Interim Results

Gulf Keystone Petroleum Ld
30 September 2004



30 September 2004


                        Gulf Keystone Petroleum Limited

                              2004 Interim Results


Gulf Keystone Petroleum Limited ("Gulf Keystone" or the "Company"), an
independent oil exploration company operating in the Republic of Algeria, today
announces its Interim Results for the period ending 30 June 2004.


Highlights


•  Gulf Keystone began trading on the Alternative Investment Market on 8
   September 2004 after raising £60 million (before expenses) from new investors



•  The Company's principle asset is a Production Sharing Contract with
   SONATRACH, the Algerian National Oil Enterprise, on the 5,891.07 km2 Block 
   126 located in northern Algeria



•  Exploration activities continued during the period with the drilling
   of exploratory well RDL-1



•  A rig, capable of drilling to depths in excess of 4,000 metres has
   been contracted and is slated for a mid-December 2004 start on a work-over 
   and drilling programme



•  A rigless work-over and completion programme is also being conducted
   on GKN-1 that it is hoped will result in a production license being granted 
   on a structure with an estimated 10 mmBOE net recoverable reserves


Todd Kozel, Chief Executive Officer and Vice President of Gulf Keystone said:



"We are delighted with our successful fund raising and excited by the many
opportunities offered by Block 126.  The funds raised will enable us to drill
additional wells, build necessary infrastructure, realise our reserve potential
and further exploit the upside exploration potential of the Block."


Enquiries


Evolution Securities                 020 7071 4300

Rob Collins



Citigate Dewe Rogerson               020 7638 9571

Martin Jackson

George Cazenove


                        Gulf Keystone Petroleum Limited

                              2004 Interim Results



Chief Executive's Statement


Results



During the six months ended 30 June 2004 the Company continued its exploration
activities in Block 126, Algeria. The results reflect this ongoing exploration
with $2,240,076 being expensed to the income statement and $7,786,649 of
expenditure being capitalised under Oil and Gas properties. During the period
the Company did not record any turnover. The main area of activity during this
period was the drilling of an exploratory well RDL-1 on which further details
are provided in the Company's AIM Admission Document which was published on 2
September 2004.



The key development for the Company occurred after the period end when the
Company successfully completed the placing of 125,000,000 new Common Shares
raising £60,000,000 and listed on AIM a market operated by the London Stock
Exchange.



At Gulf Keystone, we are enthusiastic about our future and the many exciting
opportunities we expect to be realised from Block 126 and beyond.  This
successful fund raising will benefit the company greatly by enabling us to drill
additional wells, build necessary infrastructure, realise our reserve potential
and further exploit the upside exploration potential of Block 126 and other
assets in Algeria.



Current and Future Operations



Gulf Keystone has now executed a Letter of Intent for a minimum one-year
contract with drilling contractor Saipem S.p.A. for Saipem's Drilling Rig 5832.
The rig is capable of drilling to depths in excess of 4,000 metres and is slated
for a mid-December start on a work-over and drilling program in Gulf Keystone's
5,891.07 km2 Block 126 contract area in northern Algeria.



Initial operations for the rig involve a recompletion of SONATRACH's GKS-2 well,
the discovery well on Gulf Keystone's GKS structure that has already tested at a
combined rate of over 2,700 barrels of oil and 2.2 million cubic feet of gas per
day.  The rig will then be moved to Gulf Keystone's recently drilled GKS-3
confirmation well to re-drill and complete in the objective section that had
better average porosity and oil saturations than the GKS-2 well, as indicated by
well logs.  Gulf Keystone is re-drilling the reservoir in order to employ a high
volume completion technique to better stimulate the well that cannot be
performed in the original well bore.  It is expected that the successful
completion of these two GKS wells will lead to Gulf Keystone's application for a
full production licence for the GKS structure that is estimated to contain 29.6
million barrels of oil equivalent (BOE) recoverable reserves net to Gulf
Keystone per Scott Pickford Limted's Competent Persons Report, a full version of
which is published in the Company's AIM Admission Document.



After completing work on the GKS structure, it is intended that the rig will
move to Gulf Keystone's third exploratory well on Block 126, the planned 3,100
metre RTB-W-1 test.  This well is on the same structural feature as SONATRACH's
Ras Toumb Field) that produced oil from 1977 to 2001 in neighbouring Block 108,
fifteen kilometres east of the RTB-W-1 location.  Scott Pickford has estimated
over 75 million BOE gross recoverable reserves from this RTB-W structure.



