Monday, 26 March 2012

WesternZagros finds major oil column in Kuradmir-2 well in Iraq

WesternZagros Resources (CVE:WZR) said Monday it has made a major oil discovery in the Oligocene reservoir at its Kurdamir-2 exploration well in the Kurdistan region of Iraq.
The Iraq-focused oil and gas explorer said the Kurdamir-2 well reached the intermediate casing depth of 2,812 metres, and has drilled through the Oligocene interval.
Wireline logs indicated "a porous zone of 140 metres thickness within the Oligocene interval, between 2,422 and 2,562 metres, all of which is hydrocarbon-bearing", WesternZagros said.
Within this hydrocarbon zone, well log data indicated 22 metres of gross natural gas pay above 118 metres of gross oil pay.
The company said it believes the results are another confirmation of a "significant oil column" underlying the gas cap in the Oligocene reservoir. This follows WesternZagros' first confirmation in the Kurdamir-1 well in December 2010.
No evidence of water has been found within the Oligocene interval, the company added, meaning the maximum thickness of the oil column is not yet known.
"We are excited to learn that the Kurdamir and adjacent Topkhana structures have a common oil leg in the Oligocene reservoir with the potential of containing a giant oil and gas field," said CEO Simon Hatfield.
"We're even more excited by the fact that we don't yet know the full extent of the resources that the Oligocene, alone, contains.
"The Kurdamir-2 discovery is the third high-impact discovery on our Blocks in ten months and is an important confirmation of our queue of high-quality, light oil exploration opportunities.
"In particular, our view is that this discovery significantly improves the oil potential of the deeper, as yet undrilled reservoirs in Kurdamir-2 and also those prospects adjacent to Kurdamir on our Garmian Block."
The company said that when the well reached a depth of 2,477 metres, a drill stem test was conducted of the open hole from 2,315 metres to 2,477 metres, which included 55 metres of the Oligocene porous zone.
This test was done across the interpreted gas-oil contact at 2,444 metres and tested 22 metres of gas pay, in contact with 33 metres of oil pay.
The test achieved a flow rate of 7.3 million cubic feet per day of gas, WesternZagros said, and a stabilized flow rate of 950 barrels per day of 47 degree API mixture of light oil and condensate over the final seven hours of the main flow period.
This rate was achieved through a 56/64 inch choke at an average flowing well head pressure of 650 pounds per square inch and without any stimulation.
The company said the deeper Oligocene oil pay will not be tested at this time due to time constraints, as the well is required to drill and evaluate the deeper Cretaceous by the end of June.
The 33 metres of oil pay tested to date is capable of flowing at rates of 4,000 barrels per day if isolated from the gas pay and stimulated, according to a third party engineering expert, WesternZagros said in a statement.
The company is working with operator Talisman to examine options for additional cased hole testing focused on the full 118 metres of gross oil pay in the Oligocene.
WesternZagros and Talisman each have a 40 percent working interest in the Kurdamir Block, with the Kurdistan regional government holding the remaining 20 percent.
The partners are also planning a 3D seismic program and a further appraisal well to help find the ultimate size of the Oligocene reservoir.
The company said that the bottom of the known oil column found extends down to at least 2,562 metres - significantly deeper than the limit of the Kurdamir structure as mapped from seismic data. This supports the notion that the Oligocene reservoir is involved in a "considerably larger trap", with Kurdamir and the neighbouring Topkhana structure thought to share a common oil leg.

The company will update contingent and prospective resource estimates for the Oligocene, which are expected to materially increase, WesternZagros said.

Prior to these latest results, the independently audited unrisked mean estimates for the contingent resources in the Oligocene reservoir of the Kurdamir structure were 920 billion cubic feet of gas, 35 million barrels (MMbbl) of condensate and 30 MMbbl oil, plus an unrisked mean estimate of 280 MMbbl prospective oil resources as of December 14, 2010.

The Kurdamir-2 exploration well was spudded in October 2011, and is operated by Talisman. The well is located around two kilometres northeast of the Kurdamir-1 discovery well and is targeting the Oligocene, Eocene and Cretaceous reservoirs on the flank of the structure.

The combined audited unrisked mean estimate for all three reservoirs on the Kurdamir structure is 585 MMbbl of prospective oil resources as at January 14, 2011.

WesternZagros holds two production sharing contracts with the Kurdistan regional government, which each govern separate contract areas. The Garmian contract area of 1,780 square kilometres is operated by WesternZagros, while the Kurdamir contract area of 340 square kilometres is operated by Talisman.
WesternZagros holds a 40 percent working interest in both contracts.
Separately, the company also announced its full year and fourth quarter results Monday, increasing revenues.
Aside from the Kurdamir-2 well discovery, the company highlighted operational results in 2011, starting with the Sarqala-1 well re-entry. Last March, the company decided to re-enter the well on the Garmian Block as the interval showed good potential after earlier drilling was suspended due to equipment problems.
In May, the company announced an oil discovery in the Jeribe Formation, achieving maximum flow rates in excess of 9,000 barrels per day of light, 40 degree API oil.
WesternZagros received approval from the Ministry of Natural Resources in Kurdistan to start an extended well test at the Sarqala-1 well in September, and in October, first oil production was achieved, with the oil sold into the domestic market later that month. Production started at around 2,000 barrels per day.
As at year-end, the company had generated $12.9 million of proceeds from the sales of test oil and entered into further contracts to sell test oil for another $25.9 million in the first quarter of 2012. Production continues at an average rate of 5,000 bbl/d, the company said.
At its Mil Qasim-1 well on the Garmian Block, the company said it is "actively investigating" a shallow, relatively lower cost, multi-well drilling program to evaluate the reservoir 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 up to 6,000 bbl/d".
During 2011, Sproule International Limited completed a total of four independent audits of WesternZagros' contingent and prospective resources. With these additional assessments on its two contract areas in Kurdistan, the combined mean estimate of gross unrisked contingent resources is 54.0 million barrels of oil, or 258 million barrels of oil equivalent. Gross unrisked prospective resources stand at 2.3 billion barrels of oil, or 3.7 billion barrels of oil equivalent.
For the year that ended December 31, 2011, the oil and gas company recorded a net loss of $6.9 million, or 2.3 cents per share, compared to a loss of $5.8 million, or 2.8 cents per share, in 2010.
Total interest revenue rose to $92,000 versus $87,000 a year earlier.

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