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Monday, 28 January 2013
WesternZagros boosts contingent resources at giant Kurdamir by fourfold with expansion to continue
***Updated with latest share price data as of 10:20am ET.
WesternZagros Resources (CVE:WZR) has reported a fourfold increase in its contingent resource estimates at its giant oil discovery on the Kurdamir Block in the Kurdistan region of Iraq, after several successful well tests last year.
Shares of the junior oil and gas company popped over 7% to $1.19 this morning.
The total mean estimate of gross unrisked contingent resources at Kurdamir, as per a report by Sproule International, has risen to 590 million barrels of oil in the Oligocene and Eocene reservoirs, the company said.
When gas and condensate are included, the mean contingent resources exceed 1 billion barrels of oil equivalent.
"There's a saying in the oil industry: big fields get better with time, and Kurdamir is proof of that," company CEO Simon Hatfield said in a statement Monday morning.
"The Kurdamir structure has the potential to be the largest light oil field discovered in Kurdistan, with the possibility that it extends on to our neighbouring Garmian Block. We're therefore highly motivated to drill the Kurdamir-3 well on the Kurdamir Block and the Baram-1 well on the Garmian Block this year to further delineate this giant discovery."
WesternZagros says this is the fourth straight upward revision of contingent resources by an independent audit since the Kurdamir discovery was announced in November 2009.
In the Oligocene reservoir, mean contingent resources increased to 435 million barrels of oil from 147 million barrels previously. This equates to 786 million barrels of oil equivalent when gas and condensate are included.
Recent test results from the Kurdamir-2 well at the Oligocene reservoir were released in early December. The second cased-hole test, which was conducted over a 24-metre thick interval between depths of 2,528 and 2,552 metres, achieved a stabilized flow rate of 2,184 barrels per day of light, 42 degree API oil and 10.4 million cubic feet per day of natural gas.
The initial open-hole test conducted last March resulted in a major oil discovery in the Oligocene interval, and in late November, the company said the first cased hole test in the Oligocene formation of the Kurdamir-2 well far exceeded expectations. WesternZagros had predicted that the data would "substantially increase" contingent resource estimates for the reservoir.
This latest resource estimate also recognizes contingent resources in the Eocene reservoir on the Kurdamir Block for the first time. Mean contingent resources for Eocene stand at 155 million barrels of oil, or 226 million barrels of oil equivalent when gas and condensate are factored in.
The oil and gas industry defines contingent resources as quantities of petroleum estimated to be "potentially recoverable" from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies.
The company said that the corresponding mean estimate of gross discovered petroleum initially-in-place, meaning the estimated amount of petroleum to be contained on company lands prior to production, increases to 2 billion barrels of oil. This equates to 2.8 billion barrels of oil equivalent when gas and condensate are included.
Prospective resources, or those estimated to be recovered from undiscovered accumulations, decreased as expected due to conversion from the prospective to the contingent category, the junior oil and gas company added.
Gross unrisked prospective resources for the Oligocene, Eocene and Cretaceous reservoirs combined are now 1.2 billion barrels of oil on the Kurdamir Block, or 1.5 billion barrels of oil equivalent.
WesternZagros has a 40 per cent working interest in the Kurdamir block, while Talisman Energy (TSE:TLM), the operator of the well, also holds a 40 per cent working interest, with the Kurdistan regional government holding the remainder.
Talisman is now preparing to drill the Kurdamir-3 appraisal well to continue delineating the field, with an anticipated spud date of early next month.
WesternZagros is also getting ready to drill its Baram-1 exploration well on the Garmian Block, which the company believes has the potential to prove the extension of the Kurdamir discovery. A 3D seismic program on the Kurdamir block is also underway.
Based on reservoir data and independent engineering assessments, the company predicts that "sustainable production rates" of 7,000 to 11,000 barrels of oil per day are possible for individual wells in the Oligocene reservoir using horizontal drilling technology.
Late last month, the company appointed William Jack to the position of general manager in Kurdistan, effective February 1. Jack has 30 years of “progressive leadership” in international oil and gas roles, the company noted, having spent the majority of his career withBP (NYSE:BP) (LON:BP) on projects in the United Kingdom, Middle East, Russia, Australia and North America.