Preliminary Results

Immediate Release 20 April 2009



                       Gulfsands Petroleum plc

          Preliminary Results for year to 31 December 2008

London, 20 April 2009:  Gulfsands Petroleum plc ("Gulfsands", the
"Group" or the "Company" - AIM: GPX), the oil and gas production,
exploration and development company with activities in Syria, Iraq
and the USA, announces its annual results for the twelve months ended
31 December 2008.

HIGHLIGHTS

Operations
*          Production commenced on Khurbet East field in Syria in
  July, 5 months after commercial approval was obtained
*          With only 5 months of production, Syria became Gulfsands'
  largest producing asset and averaged in excess of 5,000 bopd (net
  WI) during Q4 2008 with no significant water production or pressure
  depletion
*          Discovery of Yousefieh field in Block 26 in Syria
*          2P working interest reserves in US Gulf of Mexico reduced
  by 3.8 mmboe to 5.1 mmboe : re-estimation of Syrian reserves still
  in progress
*          Group entitlement production of 0.4 mmbbl from Syria, 0.4
  mmboe from US vs. 0.7 mmboe (all from US) in 2007
Corporate
*          Appointment of Ric Malcolm and Andrew Rose as CEO and CFO
  respectively
*          Group head office successfully relocated to London
*          Placing of 5.5 million new shares at 170p per share to
  raise $18.6 million
Financial
*          Revenues up 44% to $53.6 million (2007: $37.3 million)
*          Gross Profit nearly doubled to $21.9 million (2007: $11.9
  million)
*          Cash flow from Operating Activities more than tripled to
  $18.7 million (2007: $5.9 million)
*          Net Loss of $9.7 million (2007: loss of $1.2 million,
  restated) after impairment charges on US assets and exceptional
  administrative expenses
*          Available cash balances at year-end of $36.8 million
Outlook
*          Expect commercial development approval for Yousefieh field
  by end of 2009
*          850 km² 3D seismic acquisition under way in Syria to
  provide 2010 exploration targets
*          Targeting year-end gross production on Khurbet East field
  of up to 16,000 bopd
*          Group capex for 2009 in the order of $40 million funded
  through operating cash flow
*          Proceeding with design and construction of permanent
  production facility, capacity 50,000 bfpd
*          Contract approaching signature for Maysan project in Iraq:
  actively engaged in discussions regarding financing and potential
  equity partners

Commenting on the annual results, Ric Malcolm, CEO of Gulfsands,
stated:

"2008 marked  the  transformation of  Gulfsands  into a  Middle  East
focused E&P  company with  the potential  for rapid  growth.   Beyond
bringing Khurbet East into production significantly ahead of schedule
and making an additional commercial discovery in Syria, we have  also
restructured  the   Company's  management   and  operational   teams,
strengthened the balance sheet and  provided the platform to  sustain
our significant  growth  trajectory  despite the  challenges  of  the
global recession.  We believe  that 2009 will  deliver the fruits  of
the hard work carried  out in 2008 and  we are excited by  Gulfsands'
prospects for the year ahead."
For more information please contact:


Gulfsands Petroleum (London)                      [phone]
Ric Malcolm, Chief Executive Officer
Kenneth Judge, Director of Corporate Development  [phone]
& Communications

Buchanan Communications Limited (London)          [phone]
Bobby Morse
Ben Romney

RBC Capital Markets (London)                      [phone]
Sarah Wharry




ABOUT GULFSANDS:

Gulfsands is listed on the AIM market of the London Stock Exchange.

Syria

Gulfsands owns a 50% working interest and is operator of Block 26  in
North East Syria.  The Khurbet East oil field was discovered in  June
2007 and  commenced commercial  production within  13 months  of  the
discovery. This field is currently producing more than 11,000 barrels
of oil per day through an early production facility. Block 26  covers
approximately 8,250 square kilometres and encompasses existing fields
which currently produce over 100,000 barrels of oil per day, and  are
operated  mainly  by  the  Syrian  Petroleum  Company.   The  current
exploration licence expires in  August 2010 and  is extendable for  a
further two years.  Gulfsands' working interest reserves in Syria  at
31 December 2008 were 28.7 mmbbls.

Iraq

Gulfsands signed a Memorandum of  Understanding in January 2005  with
the Ministry of Oil  in Iraq for the  Maysan Gas Project in  Southern
Iraq, following completion of a feasibility study on the project, and
is negotiating details of a  definitive contract for this  regionally
important development.  The project will gather, process and transmit
natural gas that is  currently a waste  by-product of oil  production
and as a result of the  present practice of gas flaring,  contributes
to significant environmental  damage in  the region.  The Company  is
actively  engaged  in  discussions  with  respect  to  financing  and
potential equity partners.  Gulfsands has no reserves in Iraq.

Gulf of Mexico, USA

The Company  owns interests  in  44 blocks  comprising  approximately
138,000 gross acres  offshore Texas and  Louisiana, which include  30
producing oil  and  gas  fields  with  proved  and  probable  working
interest reserves at 31 December 2008 of 5.1 mmboe.

Certain  statements  included   herein  constitute   "forward-looking
statements" within the meaning of applicable securities  legislation.
These forward-looking  statements are  based on  certain  assumptions
made  by Gulfsands  and  as  such  are  not  a  guarantee  of  future
performance.  Actual  results  could  differ  materially  from  those
expressed or  implied  in  such  forward-looking  statements  due  to
factors such  as general  economic and  market conditions,  increased
costs of production or a decline in oil and gas prices. Gulfsands  is
under  no  obligation  to   update  or  revise  any   forward-looking
statements, whether as a result of new information, future events  or
otherwise, except as required by applicable laws.

More  information   can   be   found   on   the   Company's   website
www.gulfsands.com


CHAIRMAN'S STATEMENT

Dear Shareholder,

I am  pleased to  report on  a year  of significant  achievement  and
change at Gulfsands. 2008 was  characterised by two key  developments
in particular.

The first has been the recruitment  of a new Chief Executive  Officer
and Chief Financial Officer, each  of whom is now thoroughly  settled
in his new responsibilities in  our recently established London  head
office.  We are fortunate indeed to have secured the services of  two
such experienced individuals as Ric Malcolm and Andrew Rose.

The second was the bringing  into early commercial production of  the
Khurbet East field  in Syria  during the third  quarter.  To  achieve
commercial levels of  production within  little more than  a year  of
completing the initial  discovery well is  an impressive  achievement
for any oil and gas company, and great credit is due in particular to
Mahdi Sajjad and our team in Syria as well as to the Syrian Petroleum
Company for the  commitment and support  they have given  us. At  the
time of writing, gross production from Khurbet East is around  11,000
barrels of oil per day ("bopd"), which we intend to increase to up to
16,000 bopd  by  the  year-end,  as  an  interim  step  towards  full
commercial development of  the Khurbet East  and Yousefieh fields  in
late 2010.

Strong Financial Position

Against a backdrop  of extraordinarily fraught  global financial  and
economic circumstances, Gulfsands' financial  strength is one of  its
principal attributes.   At year  end  we had  free cash  balances  of
approximately $37 million and  no borrowings.  That position  remains
essentially unchanged at  the time  of writing.  Even  in the  recent
environment of much reduced oil prices, our Syrian operations  remain
comfortably cash generative.

In light of the continuing  economic uncertainties, your Board  feels
it is important to focus in particular on the Group's ability to cope
with "downside" scenarios.  In this regard, it should be a comfort to
shareholders that we could absorb still further significant oil price
reductions and remain able  to meet all  our operating and  corporate
overheads, including the  costs of  developing our  Khurbet East  and
Yousefieh fields, without recourse to additional external funding.

Restatement of Prior Year Accounts and Exceptional Charges

As part of a  thorough review undertaken by  the new Chief  Financial
Officer, the Board has decided that it is appropriate to restate  the
2006 and 2007 Financial Statements to reflect what we now consider to
have been  erroneous  under-recording  of  estimated  decommissioning
liabilities and  depreciation associated  with  the Group's  Gulf  of
Mexico assets.

Additionally, the 2008 Income Statement reflects significant  charges
for compensation-related expenses.  These  charges are a  consequence
in part of severance costs and  option grants related to the  changes
in senior management which took place during 2008, and in part of the
re-grant of certain options which were unable to be exercised  before
their expiry at  the end of  2007 due to  restrictions on  Directors'
ability to deal in the Company's  shares for the last several  months
of that year.

Finally, the  2008 Income  Statement reflects  a charge  for loss  on
currency translation, brought  about by the  very sudden movement  in
the US Dollar / Sterling exchange  rate in the latter part of  2008.
As the Company now has significant Sterling-denominated overheads  by
virtue of migrating its central management function to London, it  is
appropriate to maintain significant sterling balances and the loss on
translation does not represent a cash outflow.

All these matters are  dealt with in detail  elsewhere in the  Annual
Report. My reason in drawing attention to them is merely to emphasise
that,  notwithstanding  the  rather  severe  impact  on  bottom  line
reported earnings, they have no  impact on the Group's cash  position
or ability to generate positive  cash flow and are entirely  historic
in their nature.

Syria

In the course of 2008 Gulfsands made a further significant  discovery
in Block 26  in the  form of  the Yousefieh  field.  This  discovery,
together with the adjacent Khurbet East  field, is the subject of  an
aggressive appraisal and development campaign intended to define more
precisely the oil-bearing  characteristics of the  two fields and  to
bring  them  both  into  full  commercial  development  as  early  as
possible. This remains our single highest priority.

Only  slightly  behind  the  development  of  the  Khurbet  East  and
Yousefieh fields  as a  priority, and  on a  parallel track,  we  are
proceeding apace to  evaluate and exploit  the remaining  exploration
opportunities within  Block  26.  A  major  programme of  3D  seismic
acquisition is well under way.  We continue to believe, based on  all
the evidence at  our disposal,  that the remaining  potential of  our
block is tremendous.

It is an old adage that success breeds success.  As a result of  what
the Group has  been able  to achieve  to date  in Block  26, and  the
political capital and credibility thereby accumulated, we are now  in
an excellent position to pursue  further opportunities in Syria.   In
this regard,  the  timing  of  the  current  tentative  rapprochement
between Syria and the United States is propitious.  We are determined
to pursue the openings thereby presented to the full.

Iraq

Political circumstances in Iraq, although far from perfect, are  more
favourable to beginning to establish long term commercial  operations
than has been the case at any time since the invasion in 2003.

We have in  recent months made  significant progress in  negotiations
for the Maysan  gas project.   We are also  involved in  a number  of
discussions  on  other  opportunities  in  Iraq  which  are  of  very
considerable long term potential.

Your Board is cautiously optimistic that  in the near future we  will
be in a position to announce positive developments bringing with them
the prospect of handsome ultimate reward  for the time and effort  we
have expended in Iraq over the past five years.  At the same time  we
remain conscious of the  considerable uncertainties that continue  to
overhang that country's future.  We will only sign up to  commitments
which  we  are  convinced  are  soundly  based,  within  the  Group's
financial compass and which do not jeopardise the Group's ability  to
maximise the  opportunities for  value  creation represented  by  our
existing successful Syrian operations.

