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Press release from Marketwire

WesternZagros Completes Successful Oil Test at Kurdamir-2 and Prepares for Further Appraisal

Tuesday, December 11, 2012

WesternZagros Completes Successful Oil Test at Kurdamir-2 and Prepares for Further Appraisal07:30 EST Tuesday, December 11, 2012CALGARY, ALBERTA--(Marketwire - Dec. 11, 2012) -NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR DISSEMINATION IN THE UNITED STATESWesternZagros Resources Ltd. (TSX VENTURE:WZR) ("WesternZagros" or "the Company") and the Operator, Talisman (Block K44) B.V. ("Talisman"), is preparing to complete the Kurdamir-2 well after successfully finishing an additional cased-hole test in the Oligocene Formation (DST#7). The test was conducted over a 24 metres thick interval between depths of 2,528 metres and 2,552 metres. It achieved a stabilized flow rate of 2,184 barrels per day ("bbl/d") of light, 42 degree API oil, together with 10.4 million cubic feet per day ("mmcf/d") of natural gas. The gas to oil ratio likely indicates a partial contribution from the gas cap due to free gas drawdown through natural fractures in the reservoir. The 3.5 inch tubing size used to conduct this test, together with the unanticipated gas contribution from the gas cap, restricted the oil flow from the reservoir. As a result, the Operator and WesternZagros have agreed that further tests of shallower zones in the Oligocene reservoir are unnecessary and are now working together on plans to realize the maximum oil production potential from the Oligocene reservoir in Kurdamir-2, potentially through an extended well test subject to the approval of the Kurdistan Regional Government.Simon Hatfield, WesternZagros's Chief Executive Officer commented,"This second cased hole test in the Oligocene further reinforces our view that Kurdamir is a giant discovery. The results of the entire Oligocene testing program have exceeded our expectations for both thickness of oil column and reservoir quality. It is apparent that the intervals tested have excellent permeability and, with optimally designed well completions to isolate the gas cap, are expected to yield oil production rates far in excess of the currently constrained rates. The results continue to support our belief that the Oligocene has the potential to hold over a billion barrels of recoverable oil. We are excited about our next appraisal well in the Kurdamir structure at Kurdamir-3. Kurdamir-3 will spud as soon as possible in the new year."This most recent cased-hole test was conducted over a perforated interval of 24 metres thick in fractured carbonates in the main porous zone of the Oligocene reservoir. The flow rates of 2,184 bbl/d of light oil and 10.4 mmcf/d of natural gas were recorded after flowing and stabilizing the well for three days at progressively larger choke sizes. The stabilized rate was achieved on a 44/64" choke with a wellhead flowing pressure of 1,705 psi. The oil was high-quality 42 degree API and no formation water was detected. The oil rate was restricted due to gas choking within the 3.5 inch completion tubing. The gas to oil ratio is indicative of gas being drawn down from the gas-oil contact, which is 83 metres above the test interval. Larger diameter tubing would allow higher oil test rates. For example, the Company expects that the interval previously tested in DST#6 could flow oil at rates up to 7,000 bbl/d if larger tubing is used. The Company is in the process of completing a similar analysis for DST#7 and to determine the optimum tubing size for the completion.The table below summarizes the flow rates from all three intervals tested within the 168 metres gross hydrocarbon column (22 metres of gas and 146 metres of oil) encountered in the Oligocene reservoir in the Kurdamir-2 well. The three intervals are composed of the two recent cased hole tests (DST#6 and DST#7) and the first open hole test conducted in March 2012 (DST#1) which was conducted across the gas-oil contact.Kurdamir-2 Oligocene Reservoir TestsTested Interval (metres)Stabilized Oil Rate (bbl/d)Gas Rate (mmcf/d)DST#1 Open hole test previously announced March 26, 20122,422-2,4779507.3DST#7 Second cased hole test2,528-2,5522,18410.4DST#6 First cased hole test previously announced Nov 19, 20122,570-2,5903,4508.8The Kurdamir-2 test and wireline log data have been analyzed in order to update contingent and prospective resource estimates for the Oligocene reservoir. The Company expects that the contingent resource estimates will materially increase. Updated resource estimates will be publicly released once confirmed by the Company's independent auditors. The current independently audited unrisked mean estimates for the contingent resources in the Oligocene reservoir of the Kurdamir structure are 990 billion cubic feet of gas, 39 million barrels ("MMbbl") of condensate and 147 MMbbl oil as of April 20, 2012. The current independently audited unrisked mean estimate for the prospective resources in the Oligocene reservoir is 1,150 MMbbl prospective oil resources as of May 31, 2012. Following the completion of Kurdamir-2, the Operator will move the rig to the Kurdamir-3 well location for an anticipated spud date in February 2013. 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 oil 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 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. All resource estimates presented are gross volumes for the indicated reservoirs, without any adjustment for working interest or encumbrance. "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, facility, corporate commitment or political risks). The chance of commerciality is the product of these two risk components. The estimates referred to herein have not been risked for either the chance of discovery or 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. The combined prospective resource estimate referenced was independently audited as of May 31, 2012 (Tertiary Eocene), April 20, 2012 (Tertiary Oligocene) and January 14, 2011 (Cretaceous) and is the gross volume for the indicated reservoirs, without any adjustment for the Company's working interest or encumbrances. The Company's Statement of Oil and Gas Information contained in its Annual Information Form dated March 26, 2012 ("AIF") and Material Change Reports dated April 23, 2012 and June 6, 2012 ("Material Change Reports") filed on SEDAR at www.sedar.com contain additional detail with respect to the resource assessments and include the significant risks and uncertainties associated with the estimates and the recovery and development of the resources and, in respect of contingent resources, the specific contingencies which prevent the classification of the resources as reserves.. In addition, the combined mean estimate of prospective resources referenced is an arithmetic sum of the mean estimates for the three individual reservoirs on the Kurdamir structure and each such individual mean estimate is the average from the probabilistic assessment that was completed for the reservoir. Readers should refer to the AIF and the Material Change Reports for a detailed breakdown of the high (P10), low (P90) and best (P50) estimates for each of the individual reservoir assessments. 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.FOR FURTHER INFORMATION PLEASE CONTACT: 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 StevensonChief Financial Officer(403) 693-7007WesternZagros Resources Ltd.Tony KraljicVP Business Development(403) 693-7011WesternZagros Resources Ltd.Lisa HarrimanManager of Investor Relations(403) 693-7017investorrelations@westernzagros.comwww.westernzagros.comSmithfield GroupScott FultonDirector+44 (0) 20 7903 0641sfulton@smithfieldgroup.com