The significantly increased estimate of the Kurdamir resources is a result of the discovery of a major oil column in the Oligocene reservoir at the Kurdamir-2 exploration well. Wireline logs indicated a porous zone of 140 metres thickness within the Oligocene interval, between 2,422 and 2,562 metres, all of which is hydrocarbon bearing. Within this hydrocarbon zone, well log data indicates 22 metres of gross gas pay above 118 metres of gross oil pay. No evidence of a water leg has been encountered within the Oligocene interval. An open hole drill stem test was conducted from 2,315 metres to 2,477 metres, which included 55 metres of the Oligocene porous zone. This test was conducted across the interpreted gas-oil contact at 2,444 metres. The test achieved a flow rate of 7.3 million cubic feet ("MMcf") per day of gas and a stabilized flow rate of 950 barrels per day ("bbl/d") of 47 degree API mixture of light oil and condensate over the final seven hours of the main flow period. This rate was achieved through a 56/64 inch choke at an average flowing well head pressure of 650 pounds per square inch and without any stimulation. There was no observed decline and no formation water was recovered during testing. According to analysis by an independent third party engineering expert, the 33 metres of oil pay tested to date is capable of flowing at rates of 4,000 bbl/d if isolated from the gas pay and stimulated.
These latest audited estimates represent an increase in the combined Mean Prospective Resources on the Kurdamir and Garmian exploration blocks ("PSC Lands") to 3.3 Bbbl of oil, or 4.9 billion BOE when gas and condensate are included. The current combined Mean Contingent Resources on are 171 MMbbl of oil, or 415 million BOE when gas and condensate are included.
For the three month period ended June 30, 2012, the Company generated $13.7 million of gross proceeds from the sales of approximately 281,000 barrels of test oil from the Sarqala-1 well. The extended well test was temporarily suspended on May 28, 2012, when the Company began planned well repairs that carried on until July 2012. The well is ready to resume testing when the KRG issues its approval.
For the second half of fiscal 2012, WesternZagros estimates its capital expenditures, including the requirement for the Company to fund 50 percent of Garmian activities and 60 percent of the Kurdamir activities to be approximately $60-70 million. This includes approximately $15-20 million for the planned testing of the Oligocene, Eocene and Cretaceous reservoirs at Kurdamir-2; $5-$10 million for the Kurdamir-3 appraisal well; $10 million for designing, planning and procurement of the necessary long lead materials for the Hasira-1, Sarqala-2, Upper Bakhtiari, Baran and Qulijan wells; $15 million for the seismic programs on Garmian and Kurdamir Blocks; $5 million for planning and procuring the permanent facilities for Sarqala; $5 million for in-country support costs and other PSC expenditures for both the Kurdamir and Garmian Blocks; and approximately $5 million for corporate and general and administrative costs. This excludes any of the proceeds from the sale of crude oil from the extended well test at Sarqala-1.
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