Gulf of Mexico

The Group's Gulf of Mexico assets  have played a key role in  getting
us to the position we now enjoy.  Without the cash generated by these
assets over the past few  years we would not  have been able to  have
achieved our exploration and development success in Syria.

The diminution in the continuing strategic importance of these assets
to Gulfsands has coincided fortuitously  with the recent drop in  oil
and gas  prices and  the  global credit  crisis, which  factors  have
severely impacted both  the operating  profitability of  our Gulf  of
Mexico business (particularly gas production) and the market for such
assets. In addition,  the severity  of the hurricane  season in  2008
once again shut in  much of the Company's  production for the  second
half of the year.   Accordingly, our Gulf of  Mexico business made  a
loss for the year.

Your Board takes an  entirely pragmatic view  of these assets.   They
are clearly no longer strategic to the Group. They are also  unlikely
for the foreseeable future, absent a meaningful strengthening in  gas
prices, to make much in the way of a positive contribution to profits
and cash flow.  At  the same time, Gulfsands  is under absolutely  no
pressure to sell these assets and this would be a bad time to try  to
do so.   The  assets continue  to  hold potential  for  the  future.
Accordingly, we will continue  to selectively invest  in them to  the
extent we deem appropriate, and  to wait until market conditions  for
transactions in assets of this kind revert to some sort of normality.

Outlook

My fellow Directors and I  are highly enthusiastic about the  Group's
prospects for 2009  and beyond.  While we would  certainly welcome  a
recovery in oil and  gas prices, we are  well positioned not only  to
survive but indeed to flourish in the absence of such a recovery  for
the foreseeable  future.  I  look  forward to  reporting  significant
further progress in a year's time.
Yours sincerely,

Andrew West
Chairman

CHIEF EXECUTIVE'S REPORT

2008 was a transformational year for Gulfsands which has provided the
platform for sustaining the future growth of the Group.  Since coming
on board as Chief Executive Officer in October 2008, I have seen  oil
production from the  Khurbet East  field exceed  our expectations  by
averaging over  10,000  barrels  of  oil per  day,  as  well  as  the
discovery of the  Yousefieh oil  field, which is  located just  three
kilometres from the Khurbet East early production facility.

I joined Gulfsands, after almost ten  years of service with OMV,  for
three primary reasons.  Firstly, the Group has a strong balance sheet
with no debt  and is  highly cash generative.   Secondly, the  assets
held were of a  high calibre, in particular  Block 26 in Syria  where
significant upside  exists, and  thirdly, I  was impressed  with  the
quality and the blend of skills  of senior management and members  of
the Board.  Having restructured the  Company in 2008 and focussed  on
its strategy  of fast-tracking  the development  of its  Middle  East
assets, Gulfsands is  now is  a good position  to grow  substantially
over the next twelve months and beyond.

Since joining the  Company last October  I have further  strengthened
the technical and  financial teams based  in London to  enable us  to
better service our operations in the Middle East.

It is clear we have a number of key challenges ahead.  This period of
relatively low oil prices places pressure on cash flow and requires a
prudent, but  balanced,  approach to  investment.   In the  USA,  the
relative maturity of our assets in the Gulf of Mexico is evidenced by
the downgrading of our  proved and probable  reserves by 3.8  million
barrels of oil equivalent ("mmboe") to 5.1 mmboe at year-end (working
interest basis), owing to sharply  higher levels of water  production
in certain  wells.   We intend  to  contain expenditures  in  our  US
business, with  future activity  concentrating  on high  impact,  low
risk, low  cost operations  that have  the potential  to  efficiently
increase production and  ultimate reserves.  In  Syria, however,  our
assets are  at a  very early  stage of  development. The  exploration
period in Block 26 will finally cease in August 2012 and as a  result
a very active  programme is  required to fully  evaluate and  capture
opportunities prior to this date.   As we have demonstrated with  the
development of the Khurbet East field, additional discoveries will be
efficiently commercialised.

Gulfsands aims to be one  of the pre-eminent independent  exploration
and production companies in the  Middle East and a preferred  partner
and operator.   We  will  focus  on low  cost,  high  impact  onshore
operations with significant  equity interests  in a  small number  of
countries where we can capitalise on strong local relationships.  Our
primary focus will continue to be Syria, where we intend to build  on
our success  and  reinvest in  new  value-adding projects.   We  also
intend to capitalise on opportunities  to position the Group for  the
longer term in Iraq.

During 2008  Gulfsands  established  an impressive  track  record  in
exploration, appraisal,  development and  production.  The  Yousefieh
oil discovery was  made in November  with a 63  metre net oil  column
being encountered which flowed at rates of up to 1,460 barrels of oil
per day  via  a 48/64  inch  choke over  a  four hour  test  period.
Approval  to  develop  the  Khurbet  East  field  through  an   early
production facility was gained in February 2008 and only five  months
later the facility had  been constructed, development wells  drilled,
and oil produced.  The time taken  from discovery of Khurbet East  to
first production was  just thirteen months.   The Khurbet East  early
production facility has consistently produced in excess of the 10,000
barrels of oil per day design capacity with little pressure depletion
and minimal water production.

Building of  a permanent  production facility  at Khurbet  East  will
start in 2009 with the award of contracts in the third quarter,  with
the expectation that  the 50,000  barrels of fluid  per day  ("bfpd")
facility will be commissioned by the  end of 2010.  In the  meantime,
the capacity expansion of the  early production facility from  10,000
to 18,000 bfpd will  be in place by  mid-year with three new  Khurbet
East development wells  drilled in  order to  provide the  additional
volume of  oil required  to utilise  this additional  capacity.   The
Yousefieh discovery will be  appraised in 2009  with the drilling  of
two wells and  an application  will be submitted  for development  of
this field.

The acquisition in 2009 of 850 km² of 3D seismic data surrounding the
Khurbet  East  and  Yousefieh  oil  fields  will  provide  the   best
opportunity to  identify new  exploration prospects  for drilling  in
late 2009 and  2010, in  what has been  demonstrated to  be a  highly
prospective fairway.  Processing of the  data will take place in  the
third  quarter,  followed  by  seismic  interpretation  and  prospect
definition in the fourth quarter.

Due to high levels  of activity in Syria,  capital investment by  the
Group for both 2009 and 2010 will be in the order of $40 million, all
of which is expected to be fully funded from operating cash flow.  In
2010,  in  addition  to   an  active  exploration  programme,   seven
development wells are planned to be drilled in the Khurbet East field
and an as yet undefined number of development wells at Yousefieh.

Consequently, a very busy year ahead is expected on many fronts.  The
hard work, innovative approach and dedication of all employees during
2008 is duly recognised  and appreciated, along  with the support  of
shareholders as  the  Company prepares  to  meet its  objectives  and
continues to  build  an  ever  stronger  exploration  and  production
company in the Middle East.

