WesternZagros Year-End Results

Liquidity and Capital Resources

As at December 31, 2014, WesternZagros had $197.1 million in cash and cash equivalents. The Company also has access to two debt facilities, $150 million that can be drawn commencing in October 2015 and $50 million that can be drawn commencing in June 2016. These capital resources will be used to fund both future development activities and the repayment of the Cdn$100 million convertible notes where the conversion rights have not been exercised.

As the Company advances the execution of its development activities it will continually evaluate both its capital resources and capital structure. The Company in this evaluation will monitor and assess all relevant factors, including the following:

• The expected timing and scope of development activities based upon an appropriate phasing reflective of the approved development plans, current market conditions, and the political and security situation within Iraq;
• The ability to export or to sell into the domestic market oil and natural gas in accordance with the economic terms of the PSCs;
• The level of cash flow generated from production;
• The continued participation of its co-venturers in development activities;
• The current conditions of the oil and gas industry given the recent significant decline in world oil prices and the impact on further investment in in the industry;
• The current conditions in the financial markets, including the potential for further market instability; and
• The ability to access debt, and the costs thereof, for development activities in Kurdistan.

With the capital resources and anticipated crude oil sales, the Company is fully funded for currently planned activities in 2015. The Company is focused on increasing its production capacity and sales volumes to support further investment on the Garmian and Kurdamir developments.

However, the Company may need to access further capital resources depending on a number of the factors identified above, and particularly the outcome of the negotiations of the Kurdamir development plan and the participation of its co-venturer. This could include potentially accessing the debt and/or equity market, or seeking additional partnerships, farmouts or other strategic arrangements.

The Company may also delay certain phases of its development plans if the ability to export or sell into the domestic market oil and natural gas in accordance with the economic terms of the PSCs is restricted or unavailable, or if the political and security situation within Iraq is not suitable.

(Source: WesternZagros)