WesternZagros Resources announced today its operating and financial results for the fourth quarter and year ended December 31, 2015. All amounts set out in this press release are in US dollars unless otherwise stated.
Commenting on the year end and subsequent events, WesternZagros's Chief Executive Officer, Simon Hatfield (pictured) said:
"In 2015, we were pleased to establish production on the Garmian Block and to welcome Repsol S.A. to the Kurdamir Block following their acquisition of Talisman.
"We continue to work with both our joint venture partners and the Kurdistan Regional Government in finalizing the field development plans for our Kurdamir and Garmian discoveries. We also continue our cost savings initiatives to strengthen our financial position during this period of uncertain market conditions.
"On behalf of the Board and WesternZagros management, I want to express our appreciation to Fred Dyment, who held the position of Chairman from 2007 to 2015. We are very appreciative of his commitment, contributions and leadership over the past decade.
"Fred's considerable business experience, keen focus and high professional ethics have provided valuable guidance to the Company."
WesternZagros achieved several key financial and operational milestones during 2015 and to date, including:
- Production - Oil production in the Development Period from the Garmian Block commenced on February 11, 2015 as the co-venturers and the KRG continued to finalize the field development plan. Since that date, the Sarqala-1 well has averaged approximately 5,100 bbl/d 2015. Cumulative production for the year was approximately 1.7 MMbbl. Since inception of production during the first extended well test in 2011, Sarqala 1 has produced a cumulative amount of 2.7 MMbbl of light oil with no formation water and no hydrogen sulphide. Production is currently suspended pending direction from the KRG.
- Revenue - For the year ended December 31, 2015, revenue was $17.9 million, with an average realized price of $41.42/bbl and the field netback was $13.3 million.
- Reserves and Resources - The Company has received Sproule International Limited's ("Sproule") December 31, 2015 Evaluation of the P&NG Reserves and Audit of the Prospective Resources report for oil resources in the
Sarqala Jeribe / Upper Dhiban reservoir on the Garmian Block; and Sproule's Audit of the Contingent and Prospective Resources for oil and gas in the Oligocene reservoir on the Kurdamir Block. As is the Company's historical practice, both reports were prepared as part of its regular updates. The Contingent and Prospective Resources reports were prepared for risked and unrisked volumes pursuant to the new Canadian Resources other than Reserves ("ROTR") disclosure requirements.
The estimated 2P Reserves (Gross Block) for Garmian increased 16 percent to 13 million barrels of oil due to technical revisions following the production of 1.7 MMbbl of crude oil from the Sarqala-1 well in the year with no evidence of water. The Garmian Jeribe / Upper Dhiban unrisked Prospective Resources of oil, (Gross Block P50 estimate) increased by 8 percent to 66 MMbbl primarily due to technical revisions.
There was no change to the Kurdamir Oligocene unrisked Contingent Resources of 366 MMbbl of oil, 1.8 Tcf of natural gas and 55 MMbbl of condensate or the unrisked Prospective Resource of 1 billion barrels of oil and 1 Tcf of natural gas (all Gross Block P50 estimates).
- Financing - Fully repaid the Cdn $100 million convertible notes which matured December 31, 2015, from available funds recognizing a total foreign exchange gain upon repayment of approximately $25 million since the debt was first incurred in 2013. At the end of 2015, the Company had $48.4 million in cash and cash equivalents and no outstanding debt. The Company reached an agreement with Crest in December 2015 to defer the first drawdown notice date under the first tranche of its US$200 million unsecured credit facility from the original date of January 1, 2016 to May 1, 2016. The Company commenced a review of all financing alternatives available in December 2015 including but not limited to, the completion of an alternative debt financing or equity financing, or the farm down or sale of some of the assets of the Company. As previously announced, the Company has retained TD Securities to act as its financial advisor.
- Cost Reduction Initiatives - In light of the significant decline in oil price and the current capital market conditions, the Company continued to focus on strict cost management. These efforts included: optimizing capital investments, reducing staff, renegotiating contracts with service suppliers, and cutting discretionary expenditures (e.g. not awarding any discretionary cash bonuses for 2015).
Due primarily to current market conditions, the Company recognized total non-cash impairment charges during the last three quarters of 2015 in relation to the Garmian Block of $11.7 million in relation to property, plant and equipment, and $209.6 million in relation to exploration and evaluation expenditures.
- Development Plans - WesternZagros and its co-venturers on the Kurdamir and Garmian blocks continue to work with the KRG in finalizing the respective field development plans.
- Operatorship - Repsol S.A., through its subsidiary Talisman (Block K44) B.V. ("Repsol"), assumed operatorship of the Kurdamir Block following its acquisition of Talisman Energy Inc. in May 2015. Repsol has revitalized its efforts with a fully staffed, multidisciplinary team of over fifty people working on the project.
Pursuant to the terms of the Garmian PSC, operatorship of the Garmian Block transitioned from WesternZagros to Gazprom Neft Middle East B.V. effective February 29, 2016.
- Corporate - The Board of Directors of the Company transitioned the role of Chairman of the Board from Mr. Fred Dyment to Mr. David Boone as of January 1, 2016.
(Source: WesternZagros Resources)