Richard Malcolm
Chief Executive Officer

REVIEW OF OPERATIONS
SYRIA
Gulfsands is the operator of the Block 26 Production Sharing Contract
("PSC") with a 50% working interest. Block 26 covers an area of 8,250
km². The PSC grants rights to  explore, develop and produce from  all
stratigraphic levels outside the existing field areas and the  deeper
stratigraphic levels below the pre-existing  discovered field  areas.
The current  exploration period  expires in  August 2010  but may  be
extended at  the Contractor's  option for  a further  two years.  The
minimum work  commitments for  the  current exploration  period  have
already been satisfied. The development and production period for the
Khurbet  East  field  expires  in  February  2033  (25  years   after
commercial approval) but may  be extended for a  further 10 years  at
the Contractor's  option.  The terms  of  the PSC  comprise  a  12.5%
royalty, cost recovery  allowance, and the  sharing of the  resultant
profit oil.
Khurbet East field
The Khurbet East field was discovered in June 2007 by the KHE-1  well
and was  appraised  by two  further  wells  in H2  2007.  The  second
appraisal well (KHE-3) had  tested at an  average stabilised rate  of
3,420 bopd.  In February 2008, the Syrian Ministry of Oil and Mineral
Resources granted approval for commercial  development of the  field.
The development and  operation of  the field is  being undertaken  by
Dijla Petroleum  Company ("DPC"),  a joint  operating company  formed
with the national Syrian Petroleum  Company ("SPC") for this  purpose
in accordance with the terms of the PSC.
The KHE-1 well was a multi-zone discovery, encountering  hydrocarbons
in the  Cretaceous Massive  formation and  in the  deeper Butmah  and
Kurachine Dolomite formations. According  to an independent  reserves
evaluation,  conducted   prior  to   the  approval   for   commercial
development, the gross life-of-field  Proved plus  Probable  reserves
of the Cretaceous  Massive  formation as  at  31 December  2007  were
65.6 mmbbls (58.7 mmbbls if account is taken of the economic life  of
the  PSC   :   see   "Reserves   and   contingent   resources"). This
excluded hydrocarbons in the  deeper  Butmah and  Kurachine  Dolomite
formations.
Following commercial approval three development wells were drilled in
H1 2008 to  a depth of  approximately 2,050 metres  into the  Massive
reservoir :  one vertical  well (KHE-4)  followed by  two  horizontal
wells (KHE-5 & 6).  The latter wells had  horizontal sections of  300
metres and 200 metres respectively. KHE-5 was tested at a  stabilised
rate of  2,041 bopd  through a  24/64" choke  with less  than 10  psi
pressure drawdown  at  the reservoir.  Neither  KHE-4 nor  KHE-6  was
tested since  it  was  considered  that  sufficient  information  had
already been obtained from other wells.
Oil production commenced  from the  Khurbet East field  in July  2008
using a newly installed Early Production Facility ("EPF"), which  had
been constructed by SPC and leased to the Contractor group. Gross oil
production to the  end of  2008 was 1.41 million  barrels of oil,  of
which Gulfsands' net entitlement was 0.42 million barrels.  No  water
was produced. Five producer wells have been available for  production
during this period, consisting of three vertical producers, KHE-2,3 &
4, and  two horizontal  producers,  KHE-5 &  6. The  KHE-1  discovery
well has not been completed for production from the Massive reservoir
as it is  intended to  be used for  further appraisal  of the  deeper
reservoirs. Gross  field production  during the  first two  weeks  of
April 2009 averaged just over 11,000 bopd, with only trace amounts of
water. Over 2.5 million  barrels of oil have  been produced from  the
field  to  date.  Since  the  commencement  of  production,   various
reservoir and pressure monitoring  programmes have been conducted  to
collect information  to  optimise  the  design  of  the  full   field
development facilities and for effective reservoir management.
The crude oil produced from the Khurbet East field was determined  to
have  specifications   slightly   better  than   those   typical   of
Syrian Heavy crude oil of 25° API.  Under oil marketing  arrangements
agreed with SPC and the Oil Marketing Bureau of the Syrian Government
("OMB"), oil produced from  the Khurbet East field is transported  to
an  SPC-nominated  delivery  point  where   it  is  mixed  with   the
Syrian Heavy crude oil, and  exported through the Mediterranean  port
of Tartous using SPC's oil handling infrastructure.  In the period to
September 2009,  under  the  OMB's  arrangements  for  marketing  oil
produced from newly  developed fields  in this  area, the  Contractor
group receives 80 per  cent of  the price of  the Syrian Heavy  crude
oil, with the settlement for the remaining unpaid amount, subject  to
any adjustments  for  variations  in oil  quality,  taking  place  in
September 2009.
 Since the beginning of 2009 two delineation wells have been  drilled
with the intent of establishing the northern and southern  boundaries
of the Khurbet East field.  The first of these, KHE-7, located 4.1 km
to the north of KHE-1, was drilled in January. Good hydrocarbon shows
were  encountered  across  a  seven  metre  reservoir  interval   and
gradually diminished over the  next 13 metres.  Reservoir  porosities
in the  range  of  5%  to  10%  were  measured,  significantly  lower
than the  16% to 20% encountered in the central portion of the field.
Although the oil-water  contact was  not directly  determined by  the
wireline logs,  preliminary  analysis indicates  that  the  oil-water
contact  in  the  field   may  be  slightly deeper  than   previously
interpreted. The well has the potential  to be used for future  water
disposal.
The southern delineation well, KHE-8, located 2.7 km to the south  of
KHE-1, was  spudded in  March  2009 and  is currently  drilling  with
results anticipated in late April.
As a result of the early  field performance, work is now underway  to
expand the capacity of  the Khurbet East early  production facilities
to 18,000 bfpd as an interim step prior to the full field development
of the Khurbet East field.  This increase in capacity, consisting  of
the installation  of additional  surface  equipment, is  expected  to
be operational in  the   third   quarter of   2009.   Three   further
development wells are planned during the second and third quarters of
the year in order to utilise  this additional capacity. A full  field
development plan, consisting  predominantly of additional  processing
facilities and development drilling, and targeting a total production
capacity  of  around  50,000  bfpd,  is  in  preparation.   Gulfsands
anticipates that the operating company, DPC, will commit to the  full
field development plan during 2009.
An updated  independent  reserves  report  for  Khurbet  East  is  in
preparation, taking  into   account seismic,  well   and   production
information acquired since the last evaluation, including the results
of the recent KHE-7 and KHE-8  delineation wells, and is expected  to
be concluded  in the second  quarter of 2009. Since  the 31  December
2007 reserves evaluation (which  was based on  2D seismic data),  the
results of     the      3D     seismic interpretation      across the
field and the lower reservoir quality  encountered  in  the  northern
step-out well (KHE-7) are expected  to reduce the interpreted oil  in
place.     However,      the      better-than-expected      reservoir
production, combined with the field pressure performance, is expected
to enhance the oil recovery factor.
Yousefieh discovery
The Y-1 exploration  well was  drilled in  November 2008  to a  total
depth of 2,139 metres to evaluate the potential of a new  exploration
play identified from the 3D seismic survey acquired in 2007 over  the
Khurbet East  field and  nearby areas.  The well  encountered an  oil
column of  approximately  64 metres  in  the target  Cretaceous  aged
formations, containing approximately 63 metres of net oil pay  having
an average porosity of 18.6%. During an open-hole test of the top  19
metres of the reservoir the well flowed 23° API oil to surface, under
natural flow, at  approximately 900 bopd through a  48/64" choke.  In
January 2009 a cased-hole  flow test of  the Y-1 well was  performed,
effectively testing the whole  63 metre  net oil pay  interval as  an
ineffective cement  bond behind  the  casing provided  poor  vertical
isolation over the interval.  The well flowed, under natural flow and
through  a  48/64"choke,   at  an  average   rate  of   approximately
1,460 bopd over a  4  hour  period with  a  water  cut of  up  to  5%
comparing favourably  with  the  previous  open-hole  test.  Remedial
cementation of the production liner  is planned to isolate the  water
producing zone prior to commencement of production from the well.
The Y-2 appraisal well, located approximately 1.8 km east of the  Y-1
discovery  well,  commenced  drilling  in  January  2009  and reached
a total depth of  2,070 metres in  February 2009.  Based on  wireline
logging and  cores recovered  while  drilling, the  well  encountered
approximately 16  metres of  net potential  hydrocarbon pay  with  an
average porosity of approximately 16%.  An open-hole production  test
of the reservoir interval recovered  quantities of oil and water  but
did not establish continuous production at surface.  A  liner was run
in the  well  and  the  reservoir interval  may  be  re-tested  at  a
later date.  As expected  in the pre-drill  estimation, the Y-2  well
encountered the  reservoir with  less thickness  and lower  reservoir
quality  than  seen  in  Y-1.  This  variation  is consistent  with a
stratigraphic  carbonate   accumulation   such   as   the   Yousefieh
discovery.  The data acquired in this well will be used to refine the
understanding of  these  lateral  variations in  the  geological  and
reservoir modelling of the accumulation and to assist in  development
planning.
Based on a preliminary evaluation of the data acquired in the Y-1 and
Y-2 wells, the range of  gross oil in place  is estimated to be  27.2
(P90), 48.5 (P50)  and 73.9  (P10) million barrels.  Further work  is
required to  determine the  expected range  of recovery  factors  and
hence reserves,  but  Gulfsands'  best estimate  using  a  reasonable
recovery factor is in the range of 10 to 15 million barrels.
The Yousefieh discovery is located close to existing  infrastructure,
with  the  Y-1  surface  location  being  approximately  3  km   from
the early production facilities in the Khurbet East field.  The close
proximity of the  Yousefieh discovery  to the intended  site for  the
full field development  facilities for  Khurbet East may  lead to  an
enlarged shared facility  being installed resulting  in both  capital
and operating cost savings.
Exploration
Following the success in the Yousefieh discovery, the Block 26  joint
venture has      commenced      the acquisition of      an 850 km² 3D
seismic survey to assist in the  identification of further  prospects
and leads in this new exploration play  in the areas surrounding  the
Khurbet East field and Yousefieh discovery.
Health & Safety
Gulfsands' health & safety record  since it became operator of  Block
26 in  2005 has  been exemplary.  Since formal  safety records  first
began to  be  kept  in  April  2006 there  have  been  no  lost  time
incidents.
USA

In the USA  Gulf of  Mexico, Gulfsands  owns interests  in 44  blocks
comprising  approximately  138,000  gross  acres  in  shallow   water
offshore Texas and Louisiana, which include 30 producing oil and  gas
fields. All of these fields are operated by third parties. The  Group
also has an interest in one onshore gas field in Texas.

The dominating events of 2008 were  the Hurricanes Gustav and Ike  in
late August and early September. The damage they caused, primarily to
third  party  pipeline  infrastructure,   led  to  severely   reduced
production levels from September 2008 through to the end of the  year
and well  into  2009.  In  all,  production  for  the  year,  in  oil
equivalent terms  and  including  NGLs, averaged  1,433  boepd  on  a
working interest  basis and  1,095 boepd  on a  net revenue  interest
basis, compared  with 2,575  boepd and  1,970 boepd  respectively  in
2007. Of the  2008 production, oil  and NGLs amounted  to just  under
40%, with the rest being gas. Working interest production fell  below
400 boepd in September and  October 2008 compared with  pre-hurricane
levels of 1,850 boepd in August.  Production in March 2009 was  still
well below former levels.

Having suffered  in 2007  from  a scarcity  of available  Group  cash
resources for investment,  during 2008 investment  levels in the  USA
operations were restored  in order to  limit production declines  and
maintain or enhance  the value  of producing assets.   On the  Eugene
Island property two new wells (EI 58 #16 and EI 38 #17) were  drilled
and completed as multi-zone hydrocarbon discoveries, and were tied in
to the  adjacent EI  57 production  facility during  August.   Tie-in
operations were completed just prior to the facility shutdown due  to
Hurricane Ike.  The  EI 57 production  facility sustained only  minor
damage due to the hurricane,  but the facility still remains  shut-in
due to  damage  to the  third  party  owned gas  pipeline  via  which
production is off-taken.  Gulfsands  owns an approximate 25%  working
interest in these new  wells, which are  expected to add  significant
daily gas volumes once production at this facility resumes, which  is
expected to be in Q2 2009. In the West Cameron area, the WC 498 B8ST1
well encountered  producible hydrocarbons  in four  zones, and  after
tie-in the well  commenced production through  the WC 498  facility.
The Group  owns an  approximate 4%  working interest  in the  WC  498
field.

Significant well workovers and re-completions were undertaken in  the
Eugene Island 32 field and at Vermillion 161.  These operations  were
also successful, leading to significantly increased production levels
from these properties.  The  Group owns a  26.3% working interest  at
Eugene Island 32 and 30.6% working interest at Vermillion 161.

A number of leases expired in 2008.  These include Eugene Island  83,
High Island A-471 and Matagorda 555.  The leases associated with  the
onshore Emily Hawes field, located on Matagorda Island in Texas, were
relinquished during 2008.

The total net  cost of  hurricane-related repairs  due to  Hurricanes
Gustav  and  Ike  is  currently  estimated  at  $3.5  million,   with
approximately  two  thirds  of   these  costs  concentrated  on   two
properties (Eugene  Island 32  and  Vermillion 315/332).  Amounts  in
excess of $2.75 million  are covered by  insurance. Repairs to  third
party facilities, such as pipelines, are not a direct cost but have a
significant  impact   due   to  shut-in   production.   Third   party
infrastructure repairs are  expected to continue  throughout much  of
2009, but with the majority being completed by the end of the  second
quarter.

A new reserves assessment  as at 31 December  2008 was undertaken  by
Netherland, Sewell & Associates, Inc. This showed proven and probable
reserves of 5.1mmboe on a working  interest basis and 3.9 mmboe on  a
net revenue interest basis: a reduction, compared with the equivalent
report a year earlier, of 3.8 mmboe (working interest) and 2.9  mmboe
(net revenue interest).  The greater  part of this  reduction was  to
proven reserves,  and arose  mainly from  a sharp  increase in  water
production at  certain  producing  wells.  Proven  and  probable  net
revenue interest reserves at year-end comprised 1.8 mmbbl of oil  and
12.7 bcf of gas.

RESERVES AND CONTINGENT RESOURCES

Syria

The figures in the table below are taken from an independent estimate
of reserves  as  at 31  December  2007  carried out  by  RPS  Energy,
adjusted for  production in  2008. An  updated reserves  estimate  is
under preparation by RPS  but the work had  not been completed as  at
the date of this annual report.

Working interest reserves represent  the proportion, attributable  to
the Group's  50% joint  venture participating  interest, of  forecast
future crude oil production during  the economic life of the  Khurbet
East PSC,  including the  share of  that production  attributable  to
Syrian Petroleum  Company ("SPC")  under  the terms  of the  PSC.  In
assessing the economic life  it has been assumed  that the option  to
extend the life of the PSC for a further ten years after its  initial
expiry date is exercised.

