WesternZagros Announces 2015 Fourth Quarter and Year End Results

CALGARY, ALBERTA–(Marketwired – March 17, 2016) –

NOT FOR DISTRIBUTION TO U.S. NEWSWIRE SERVICES OR DISSEMINATION IN THE UNITED STATES

WesternZagros Resources Ltd. (TSX VENTURE:WZR) (“WesternZagros” or “the Company”) 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 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.

Reserves and Resources Update

The table below summarizes the Company’s Reserves, Contingent Resources and Prospective Resources for the
Garmian and Kurdamir Blocks as evaluated and audited by Sproule.

Notes:

1. Values may not add or be consistent from one presentation to the next due to rounding.
2. “Gross Block Oil Reserves” are the total remaining recoverable reserves associated with the acreage in which the
   Company has an interest.
3. “Company Gross” without any adjustment for the Company’s working interest therein means the Company’s 40% working interest (operating or non-operating) share before deduction of royalty petroleum, profit petroleum, production bonuses and capacity building support payments to the Kurdistan Regional Government pursuant to the provisions of the applicable PSC.
4. “Company Net” means the Company’s cost and profit petroleum volume entitlements, pursuant to the provisions of the
   Garmian PSCs.
5. The classifications shown are Proved (1P), Proved plus Probable (2P) and Proved plus Probable plus Possible (3P). Possible Reserves are those additional Reserves that are less certain to be recovered than Probable Reserves. There is a 10 percent probability that the quantities actually recovered will equal or exceed the 3P Reserves.
6. After-tax net present value of future net revenue associated therewith using forecast prices and costs and a10 percent and 15 percent discount rates. Reserves estimates used to calculate future net revenue are estimated based on the economically recoverable volumes within the development/exploitation period specified in the PSCs. The estimated net present values disclosed do not represent fair market value.
7. Contingent Resources are those quantities of petroleum, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingent Resources have an associated chance of development. There is no certainty as to the timing of such development or whether it will be commercially viable to produce any portion of the resources.
8. Prospective Resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective resources have both an associated chance of discovery and a chance of development. The chance of commerciality is the product of these two risk components. There is no certainty that any portion of the prospective resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the prospective resources.

Fourth Quarter 2015 and Year End Results

WesternZagros has posted its operating and financial results for the fourth quarter and year ended December 31, 2015 on its website. The financial statements, the Management Discussion and Analysis, and the Annual Information Form are available at www.westernzagros.com and on SEDAR at www.sedar.com.

Outlook

In 2016, the Company anticipates the average daily productive capacity of Sarqala-1 will range from 4,500 bbl/d to 5,000 bbl/d. Assuming continuous production for the remaining nine months of 2016, and an average Brent price of $35 to $45 per barrel, WesternZagros estimates 2016 revenues of $5 to $8 million.

WesternZagros will focus on strict cost management while securing KRG approval of the phased development plans for the Kurdamir and Garmian blocks. The Company has $48.4 million in cash and cash equivalents as at December 31, 2015 to advance the field development plans with its co-venturers and secure KRG approval. The Company estimates capital and operating expenditures of $35 to $45 for 2016 to operate the Sarqala production operations, advance the respective development plans on the Kurdamir and Garmian blocks with its co-venturers and for general and administrative costs for the Kurdistan joint venture offices and the WesternZagros headoffice.

As previously announced, the Company is reviewing all financing alternatives 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 to advance the developments. The Company will provide further guidance on the anticipated quantum and timing of capital expenditures for the respective Kurdamir and Garmian projects as the field development plans are finalized and approved. The Company has retained TD Securities to act as its financial advisor.

Liquidity and Capital Resources

As at December 31, 2015, WesternZagros had $48.4 million in cash and cash equivalents. The Company also has an undrawn $200 million debt facility under the Crest Loan Agreement which is available in two tranches and subject to certain conditions precedent to drawdown: Tranche 1 – $150 million available, with initial draw to be made by May 1, 2016 and Tranche 2 – $50 million available June 1, 2016, with initial draw to be made by July 1, 2016. If the initial draw is not made by the respective dates, the respective tranches are cancelled.

The development plans for the Kurdamir and the Garmian blocks have not yet been approved by the KRG and, as such, the anticipated level of capital expenditures required by the Company and the associated timing of such spending is uncertain at this time. 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 sales of crude oil;
• The continued participation of its co-venturers in development activities;
• The availability and suitability of the Crest debt facility in accordance with its terms;
• 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 other sources of funding for development activities in Kurdistan.

With the existing capital resources on hand and anticipated revenue, the Company believes that it is fully funded for currently planned activities in 2016. However, additional funding will be required by the Company in the future as the Company advances the execution of its development activities. The quantum of, and timing for, such funding will be dependent upon the factors identified above, and particularly the outcome of the negotiations and final approvals of the Kurdamir and Garmian FDPs. 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. The sources for such additional funding may include the existing Crest debt facility but, as previously announced, the Company is also exploring all other financing alternatives to allow for optimum alignment of capital availability with the development plan needs of the Company. This could include potentially accessing the debt and/or equity markets or seeking additional partnerships, farmouts or other strategic arrangements.

