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Wednesday, 21 November 2012
WesternZagros finishes Q3 with $114 mln in working capital as it advances Kurdamir structure
WesternZagros Resources (CVE:WZR) Wednesday posted its third quarter financial and operational results, ending the period with $114 million in working capital to advance its oil and gas assets in Iraq.
The junior oil and gas explorer has a 40 per cent working interest in the Kurdamir block in Iraq, while Talisman Energy(TSE:TLM), the operator of the well, also holds a 40 per cent working interest, with the Kurdistan regional government (KRG) holding the remaining 20 per cent.
In the third quarter, the company completed a private placement with Crest Energy International, at C$1.40 per share for $57 million, at a roughly 10-per-cent premium to its closing price on August 4.
This gave WesternZagros a strong cash position for its aggressive exploration campaign.
Earlier this week, WesternZagros said that flow rates of up to 3,450 barrels per day (bbl/d) of light, 38 degree API oil and 8.8 million cubic feet per day (MMcf/d) of natural gas were achieved from the Oligocene reservoir of the Kurdamir-2 well.
The cased-hole test was the first and deepest of three such planned tests in the Oligocene formation of Kurdamir-2 - the primary target of the well.
The company said the results far exceeded expectations in the first cased hole test and anticipates that its contingent resources estimate will rise "significantly" as a result. It now interprets the Oligocene oil leg encountered in the well to be around 146 metres in minimum thickness, compared to its previous estimate of 118 metres.
The test results also validate that the prospective resources contained in the Oligocene extend still further down the structure, and this will be further evaluated in the upcoming Kurdamir-3 well to be drilled once current operations on Kurdamir-2 are completed.
After the end of the third quarter, WesternZagros also achieved “a new operational milestone”, as the extended well test production from the Sarqala-1 well was restarted on November 8 after approval from the Kurdistan government.
Sarqala-1 is now producing roughly 5,000 bbl/d of oil, the company said, which is being trucked from Sarqala to Khurmala and delivered into the export market.
A 3D seismic acquisition program over the Sarqala, Mil Qasim and Zardi complex structures began at the beginning of November, and is anticipated to finish mid-March, 2013.
“During the third quarter, we successfully increased our funding for our aggressive exploration program,” said CEO Simon Hatfield.
“We look forward with great anticipation to the additional testing results from the Kurdamir-2 well and an active upcoming year as we secure drilling rigs and long lead items to advance the Hasira, Baram, Upper Bakhtiari and Kurdamir wells in 2013.
“The recent re-commencement of the Sarqala EWT has achieved a new operational milestone for the company as we have now produced over 1 million barrels of oil.”
Meanwhile, the company said that oil producing Gazprom Neft Middle East B.V. was assigned as the third party participant (TPP) in the Garmian block in the Kurdistan Region in the third quarter, for the Garmian product sharing contract.
Under the terms of the assignment, Gazprom Neft gained a 40 per cent interest in the Garmian product sharing contract, while WesternZagros maintained its 40 per cent interest, with the KRG holding the remaining 20 per cent.
WesternZagros received a net amount of $56 million in back costs from Gazprom Neft, and said that it will continue operatorship until the start of the development period when it will transfer to Gazprom Neft.
Both companies will each fund 50 per cent of costs on the Garmian block.
In October, the company also made two new oil discoveries – one in the Eocene reservoir, and one in the Cretaceous reservoir at Kurdamir-2.
In the Eocene reservoir, WesternZagros said it will engage in further study to “optimize completion techniques” in order to unlock this resource.
The discovery within the Cretaceous reservoir added to a previously announced major oil discovery in the Oligocene reservoir, the company noted.
Further evaluation, including additional analyses of the test results, followed by the planned 3D seismic program, will be required.
WesternZagros said that the combined audited unrisked mean estimate for all three reservoirs on the Kurdamir prospect is 1,609 MMbbl of prospective oil resources, 11 per cent of which is attributed to the Cretaceous.
Looking ahead to the fourth quarter, the company estimates its capital expenditures, including the requirement to fund 50 per cent of Garmian activities and 60 per cent of the Kurdamir activities, to be roughly $30 to 40 million. This excludes any costs or proceeds from the anticipated resumption of crude oil sales from the extended well test at Sarqala-1.
In other news, WesternZagros also announced the promotion of Michael Mossman to senior VP of engineering and operations, late Tuesday.
Mossman joined WesternZagros in June, to lead the planning, evaluation and execution of its joint venture drilling programs. Previously, he spent 35 years with BP (NYSE:BP).