Entitlement reserves represent the Group's estimated share of working
interest reserves after deducting  the proportion of forecast  future
production attributable to the state under the terms of the PSC. This
proportion is  impacted  by  assumptions  as  to  future  development
expenditure and future oil prices. For the purpose of the estimate as
at 31 December 2007 the average price of Brent crude during 2008  was
assumed to  be $95/bbl,  declining to  $88/bbl in  2012 and  constant
thereafter. No adjustment has been  made to this estimate to  reflect
current assumptions as to future oil prices.

Under the terms of  the PSC the Group's  liability for income tax  in
Syria is settled by SPC out of their share of crude oil production.


   SYRIA                 Oil                             Gas                     Total Oil Equivalent

            Proved Probable   P+P Possible   Proved Probable P+P Possible   Proved Probable   P+P Possible
             mmbbl    mmbbl mmbbl    mmbbl      bcf      bcf bcf      bcf    mmboe    mmboe mmboe    mmboe

Working
Interest
At 31 Dec      9.7     19.7  29.4     35.6      0.0      0.0 0.0      0.0      9.7     19.7  29.4     35.6
2007
Additions      0.0      0.0   0.0      0.0      0.0      0.0 0.0      0.0      0.0      0.0   0.0      0.0
less
disposals
Revisions      0.0      0.0   0.0      0.0      0.0      0.0 0.0      0.0      0.0      0.0   0.0      0.0
less 2008    (0.7)      0.0 (0.7)      0.0      0.0      0.0 0.0      0.0    (0.7)      0.0 (0.7)      0.0
production
At 31 Dec      9.0     19.7  28.7     35.6      0.0      0.0 0.0      0.0      9.0     19.7  28.7     35.6
2008

Entitlement
At 31 Dec      5.0      6.3  11.3     11.2      0.0      0.0 0.0      0.0      5.0      6.3  11.3     11.2
2007
Additions      0.0      0.0   0.0      0.0      0.0      0.0 0.0      0.0      0.0      0.0   0.0      0.0
less
disposals
Revisions      0.0      0.0   0.0      0.0      0.0      0.0 0.0      0.0      0.0      0.0   0.0      0.0
less 2008    (0.4)      0.0 (0.4)      0.0      0.0      0.0 0.0      0.0    (0.4)      0.0 (0.4)      0.0
production
At 31 Dec      4.6      6.3  10.9     11.2      0.0      0.0 0.0      0.0      4.6      6.3  10.9     11.2
2008


In the 2007 annual report  reference was made to gross  life-of-field
proved and probable reserves for the Khurbet East field of 66  mmbbls
and to proved, probable  and possible reserves  of 143 mmbbls.  These
figures are estimates of the recoverable oil given an unlimited  time
horizon and take no account of the economic life of the Block 26 PSC.
This does not  comply with  the recommended  definitions of  reserves
approved  by  the  Society   of  Petroleum  Engineers  ("SPE").   The
comparable gross reserves figures at 31 December 2007 which take into
account the economic  life of the  PSC were 58.7  mmbbls (proved  and
probable)  and  130.0   mmbbls  (proved,   probable  and   possible).
Gulfsands' working interest reserves at that date, on the same basis,
were 50% of these figures.

USA

The figures  in the  table below  are taken  from a  new  independent
estimate of reserves attributable to the Group's interest in oil  and
gas properties in  the Gulf  of Mexico and  onshore in  the state  of
Texas as at  31 December  2008 carried  out by  Netherland, Sewell  &
Associates, Inc. ("NSA").

Working interest reserves represent  the proportion, attributable  to
the Group's participating  interests, of  forecast future  oil &  gas
production during the  economic life of  the properties in  question,
before deduction  of state  production taxes  and overriding  royalty
interests. Working interest reserves have  been derived from the  net
revenue interest  reserves  data  contained in  the  NSA  report,  by
grossing up for  the percentage production  tax and royalty  "burden"
applicable to each property. The reserves-weighted average burden  at
31 December 2008 was 23.6%.

Net revenue interest reserves  represent the Group's estimated  share
of working interest reserves after deduction of the equivalent  share
of oil and gas production attributable to state production taxes  and
overriding royalty interests.


USA                     Oil                               Gas                      Total Oil Equivalent

           Proved Probable   P+P Possible   Proved Probable    P+P Possible   Proved Probable   P+P Possible
            mmbbl    mmbbl mmbbl    mmbbl      bcf      bcf    bcf      bcf    mmboe    mmboe mmboe    mmboe

Working
Interest
At 31 Dec     2.1      0.8   2.9      0.1     31.7      4.5   36.2      9.8      7.3      1.6   8.9      1.7
2007
Additions     0.0      0.0   0.0      0.0    (1.0)    (0.4)  (1.4)    (6.0)    (0.1)    (0.1) (0.2)    (1.0)
less
disposals
Revisions   (0.3)      0.0 (0.3)      0.0   (14.9)    (1.5) (16.4)    (1.4)    (2.8)    (0.3) (3.1)    (0.2)
less 2008   (0.2)      0.0 (0.2)      0.0    (1.9)      0.0  (1.9)      0.0    (0.5)      0.0 (0.5)      0.0
production
At 31 Dec     1.6      0.8   2.4      0.1     13.9      2.6   16.5      2.4      3.9      1.2   5.1      0.5
2008

Net
Revenue
Interest
At 31 Dec     1.5      0.6   2.2      0.1     24.2      3.5   27.7      7.5      5.6      1.2   6.8      1.3
2007
Additions     0.0      0.0   0.0      0.0    (0.7)    (0.3)  (1.0)    (4.6)    (0.1)      0.0 (0.1)    (0.8)
less
disposals
Revisions   (0.2)      0.0 (0.3)    (0.1)   (11.4)    (1.1) (12.5)    (1.1)    (2.1)    (0.3) (2.4)    (0.2)
less 2008   (0.1)      0.0 (0.1)      0.0    (1.5)      0.0  (1.5)      0.0    (0.4)      0.0 (0.4)      0.0
production
At 31 Dec     1.2      0.6   1.8      0.0     10.6      2.1   12.7      1.8      3.0      0.9   3.9      0.3
2008


FINANCIAL REVIEW

Selected Operational & Financial Data


                                                      2008       2007
                                                           (restated)

Production : working interest                mmboe     1.2        0.9
Production : entitlement                     mmboe     0.8        0.7

Revenue                                      US$MM    53.6       37.3
Gross Profit                                 US$MM    21.9       11.9
Operating Loss (Profit)                      US$MM  (11.2)        2.0
Net Loss after tax                           US$MM   (9.7)      (1.2)

Net cash provided by Operating Activities    US$MM    18.7        5.9
Capital Expenditures                         US$MM  (17.7)     (18.8)
Decommissioning costs net of escrow cash     US$MM   (2.7)      (5.9)
released
Cash balance at end of year                  US$MM    36.8       18.5

Average realised sales price / bbl          US$/bbl   65.5       51.9
Production cost / working interest bbl      US$/bbl   13.5       18.5
DD&A / entitlement bbl                      US$/bbl   10.7        9.1


A close examination of the historic financial statements for 2007 and
2006 has revealed  a number  of errors  in the  preparation of  those
financial statements  which require  correcting, and  so the  balance
sheets, income statements  and cash flow  statements for those  years
have been restated. A  full explanation of  the restatements and  the
reconciliation with the original financial statements is contained in
the notes to the Consolidated Financial Statements, and is summarised
below.  In  the commentary  that follows  the prior  year  comparison
refers to the restated financial statements.

Income Statement

Entitlement production in 2008 was 0.8 mmboe, of which half came from
Syria and half came from the  US operations, compared with 0.7  mmboe
in 2007, all of which arose in the US. Syrian production commenced in
July  2008:  as  there   were  significant  unrecovered  past   costs
throughout the year  Gulfsands' entitlement production  in Syria  was
59% of its working interest production, being the maximum  achievable
under the PSC. Virtually all oil  and gas produced in both Syria  and
the Gulf of Mexico is sold in the month of production: storage in the
field is negligible.

The 44% increase in  revenue to $53.6 million  was partly due to  the
increased production  volumes  and  partly to  higher  realised  unit
prices which rose to $65.5/bbl from  $51.9/bbl in 2007. In Syria  the
average realised unit price  was $61.1/bbl, representing a  $10.9/bbl
discount to  the  production-weighted  Brent price.  In  the  US  the
average sales prices  for oil  and gas were  $103.6/bbl and  $9.4/mcf
respectively.

Excluding depletion  and  impairment  charges,  cost  of  sales  fell
slightly from $17.4 million  in 2007 to $16.6  million in 2008.   All
but $1.3  million  of  this  expense  arose  in  the  US  operations.
Underlying US lease operating expenses  fell by $2.6 million to  $8.3
million, but this was partly offset by an increase in decommissioning
costs incurred  in excess  of the  relevant existing  provision  (the
excess being charged to the income statement). Insurance premiums  of
$2.3 million are included within the 2008 US cost of sales figure.

Depletion charges rose from $6.5 million to $8.8 million as a  result
of increases in  both entitlement production  and the unit  depletion
charge ($10.5/boe in 2008 vs. $9.1/boe in 2007).  Impairment  charges
rose  sharply  to   $6.3  million   (2007:  $1.4   million)  as   the
commerciality of some of  the Group's Gulf  of Mexico properties  was
impacted by the  fall in expected  future oil and  gas prices  during
2008 and by lower reserve estimates.  However, these higher  non-cash
charges did not  outweigh the  impact of  higher revenues,  and as  a
result gross  profit nearly  doubled to  $21.9 million  (2007:  $11.9
million).

Excluding exceptional  charges, which  comprised share-based  payment
charges  and   foreign  exchange   losses,  administrative   expenses
increased by 75%  to $13.0  million, owing to  increased staffing  in
London and  Syria,  severance  payments  made  to  the  former  Chief
Executive and Chief  Financial Officer, and  incentive and  retention
bonuses paid to  certain directors and  key members of  staff in  the
wake of the senior management changes in H1 2008. Share-based payment
charges of $12.6 million  arose as a result  of the award of  options
over 7.2 million shares to  existing and incoming management:   under
the Group's present option scheme the majority of option awards  vest
immediately and so the impact of  these awards is felt in the  Income
Statement in the year of award. $2.4 million of this charge arose  as
a result  of the  decision to  re-grant short-term  options over  0.6
million shares at  the original strike  price to a  Director who  was
prevented from exercising the existing options prior to their  expiry
due to the Company being in possession of material unpublished  price
sensitive information during the last several months of 2008. Foreign
exchange losses of  $4.7 million  arose because the  majority of  the
£9.4 million proceeds of the share issue in April 2008 were  retained
in Pounds Sterling,  inter alia  to defray  future costs  of the  new
London head office and senior management.

The amount charged to income for hurricane repairs was $2.8  million,
being the amount of the first loss to be borne by the Group under its
windstorm insurance policy. The estimated  total cost of the  repairs
is approximately $3.5 million, and the balance will be the subject of
an insurance  claim  as  and  when the  final  total  cost  has  been
established.

The above factors resulted in an operating loss for the year of $11.2
million, compared  with  a profit  of  $2.0 million  in  2007.  After
crediting interest income  of $1.2 million,  deducting a non-cash  an
operating charge of  $1.7 million  for the gradual  unwinding of  the
present-value discount inherent in the balance sheet  decommissioning
provision, and crediting a deferred tax clawback of $1.9 million, the
net loss for  the year amounted  to $9.7 million  (2007: net loss  of
$1.2 million).

