(MENAFN- ProactiveInvestors)
WesternZagros () started producing and selling oil from the Sarqala-1 well at its Garmian Block in the first quarter of 2015.
Production began last February at a rate of 5221 barrels of oil per day (bbl/d). The company realized net sales of 68997 barrels generating revenues of US$2.9 million for the three months of the year.
The average realized price per barrel was US$41.74 and field netback was US$1.9 million.
Gross sales were 255807 bbl and the company has expects gross production from Sarqala-1 to fall in the range of 5700 to 6700 bbl/d for the remainder of 2015.
WesternZagros has a healthy balance sheet ending the first three months of the year with US$158.6 million in cash and cash equivalents as well as an additional US$200 million from an undrawn credit facility.
Other operational highlights included the preparation of the next development well at the Sarqala oilfield including long lead equipment for the next development well on the Sarqala oilfield which is anticipated to spud pending approval of the Garmian Development Plan by Kurdish regional authorities (KRG) in accordance with the terms of the production sharing contracts (PSC).
The Garmian Development Plan was submitted to the KRG on June 19 2014 and WesternZagros has worked closely with the KRG on plans for the construction of a natural gas plant close to the existing oil facilities.
The Hasira-1 well was suspended because the cased-hole testing program proved to be unsuccessful in the high pressure Mio-Oligocene oil reservoir.
But WesternZagros did manage to improve the Sarqala production facility allowing for processing capacity to increase 50% from 10000 to 15000 bbl/d with the capability to tie in future development wells highlighting the company’s progress in the first quarter of 2015:
“The first quarter of 2015 was a significant transition point for WesternZagros as we initiated light oil production commenced sales into the domestic market and generated cash flow from our Sarqala-1 well. As the well and surface facilities are optimized we expect Sarqala-1 to produce up to 6700 bbl/d on a sustained basis. We also plan to grow this production with our next development well at Sarqala pending approval of the Garmian Development Plan. Should the current oil sales arrangement continue cash flow generated from production will help support our development program as we progress towards a planned production rate of 35000 bbl/d for the field" said WesternZagros’s CEO Simon Hatfield.
For the remainder of this year the company can count on its capital flexibility to remain operational navigating through the challenges of lower oil prices and geopolitical uncertainties:
"We will continue to strengthen our internal operations management exercise strict cost control and enhance efficiency to proactively respond to low oil prices through the prudent advancement of various production and operational plans. We are continuing negotiations with our co-venturer and the KRG on the Kurdamir Development Plan - approval of both the Sarqala and Kurdamir field development plans are key value driving events to our Company" Hatfield said.
WesternZagros is a Canadian oil and gas explorer that is successfully exploring and developing crude oil and natural gas resources in the Kurdistan region of Iraq.
The company said that its current sales volumes have been constrained by domestic market transportation limitations which suggest that gross production from Sarqala-1 will remain in the range of 5700 to 6700 bbl/d for the remainder of 2015.
Production from Sarqala-1 will support additional expansion that targets production of 35000 bbl/d in the Garmian Block over the course of the planned development period.
Results generated by the drilling of Sarqala-1 in the Garmian Block and Kurdamir-1 on the Kurdamir Block indicate that the two Blocks cover an estimated 2.2 billion BOE of unrisked Prospective Resources (Gross Block combined Mean estimate) remaining for future appraisal and development.
The Kurdamir and Garmain Blocks cover 2120 square kilometres and are among the largest exploration areas that were granted by the Kurdistan Regional Government to any entity.
WesternZagros is the operator and holds a 40% interest in the Garmian Contract Area that covers 1780 square kilometers; and holds a 40% interest in the Kurdamir Contract Area that covers 340 square kilometers and had (NYSE:TLM) () as operator. But on May 8 2015 Talisman was acquired by Spain’s Repsol SA.
The Kurdistan Regional Government retains a 20% working interest in both Blocks and discussions are ongoing between WesternZagros Talisman and the KRG regarding the development plan to advance the Kurdamir discovery into production.
At the Kurdamir discovery the company has predicted unrisked contingent Resources of 541 million bbl and prospective resources of 1.3 billion barrels of oil. While the Kurdamir deliberations proceed operations on the Block have been suspended and the reserves have not yet been recognized by a qualified independent reserves evaluator.
Kurdistan is part of the federal State of Iraq but independent enough to have become a rare success. The autonomous region is prosperous secular and pro-Western and the region is aiming for greater independence.
Kurdistan is sitting on 55 billion barrels of oil; a quarter of Iraqi reserves and produces 200000 barrels a day unofficially avoiding consultations with Baghdad on signing contracts with foreign companies or selling its crude on the international market. Increasingly the region acts as a de facto state.
In February 2014 Canada opened its first trade office in Iraq in Erbil Kurdistan’s regional capital rather than Baghdad but in Erbil. The location was chosen to support Canadian oil companies like Talisman and WesternZagros.
Shares of WesternZagros were trading down 3.13 percent today.
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