WISR Ltd V.WZR

RE:Canadafox

[canadafox]

i-I;  The NR was very much as expected post-DST #2 but it was not 'good'.  The basic situation is that Talisman have contrived by unfortunate surface location selection and p*ss poor operational execution to deny WZR shareholders what should have been a $1+ Bn WI nett NPV value.  The good aspect is that we very likely have 400 MM bbls light oil or near 700 MM boe ( oil+condensate+gas ) in Kurdamir.  But, K-3 is consigned to the scrapyard after multiple $10millions in costs and is very unlikely to figure in production without a 100-1 shot at remediation.  K-2 will be re-entered in 2014 in order to prove reservoir production potential and generally fiddle around to get data because K-3 is piled up against the canyon wall...

On future value as 'we are where we are'...  The H-1 well is nearing the Jeribe reservoir and is a lo-risk and hi-flow Mio-Oligocene prospect because it is crestal and proximal to S-1 Jeribe.  Jeribe results were first targeted for mid-November but that may have moved by weeks.  I need to check.  In any case, the contingent resources figure cannot move that much with this well as it is not downdip enough to allow a large CPR'd resource addition but what we should get ( pray to the Lord ) is similar production.  This is where it gets interesting because S-1 is capable with the planned workover of a stable 10K bbls/day and H-1 may get there too.  If so WZR could have 40% of 20K bbls/day of cost recovery oil in Q2/Q3-2014 at export pricing if the new Taq Taq pipeline and associated payments system actually happens.  The value to WZR would be significant and will influence the funding effort in 2014.  This will be needed as ex-2013 they will have around $70m which is sufficient for Qulijan or Alyan or whatever as their remaining Garmian commitment well.  K-4 in H-2 2014 is a more complex ( horizontal ) well and presumably will need cash significant inputs available by mid-2014.  Alternatively, the bank could send the money directly to Talisman's 'Kurdamir Value Destruction Unit' and we could all save ourselves a further 9 months of angst.  So, H-1 is an important near-term event for production and cashflow reasons.

Then, Baram-1, which WZR think is more likely than before to be a separate structure having run an initial pass over the 3D seismic.  CofS remains at 35% and this is a good figure in an exploration scenario.  Get out your prayer mat for that one as it could have 200 MM bbls.  Unfortunately, the fluid type is the difference between a $1 and $2 SP assuming H-1 is good.

In the background is the new export pipeline expected by end-2013 and that is of overriding importance as it spells monetisation for those with export-quality production; like WZR.

To sum up; the prospective value of WZR has dropped as we have probably lost significant prospective resources at Kurdamir with the OWC conclusion. WZR's future value is still high however as Sarqala area, Baram and Kurdamir alone look likely to prove at least 500 - 750 MM bbls oil and that is worth approx. $1.5 Bn - $2 Bn nett with cost recovery included.  The risks have also increased IMO as TLM are still in the frame for K-4 and they have proven themselves not up to the challenge.  Current MC <$400m and x4 and x5 in prospect.  Your choice...