Cash Flow and Capital Expenditure

Net cash  from  operations  in  2008, after  a  net  working  capital
increase of $1.7  million, was  $18.0 million  (2007: $5.1  million).
Interest received added $1.2 million and tax of $0.5 million was paid
(all in the US). Capital expenditure was $17.7 million compared  with
$18.8 million  in 2007:  of  this $16.2  million was  on  development
assets,  in  contrast  with  the  previous  year  when  most  of  the
expenditure was on exploration.

Decommissioning costs paid  were $5.6  million, double  that paid  in
2007. Of this amount, $2.9 million  was funded by cash released  from
blocked  escrow  accounts   backing  bonds  posted   in  respect   of
decommissioning liabilities.

A placing of 5.5 million new shares  in April 2008 at 170p per  share
raised £9.4  million  ($18.6 million)  and  the exercise  of  options
during the year raised a further $1.4 million.

The net increase in the Group's cash balances over the year was $18.3
million.

Financial Position

Gulfsands' financial position is strong, with cash balances of  $36.8
million at the  end of the  2008 financial year  and a further  $13.2
million in blocked escrow accounts backing decommissioning bonds. The
Group has no debt facilities in place and no hedges in place  against
movement in oil, gas or foreign exchange prices.

Since the year-end  the Group's energy  insurance policy, which  last
year included insurance against windstorms in the Gulf of Mexico, has
come up for renewal. Owing to the losses suffered by underwriters  as
a result of the  2008 hurricanes, the  indicative terms received  for
the renewal of the windstorm element  of this policy showed a  marked
deterioration  compared   with  the   previous  year,   including   a
substantial  reduction  in  the  level  of  cover   and   substantial
increases both in first loss retention by the insured and in premium.
In light  of  these  indicative  terms, and  in  view  of  the  lower
strategic importance of the  Gulf of Mexico assets  to the Group  now
that production from Syria is  on stream, the Directors have  decided
not to insure against  windstorm risk for 2009/10  but only to  cover
the Gulf of Mexico assets against normal operational risks.

Restatement of Prior Year Financial Statements

The current management of Gulfsands considers that a number of errors
and omissions  were made  in the  compilation of  the 2007  and  2006
Financial Statements,  which  has led  to  the restatement  of  those
financial statements.

The errors and omissions identified are as follows:
i)        Depletion charges on oil and gas assets had been calculated
based on proven and probable reserves but incorporating no  allowance
for forecast  future capital  expenditure required  to produce  those
reserves. The  restated  figures  incorporate  this  forecast  future
capital expenditure,  with  a  consequent additional  charge  to  the
Income Statement for the years in question.
ii)       The provision for decommissioning liabilities was based  on
the amount of bonds outstanding  relating to those liabilities,  many
of which had  been posted  several years previously.  No account  was
taken of  a  report  from  third  party  specialist  surveyors  which
included up-to-date estimates of decommissioning costs. The  restated
figures reflect  the  up-to-date estimates  in  this report,  with  a
consequent additional charge to the Income Statement for the years in
question.
iii)     Cash held  in blocked  escrow accounts  was included  within
cash and  cash equivalents  in the  Balance Sheet  even though  these
amounts were not readily available for withdrawal. It is felt that  a
more appropriate treatment would  be to record  such amounts as  long
term financial assets, and so  the historic Balance Sheets have  been
restated accordingly.  This restatement  has  no impact  on  historic
Income Statements.
The net impact of the above  adjustments is to reduce the net  profit
of $2.7 million originally reported for 2007 by $3.9 million, to give
a restated $1.2  million net  loss for 2007,  and to  reduce the  net
profit of $2.1 million originally  reported for 2006 by $9.3  million
(representing the cumulative adjustments to 31 December 2006) to give
a restated $7.2 million net loss for 2006.

Andrew Rose
Chief Financial Officer
General information

Gulfsands Petroleum plc  is a  public limited company  listed on  the
Alternative Investment Market  ("AIM") of the  London Stock  Exchange
and incorporated in England.

The Group's financial statements for the year ended 31 December 2008,
from which this financial information has been extracted, and for the
comparative year  ended 31  December 2007,  are prepared  on a  going
concern  basis  and  in  accordance  with  IFRS,  including  IFRS   6
"Exploration  for  and  Evaluation  of  Mineral  Resources"  and   in
accordance with those parts of  the Companies Act 1985 applicable  to
companies reporting under IFRS.

The  financial  information  contained   in  this  report  does   not
constitute full statutory accounts within the meaning of Section  240
of the  Companies  Act 1985.   The  figures are  extracted  from  the
financial statements for the year ended 31 December 2008, which  have
been agreed with the  company's auditors and will  be filed with  the
Registrar of Companies, sent to shareholders and will be available on
Gulfsands' website at www.gulfsands.com, following formal  completion
of the audit.  The auditors' report on the full financial  statements
for the year ended 31 December 2008 is yet to be signed.

The comparative figures for the year  ended 31 December 2007 are  not
the statutory financial statements for that year. Those accounts have
been reported  on by  the  company's auditors  and delivered  to  the
Registrar  of  Companies.  The  report   of  the  auditors  was   (i)
unqualified, (ii) did not include a reference to any matters to which
the auditors drew  attention by  way of  emphasis without  qualifying
their report, and  (iii) did  not contain a  statement under  section
237(2) or (3) of the Companies Act 1985.




CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2008
                                               2008   2007 (restated)
                                     Notes   $' 000            $' 000

Revenue                                3     53,600            37,309
Cost of sales
          Depletion                         (8,767)           (6,541)
          Impairment                        (6,327)           (1,418)
          Other cost of sales              (16,588)          (17,425)
Total cost of sales                        (31,682)          (25,384)
Gross profit                                 21,918            11,925

Administrative expenses before
exceptional items                          (13,033)           (7,431)
Foreign exchange losses                     (4,729)               227
Share based payments                   4   (12,572)             (882)

Total administrative expenses              (30,334)           (8,086)
Hurricane repairs                      5    (2,750)           (1,856)
Operating (loss) / profit                  (11,166)             1,983
Discount expense on
decommissioning provision                   (1,667)           (1,828)
Net interest income                           1,229             1,190
(Loss) / profit before taxation            (11,604)             1,345
Taxation                                      1,932           (2,557)
LOSS FOR THE YEAR - attributable to equity
holders of
          the Company                       (9,672)           (1,212)

Loss per share (cents):
Basic                                  6     (8.37)            (1.13)

Diluted                                6     (8.37)            (1.13)











CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2008

                                               2008   2007 (restated)
                                    Notes    $' 000            $' 000

ASSETS
Non-current assets
     Property, plant and
     equipment                        7      79,661            49,532
     Intangible assets                8         343            28,593
     Long term financial assets        9     13,167            16,078
                                             93,171            94,203

Current assets
     Inventory                                2,401               -
     Trade and other receivables             15,536            11,154
     Cash and cash equivalents        9      36,812            18,533
                                             54,749            29,687

Total Assets                                147,920           123,890

LIABILITIES
Current liabilities
     Trade and other payables                11,245             6,672
     Provision for
     decommissioning                  10      5,877            10,952
                                             17,122            17,624

Non-current liabilities
     Deferred tax liabilities                   -               1,932
     Provision for
     decommissioning                  10     20,430            16,824
                                             20,430            18,756

Total Liabilities                            37,552            36,380

NET ASSETS                                  110,368            87,510

EQUITY
Capital and reserves attributable to
equity holders
     Share capital                    11     12,814            11,997
     Share premium                           98,530            79,389
     Share-based payments
     reserve                                 14,305             1,733
     Merger reserve                          11,709            11,709
     Retained losses                       (26,990)          (17,318)
TOTAL EQUITY                                110,368            87,510












CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2008

                                               2008   2007 (restated)
                                     Notes   $' 000            $' 000

Cash flows from operating
activities
Operating (loss) / profit                  (11,166)             1,983
Depreciation, depletion and
amortisation                         7 & 8    8,953             6,541
Impairment charge                      7      6,327             1,418
Decommissioning costs paid in
excess of provision                   10      2,987             1,640
Share-based payment charge             4     12,572               882
Non-cash bonus                                  -                 252
Loss on disposal of assets                        9                 2
Increase in receivables                     (4,066)           (2,265)
Increase / (decrease) in payables             4,781           (5,398)
Increase in inventory                       (2,401)               -

Net cash provided by operations              17,996             5,055

Interest received                             1,229             1,190
Taxation paid                                 (524)             (356)
Net cash provided by operating
activities                                   18,701             5,889

Investing activities
Exploration and evaluation
expenditure                            8      (645)          (13,510)
Oil and gas properties expenditure     7   (16,157)           (5,275)
Other capital expenditures           7 & 8    (923)              (46)
Change in long term financial
assets                                 9      2,911           (3,181)
Decommissioning costs paid            10    (5,566)           (2,752)
Net cash used in investing
activities                                 (20,380)          (24,764)

Financing activities
Cash proceeds from issue of shares           19,958            23,831
Share issue costs                               -               (250)
Net cash provided by financing
activities                                   19,958            23,581

Increase in cash and cash
equivalents                                  18,279             4,706

Cash and cash equivalents at
beginning of year                            18,533            13,827
Cash and cash equivalents at end
of year                                9     36,812            18,533




NOTES TO THE PRELIMINARY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2008


1.    Correction of errors in prior periods
The Group has restated the Income Statements, Balance Sheets and Cash
Flow Statements as reported for  prior periods. In prior periods  the
Group had  omitted  to  take into  account  future  forecast  capital
expenditure when  calculating  a depletion  charge  for its  Gulf  of
Mexico assets and had  understated the provision for  decommissioning
for the  periods ended  31 December  2007 and  31 December  2006.  In
addition the Group had inaccurately recorded balances held in  escrow
accounts as cash equivalents rather than long term financial  assets.
Further details of these restatements are shown in note 12.


2.    Basis of accounting and principal accounting policies
2.1 Basis of preparation and accounting standards
While  the  financial  information   included  in  this   preliminary
announcement has  been  prepared  in  accordance  with  International
Financial Reporting  Standards  (IFRS), this  announcement  does  not
itself contain  sufficient  information  to  comply  with  IFRS.  The
Company expects  to distribute  the  full financial  statements  that
comply with IFRS in May 2009.

The  financial  information  contained   in  this  report  does   not
constitute full statutory accounts within the meaning of Section  240
of the  Companies  Act 1985.   The  figures are  extracted  from  the
financial statements for the year ended 31 December 2008, which  have
been agreed with the  company's auditors and will  be filed with  the
Registrar of Companies, sent to shareholders and will be available on
Gulfsands' website at www.gulfsands.com, following formal  completion
of the audit.  The auditors' report on the full financial  statements
for the year ended 31 December 2008 is yet to be signed.

