WesternZagros Resources Ltd. has successfully and safely completed well control operations at the Kurdamir-1 well and is preparing to test for the presence of hydrocarbons in the Lower Oligocene formation. Having encountered significant gas and gas condensate in the Upper Oligocene formation in late 2009 in the interval from 2,144 metres to 2,312 metres WesternZagros now intends to run a cased hole test of a 50-meter thick zone below 2,350 metres.
The open hole in the Kurdamir-1 well has been plugged and cemented up to approximately 2,500 metres, concluding WesternZagros' well control operations. No further drilling is planned for Kurdamir-1 at this time.
"With the well control issues finally behind us, we are getting back to the business of finding oil and gas," said Simon Hatfield, WesternZagros' Chief Executive Officer. "Having previously made a large gas and condensate discovery in the Upper Oligocene reservoir, we are optimistic that the test we are about to conduct will confirm additional resources in this prolific area. We are also now turning our attention to the next of our drilling opportunities in the region."
While the previous Upper Oligocene test rates were limited due to testing equipment restrictions, an initial well test analysis conducted by an independent third party indicated that reservoir production potential of approximately 52 million cubic feet per day of gas and 2,240 barrels per day of condensate could be expected from this interval. The decision to test the Lower Oligocene at this time is based on recent wireline log analysis, which shows that even though the reservoir in the Lower Oligocene does not appear to be of the same quality as that of the Upper Oligocene, the potential exists, nonetheless, to confirm the presence of either an oil leg below the discovered gas condensate column, or a larger gas and gas condensate column.
Insurance Claim Update
WesternZagros' share of the Kurdamir-1 well costs is estimated to be $72 million (gross $123 million) to the end of well control operations. Of this $72 million, approximately $39 million is related to well control operations alone. The Company expects future-testing operations will cost approximately $4 million (gross $7 million). WesternZagros has received approximately $16 million in insurance proceeds and has submitted claims for an additional approximately $23 million, which it expects to recover.
At the Kurdamir-1 well, WesternZagros encountered a number of zones of interest in addition to the Oligocene formation, with significant oil shows in the Upper Aaliji, Shiranish and Kometan formations. WesternZagros will not be testing these additional formations in Kurdamir-1 due to wellbore conditions; however further exploration of these zones remains a prime goal. WesternZagros and its co-venturers, the Kurdistan Regional Government ("KRG") and Talisman Block K44 B.V. ("Talisman"), are investigating drilling another well at Kurdamir to obtain a thorough and definitive evaluation of the potential of the structure. This well – Kurdamir-2 – will likely be spudded after drilling the third exploration well required under the Production Sharing Contract ("PSC") that WesternZagros holds with the KRG.
WesternZagros is in active discussions with the KRG and Talisman to determine the optimum way to conduct future activities in the Production Sharing Contract area. WesternZagros had identified two locations, Mil Qasim and Qulijan, as potential drilling opportunities to meet the third well commitment, and is currently preparing to drill Mil Qasim. The Company has also revisited the results of Sarqala-1, its first well drilled in Kurdistan, and completed a revised analysis of the oil shows in the Miocene Jeribe reservoir encountered in that well. WesternZagros is evaluating the possibility of drilling a short sidetrack to re-enter the Sarqala-1 well in order to test this zone, once the Kurdamir-1 test is completed.