Concurrent with these drilling operations, Gulf Keystone is conducting a rigless
work-over and completion program on the GKN-1 well that is hoped will result in
a production licence being granted to Gulf Keystone for this structure that has
an estimated 10 million BOE recoverable reserves net to Gulf Keystone (as
detailed in Scott Pickford's Competent Persons Report).  The results of the
Production Logging Program run by Gulf Keystone in May 2004 indicated that many
of the perforated intervals in the Turonian - Cenomanian Ras Toumb reservoir
were not contributing flow to the well-bore.  To increase total well production,
the non-contributing perforated intervals will be selectively acidised to
re-establish well-bore flow and increase production.



Strategy



The company will pursue its strategy by conducting early work-over,
re-completion drilling operations and 3D seismic acquisition and interpretation
on Block 126.  Furthermore, additional opportunities, both in Algeria and North
Africa, will be evaluated with the objective of expanding the company's asset
base.



                        Gulf Keystone Petroleum Limited

                                 Balance Sheet

                                  (Unaudited)



                                Assets                                         30-Jun-04             31-Dec-03
                                                                                        $                     $

Current assets:
      Cash and cash equivalents                                                2,930,616             6,974,728
      Inventory                                                                   448,427              869,114
      Other Current Assets                                                        64,228                64,228
Total current assets                                                           3,443,271             7,908,070

Property and equipment:
      Oil and gas properties                                                  27,449,949            19,663,300
      Furniture and equipment                                                     72,966                72,966
      Less depreciation, depletion, and amortization                             (30,300)             (24,240)
Property and equipment, net                                                   27,492,615            19,712,026

Seismic data                                                                   2,730,000             2,730,000

Total assets                                                                  33,665,886            30,350,096

               Liabilities and Stockholders' Deficiency

Current liabilities:
      Accounts Payable                                                           950,847             8,372,841
      Accrued liabilities                                                              -                      -
      Due to Gulf Keystone Petroleum Company, LLC                                473,725               560,830
      Due to joint venture partner                                             2,500,000             2,500,000
Total current liabilities                                                      3,924,572            11,433,671

Series A Preferred stock, $1,000 par value, authorised 60,000 shares,          37,564,500           24,493,475
issued 37,381 shares

Stockholders' deficiency:
      Common stock, no par value, authorised 2,000,000 shares;
      issued 900,000 shares                                                            -                     -
      Retained deficiency                                                     (7,823,186)           (5,577,050)
Total stockholders' deficiency                                                (7,823,186)           (5,577,050)

Total liabilities and stockholders' deficiency                                33,665,886            30,350,096


                        Gulf Keystone Petroleum Limited

                                Income Statement

                                  (Unaudited)


                     For the Six Months Ended 30 June 2004


                                                                                                 $
REVENUES                                                                                        -

Expenses
      General and administrative                                                      (2,240,076)
      Depreciation, depletion, and amortisation                                           (6,060)
Total expenses                                                                        (2,246,136)

Interest income                                                                                 -

Net loss                                                                               (2,246,136)

Retained deficiency beginning of period                                                (5,577,050)

Retained deficiency end of period                                                      (7,823,186)


                        Gulf Keystone Petroleum Limited

                            Statement of Cash Flows

                                  (Unaudited)


                     For the Six Months Ended 30 June 2004


                                                                                                     $
OPERATING ACTIVITIES
      Net Income (Loss)                                                                    (2,246,136)
          Adjustments to reconcile Net Income to net cash provided by operations:
               Depreciation and Amortisation                                                     6,060

               Increase (decrease) in cash from changes in:
               Inventory                                                                      420,688
               Prepaid management fees
                                                                                                    -
               Other Current Assets
                                                                                                    -
               Accounts Payable                                                            (7,421,994)
               Accrued liabilities
                                                                                                    -
               Due to Gulf Keystone Petroleum Company, LLC
                                                                                              (87,105)
      Net cash provided by Operating Activities                                            (9,328,488)

      INVESTING ACTIVITIES
          Office Furniture & Equipment
                                                                                                    -
          Oil and Gas Properties                                                           (7,786,649)
          Net cash provided by Investing Activities                                        (7,786,649)

      FINANCING ACTIVITIES
          Series A Preferred Stock receipts                                                 13,071,025
      Net cash provided by Financing Activities                                            13,071,025

Net cash increase (decrease) for period                                                    (4,044,112)

Cash at beginning of period                                                                 6,974,728
Cash at end of period                                                                       2,930,616


Gulf Keystone Petroleum Limited

Notes to Financial Statements

1.      Oil and Gas Properties

The Company uses the full cost method of accounting for oil and gas properties.
Under the full cost method of accounting, all productive and nonproductive costs
directly identified with acquisition, exploration and development activities
including certain payroll and other internal costs are capitalised. Depletion is
based upon the ratio of current year revenues to expected total revenues,
utilising current prices, over the life of production. As the Company has not
yet commenced production from any of its well sites, no depletion expense has
been recorded. If such capitalised costs exceed the sum of the estimated present
value of the net future oil and gas revenues and the lower of cost or estimated
value of unproved properties, an amount equivalent to the excess is charged to
current depletion expense. Gains or losses on the sale or other disposition of
gas and oil properties are normally recorded as adjustments to capitalised
costs, except in the case of a sale of a significant amount of properties, which
would be reflected in the income statement.

