WesternZagros Resources Ltd. (TSX VENTURE:WZR) ("WesternZagros" or "the Company") has completed testing operations in the Oligocene reservoir of the Kurdamir-3 appraisal well on the Kurdamir oil and gas discovery in the Kurdistan Region of Iraq. Although the testing operations took longer than anticipated due to mechanical difficulties, the results of the third and fourth drill stem tests (DST #3 and DST #4) confirm the presence of light oil, with an oil-water contact at a depth of at least -2,049 metres subsea ("mSS"), which is a minimum of 33 metres deeper than the lowest known oil at -2,016 metres from the Kurdamir-2 well. The results continue to confirm the scale of the Kurdamir oil discovery. Following the testing of Kurdamir-2, the Company's independent resource evaluators confirmed that the Kurdamir Oligocene reservoir holds a mean estimate of 390 million barrels of gross unrisked contingent resources of oil, and an additional 327 million barrels of oil equivalent of gross unrisked contingent resources of gas and condensate. Although the Company has yet to present the latest findings to its independent resource evaluators, internal evaluations support that the most likely outcome will result in no material change to the current contingent resource estimates
"Based on the Kurdamir-3 results and the other appraisal activities on the Kurdamir Block to date, we are working towards filing a Declaration of Commerciality for the Kurdamir discovery with the Kurdistan Regional Government ("KRG"). We are planning to file the development plan with the KR in 2014 upon integration of the well results with the interpretation of the recently-shot 3D seismic program, and the results of an extended well test planned for Kurdamir-2," said Simon Hatfield, Chief Executive Officer of WesternZagros.
The earlier Kurdamir-1 exploration well discovered a significant volume of natural gas above an oil column in the Oligocene. Subsequently, the Kurdamir-2 appraisal well defined the oil column from -1,838 mSS down to a lowest known oil at -2,016 mSS. Now the Kurdamir-3 appraisal well tests, pressure data and log data have resulted in an interpreted oil-water contact to be at least-2,049 mSS.
DST #3 and DST #4 both flowed 37 degree API oil at rate of 633 barrels of oil per day ("bbl/d") and 885 bbl/d respectively. The gas-to-oil ratio was approximately 1,000 to 1,100 standard cubic feet per barrel, indicating that the oil leg is likely in connection with the gas cap on the crest of the structure. The total fluid volumes flowed in each test contained approximately 55 percent water. Well log data and fluid composition supports that the water was a contaminant in the tests and was sourced from deeper than the tested intervals via channels in the cement behind well casing. Flow rates were lower than expected due to the lower density of fractures encountered in the Oligocene reservoir at Kurdamir-3 in comparison with Kurdamir 1 and 2.
Expert analysis by a third party has concluded that due to problems with cement bond integrity there was water channeling upwards through the cement in the well bore annulus that connects DST intervals #3 and #4 to the deeper DST #2 interval. DST #2 straddled the oil-water contact and tested both oil and water. The petrophysical analysis of the DST #3 and DST #4 intervals does not indicate the presence of movable formation water. This further supports that the source of the water in the DST #3 and #4 is from deeper within the DST #2 interval.
The Company will be working with its independent resource evaluators to further refine its contingent and remaining prospective resources estimates.
The Company is actively evaluating horizontal well options for future operations which are expected to maximize the deliverability of light oil from the field. Analysis of the 3D seismic data will assist in locating future Kurdamir wells in areas of the Oligocene reservoir likely to have higher fracture density.
Focus will now turn to additional appraisal and development drilling. As a first step in this process, the Operator is in discussion with the KRG to conduct an extended well test on the Kurdamir-2 well. This is anticipated to commence in Q1 2014.
"Our Kurdistan appraisal and development plans show enormous promise and with the expected opening of a new export pipeline by 2014, WesternZagros is well positioned to commence development to help fulfill the Kurdistan Region's stated goal of exporting 300,000 barrels of oil in the near term and 1 million barrels by 2015," Hatfield said.