The comparative figures for the year  ended 31 December 2007 are  not
the statutory financial statements for that year. Those accounts have
been reported  on by  the  company's auditors  and delivered  to  the
Registrar  of  Companies.  The  report   of  the  auditors  was   (i)
unqualified, (ii) did not include a reference to any matters to which
the auditors drew  attention by  way of  emphasis without  qualifying
their report, and  (iii) did  not contain a  statement under  section
237(2) or (3) of the Companies Act 1985.

The accounting policies applied are consistent with those adopted and
disclosed in the  Group's annual  financial statements  for the  year
ended 31 December 2007. The principal accounting policies are set out
below.

2.2  Oil and gas assets
The Group applies  the requirements  of IFRS 6  'Exploration for  and
Evaluation of  Mineral Resources'  and where  additional guidance  is
needed IAS 16 'Property, Plant and Equipment' and IAS 36  'Impairment
of Assets' noting that several items in the latter two standards  are
excepted due to the  application of IFRS 6.    Set out below are  our
interpretation of the principles set out in IFRS 6 and other  IFRSs.
It should be noted that guidance on certain aspects of IFRS 6 has not
yet been provided by the  IASB or IFRIC. Accordingly, amendments  may
be required to the accounting policies set out below in future years.

There are  two categories  of  oil and  gas assets,  exploration  and
evaluation assets  which  are  included  in  Intangible  assets,  and
development and  production assets  which are  included in  Property,
plant and equipment.

Oil and gas assets:  exploration and evaluation
Recognition and measurement
Exploration and evaluation (E&E) assets  consist of costs of  license
acquisition,  exploration,  evaluation,  appraisal  and   development
activities and evaluating  oil and  gas properties. The  cost of  E&E
assets includes capitalised overheads relevant to the exploration and
evaluation up to  the point of  commercial discovery. Costs  incurred
prior to  having  obtained  the  legal  rights  to  explore  an  area
(pre-license costs) are expensed directly to the income statement  as
they are incurred and are not included in E&E assets.  E&E costs  are
accumulated and capitalised into cost  pools and added to  Intangible
assets pending determination of commercial reserves.

E&E assets  relating to  each  exploration license/prospect  are  not
amortised but are carried forward until the existence or otherwise of
commercial reserves has been determined.  If commercial reserves have
been discovered, the related E&E  assets are assessed for  impairment
on a cash generating unit basis  as set out below and any  impairment
loss is recognised in  the income statement.   The carrying value  of
the E&E assets, after  any impairment loss,  is then reclassified  as
development and production assets in Property, plant and equipment.

Impairment
E&E assets are assessed for  impairment when facts and  circumstances
suggest that the carrying amount may exceed its recoverable  amount.
Such indicators include the point at which a determination is made as
to whether commercial reserves exist.

Where the  E&E assets  concerned  fall within  the  scope of  a  cash
generating unit, the  E&E assets are  tested for impairment  together
with all development and production assets associated within the cash
generating unit.  The  aggregate carrying value  is compared  against
the expected recoverable amount of  the pool, generally by  reference
to the present  value of  the future net  cash flows  expected to  be
derived from production of commercial reserves.  Where the E&E assets
to be tested fall outside the scope of a cash generating unit,  there
will generally be no commercial reserves and the E&E assets concerned
will generally be written off in full.

Any impairment  loss is  recognised in  the income  statement and  is
separately disclosed.  In  the balance sheet  it is recorded  against
the carrying value of the related E&E asset.

Oil and gas assets: development and production
Tangible oil and gas assets are  grouped into a cash generating  unit
or groups  of  units  for  purposes of  impairment  testing  and  for
depreciating  the  development   and  production   assets.   A   cash
generating unit is the smallest unit that does not have  interrelated
revenues and may  be a  well, field,  area, block,  region, or  other
defined area as appropriate.   Interrelationships can be measured  by
oil  and  gas  production  agreements,  reserve  reports,  or   other
documentation showing such relationships.  The only limitation in the
size of a cash  generating unit is  that it cannot  be larger than  a
reporting segment of the Group.

Recognition and measurement
Development  and  production  assets   are  accumulated  on  a   cash
generating unit  basis  and  represent the  cost  of  developing  the
commercial reserves  discovered and  bringing them  into  production,
together with  the E&E  expenditures incurred  in finding  commercial
reserves transferred from intangible E&E assets.

The cost of development and production assets also includes the  cost
of acquisitions and purchases  of such assets, directly  attributable
overheads,  and  the  cost  of  recognising  provisions  for   future
restoration and decommissioning.

Depletion of producing assets
Expenditure within each cash generating pool is depleted by a unit of
production method using the  ratio of oil and  gas production in  the
year compared to the estimated quantity of commercial reserves at the
beginning  of  the  year.  Costs  used  in  the  unit  of  production
calculation comprise the net book value of capitalised costs plus the
estimated future  field development  costs  for proved  and  probable
reserves. Changes  in  estimates  of commercial  reserves  or  future
development costs are dealt with prospectively.

Impairment
An impairment  test is  performed whenever  events and  circumstances
arising during the development or production phase indicate that  the
carrying value of a  development or production  asset may exceed  its
recoverable amount.  The aggregate carrying value is compared against
the recoverable  amount of  the cash  generating unit,  generally  by
reference to the present value of the future net cash flows  expected
to be derived from production of commercial reserves.

2.3  Decommissioning
Where a material liability for  the removal of production  facilities
and site restoration  at the end  of the productive  life of a  field
exists, a provision  for decommissioning is  recognised.  The  amount
recognised is  the  present  value of  estimated  future  expenditure
determined in accordance with  local conditions and requirements.   A
fixed asset of an amount equivalent to the provision is also  created
(included in development  and production  assets) and  depleted on  a
unit of  production  basis.   Changes  in  estimates  are  recognised
prospectively, with corresponding  adjustments to  the provision  and
the associated fixed asset.
2.4  Definition of reserves
The Group's definition of commercial reserves is proven and  probable
reserves. Proven  and probable  oil and  gas reserves  are  estimated
quantities of commercially  producible petroleum  which the  existing
geological, geophysical and engineering  data show to be  recoverable
in future years.  The proven reserves included herein conform to  the
definition approved by the Society of Petroleum Engineers ("SPE") and
the World Petroleum Congress ("WPC").  The probable reserves included
herein conform to  definition of  probable reserves  approved by  the
SPE/WPC using the deterministic methodology.

2.5 Share based payments
The Company has made share-based payments to certain employees and
directors by way of issues of share options.  The fair value of these
payments is calculated by the Company using the Black Scholes option
pricing model.  The expense is recognised on a straight line basis
over the period from the date of award to the date of vesting, based
on the Company's best estimate of shares that will eventually vest.

3.   Segmental information
The primary  segmental  reporting  format is  determined  to  be  the
geographical segment according  to the location  of the assets.   The
Directors consider the Group to have a single line of business, being
the  exploration,  development  and  production  of  oil  and   gas.
Accordingly no secondary segmental information is presented.

There are two major  geographical segments, the  USA and Syria.  Both
segments are involved with production and exploration of oil and gas.

The  Group  loss  before  interest  for  the  year  is  analysed   by
geographical area as follows:


                                               2008
                                  USA     Syria      Other      Total
                               $' 000    $' 000     $' 000     $' 000
Revenues                       28,121    25,479        -       53,600

Depreciation, depletion
and amortisation              (6,010)   (2,930)       (23)    (8,963)
Impairment                    (6,327)       -          -      (6,327)
Hurricane repairs             (2,750)       -          -      (2,750)
Other cost of sales          (15,270)   (1,318)        -     (16,588)
Administrative expenses
before exceptional items
and depreciation              (3,208)   (3,026)    (6,603)   (12,837)
Foreign exchange gains /
(losses)                          -          74    (4,803)    (4,729)
Share based payments              -         -     (12,572)   (12,572)

(Loss) / profit before
interest and taxation         (5,444)    18,279   (24,001)   (11,166)

Net interest and
unwinding of discount         (1,204)       133        633      (438)
Inter-segment interest        (3,618)       -        3,618        -
Taxation                        1,932       -          -        1,932

(Loss) / profit for the
year                          (8,334)    18,412   (19,750)    (9,672)

                                    2007 (restated)
                                  USA     Syria      Other      Total
                               $' 000    $' 000     $' 000     $' 000
Revenues                       37,309       -          -       37,309

Depreciation, depletion
and amortisation              (6,485)      (44)       (12)    (6,541)
Impairment                    (1,418)       -          -      (1,418)
Hurricane repairs             (1,856)       -          -      (1,856)
Other cost of sales          (17,425)       -          -     (17,425)
Administrative expenses
before exceptional items
and depreciation              (3,522)     (844)    (3,065)    (7,431)
Foreign exchange gains /
(losses)                          -         (6)        233        227
Share based payments              -         -        (882)      (882)

Profit / (loss) before
interest and taxation           6,603     (894)    (3,726)      1,983

Net interest and
unwinding of discount           (712)        72          2      (638)
Inter-segment interest        (3,296)       -        3,296        -
Taxation                      (2,164)       -        (393)    (2,557)

(Loss) / profit for the
year                              431     (822)      (821)    (1,212)




Central costs have not been apportioned to geographical areas and are
included within 'Other' above.

The segment assets and liabilities as at 31 December and the  segment
capital expenditure  during  the  year  ended  31  December  were  as
follows:

                                            2008
                                USA      Syria    Other      Total
                             $' 000     $' 000   $' 000     $' 000
Assets                       68,866     52,475   26,579    147,920
Liabilities                (33,397)    (3,757)    (398)   (37,552)
Inter-segment balances     (40,466)   (32,466)   72,932        -

Capital expenditure           5,887     11,125      156     17,168

                                 2007 (restated)
                                USA      Syria    Other      Total
                             $' 000     $' 000   $' 000     $' 000
Assets                       72,978     35,769   15,143    123,890
Liabilities                (34,380)    (1,769)    (231)   (36,380)
Inter-segment balances     (37,699)   (36,161)   73,860        -

Capital expenditure           6,138     13,510      -       19,648




4.      Share based payments
The charge for the  period is based upon  the requirements of IFRS  2
regarding share  based  payments.   For this  purpose,  the  weighted
average estimated  fair  value  of  the  share  options  granted  was
calculated  using  a   Black-Scholes  option   pricing  model.    The
volatility measured at the standard deviation of expected share price
return is 63.6%. No dividends were factored into the model.

Details of  option  grants  made  during  the  year  and  assumptions
included in the calculation of the charge to the income statement are
as follows:


                                    Number of      Weighted Risk free
            Stock price at Exercise   options       average  interest
Grant date   date of grant    price    issued   option life      rate

8 May 2008           £1.80    £1.75 1,000,000 *         4.5     4.45%
13 May 2008          £1.88    £1.88 3,075,000           4.5     4.53%
13 May 2008          £1.88    £1.88   500,000           4.0     4.53%
13 May 2008          £1.88    £1.88    50,000           0.5     4.53%
17 June
2008                 £2.38    £0.22   568,750           0.1     1.86%
18 July
2008                 £1.95    £1.86    20,000           0.5     5.30%
5 September
2008                 £1.75    £1.86   225,000           4.0     4.29%
15 October
2008                 £1.17    £1.86 1,500,000 *         4.5     4.37%
27 October
2008                 £0.94    £1.86   200,000 *         4.0     3.92%
24 November
2008                 £1.37    £1.86    10,000           4.0     3.18%
8 December
2008                 £1.30    £1.86    15,000           4.0     3.13%

Total options granted               7,163,750




The share options granted on 17  June 2008 were issued to replace  an
identical number of  options granted on  1 January 2003  at the  same
price which had expired unexercised. These options were not exercised
prior to their expiry date as the option holder was in possession  of
unpublished price sensitive information in  the period leading up  to
the  option  lapse   date.  The  reissued   options  were   exercised
immediately upon grant.