About WesternZagros Resources Ltd.

WesternZagros is an international natural resources company focused on acquiring properties and exploring for, developing and producing crude oil and natural gas in Iraq. WesternZagros, through its wholly-owned subsidiaries, holds a 40 percent working interest in two Production Sharing Contracts with the Kurdistan Regional Government in the Kurdistan Region of Iraq. WesternZagros’s shares trade in Canada on the TSX Venture Exchange under the symbol “WZR”.

This news release contains certain forward-looking statements relating to, but not limited to, operational information, future development concepts and plans and the timing associated therewith, planned expenditures, future production capability and capacity of facilities and expected production rates, revenues, field netback, and petroleum costs (as defined in each Production Sharing Contract (“PSC”)). Forward-looking information typically contains statements with words such as “anticipate”, “estimate”, “expect”, “potential”, “could”, or similar words suggesting future outcomes. The Company cautions readers and prospective investors in the Company’s securities to not place undue reliance on forward-looking information as, by its nature, it is based on current expectations regarding future events that involve a number of assumptions, inherent risks and uncertainties, which could cause actual results to differ materially from those anticipated by WesternZagros.

Forward looking information is not based on historical facts but rather on management’s current expectations as well as assumptions made by, and information currently available to management, concerning, among other things, development plans and concepts, outcomes of future well operations, results of drilling activity and testing, future capital and other expenditures (including the amount, nature and sources of funding thereof), the availability of debt financing or access to alternate financing, the continued ability to sell production in the domestic or export markets and the payments to be received in connection therewith, anticipated operating costs, future economic conditions, future currency and exchange rates, continued political stability, continued security in the Kurdistan Region, timely receipt of any necessary co-venturer, government or regulatory approvals, the successful resolution of any disputes, the Company’s continued ability to employ qualified staff and to obtain equipment in a timely and cost efficient manner and the participation of the Company’s co-venturers in joint activities. In addition, budgets are based upon WesternZagros’s current development plans and anticipated costs, both of which are subject to change based on, among other things, the outcome of negotiations with co-venturers and the government, the actual outcomes of well operations and the installation and commissioning of facilities, unexpected delays, availability of future financing and changes in market conditions. Although the Company believes the expectations and assumptions reflected in such forward-looking information are reasonable, they may prove to be incorrect. Forward-looking information involves significant known and unknown risks and uncertainties. A number of factors could cause actual results to differ materially from those anticipated by WesternZagros including, but not limited to, risks associated with the oil and gas industry (e.g. operational risks in development and production; inherent uncertainties in interpreting geological data; changes in plans with respect to capital expenditures; interruptions in operations together with any associated insurance proceedings; the uncertainty of estimates and projections in relation to timing, costs and expenses and health, safety and environmental risks), the risk of commodity price and foreign exchange rate fluctuations, risks relating to domestic refining capacity and continuing ability to access the domestic market, risks relating to the ability to access export markets and receive payments in accordance with the PSC terms on a timely basis, the uncertainty associated with any dispute resolution proceedings, the uncertainty associated with negotiating with foreign governments and risk associated with international activity, including the lack of federal petroleum legislation and ongoing political disputes and recent terrorist activities in Iraq in particular.

Readers are cautioned that the foregoing list of important factors is not exhaustive and that these factors and risks are difficult to predict. The forward-looking statements contained in this news release are made as of the date of this news release and, except as required by law, WesternZagros does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement. See the “Risk Factors” section of the Company’s Annual Information Form dated March 1 6, 2016 (“AIF”) filed on SEDAR at www.sedar.com for a further description of these risks and uncertainties facing WesternZagros. Additional information relating to WesternZagros is also available on SEDAR at www.sedar.com, including the Company’s AIF.

Non-IFRS Measures

Field netback is a non-IFRS measure that represents the Company’s working interest share of oil sales, after deducting royalties and operating expenses. Management believes that the field netback is a useful measure to analyze operating performance and provides an indication of the Company’s results of business activities prior to other income and expenses. Field netback does not have a standard meaning under IFRS and may not be comparable to similar measures used by other companies. It should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS such as total income (loss) or cash flow from (used in) operating activities. See the “Financial Performance” section of this news release for a reconciliation of field netback. Note that the Annual MD&A dated March 13, 2015, and news release dated May 4, 2015, previously used the term operating income rather than field netback.

Reserves and Resources Advisory

In addition, statements relating to reserves and other resources contained herein are deemed to be forward-looking statements, as they involve the implied assessment, based on certain estimates and assumptions that the resources described can be economically produced in the future. Future net revenue values are estimated values only and do not represent fair market value. There is no assurance that the forecast prices and cost assumptions, the initial phases of the development plans as submitted to the Kurdistan Regional Government (“KRG”) and anticipated future phases contemplated in completing the full field development utilized in such estimated values will be attained and variances could be material. The reserve and resource estimates provided herein are estimates only and there is no assurance that the estimated reserves and other resources will be recovered. Actual reserves and other resources may be greater than or less than the estimates provided herein. Terms related to resource classifications referred to herein are based on the definitions and guidelines in the Canadian Oil and Gas Evaluation Handbook which are as follows. The reserves have been evaluated by Sproule International Limited (“Sproule”). Resources other than reserves have been estimated by the Company and audited by Sproule.

