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WesternZagros Resources Continues Cost Cutting Drive

|Includes: Westernzagros Resources., Ltd. (WZGRF)

Kurdistan-focused oil producer WesternZagros Resources (CVE:WZ) clocked up revenue of $5.6mln in the second quarter of 2015, taking half-year sales up to $8.4mln.

The average realized price was $41.71 in the second quarter, three cents down on the price achieved in the first quarter.

As announced last week, production during the quarter from the Sarqala-1 well in the Garmian block averaged 5,427 barrels of oil per day (bopd).

The company reckons production from the Sarqala-1 well will be in the range of 5,000 to 5,500 bopd for the remainder of this year. Based on this production guidance and domestic oil prices in the range of $42 to $52 a barrel, the company now expects full-year sales revenue will be somewhere between $15mln and $22mln, while field netback is expected to be in the range of $10mln to $17mln.

WesternZagros is well-funded and ended the second quarter with $145mln in cash and cash equivalents, while it has a $200mln credit facility that it has yet to draw on.

The company noted that Repsol has re-entered into negotiations with WesternZagros and the Kurdistan Regional Government (NYSE:KRG) regarding the development of the Kurdamir block, and said it was encouraged by Repsol's and the KRG's desire to progress this oil and gas project.

"The company is committed to advancing development on the Garmian and Kurdamir Blocks to grow production and cash flow. We are also focused on delivering on our cost controls and capital efficiency," said Simon Hatfield, chief executive officer of WesternZagros.

"We have established a strong financial position for our company and are well positioned to weather the adverse global market conditions. In light of the ongoing oil price environment, the company continues to implement strict cost reduction efforts that have meaningful impact to the bottom line, including optimizing capital investment, renegotiating contracts with service companies and cutting discretionary expenditures," he added.

The company acknowledged that these are challenging times, both for the Kurdistan region and international oil companies, but said it continued to benefit from the relative security in the Kurdistan region, which has been unaffected by the military operations elsewhere in Iraq.