WesternZagros sells first oil to market

WesternZagros Resources (CVE:WZR) said Thursday that it has received payment for its first sale of crude oil to the domestic market in the Kurdistan region of Iraq.

First oil production from the Sarqala-1 extended well test was achieved on October 18, and first lifting occurred by truck today.

Shares of the company were up 2.94% to $0.7 as of 12:47pm ET.

"Production start-up marks a new chapter in the company's history, as WesternZagros takes its first steps to become an exploration and production company, rather than a pure exploration company," said CEO Simon Hatfield.

"We are appreciative of the process established by the Kurdistan Regional Government's Ministry of Natural Resources, which requires pre-payment directly to WesternZagros for the contracted volumes. Thanks to the diligence of our in-country operations personnel, the start-up was conducted in a safe, responsible manner and ahead of schedule."

Production started at approximately 2,000 barrels of oil per day (bopd) and is anticipated to increase towards 5,000 bopd in the near future, the company said.

WesternZagros signed an initial sales contract for delivery of approximately 33,500 barrels of oil, priced in the range of US$50 to US$60 per barrel. The company said it plans to use the information from the extended well test to determine future development activities, including increased production potential.

The company also gave updates on two of its exploration wells, the Mil Qasim-1 and the Kurdamir-2 wells. At Mil Qasim-1, the company's third exploration well, the rig is currently drilling ahead at 1,800 metres in the targeted Upper Fars Reservoir, which has a mean estimate of 106 million barrels of oil for gross unrisked prospective resources. Following a delayed spud date, drilling is now proceeding on time and on budget.

At Kurdamir-2, the exploration well spudded on October 25, and is anticipated to be completed by June 2012. The well is being drilled on the flank of the Kurdamir structure approximately two kilometres from the Kurdamir-1 discovery well. The combined mean estimate of the gross unrisked prospective resources for the Oligocene, Eocene and Cretaceous reservoirs being targeted by the Kurdamir-2 well is over 585 million barrels of oil.

WesternZagros is an international natural resources company developing and producing crude oil and natural gas in Iraq. The company, through its wholly-owned subsidiaries, holds two Production Sharing Contracts with the Kurdistan Regional Government in the Kurdistan Region of Iraq.