2.      Use of Estimates

The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

3.      Taxes

Bermuda currently imposes no taxes on corporate income or capital gains.


4.      Preferred Stock

The Company has issued a total of 37,564.5 Series A Preferred Shares for
$37,564,500 ($1,000 per share).

Each holder of a Series A Preferred Share shall have the right, at the option of
the holder, at any time and from time to time after the earlier of 30 June 2003
and the tenth day immediately prior to the record date for determining the
shareholder entitled to participate in the distribution of the assets legally
available for distribution to the shareholders following a liquidation event,
and until the earlier of 31 December 2005 and the liquidation record date, to
convert such share into a number of fully paid and non assessable, nonvoting
common shares at a conversion rate that is equal to the base liquidation value
divided by $1,000.

All outstanding Series A Preferred Shares shall be redeemed on 31 December 2005
if such Series A Preferred Shares have not been converted into nonvoting common
shares or common shares with full voting rights at a price per share equal to
the base liquidation value of such shares on said date.

In the event that the Company shall be liquidated, dissolved or wound up, the
holders of the Series A Preferred Shares shall be entitled to receive an
aggregate amount equal to $1,000 in cash per share. If upon any liquidating
event the net assets of the Company shall be insufficient to pay the holders of
all outstanding Series A Preferred Shares, the proceeds shall be distributed
ratably among the holders of the Series A Preferred Shares.

5.      Commitments and Contingencies

On 28 February 2001, Gulf Keystone UAE entered into a Contract for the
Exploration,
Evaluation and Exploitation of Hydrocarbons between SONATRACH and Gulf Keystone
Petroleum Company, LLC concerning the Ferkane Perimeter (Block 126) (the
Contract). The Contract was subsequently transferred to Gulf Keystone Algeria.

In accordance with Article 7 of the Contract, the Company agreed to acquire 600
kilometres of seismic data and drill two exploration wells. The exploration and
evaluation phase of the Contract consists of a three-year period, with an option
to extend for two more years upon SONATRACH's request. If extended, the Company
will acquire an additional 600 kilometres of seismic data and drill one
exploration well. The cost of performing the minimum work program is estimated
to be $15 million for the first period and $9 million for the second.

In accordance with Article 7.5 of the Contract, 500 seismic kilometres 2D were
performed by SONATRACH during 2000 and were acquired by the Company. The
compensation for the data acquired was $2.7 million. The Company paid $230,000
of the cost at acquisition. The remaining $2.5 million will come as a deduction
from the performance cost and shall be repaid in the event a discovered deposit
is declared commercially exploitable. However, if no commercially exploitable
deposits are discovered, the Company does not owe SONATRACH for the data
acquired. As of 30 June 2004, the Company has recorded a $2.7 million seismic
data asset and reflected a liability of $2.5 million to SONATRACH representing
the remaining amount due upon commercial declaration.

Additionally, in accordance with Article 15 of the Contract, the rate of
participation of the investors in the financing of the investment costs for
exploration, evaluation, development, exploitation and operating costs is set at
40 per cent. for SONATRACH and 60 per cent. for Gulf Keystone Algeria. However,
in the absence of the discovery of a commercially exploitable deposit, the
Company may not claim any reimbursement or compensation. As of 30 June 2004,
potentially reimbursable petroleum costs, from SONATRACH, in the event that
commercially exploitable deposits are discovered, total $10,979,980.

6.      Related Party Transactions

The Company entered into an agreement with Texas Keystone, Inc. (TKI) in which
the Company pays a fee to TKI for professional, management and administrative
services. The fee for administrative services is equal to TKI's actual cost of
providing the administrative services plus 10 per cent., the fee for
professional services is equal to the then hourly rates charged by TKI to third
parties for such services, and the Company shall reimburse TKI for reasonable
out-of-pocket expenses. The TKI fees totaled $610,478 for the first six months
of 2004.

 7. Subsequent Event



On 8 September 2004 the company placed 125,000,000 new common shares and these
common shares and all the existing common shares were admitted to trading on AIM
a market operated by the London Stock Exchange.  The proceeds from this
placement, before expenses, were GBP £60,000,000 (approximately US
$104,400,000).  The proceeds from this placement will be used for the continuing
development of Block 126.  Simultaneously with the placement of new shares the
Series A Preferred Shares were converted into common shares at a ratio of 1,000
common shares for each one share of Series A shares.


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