Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

WesternZagros Resources Wraps Up "Successful Oil Test" At Kurdamir-2, Expects Material Increase In Resources

WesternZagros Resources (CVE:WZR) says it has completed a successful oil test at its Kurdamir-2 well in Iraq and is preparing for further appraisal together with operatorTalisman Energy (TSE:TLM).

The cased-hole test in the Oligocene formation, which was conducted over a 24-metre thick interval between depths of 2,528 and 2,552 metres, achieved a stabilized flow rate of 2,184 barrels per day of light, 42 degree API oil and 10.4 million cubic feet per day of natural gas.

The junior oil and gas producer said the gas to oil ratio likely suggests 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 the test, together with the unanticipated gas contribution from the gas cap, restricted the oil flow from the reservoir, the parties concluded. Larger diameter tubing would allow for higher oil test rates, they added, and they are now working on determining the optimal tubing size for completion.

As a result, both Talisman and WesternZagros have agreed that further tests of shallower zones in the Oligocene reservoir are not necessary, and are now working on plans to realize the maximum oil production potential from the reservoir in Kurdamir-2.

This could potentially be through an extended well test, depending on the approval of the Kurdistan regional government.

"This second cased hole test in the Oligocene further reinforces our view that Kurdamir is a giant discovery," said WesternZagros CEO, Simon Hatfield.

The initial open-hole test conducted earlier this year in March resulted in a major oil discovery in the Oligocene interval, and late last month, the company said the first cased hole test in the Oligocene formation of the Kurdamir-2 well far exceeded expectations.

"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."

The company said the flow rates in the most recent cased hole test in Kurdamir-2 were recorded after flowing and stabilizing the well for three days at progressively larger choke sizes.

The Kurdamir-2 test and wireline log data have now been analyzed in order to update contingent and prospective resource estimates for the Oligocene reservoir, which the company expects will "materially" increase.

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.

As of May 31, the unrisked mean estimate for the prospective resources in the Oligocene reservoir is 1,150 MMbbl.

Following the completion of Kurdamir-2, Talisman will move the rig to the Kurdamir-3 well location for an anticipated spud date in February of next year, WesternZagros said.

The junior oil and gas explorer has a 40 per cent working interest in the Kurdamir block, while Talisman Energy, the operator of the well, also holds a 40 per cent working interest, with the Kurdistan regional government holding the remainder.

The joint venture has seen notable achievements from the Kurdamir-2 well lately. In October, the companies confirmed oil in the Eocene reservoir - the second of three target intervals in the Kurdamir-2 exploration well.

In the Eocene testing, a single cased hole test was performed over a net perforated interval of 108 metres, and resulted in the flow of light, 45 degree API oil at "sub-commercial" flow rates.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.