CALGARY, ALBERTA--(Marketwire - Aug. 2, 2011) -
NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR DISSEMINATION IN THE UNITED STATES
WesternZagros Resources Ltd. (TSX VENTURE:WZR) ("WesternZagros" or "the Company") is pleased to announce that it has finalized an agreement with the Kurdistan Regional Government of Iraq ("KRG") and Talisman (Block K44) B.V. ("Talisman") to amend the original Production Sharing Contract ("Original PSC") that governed the Company's exploration activities in the Kalar-Bawanoor Block in Kurdistan. The agreement divides the contract area of the Original PSC into two contract areas named Garmian and Kurdamir (refer to Figure 1) and each will be operated under a distinct PSC.
WesternZagros will continue to operate the southern contract area named the Garmian Block that covers approximately 1,780 square kilometres and is now governed under the new Garmian PSC. The Garmian Block contains the Sarqala-1 oil discovery, the Mil Qasim-1 prospect, and the other numerous prospects that contributed to a large increase in prospective resources reported by the Company on July 20, 2011. The northern contract area is named the Kurdamir Block. It covers some 340 square kilometres and contains the Kurdamir-1 oil, gas and condensate discovery and is now governed under an amended version of the Original PSC (the "Kurdamir PSC"). The northern area is now operated by Talisman. WesternZagros's production sharing terms, under both the Garmian and Kurdamir PSCs, remain unchanged from the Original PSC.
To view the Figure 1 map, please visit the following link: http://media3.marketwire.com/docs/802wzr_fig1.pdf
The agreement amends the work obligations and timeline for the first exploration period of the Original PSC.
- On the Garmian Block, WesternZagros's remaining work commitment will be fulfilled by drilling the Mil Qasim-1 exploration well by December 31, 2011. The drilling rig for the Mil Qasim-1 well is on location with the spud date anticipated for mid August. Mil Qasim-1 will be drilled to test the oil potential of the Upper Fars Formation at a location three kilometres away from where that same formation displayed shows of high pressure light oil when penetrated by the Company's Sarqala-1 well. WesternZagros's 40% working interest and the KRG's 20% carried interest remain unchanged in the Garmian Block. The remaining 40% working interest will be assigned to a Third Party Participant ("TPP") by the KRG in due course.
- On the Kurdamir Block, the remaining work commitment will be fulfilled by the drilling of the Kurdamir-2 well by June 30, 2012. Talisman is in the process of securing a drilling rig for the Kurdamir-2 well, with an anticipated spud date within the fourth quarter of 2011. The well will be drilled to evaluate the Oligocene, Eocene and Cretaceous reservoirs at a location two kilometres away from where the Company observed numerous oil shows and tested oil, gas and condensate in Kurdamir-1 well. The working interests in the Kurdamir Block remain unchanged. As operator of the Kurdamir Block, Talisman will draw on the experience from both the Kurdamir-1 well and the Topkhana-1 well, which Talisman is currently drilling on their adjacent K-39 Block.
"We are pleased that we have reached a win-win solution that meets the objectives of the government and each of the contractor parties," said Simon Hatfield, WesternZagros's Chief Executive Officer. "These amended PSCs give us the additional time needed to drill our next wells and to enable us to incorporate the information gained from our recent discoveries in order to maximize our potential for future exploration success. We are excited by the opportunities we see in both Garmian and Kurdamir Blocks."
On the Garmian Block WesternZagros is preparing to carry out an extended well test in the Jeribe Formation at the Sarqala-1 light oil discovery concurrently with the drilling of the Mil Qasim-1 well. WesternZagros has identified numerous other prospects and plays on the Garmian Block, including Baran, Qulijan, Bawanoor, the Upper Fars Fault Trap Play and the Zardi Complex, all of which offer considerable further exploration potential.
For the Kurdamir-2 well the necessary long lead items, including casing and well head equipment, have been procured and a 2000 horse power rig is being contracted for the drilling operations.
A summary of the material amendments to the Original PSC is set forth below in Table 1.
|First exploration sub-period (expires)||December 31, 2010||June 30, 2012||December 31, 2011|
|Exploration obligation (remaining)||Third exploration well||Kurdamir-2||Mil Qasim-1 exploration well|
|Second exploration sub-period||Additional
|Exploration obligation||Two exploration wells||One appraisal well||One exploration well|
|Other extensions||Two one year extensions||Six month extension||One year extension|
|Economic terms||10% Royalty Oil, remainder available for Cost Recovery and Profit Oil||Unchanged||Unchanged|
|PSC payments||$ 5 Million Signature Bonus
$40 Million Capacity Building Support Payment
$ 1.1 Million annual payments
|Additional Capacity Building Support Payment payable equal to 3% of WesternZagros Profit Oil. Continuation of previous annual payments.||Additional Capacity Building Support Payment payable equal to 3% of WesternZagros Profit Oil. Annual payments 50% of previous payments.|
|KRG||20% *||KRG||20% *||KRG||20% *|
|2,120 km2||340 km2||1,780 km2|
|*||WesternZagros funds 20% of the KRG costs, ultimately to be recovered by WesternZagros through the KRG's share of Cost Recovery Oil.|
|**||WesternZagros initially funds the 40% of the costs for the Third Party Participant until it is assigned by the KRG. The amounts funded by WesternZagros for the Third Party Participant interest will be repaid upon assignment of this interest.|
For additional information regarding the Kurdamir PSC and the Garmian PSC, please refer to the Material Change Report filed on www.sedar.com on August 2, 2011.
About WesternZagros Resources Ltd.
WesternZagros is an international natural resources company engaged in acquiring properties and exploring for, developing and producing crude oil and natural gas in Iraq. WesternZagros, through its wholly-owned subsidiaries, holds two Production Sharing Contracts with the Kurdistan Regional Government in the Kurdistan Region of Iraq.
WesternZagros's shares trade in Canada on the TSX Venture Exchange under the symbol "WZR".
This news release contains certain forwardlooking information relating, but not limited, to operational information, future drilling plans and testing programs and the timing associated therewith. Forward-looking information typically contains statements with words such as "anticipate", "estimate", "expect", "potential", "could", or similar words suggesting future outcomes. The Company cautions readers not to place undue reliance on forwardlooking information as by its nature, it is based on current expectations regarding future events that involve a number of assumptions, inherent risks and uncertainties, which could cause actual results to differ materially from those anticipated by WesternZagros. In addition, the forwardlooking information is made as of the date hereof, and the Company assumes no obligation to update or revise such to reflect new events or circumstances, except as required by law.
Forwardlooking information is not based on historical facts but rather on management's current expectations and assumptions regarding, among other things, plans for and results of drilling activity and testing programs, future capital and other expenditures (including the amount, nature and sources of funding thereof), continued political stability, and timely receipt of any necessary government or regulatory approvals. Although the Company believes the expectations and assumptions reflected in such forwardlooking information are reasonable, they may prove to be incorrect. Forwardlooking information involves significant known and unknown risks and uncertainties. A number of factors could cause actual results to differ materially from those anticipated by WesternZagros including, but not limited to, risks associated with the oil and gas industry (e.g. operational risks in exploration; inherent uncertainties in interpreting geological data; changes in plans with respect to exploration or capital expenditures; interruptions in operations together with any associated insurance proceedings; the uncertainty of estimates and projections in relation to costs and expenses and health, safety and environmental risks), the risk of commodity price and foreign exchange rate fluctuations, the uncertainty associated with negotiating with foreign governments and risk associated with international activity. For further information on WesternZagros and the risks associated with its business, please see the Company's Annual Information Form dated April 11, 2011, which is available on SEDAR at www.sedar.com.
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