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

WesternZagros Resources Unveils Oil Discovery In Mil Qasim-1 Iraqi Well

WesternZagros Resources (CVE:WZR) said Thursday it has made an oil discovery in the Upper Fars Formation at the Mil Qasim-1 exploration well in the Kurdistan Region of Iraq.

The company said the well encountered a gross hydrocarbon-bearing interval of approximately 800 metres containing numerous sandstones, each in the range of 2-13 metres thick, in the Lower Bakhtiari and Upper Fars Formations.

Hydrocarbon shows and wireline logs indicated the presence of oil in the Upper Fars Formation, and also showed the potential for additional oil in the Lower Bakhtiari Formation. Testing of the latter interval has been deferred to a later date, however, the company said.

In the Upper Fars Formation, the testing program resulted in the flow of light, 43 to 44 degree API oil to surface from low permeability sandstone reservoirs and natural fractures.

No H2S and no formation water were identified during testing. Four tests were conducted in the Mil Qasim-1 well, with test 1 being an open hole test, and the remainder being cased hole tests.

The Mil Qasim-1 well was drilled to a total depth of 2,425 metres in December 2011, ahead of time and on budget, WesternZagros added.

Test 1 was conducted over the open hole section between the depths of 2,129 metres and 2,168 metres, and resulted in a flow of 44 degree API gravity oil with no formation water, at an average rate of 108 barrels of oil per day (bopd) over a two day period.

Test 2 was conducted over a gross perforated interval of 49 metres between the depths of 2,054 metres and 2,103 metres, and although the test successfully flowed limited amounts of oil to surface, it failed to evaluate the potential of the reservoir interval due to "ineffective perforations", the company said.

Test 3 resulted in a flow of 44 degree API oil with no formation water, at an average rate of 488 bopd over a one day period. Analysis of this test conducted by an independent third party engineering expert indicated that this interval has the potential to produce at over 1,000 bopd - if formation damage can be mitigated by stimulation or use of alternative drilling techniques, WesternZagros said.

The company is now considering additional measures to build future flow from this interval.

Finally, test 4 was conducted over a gross perforated interval of 107 metres between the depths of 1,636 metres and 1,743 metres, and resulted in a flow of 43 degree API oil and an emulsion at an estimated rate of 250 barrels per day (bpd) over a one day period.

Once the company receives approval from the local government, it plans to conduct an extended well test over the Test 4 interval to further clean up the well and find additional information on its long-term "deliverability".

The company will also do more analysis to find out how to increase flow rates and unlock the potential of the sandstones of the Upper Fars Formation.

Commenting on the test results, WesternZagros CEO Simon Hatfield said: "The data gained while testing Mil Qasim-1 significantly contributes to our improving knowledge of the Upper Fars Formation.

"We're encouraged that we have flowed oil from multiple zones in the Upper Fars with no identified formation water and we are optimistic that these reservoirs can achieve economic flow rates in the future.

"The next two wells that WesternZagros plans to drill in the area, Sarqala-2 and Hasira-1, although being drilled for deeper targets, will also provide additional information on the Upper Fars reservoirs and the extent of the Mil Qasim discovery.

"The light oil discovered in Mil Qasim underscores the importance of our Blocks as a source of high quality light oil from the Kurdistan Region of Iraq."

In addition to the Upper Fars Formation, WesternZagros said the Mil Qasim-1 well also encountered hydrocarbon shows in a sandstone interval of around 25 metres thickness in the Upper Bakhtiari Formation at a depth of approximately 500 metres.

In a statement Thursday, WesternZagros said: "The company is actively researching lower cost drilling solutions to evaluate this shallow zone later this year as it is encouraged by the existence of numerous highly productive water wells drilled in the Upper Bakhtiari Formation in the southern Garmian area that have typical flow rates of 6,000 bpd."

The company also gave Thursday an update on other wells. With regards to its Kurdamir-2 exploration well on the Kurdamir Block, the oil and gas explorer said it is on track to drill and test the Oligocene reservoir by the end of the first quarter of 2012.

At the Sarqala-1 extended well test on the Garmian Block, the company said production continues at an average rate of 5,000 barrels of oil per day following the installation of additional tank storage capacity. Sarqala crude is being processed in local refineries, under the auspices of the Ministry of Natural Resources.

WesternZagros is an international natural resources company focused on acquiring properties and exploring for crude oil and natural gas in Iraq.

The company, through its wholly-owned subsidiaries, holds two Production Sharing Contracts with the Kurdistan government.