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.
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.
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.
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".