“Reserves” are estimated remaining quantities of oil and natural gas and related substances anticipated to be recoverable from known accumulations, as of a given date, based on (a) analysis of drilling, geological, geophysical and engineering data, (b) the use of established technology and (c) specified economic conditions which are generally accepted as being reasonable and shall be disclosed. Reserves are classified as Proved, Probable or Possible according to the degree of certainty associated with the estimates. “Proved Reserves” are those Reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated Proved Reserves. If probabilistic methods are used, there should be at least a 90 percent probability that the quantities actually recovered will equal or exceed the estimated Proved Reserves. “Probable Reserves” are those additional Reserves that are less certain to be recovered than Proved Reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated Proved plus Probable (2P) Reserves. If probabilistic methods are used, there should be at least a 50 percent probability that the quantities actually recovered will equal or exceed the sum of the estimated 2P Reserves. “Possible Reserves” are those additional Reserves that are less certain to be recovered than Probable Reserves. It is unlikely that the actual remaining quantities recovered will exceed the sum of the estimated Proved plus Probable plus Possible (3P) Reserves. If probabilistic methods are used, there should be at least a 10 percent probability that the quantities actually recovered will equal or exceed the sum of the estimated 3P Reserves.

“Contingent Resources” are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingent Resources have an associated chance of development (economic, regulatory, market and facility, corporate commitment or political risks). The Contingent Resources estimates referred to herein have not been risked for the chance of development. There is no certainty that the Contingent Resources will be developed and, if developed, there is no certainty as to the timing of such development or that it will be commercially viable to produce any portion of the Contingent Resources.

“Prospective Resources” are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from undiscovered accumulations by application of future development projects. Prospective Resources have both an associated chance of discovery (geological chance of success) and a chance of development (economic, regulatory, market, facility, corporate commitment or political risks). The chance of commerciality is the product of these two risk components. The estimates referred to herein have not been risked for either the chance of discovery or the chance of development. There is no certainty that any portion of the Prospective Resources will be discovered. If a discovery is made, there is no certainty that it will be developed or, if it is developed, there is no certainty as to the timing of such development or that it will be commercially viable to produce any portion of the Prospective Resources.

Gross Block resource estimates presented herein represent the total volumes for the indicated reservoirs attributable to 100 percent of the relevant block, without any adjustment for the Company’s working interest therein whereas the Working Interest (Gross) or Company Gross resource estimates presented represent the Company’s 40 percent working interest (operating or non-operating) share before deduction of royalty petroleum, profit petroleum, production bonuses and capacity building support payments pursuant to the provisions of the applicable Production Sharing Contract.

A barrel of oil equivalent (BOE) is determined by converting a volume of natural gas to barrels using the ratio of 6 thousand cubic feet (Mcf) to one barrel. BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf:1 BOE is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be misleading as an indication of value.

The section “Statement of Reserves and Other Oil and Gas Information” (including Schedule A) contained in the Company’s Annual Information Form dated March 16, 2016 (“AIF”) filed on SEDAR at www.sedar.com, contains additional detail with respect to the Company’s resource assessments and the estimates of net present value associated with its Reserves. This section includes the significant risks and uncertainties associated with the volume estimates and the recovery and development of the resources, the forecast prices and cost assumptions, descriptions of the applicable projects and field development plans (“FDPs”) and the specific contingencies which prevent the classification of the Contingent Resources as Reserves.

As indicated above, estimates of Contingent Resources and Prospective Resources contained in this document are presented on an unrisked basis. Readers should refer to the AIF for the associated risked estimates of Contingent Resources and Prospective Resources. Such risked estimates are based upon the Company’s estimates of chance of commerciality set forth therein which involves assessing various risks based upon a number of assumptions and other factors. While the Company believes that such estimates and underlying assumptions are reasonable, many of these assumptions are beyond the Company’s control, are subject to change and may not, over time, prove to be accurate. As such, the actual level of various risks (including those currently identified and additional risks which may be identified in the future) could prove to be greater and the chance of commerciality lower than currently estimated and such differences could be material.

No additional projects have been defined at this time in respect of the Contingent Resources and Prospective Resources pertaining to other reservoirs for the Garmian and Kurdamir blocks since these reservoirs do not form part of the initial phases of the field development plans.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE

WesternZagros Resources Ltd.
Tony Kraljic
Senior VP Finance
(403) 693-7011

WesternZagros Resources Ltd.
Lisa Harriman
Manager of Investor Relations
(403) 693-7017
investorrelations@westernzagros.com
www.westernzagros.com