Other than the  options marked  with an *  above, which  vest over  a
period of three  years, all options  are exercisable immediately  and
accordingly the greater part of the estimated fair value was expensed
during the period.

5.    Hurricane repairs
In 2008 Hurricanes Gustav and Ike caused damage to several of the
Group's oil and gas properties and supporting infrastructure in the
Gulf of Mexico. A provision has been made in these accounts for the
full amount of any damage notified by the operators less potential
insurance claim refunds. The amount charged to the Income Statement
in the year end 31 December 2008 was $2,750,000.

In 2005, Hurricanes Katrina and Rita hit the Gulf Coast and several
of the Group's offshore oil and gas properties were damaged.  Most of
the repairs were not performed until 2006 and 2007.  The charge to
the Income Statement for these hurricane repairs was $1,856,000 in
2007. These charges are net of insurance claims of which $3,701,000
was receivable at 31 December 2007.The insurance claim amount
reflects the Directors' best estimate of the refund due from
insurance companies.

6.   Loss per share
The basic and diluted loss per share have been calculated using the
loss for the year ended 31 December 2008 of $9,672,000 (2007 loss
(restated) - $1,212,000).  The basic and diluted loss per share were
calculated using a weighted average number of shares in issue of
115,520,651 (2007 - 107,223,298).

7.   Property, plant and equipment


                           Oil and gas properties
                                                     Other
                                                     fixed
                                  USA       Syria   assets      Total
                               $' 000      $' 000   $' 000     $' 000
Cost:
At 1 January 2007
(restated)                     75,899         -        273     76,172
Additions (restated)            6,092         -         45      6,137
Disposals                         -           -        (8)        (8)
At 31 December 2007
(restated)                     81,991         -        310     82,301
Additions                       5,600      10,000      596     16,196
Transfer from Intangible
assets                            -        29,221      -       29,221
Disposals                         -           -       (33)       (33)
At 31 December 2008            87,591      39,221      873    127,685

Accumulated depreciation
and depletion:
At 1 January 2007
(restated)                   (19,475)         -       (80)   (19,555)
Charge for 2007
(restated)                    (6,433)         -       (93)    (6,526)
Disposals                         -           -          7          7
At 31 December 2007
(restated)                   (25,908)         -      (166)   (26,074)
Charge for 2008               (5,961)     (2,806)    (185)    (8,952)
Disposals                         -           -         24         24
At 31 December 2008          (31,869)     (2,806)    (327)   (35,002)

Accumulated impairment:
At 1 January 2007
(restated)                    (5,277)         -        -      (5,277)
Impairment charge for
2007 (restated)               (1,418)         -        -      (1,418)
At 31 December 2007
(restated)                    (6,695)         -        -      (6,695)
Impairment charge for
2008                          (8,154)         -        -      (8,154)
Reversal of impairment
charges from prior years        1,827         -        -        1,827
At 31 December 2008          (13,022)         -        -     (13,022)

Net book value at 31
December 2008                  42,700      36,415      546     79,661

Net book value at 31
December 2007 (restated)       49,388         -        144     49,532




The impairment charges for 2007 and 2008 relate to provisions against
the Group's carrying values of its USA producing assets, following  a
review of reserves at the year end. The decrease in the market  price
of oil and gas has led to reductions in forecast future revenues  per
barrel of oil equivalent and also  a reappraisal of the economics  of
certain fields in the Gulf of  Mexico together with decreases in  the
estimated commercially recoverable reserves of those fields.

8.      Intangible assets


                                Exploration and   Computer
                              evaluation assets   software      Total
                                         $' 000     $' 000     $' 000
Cost:

At 1 January 2007                        15,066         49     15,115
Additions                                13,510          1     13,511
At 31 December 2007                      28,576         50     28,626
Additions                                   645        327        972
Transfer to Property, plant
& equipment                            (29,221)        -     (29,221)
At 31 December 2008                         -          377        377

Accumulated amortisation:

At 1 January 2007                           -         (18)       (18)
Charge for 2007                             -         (15)       (15)
At 31 December 2007                         -         (33)       (33)
Charge for 2008                             -          (1)        (1)
At 31 December 2008                         -         (34)       (34)

Net book value at 31
December 2008                               -          343        343

Net book value at 31
December 2007                            28,576         17     28,593



Intangible Exploration and Evaluation  ("E&E") assets of  $29,221,000
representing the cumulative cost of  exploration work in Block 26  in
Syria were transferred  to development and  production assets  within
tangible  fixed   assets   upon   the   successful   declaration   of
commerciality for the Khurbet East field in the second half of  2008.
At 31 December 2008 there were no E&E assets.

Included in  E&E  assets  at  31  December  2007  was  an  amount  of
$1,664,000  in  respect  of  capitalised  overheads  related  to  the
exploration and evaluation activities in  Block 26, Syria. A  further
$645,000 of overhead expense was capitalised during the year ended 31
December 2008 in respect of general and administrative costs prior to
discovery of commercial reserves.


9.   Cash and cash equivalents


                                           2008     2007
                                         $' 000   $' 000
Short term cash deposits                    -     11,115
Cash at bank and in hand                 36,812    7,418
Restricted cash balances                 13,167   16,078
                                         49,979   34,611
Included in long term financial assets   13,167   16,078
Total cash and cash equivalents          36,812   18,533



Short term cash deposits comprised amounts held on deposit, but
readily convertible to cash.

The restricted cash balances  include (i) amounts  held in escrow  to
cover decommissioning  expenditures  under the  requirements  of  the
regulatory authorities that manage the oil and gas and other  mineral
resources in the  Gulf of Mexico  and (ii) a  bank guarantee that  is
required under the terms of the Production Sharing Contract with  the
Syrian Petroleum  Company  and  which is  reduced  quarterly  as  the
obligations under the required work programmes are completed.

10.   Provision for decommissioning
The provision for decommissioning relates to the expected present
value of costs of plugging and abandoning the oil and gas properties
held by Gulfsands Petroleum USA, Inc and Darcy Energy LLC. The
provision for decommissioning is estimated after taking account of
inflation, years to abandonment, and borrowing rates.   At 31
December 2008, the oil and gas properties have estimated plugging and
abandonment dates between 2009 and 2036.

The portion of the provision for decommissioning expected to be
settled in 2009 totalling approximately $5.9 million is included in
current liabilities and the remainder totalling approximately $20.4
million is included in non-current liabilities in the consolidated
balance sheet at 31 December 2008.

Actual decommissioning costs will ultimately depend upon future
market prices for the necessary decommissioning work required, which
will reflect market conditions at the relevant time.  Furthermore,
the timing of decommissioning is likely to depend on when the fields
cease to produce at economically viable rates.  This in turn will
depend upon future oil and gas prices, which are inherently
uncertain.

The movement in the provision for decommissioning was as follows:


                                             $' 000

  At 1 January 2007 (restated)               26,141
  Changes in estimates (restated)               919
  Additions (restated)                          -
  Costs in excess of provision (restated)     1,640
  Decommissioning costs paid                (2,752)
  Discount expense (restated)                 1,828
  At 31 December 2007 (restated)             27,776
  Less: current portion (restated)           10,952
  Non-current portion (restated)             16,824
  At 1 January 2008 (restated)               27,776
  Changes in estimates                        (557)
  Additions                                     -
  Costs in excess of provision                2,987
  Decommissioning costs paid                (5,566)
  Discount expense                            1,667
  At 31 December 2008                        26,307
  Less: current portion                       5,877
  Non-current portion                        20,430


11.   Share capital


                                               2008              2007
                                             Number            Number
Authorised:
Ordinary shares of
5.714 pence each                        175,000,000       175,000,000

                                               2008              2007
                                             $' 000            $' 000
Allotted, called up
and fully paid:
118,522,500 (2007 - 111,178,750)
ordinary shares of 5.714 pence each          12,814            11,997

The movements in share capital and
share options were:

                           Weighted
                            average
                     exercise price Number of share         Number of
                         of options         options   ordinary shares
At 1 January 2008             £0.95       5,413,750       111,178,750
Private placement                               -           5,500,000
Share options
exercised for cash            £0.39     (1,843,750)         1,843,750
Share options lapsed          £0.22       (568,750)               -
Share options issued          £1.76       7,163,750               -
At 31 December 2008           £1.64      10,165,000       118,522,500


The detail of the share options outstanding at 31 December 2008 are
as follows:


                      Year options      Weighted average    Number of
Exercise period               vest        exercise price      options

5 April 2005 - 4
April 2010                    2005                 £1.30    2,135,000
13 February 2006 -
18 October 2011               2006                 £1.18      855,000
19 February 2007 - 3
June 2012                     2007                 £1.12      580,000
8 May 2008 - 8
December 2013                 2008                 £1.84    5,245,000
8 May 2009 - 27
November 2015        2009 and 2010                 £1.83    1,350,000

                                                   £1.64   10,165,000



Options are exercisable at prices from £0.96 to £1.88 per share and
have a weighted estimated remaining contractual life of 3.8 years.

Of the total  outstanding options  at 31 December  2008, the  options
granted to the  Directors numbered 6,675,000  (2007 - 3,743,750)  and
those granted  to  other  staff numbered  1,845,000.   The  remaining
1,645,000  were   granted  to   ex-employees  and   ex-directors   or
consultants who are  currently involved with  or have performed  work
for the Group.

The average share price during 2008 was £1.64 (2007 - £1.19).


