WesternZagros Year-End Results

Outlook

2015 Operations Outlook

The Company anticipates crude oil sales during 2015 into the domestic market, which is supported by the initial sales in February and March. Crude oil production from the Sarqala-1 well is anticipated to produce between 6,000 and 7,500 barrels per day on an annualized basis (8,000 to 10,000 barrels per day for the remainder following a ramp up in the first quarter of the year).The domestic market price is linked to Brent pricing and payments for the sale of crude oil are received prior to deliver of the volumes. The Company estimates the domestic price will range from $42/bbl to $52/bbl (assuming Brent ranges between $50 to $60 per barrel) which would result in 2015 revenues of $20 to $35 million and operating income of $15 to $30 million after consideration of field operating costs.

2015 Capital Outlook

The Company's planned expenditures for 2015 total $125 million, which includes $100 million of capital costs for Phases 1 and 2 of the Garmian development, $10 million of capital costs for development planning and long leads to advance the Kurdamir development plan and $15 million of Corporate, G&A and interest costs. Phase 2 spending for Garmian is dependent on securing KRG approval of the Garmian development plan and the continued ability to monetize crude sales from Sarqala-1.

Garmian Block

The first three phases of the Garmian development plan submitted to the Kurdistan Regional Government ("KRG") are outlined below. Commitment to subsequent phases, including construction of the central processing facility ("CPF") will be dependent on the results of, and the ability to monetize production from, phases 1 and 2.

Phase 1 - Establish Production: The Sarqala-1 workover was completed in 2014 with flow rates testing at 11,500 bbl/d. The early processing facility ("EPF") upgrades were also completed increasing the processing capacity from 10,000 bbl/d to 15,000 bbl/d. The EPF has been commissioned and is now in operation supplying crude to the domestic market. The Hasira-1 exploration well test results are anticipated in the second quarter of 2015. Estimated costs in 2015 to complete the Hasira-1 testing operations and final EPF commissioning are $8 to $9 million.

The Company is in discussions to provide associated gas to a proposed KRG gas facility near the block boundary for utilization by the government pursuant to the PSC. This will allow for the utilization of gas to fuel domestic electrical power production and minimize flaring.

Phase 2 - Facility Expansion: Expand production facilities to 35,000 bbl/d including centralized storage and loading facilities, tie-in Hasira-1 well upon success and drill the first two horizontal development wells. This phase of development work is anticipated to start in second half of 2015 and into 2016 with estimated net costs of $85 million to $90 million.

The planned development drilling program will delineate the Prospective Resources within the Jeribe reservoir. Based on the well results, the production facility capacity could be increased beyond the planned 35,000 bbl/d. With success, the Company believes that the current 2P Reserves and the Gross Prospective Resources (P50 basis) for the Garmian Block could ultimately support a project up to 50,000 bbl/d of oil production.

Phase 3 - Increase Well Capacity: Drill up to four additional deviated or horizontal development wells to optimize plant capacity and install water handling and compression equipment, as required. This phase of development work has an estimated net capital cost of up to $155 million.

The Company's Garmian reserves, as recognized at December 31, 2014 by the independent reserves evaluator was limited solely to the Jeribe reservoir and assumed a maximum well production capability of approximately 6,000 bbls/d for the best producing well. The reserves did not include the results from preliminary testing at Hasira-1 in the Oligocene reservoir and do not include any technical adjustment for the Sarqala workover results due to the limited duration of the test, which tested at over 11,500 bbls/d. It is anticipated that reserves will be updated later in 2015 once results from Hasira-1 are known and the Sarqala-1 well has produced for a longer duration.

Kurdamir Block

On the Kurdamir Block, the Company has submitted an alternative development plan to the KRG and is now in active discussions with the KRG on further refinements to advance the development of both the significant gas and oil volumes. Certain activities, including front end engineering of the necessary facilities and planning for additional drilling, will be completed in coordination with the KRG as the development plan is agreed. The Company will provide further guidance and will look to convert the contingent resources to reserves once the development plan has been finalized with the KRG.