WesternZagros Resources (CVE:WZR) reported Thursday its second quarter results, ending the period with more than $167 million in working capital, fully funded for its planned activities as it continues to test its Kurdamir-3 well in Iraq and advance toward commercial production.
"We're continuing testing in the Kurdamir-3 well to provide valuable information on the Kurdamir Discovery as we progress towards commerciality and to help us plan future well locations," said CEO Simon Hatfield in the press release Thursday.
"In addition, our two Garmian wells, Baram-1 and Hasira-1, are drilling with completion anticipated in late Q4 2013 and early Q1 2014, respectively. Hasira-1 will help us in our development plans for our Sarqala Discovery."
The Kurdistan-focused junior oil and gas company holds two production sharing contracts in Iraq at the Kurdamir and Garmian blocks. WesternZagros holds a 40 per cent working interest in the Kurdamir block, while Talisman Energy(TSE:TLM), the operator of the well, holds a 40 per cent working interest, with the Kurdistan regional government holding the remainder. Drilling began at the Kurdamir-3 appraisal well on the Kurdamir oil discovery in February.
Earlier this month, the company revealed unexpected results from testing on the Kurdamir-3 well, after two drill stem tests were carried out. The first flowed a non-commercial volume of oil as well as spent acid, and the other encountered water at what the company believes to be either a transition zone or a oil-water contact. The findings of the test are difficult to interpret, it said last week. Two more tests are being conducted for upper zones in the reservoir.
Kurdamir 3 follows two prior wells, both of which were successful. "While these first two test results are not the best case scenario, we still have a large oil discovery with more work yet to be done to assess it fully," said Hatfield in a prior statement. Final results from the Kurdamir-3 well are expected late in the third quarter, or early in the fourth.
At its Garmian block, where the company also holds a production sharing contract, the Baram-1 well, in the northern portion of the block, was spudded earlier this month. The well is exploring whether the Baram structure is separate from Kurdamir, or a potential extension of the oil leg discovered in the Oligocene reservoir of the Kurdamir structure. WesternZagros is expecting the well to be drilled to a total depth of 3,800 metres by the end of the year.
If the extension is confirmed and it is oil bearing, the company believes that this could be the highest impact well of the 2013 drilling program, with the potential to add substantial contingent resources in both the Garmian and Kurdamir blocks.
Also at Garmian, the preliminary engineering design of the Sarqala-1 first phase central processing facility with 20,000 bbl/d capacity is advancing, the company said Thursday, with WesternZagros currently in discussions with its partner on the timing of declaring commerciality at the discovery.
"The timing of declaration of commerciality and submission of development plans are actively in discussion with our partners and will represent a major step for our company," added Hatfield. "We have also completed our first 3D seismic program at Sarqala and the second, our North Garmian, is underway. This is a busy year for WesternZagros."
Results from a 3D seismic survey at the Kurdamir block are expected in the first quarter of next year, to be used to select the location of the Kurdamir-4 well. There is currently an estimated 943 million barrels of oil equivalent of unrisked gross contingent resources at the Kurdamir Block, and another 1.6 billion in prospective resources.
Shares of WesternZagros opened up a penny higher on Thursday, at $1.04. In the last six months, its stock has improved more than six per cent.