/
Bcf
MMbbl/
Bcf
Kurdamir Tertiary Oligocene Oil Initially-In-Place 969 1381 1872 1406
Solution Gas Initially-In-Place 1260 1770 2355 1795
Gas Initially-In-Place 1305 1820 2450 1855
MMBOE(11) 1397 1979 2673 2014
Kurdamir Tertiary Eocene Oil Initially-In-Place 344 572 928 614
Solution Gas Initially-In-Place 565 1040 1730 1100
Gas Initially-In-Place 130 185 255 185
MMBOE 460 776 1259 828
Kurdamir Total Mean MMbbl Oil Only - Gross Unrisked Discovered Petroleum Initially-In-Place 2020
Kurdamir Total Mean MMBOE - Gross Unrisked Discovered Petroleum Initially-In-Place 2843
Table 1(c)
Gross Unrisked Prospective Resources (1),(3)
Kurdamir Block Oil, Gas and Condensate
As of Jan 23, 2013
Low
Esti-
mate
(7)
Best
Esti-
mate
(8)
High
Esti-
mate
(9)
Mean
Esti-
mate
(10)
Prospect Reservoir Hydrocarbon P90 P50 P10 Mean
Type MMbbl MMbbl MMbbl MMbbl
Kurdamir Tertiary Oligocene Oil 268 884 1649 939
Solution Gas 345 1135 2085 1200
MMBOE(11) 326 1073 1997 1139
Kurdamir Tertiary Eocene Oil 31 91 202 107
Solution Gas 50 160 350 185
MMBOE 39 118 260 138
Kurdamir Creta-
ceous
Oil 38 108 243 130
Solution Gas 75 225 525 275
Associated Gas(6) 65 140 260 155
Condensate 2 4 8 4
MMBOE 63 173 382 206
Kurdamir Sub Total Mean MMbbl Oil Only - Gross Unrisked Prospective Resources 1176
Kurdamir Sub Total Mean MMBOE - Gross Unrisked Prospective Resources 1483
Table 1(d)
Gross Undiscovered Petroleum (Oil and Gas) Initially in Place (Unrisked) (1),(5)
Kurdamir Block
As of Jan 23, 2013
Low
Esti-
mate
(7)
Best
Esti-
mate
(8)
High
Esti-
mate
(9)
Mean
Esti-
mate
(10)
Prospect Reservoir Hydrocarbon P90 P50 P10 Mean
Type MMbbl/
Bcf
MMbbl/
Bcf
MMbbl/
Bcf
MMbbl/
Bcf
Kurdamir Tertiary Oligocene Oil Initially-In-Place 986 3126 4873 3051
Solution Gas Initially-In-Place 1280 4060 6125 3895
MMBOE(11) 1199 3803 5894 3700
Kurdamir Tertiary Eocene Oil Initially-In-Place 153 388 708 417
Solution Gas Initially-In-Place 250 680 1275 730
MMBOE 195 501 921 539
Kurdamir Creta-
ceous
Oil Initially-In-Place 223 512 1014 574
Solution Gas Initially-In-Place 430 1095 2165 1215
Associated Gas Initially-In-Place 115 235 425 255
MMBOE 314 734 1446 819
Kurdamir Total Mean MMbbl Oil Only - Gross Unrisked Undiscovered Petroleum Initially-In-Place 4042
Kurdamir Total Mean MMBOE - Gross Unrisked Undiscovered Petroleum Initially-In-Place 5058
Notes to Tables 1(a), 1(b), 1(c) and 1(d):
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.
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 report dated January 25, 2013, which is available at www.sedar.com, contains additional detail on the specific contingencies which prevent the classification of these contingent resources as reserves.
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.
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 prior to production. 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).
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 reservoirs in the Kurdamir structure below the lowest known oil. The undiscovered petroleum initially-in-place has not been risked for chance of discovery.
The gross unrisked contingent resources for gas reflect reductions for condensate recovery, surface losses, and fuel gas.
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.
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.
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.
Mean Estimate is the average from the probabilistic assessment.
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: the specific contingencies which prevent the classification of contingent resources for the Kurdamir block 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.

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 future drilling and appraisal plans, and the timing associated therewith, as well as predicted production rates. 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.

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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