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WesternZagros Updates On Aggressive Plans, Starts Kurdamir-3 Well Testing Program

Jul. 18, 2013 1:07 PM ET
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WesternZagros Resources (CVE:WZR) provided Thursday an operational update on its Kurdamir and Garmian blocks in Iraq, saying its Kurdamir-3 well has reached total depth with a testing program started.

"Everything we have seen while drilling the Kurdamir-3 well supports our optimism about the size of the Oligocene reservoir in the giant Kurdamir oilfield," said CEO Simon Hatfield in a statement Thursday.

"The Oligocene is thicker in the Kurdamir-3 well than penetrated in the Kurdamir-1 and Kurdamir-2 wells. We did not see gas at the top of the oil interval, nor did we encounter water at the bottom. We look forward to the results of the testing program."

Indeed, a cased hole, multiple test program of the Oligocene reservoir in the Kurdamir-3 well, which is located 5 km southwest of the Kurdamir-2 well, has started, with the well having been drilled to a total depth of 2,895 metres.

According to the junior oil and gas company's statement, oil shows and supportive log data indicative of oil were recorded over the majority of the Kurdamir-3 Oligocene section penetrated. "The Oligocene comprises a gross interval of 372 metres of naturally-fractured marlstones and dolomitic limestones including an interpreted 194 metres of porous reservoir interval," it said in the release.

Based on initial logging results, the company believes that the lowest known oil could extend about 150 metres deeper than that proven in Kurdamir-2. It expects to wrap up the Oligocene testing program in the second half of August, with results expected in the third quarter.

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.

At its Garmian block, where the company also holds a production sharing contract, the Baram-1 well, in the northern portion of the block, is on track to spud in August, WesternZagros said. The well will explore the potential extension of the oil leg discovered in the Oligocene reservoir of the Kurdamir structure onto the northern portion of the Garmian block.

The oil and gas junior expects the well, which is thought to be the highest impact well of the 2013 drilling program, to take approximately five months to reach the planned total depth of 3,800 metres. According to WesternZagros, Baram-1 has the potential to add gross unrisked mean contingent resources of up to 200 to 300 million barrels of oil equivalent at Garmian, and if the structure can extend onto Kurdamir, an additional 500 to 600 million barrels at Kurdamir.

Meanwhile, on the same block, the Hasira-1 well, in the southern area, is currently drilling ahead at 1,860 metres, while the Upper Bakhtiari formation drilling was cancelled after "sub-commercial flow rates of oil" were seen at the first two wells, the company said.

"This shallow, inexpensive well program recovered oil and gas at sub-commercial rates and formation water. The wells have consequently been suspended and the rig released. As a result, the third well has been cancelled," it explained in the statement, adding that the program was never viewed as high potential in terms of adding resources.

Also in the update, the company said the Kurdamir block 3D seismic survey, which comprises 184 sq km, has been completed, with a new 3D seismic survey to begin in August on the northern portion of the Garmian block to define future drill locations.

After what the company has described in the past as a "breakthrough" 2012 due to its oil discovery at its Kurdamir-2 well, it is working to aggressively explore its properties this year.

The total combined mean estimate of gross unrisked contingent resources at the Kurdamir and Garmian blocks is now 974 million barrels of oil equivalent and the total mean estimate of gross unrisked prospective resources is now 4.7 billion barrels of oil equivalent.

Shares of WesternZagros were trading higher on Thursday, adding one penny to sit at $1.30 on the TSX Venture Exchange. The company's ambitious plans have paid off, being one of the top share price performers so far this year in the Canadian listed international oil and gas sector of those companies with a market cap in the $200 million to $1.0 billion range. Year-to-date, its stock has added 19.3 per cent.

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

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