WesternZagros 3rd Quarter Results

Revenues

Interest Income $ 38 $ 36 $ 74 $ 152

Expenses

General and Administrative 1,208 2,359 4,202 4,826

Depreciation 132 189 443 566

Accretion on Asset Retirement

Obligation 4 3 11 7

Foreign Exchange (Gain) Loss (140) 44 105 (9)

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1,204 2,595 4,761 5,390

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Loss Before Income Taxes 1,166 2,559 4,687 5,238

Income Tax Expense (Recovery) (note 7) (68) 153 (863) (782)

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Net Loss and Other Comprehensive Loss 1,098 2,712 3,824 4,456

Deficit, Beginning of Period 42,453 35,980 39,727 34,236

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Deficit, End of Period $ 43,551 $ 38,692 $ 43,551 $ 38,692

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Net Loss Per Share

- Basic and Diluted (note 11) $ 0.005 $ 0.013 $ 0.018 $ 0.022

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Going Concern (note 1)

See Accompanying Notes to the Interim Consolidated Financial Statements

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(United States dollars thousands)

(Unaudited)

Three months ended Nine months ended

September September September September

30, 2010 30, 2009 30, 2010 30, 2009

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Cash Provided By (Used In)

Cash From Operating Activities

Net Loss $ (1,098) $ (2,712) $ (3,824) $ (4,456)

Non-cash Items

Depreciation 132 189 443 566

Accretion on Asset Retirement

Obligation (note 6) 4 3 11 7

Stock-based Compensation 385 401 880 1,193

Future Income Tax Recovery (note 7) 42 181 151 646

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(535) (1,938) (2,339) (2,044)

Decrease (Increase) in Non-Cash

Working Capital (note 13) 292 1,615 (273) (6,108)

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(243) (323) (2,612) (8,152)

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Cash From Financing Activities

None - - - -

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- - - -

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Cash From Investing Activities

Short-term Investments - - - 39,967

Capital Expenditures (20,455) (11,456) (49,830) (43,106)

Insurance Recoveries (note 4) 10,284 - 15,664 -

Decrease (Increase) in Non-cash

Working Capital (note 13) (3,255) 2,675 (9,830) 9,483

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(13,426) (8,781) (43,996) 6,344

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Decrease in Cash and Cash

Equivalents (13,669) (9,104) (46,608) (1,808)

Cash and Cash Equivalents at

Beginning of Period 43,769 97,312 76,708 90,016

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Cash and Cash Equivalents at

End of Period $ 30,100 $ 88,208 $ 30,100 $ 88,208

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Supplemental cash flow information:

Income Taxes Recovered (Paid) $ - $ 1,693 $ 598 $ (4,669)

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Going Concern (note 1)

See Accompanying Notes to the Interim Consolidated Financial Statements

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Three and nine months ended September 30, 2010 and 2009

(Tabular amounts in United States dollars thousands)

(Unaudited)

1. GOING CONCERN UNCERTAINTY AND BASIS OF PRESENTATION

These interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("GAAP") on the basis that WesternZagros Resources Ltd. (the "Corporation" or "WesternZagros") will continue to operate as a going concern, which implies the realization of assets and the settlement of liabilities and commitments in the normal course of business for the foreseeable future.

Since inception and typical with development stage companies, the Corporation has incurred losses from operations and negative cash flows from operating activities, and has an accumulated deficit at September 30, 2010. During the three months ended September 30, 2010, the Corporation had expenditures of $0.5 million, before net change in non-cash working capital, for operating activities and $20.5 million for oil and gas property expenditures, as well as an overall increase in non-cash working capital of $3.0 million. During the nine months ended September 30, 2010, the Corporation had expenditures of $2.3 million, before net change in non-cash working capital, for operating activities and $49.8 million for oil and gas property expenditures, as well as an overall increase in non-cash working capital of $10.1 million. The Corporation will require additional funding over time to maintain ongoing exploration programs and property commitments, as well as for administration expenses. This requirement for funding will occur during the fiscal year ending December 31, 2011, with the amount dependent on the level of exploration activities pursued by the Corporation.

There are material uncertainties that could raise significant doubt about the Corporation's ability to continue as a going concern, as further outlined below:

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