CALGARY, ALBERTA--(Marketwired - Oct. 6, 2015) -
NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR DISSEMINATION IN THE UNITED STATES
WesternZagros Resources Ltd. (TSX VENTURE:WZR) ("WesternZagros" or "the Company") announces its production of light oil in the Kurdistan Region of Iraq averaged approximately 5,000 barrels per day in the third quarter. As previously disclosed, operatorship of the Garmian Block was to transition from WesternZagros to Gazprom Neft Middle East B.V ("Gazprom Neft") at the end of the exploration period for the block pursuant to agreements entered into in 2012. While the Company had been requested to continue operatorship for a period of time following the end of exploration, the co-venturers are now in the process of implementing this transfer of operatorship.
Garmian Block
Production from the Sarqala-1 well in the third quarter remained on target, averaging approximately 5,000 barrels of light oil per day ("bbl/d") and has averaged approximately 5,200 bbl/d since commencement of production from the well on February 11, 2015. Since the time of the first extended well test in 2011, the well has now produced 2.2 million barrels of oil with no formation water.
Hasira-1 has been successfully and safely suspended and future options to utilize the well bore are being evaluated.
"We are now ready to transfer operatorship to Gazprom Neft according to the original 2012 agreement," stated CEO Simon Hatfield. "WesternZagros took the initial exploration risk that resulted in the Sarqala light oil discovery and also started production to unlock the potential of the block. Now it is time to turn development operations over to a world-class operator with extensive technical, operational and regional expertise in crude oil production, refining and marketing. Gazprom Neft is a US$10 billion company that shares our vision of the Garmian Block's potential."
Operatorship is expected to transfer on or before the end of the first quarter of 2016. Pursuant to amendments to the Production Sharing Contract entered into in 2012, Gazprom Neft was to assume operatorship with the move from the exploration period to the development period in December 2013. However, this action was deferred at the time and WesternZagros was asked by its co-venturers to remain as the operator during the interim period.
The current period is a convenient time to transfer operatorship while the Garmian Field Development Plan ("FDP") is under final review by the Kurdistan Regional Government ("KRG"). Based on the current anticipated timing of FDP approval, the Sarqala-2 development well will likely be spud in the first quarter of 2016. During this time, the co-venturers will finalize the transfer of operatorship and continue to evaluate lower-cost drilling rigs and support contracts to reduce capital costs.
Gazprom Neft Group consists of more than 70 production, refining and sales subsidiaries in Russia, neighbouring countries and further afield. It refines approximately 80 percent of all the oil it produces, one of the highest ratios of all Russian companies in the sector. It is the third-largest oil company in Russia by refining volume and the fourth largest in terms of production. Gazprom Neft is the operator of two other blocks in the Kurdistan Region, where exploration drilling programs are ongoing, and is the operator of the US$4 billion, production-stage Badra Project in western Iraq.
Kurdamir Block
WesternZagros and its operator in the Kurdamir Block, Repsol S.A., continue to actively work with the KRG to advance the development plan for the Kurdamir oil and natural gas discovery. It is expected that these plans will be finalized in the first quarter of 2016.
Corporate
As the operatorship of the Garmian Block is transitioned to Gazprom Neft, WesternZagros is looking to apply its extensive core expertise in exploration and early-stage development, as well as its well-capitalized balance sheet, to assess other potential opportunities in the Kurdistan Region of Iraq, and elsewhere in the Middle East and North Africa.
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 statements relating to, but not limited to, operational information, future development plans and the timing associated therewith, expected production rates, sales revenues and field netbacks. Forward-looking information typically contains statements with words such as "anticipate", "estimate", "expect", "potential", "could", or similar words suggesting future outcomes. The Company cautions readers and prospective investors in the Company's securities to not 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.
Forward looking information is not based on historical facts but rather on management's current expectations as well as assumptions made by, and information currently available to management, concerning, among other things, outcomes of future well operations, plans for and results of drilling activity, future capital and other expenditures (including the amount, nature and sources of funding thereof), the availability of debt facilities, the continued ability to sell production in the domestic market and the prices to be received in connection therewith (estimated 2015 sales revenue and field netbacks are based on domestic oil prices in the range of $40 to $50 per barrel), anticipated operating costs, future economic conditions, future currency and exchange rates, continued political stability, continued security in the Kurdistan Region, timely receipt of any necessary co-venturer, government or regulatory approvals (including those required for the field development plans), the successful resolution of disputes, the Company's continued ability to employ qualified staff and to obtain equipment in a timely and cost efficient manner and the participation of the Company's co-venturers in joint activities. In addition, budgets are based upon WesternZagros's current development plans and anticipated costs, both of which are subject to change based on, among other things, the outcome of negotiations with co-venturers and the government, the actual outcomes of well operations and the installation and commissioning of facilities, unexpected delays, availability of future financing and changes in market conditions. 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 development and production; inherent uncertainties in interpreting geological data; changes in plans with respect to 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, risks relating to domestic refining capacity and continuing ability to access the domestic market, the uncertainty associated with any dispute resolution proceedings, the uncertainty associated with negotiating with foreign governments and risk associated with international activity, including the lack of federal petroleum legislation and ongoing political disputes and recent terrorist activities in Iraq in particular. For further information on WesternZagros and the risks associated with its business, please see the Company's Annual Information Form dated March 16, 2015 ("AIF") which is available on SEDAR atwww.sedar.com.
Non-IFRS Measures
Field netback is a non-IFRS measure that represents the Company's working interest share of oil sales, royalties and field operating expenses. Management believes that the field netback is a useful measure to analyze operating performance and provides an indication of the Company's results of business activities prior to other income and expenses. Field netback does not have a standard meaning under IFRS and may not be comparable to similar measures used by other companies. It should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS such as total income (loss) or cash flow from (used in) operating activities. See the "Financial Performance" section of the Company's second quarter MD&A dated August 12, 2015, for a reconciliation of field netback.
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