12.   Restatement of previous period financial statements

The Group has identified corrections required to certain balances and
also in the classification of certain other balances in the financial
statements of  prior periods.  The Group  has chosen  to restate  the
Balance Sheets, Income Statements and Statements of Cash Flows as at,
and for the periods ended, 31 December 2007 and 2006.
(i)                  In prior years the Group had calculated
depletion charges on its oil and gas assets over the estimated proved
and probable reserves. No allowance had been made for forecast future
capital expenditure associated with producing those reserves. At 31
December 2007 the forecast future capital expenditure, excluding
plugging and abandonment costs, amounted to approximately $34,452,000
(2006 - $26,683,000).
(ii)                In prior years the Group had provided for
decommissioning liabilities using an outdated estimate of the cost of
decommissioning work required (as stated in current prices). Prior to
the completion of the financial statements for those years the Group
had received a report from third party specialist surveyors in
connection with insurance related matters which report also included
an update of the estimated cost of decommissioning and which, if
adopted for use in the preparation of the financial statements, would
more accurately reflect the current cost of decommissioning work.
This report included an estimated value of $38,127,000 (in current
prices) for decommissioning. This is $17,539,000 in excess of the
previously estimated amounts and the decommissioning liabilities for
prior periods have been restated to reflect the higher figure.
(iii)               In prior years bank balances held in escrow
accounts were treated as cash and cash equivalents. These balances
were, however, not available to the Group to fund short term
requirements and the Group now considers that these should more
accurately be classified as other financial assets. Retrospective
adjustments have been made to the Balance Sheets and Statement of
Cash Flows for the Group to reclassify $16,078,000  (2006 -
$12,897,000 million) of such balances.
The effect of these restatements to the income statement, balance
sheet and statement of cash flows is set out below:



CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER
2007

                                              As
                                      originally   (i) and         As
                                          stated      (ii)   restated
                                          $' 000    $' 000     $' 000

Revenue                                   37,309       -       37,309
Cost of sales
       Depletion                         (5,034)   (1,507)    (6,541)
       Impairment                          (947)     (471)    (1,418)
       Other cost of sales              (15,883)   (1,542)   (17,425)
Total cost of sales                     (21,864)   (3,520)   (25,384)
Gross profit                              15,445   (3,520)     11,925

Administrative expenses before
exceptional items                        (7,204)       -      (7,204)
Share based payments                       (882)       -        (882)
Total administrative expenses            (8,086)       -      (8,086)
Hurricane repairs                        (1,856)       -      (1,856)
Operating profit                           5,503   (3,520)      1,983
Discount expense on
decommissioning provision                (1,475)     (353)    (1,828)
Net interest income                        1,190       -        1,190
Profit before taxation                     5,218   (3,873)      1,345
Taxation                                 (2,557)       -      (2,557)
(LOSS) / PROFIT FOR THE YEAR -
attributable to equity holders of the
Company                                    2,661   (3,873)    (1,212)

Earnings per share (cents):
Basic                                       2.48               (1.13)

Diluted                                     2.37               (1.13)

Note that the adjustments required to restate the depletion,
impairment charges and decommissioning liabilities in (i) and (ii)
above are not practicable to separate and are aggregated in the
presentation above.






CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER
2006

                                             As
                                     originally    (i) and         As
                                         stated       (ii)   restated
                                         $' 000     $' 000     $' 000

Revenue                                  33,934        -       33,934
Cost of sales
       Depletion                        (4,716)    (6,977)   (11,693)
       Impairment                       (1,334)    (2,801)    (4,135)
       Other cost of sales             (14,465)      (969)   (15,434)
Total cost of sales                    (20,515)   (10,747)   (31,262)
Gross profit                             13,419   (10,747)      2,672

Administrative expenses before
exceptional items                       (4,455)        -      (4,455)
Share based payments                      (851)        -        (851)
Total administrative expenses           (5,306)        -      (5,306)
Hurricane repairs                       (2,573)        -      (2,573)
Operating profit                          5,540   (10,747)    (5,207)
Discount expense on
decommissioning provision               (2,223)      1,438      (785)
Net interest income                       1,193        -        1,193
Profit before taxation                    4,510    (9,309)    (4,799)
Taxation                                (2,433)        -      (2,433)
(LOSS) / PROFIT FOR THE YEAR -
attributable to equity holder of the
Company                                   2,077    (9,309)    (7,232)

Earnings per share (cents):
Basic                                      2.17                (7.57)

Diluted                                    2.15                (7.57)



Note that the adjustments required to restate the depletion,
impairment charges and decommissioning liabilities in (i) and (ii)
above are not practicable to separate and are aggregated in the
presentation above.



CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER
2007
                                  As
                          originally    (i) and                    As
                              stated       (ii)      (iii)   restated
                              $' 000     $' 000     $' 000     $' 000

ASSETS
Non-current assets
  Property, plant and
  equipment                   46,925      2,607        -       49,532
  Intangible assets           28,593        -          -       28,593
  Long term financial
  assets                         -          -       16,078     16,078
                              75,518      2,607     16,078     94,203

Current assets
  Trade and other
  receivables                 11,154        -          -       11,154
  Cash and cash
  equivalents                 34,611        -     (16,078)     18,533
                              45,765        -     (16,078)     29,687
Total Assets                 121,283      2,607        -      123,890

LIABILITIES
Current liabilities
  Trade and other
  payables                     6,672        -          -        6,672
  Provision for
  decommissioning              2,512      8,440        -       10,952
                               9,184      8,440        -       17,624
Non-current
liabilities
  Deferred tax
  liabilities                  1,932        -          -        1,932
  Provision for
  decommissioning              9,475      7,349        -       16,824
                              11,407      7,349        -       18,756
Total liabilities             20,591     15,789        -       36,380

NET ASSETS                   100,692   (13,182)        -       87,510

EQUITY
Capital and reserves attributable to
equity holders
  Share capital               11,997        -          -       11,997
  Share premium               79,389        -          -       79,389
  Share-based
  payments reserve             1,733        -          -        1,733
  Merger reserve              11,709        -          -       11,709
  Retained losses            (4,136)   (13,182)        -     (17,318)
TOTAL EQUITY                 100,692   (13,182)        -       87,510


Note that the adjustments required to restate the depletion,
impairment charges and decommissioning liabilities in (i) and (ii)
above are not practicable to separate and are aggregated in the
presentation above.



CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER 2006
                                   As
                           originally   (i) and                    As
                               stated      (ii)      (iii)   restated
                               $' 000    $' 000     $' 000     $' 000

ASSETS
Non-current assets
  Property, plant and
  equipment                    46,247     5,093        -       51,340
  Intangible assets            15,097       -          -       15,097
  Long term financial
  assets                          -         -       12,897     12,897
  Deferred tax asset              176       -          -          176
                               61,520     5,093     12,897     79,510
Current assets
  Trade and other
  receivables                   9,629       -          -        9,629
  Cash and cash
  equivalents                  26,724       -     (12,897)     13,827
                               36,353       -     (12,897)     23,456
Total Assets                   97,873     5,093        -      102,966

LIABILITIES
Current liabilities
  Trade and other
  payables                     12,717       -          -       12,717
  Provision for
  decommissioning               3,319     4,308        -        7,627
  Oil and gas price
  derivatives                     101       -          -          101
                               16,137     4,308        -       20,445
Non-current
liabilities
  Provision for
  decommissioning               8,420    10,094        -       18,514
                                8,420    10,094        -       18,514
Total liabilities              24,557    14,402        -       38,959

NET ASSETS                     73,316   (9,309)        -       64,007

EQUITY
Capital and reserves attributable to
equity holders
  Share capital                11,047       -          -       11,047
  Share premium                56,506       -          -       56,506
  Share-based payments
  reserve                         851       -          -          851
  Merger reserve               11,709       -          -       11,709
  Retained losses             (6,797)   (9,309)        -     (16,106)
TOTAL EQUITY                   73,316   (9,309)        -       64,007


Note that the adjustments required to restate the depletion,
impairment charges and decommissioning liabilities in (i) and (ii)
above are not practicable to separate and are aggregated in the
presentation above.



CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2007

                                   As
                           originally   (i) and                    As
                               stated      (ii)      (iii)   restated
                               $' 000    $' 000     $' 000     $' 000
Cash flows from
operating activities:
Operating profit                5,503   (3,520)        -        1,983
Depreciation,
depletion and
amortisation                    5,034     1,507        -        6,541
Impairment charge                 947       471        -        1,418
Decommissioning costs
paid in excess of
provision                         -       1,640        -        1,640
Share-based payment
charge                            882       -          -          882
Non-cash bonus                    252       -          -          252
Loss on disposal of
assets                              2       -          -            2
Increase in
receivables                   (2,266)         1        -      (2,265)
(Decrease)/increase in
payables                      (5,399)         1        -      (5,398)

Net cash from
operations                      4,955       100        -        5,055

Interest received               1,190       -          -        1,190
Taxation paid                   (356)       -          -        (356)
Net cash from
operating activities            5,789       100        -        5,889

Investing activities
Exploration and
evaluation expenditure       (13,511)         1        -     (13,510)
Oil and gas properties
expenditure                   (5,175)     (100)        -      (5,275)
Other capital
expenditures                     (45)       (1)        -         (46)
Change in long term
financial assets                  -         -      (3,181)    (3,181)
Decommissioning costs
paid                          (2,752)       -          -      (2,752)
Net cash used in
investing activities         (21,483)     (100)    (3,181)   (24,764)

Financing activities
Cash proceeds from
issue of shares                23,831       -          -       23,831
Share issue costs               (250)       -          -        (250)
Net cash from
financing activities           23,581       -          -       23,581

Increase/(decrease) in
cash and cash
equivalents                     7,887       -      (3,181)      4,706

Cash and cash
equivalents at
beginning of year              26,724       -     (12,897)     13,827
Cash and cash
equivalents at end of
year                           34,611       -     (16,078)     18,533



Note that the adjustments required to restate the depletion,
impairment charges and decommissioning liabilities in (i) and (ii)
above are not practicable to separate and are aggregated in the
presentation above.




CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2006
                                  As
                          originally    (i) and                    As
                              stated       (ii)      (iii)   restated
                              $' 000     $' 000     $' 000     $' 000
Cash flows from
operating activities:
Operating profit /
(loss)                         5,540   (10,747)        -      (5,207)
Depreciation,
depletion and
amortisation                   4,716      6,977        -       11,693
Impairment charge              1,334      2,801        -        4,135
Decommissioning costs
paid in excess of
provision                        -          969        -          969
Share-based payment
charge                           851        -          -          851
Increase in
receivables                  (3,888)        -          -      (3,888)
Increase in payables           7,441        -          -        7,441
Net cash from
operations                    15,994        -          -       15,994

Interest received              1,193        -          -        1,193
Taxation paid                (1,111)        -          -      (1,111)
Net cash from
operating activities          16,076        -          -       16,076

Investing activities
Exploration and
evaluation
expenditure                  (9,375)        -          -      (9,375)
Oil and gas
properties
expenditure                 (17,896)        -          -     (17,896)
Purchase of minority
interest                       (277)        -          -        (277)
Other capital
expenditures                   (234)        -          -        (234)
Change in long term
financial assets                 -          -        1,691      1,691
Decommissioning costs
paid                         (2,062)        -          -      (2,062)
Net cash used in
investing activities        (29,844)        -        1,691   (28,153)

Financing activities
Cash proceeds from
issue of shares                3,931        -          -        3,931
Net cash from
financing activities           3,931        -          -        3,931

(Decrease) / increase
in cash and cash
equivalents                  (9,837)        -        1,691    (8,146)

Cash and cash
equivalents at
beginning of year             36,561        -     (14,588)     21,973
Cash and cash
equivalents at end of
year                          26,724        -     (12,897)     13,827


Note that the adjustments required to restate the depletion,
impairment charges and decommissioning liabilities in (i) and (ii)
above are not practicable to separate and are aggregated in the
presentation above.

---END OF MESSAGE---




This announcement was originally distributed by Hugin. The issuer is 
solely responsible for the content of this announcement.