WesternZagros Reports on Kurdistan Operations

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.

Drilling Update

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.