Canadian independent oil explorer WesternZagros says it may be about to tie up with a “large European company” at its Garmian block it operates in the Kurdish region of Iraq, a partnership which may put the company’s mixed track record in the region behind it.
“We’re relying on getting about $55 million in back costs from the large European partner we’re about to get, which will give the company funding through next year,” CEO Simon Hatfield told Reuters yesterday, saying the European firm – which Hatfield declined to name – would assume operatorship of the block, presumably under a farm-in agreement.
“They had their lawyers in Calgary last week doing their final legal due diligence with our lawyers,” Hatfield said. “But ours is not the only deal this company is looking at – that’s why it’s taking so long.”
WesternZagros is sitting on just $30.6 million of working capital, after years of cost overruns in drilling its Sarqala-1 and Kurdamir-1 exploration wells, and the company continues to make a loss as operating costs continue to outstrip its revenues from sales to the local market at $50 a barrel.
Hatfield says the move by the European company would be the largest part of a multi-asset play in the region akin to the six-block splash ExxonMobil made in November 2011.
“It’s a big company and they want a material position,” said the chief executive. “There’s not a lot left, so they’ve got to piece it together.”
WesternZagros has a 40% working interest in the Garmian block (before back-in rights), which contains the company’s Sarqala-1 well, which is currently producing 5,000 barrels of oil per day, slated to rise to 8,000 bpd by the end of the year.
