Syria Operations Update

RNS Number : 0914K

Gulfsands Petroleum PLC

11 July 2011

 



Immediate Release	11th July, 2011

GULFSANDS PETROLEUM PLC

Syria Operations Update

Khurbet East and Yousefieh Drilling Results

Yousefieh East and Safa Exploration wells

Gross Oil Production from Khurbet East and Yousefieh Fields Steady at 21,000 bopd

London, 11^th July, 2011:  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, Tunisia, Italy and the U.S.A., is pleased to provide this update on operations in Syria.

Khurbet East 19 and Khurbet East 19 Sidetrack

Rig-based operations have recently concluded on the Khurbet East 19 ("KHE-19") and Khurbet East 19 Sidetrack ("KHE-19 ST1") utilizing the Crosco E-401 rig.  The KHE-19 ST1 well has been completed as a potential future oil production well and awaits a flow testing trial which will be conducted shortly via a rig-less operation. The productive section of this well is located in a horizontal side-track drilled in a south-southeasterly direction from the original KHE-19 vertical hole, which is interpreted to have encountered the primary reservoir section outside of the limits of the Khurbet East Field.

The KHE-19 vertical well encountered the Massive Formation at 1967 metres Measured Depth ("m MD") or 1561 metres True Vertical Depth sub-sea ("m TVD ss"). The well encountered a gross vertical oil column of approximately 4 metres, however formation pressure data obtained via wireline sampling in the KHE-19 well-bore indicates that the Massive section in this well is not in communication with the Khurbet East field. A flow test was not undertaken on the vertical section and the well was plugged back in order to proceed with a sidetrack contingency operation that was included in the pre-drill plan as part of the field delineation strategy.

The KHE-19 ST1 encountered the Cretaceous Massive Formation of the Khurbet East field at 2206 m MD (1545m TVD ss). A complete loss of drilling fluids was experienced soon after drilling into the Massive formation, indicating that the excellent quality vuggy reservoir of the producing Khurbet East Massive Formation had been encountered. A gross horizontal reservoir section of 67 metres was drilled before reaching a total depth of 2273m MD (1545m TVD ss). The well has since been completed with a 3.5 inch production string. Production flow testing trials will commence shortly, the results of which will be the subject of a future news release.

The Crosco-401 rig will now move to the Yousefieh East exploration well location (see below).

Yousefieh  7

The Yousefieh 7 ("Yous-7") vertical well located on the northern flank of the Yousefieh field was spudded on the 19^th May 2011 utilizing the Crosco E-501 rig. The Yous-7 well location was selected in order to gain information on reservoir extent and quality in the undrilled northern flank of the Yousefieh field.

The Yous-7 well encountered the Massive Formation at 1972 m MD (1554 m TVD ss), 18 metres deep to prognosis.  The well encountered a gross reservoir pay interval of approximately 34 metres and a net oil column thickness of approximately 27 metres with average porosity of 17%. Pressure data obtained via wireline sampling in the Yous-7 well-bore indicates that the oil bearing Massive section in this well is in good pressure communication with the main producing area of the Yousefieh field with reservoir pressure showing depletion of between 30-40 psi, which is in line with expectations. 

A production liner was cemented over the reservoir section of the well and following perforation of a 15 metre oil bearing reservoir section and an acid wash operation, a flow test was conducted. The well flowed at an average rate of 528 barrels of oil per day ("bopd") of 22 degree API oil on a 2" choke at an average wellhead pressure of 25 psi utilizing nitrogen lift over a period of 7 hours. It is likely that this well will require the installation of artificial lift facilities in order to produce at the planned rate of 500 bopd on a continuous basis, and discussions are underway with vendors for procurement of the equipment. Further perforation and acid stimulation operations are also planned for this well in order to improve well performance.

The results of the KHE-19 and Yous-7 wells will be considered, along with the results of the other development and exploration wells in the 2011 drilling programme, in the year end re-assessment of the Khurbet East and Yousefieh field's recoverable reserves.

Yousefieh East Exploration Well (Yous-8)

The Yousefieh East exploration well ("Yous-8") will target an untested structure in Cretaceous age carbonates located approximately 3 kilometres to the east of the Yousefieh field discovery well with estimated mean unrisked oil resources of approximately 14 million barrels. The Yousefieh East well is located within the Yousefieh field Development Licence Area and, in the success case, could be quickly tied back and produced into the existing Yousefieh field production facilities.

Safa Exploration Well

The Crosco E-501 rig has been moved to the Safa exploration well location. This well will target

a prospect with fault bound dip closure potentially containing a Cretaceous age reservoir on trend with the Khurbet East Field.  The pre-drill Mean unrisked resource estimate for the Safa area is calculated to be 27 million barrels of oil. The well will test the potential for a wider distribution of the high quality Massive karst reservoir encountered in Khurbet East.

Gulfsands drilling operations in Syria Block 26, using the Crosco E-401 and E-501 drilling rigs, are continuing as planned and have continued without interruption during recent months. Drilling operations on the Yousefieh East and Safa exploration prospects will be the subject of a future news release.

Block 26 Oil Production

Oil production and revenue receipts from the Khurbet East and Yousefieh fields continue without interruption. Both fields demonstrate continued strong performance with limited reservoir pressure loss and minimal production of formation water. Daily average oil production from both fields combined during June 2011 was in excess of 21,000 bopd. Cumulative gross oil production from the Yousefieh field now exceeds 1 million barrels and cumulative production from the Khurbet East field exceeds 15 million barrels.

We expect that combined production from these fields will be increased to approximately 24,000 bopd by the end of 2011 with the drilling and tie-in of additional development and delineation wells and via minor upgrades and de-bottle necking of existing surface facilities.

Ric Malcolm, Gulfsands CEO, said

"We are pleased to have encountered high quality, oil bearing reservoirs in both the Yous-7 and KHE-19st wells and expect that these wells will soon add incremental volumes to the production capacity of the Khurbet East and Yousefieh fields. 

We also look forward to the resumption of our exploration drilling programme with the drilling of the Safa and Yousefieh East prospects.  If successful, these prospects are ideal candidates for rapid development due to their proximity to existing Gulfsands operated infrastructure. "

This release has been approved by Richard Malcolm, Chief Executive of Gulfsands Petroleum Plc who has a Bachelor of Science degree in Geology with 30 years of experience in petroleum exploration and management. Mr. Malcolm has consented to the inclusion of the technical information in this release in the form and context in which it appears.

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 producing at an average gross production rate of approximately 18,500 barrels of oil per day through an early production facility. A second field discovery, the Yousefieh field, was brought on-stream in April 2010, and is currently producing approximately 2,600 barrels of oil per day. Block 26 covers approximately 5,414 km² 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 license expires in August 2012. Gulfsands' working interest 2P reserves in Syria at 31 December 2010 were 53.6 mmbbls.

Tunisia

Gulfsands is acquiring working interest positions in two exploration permits in Tunisia (Chorbane and Kerkouane Permits) and one exploration permit in Southern Italy (G.R15.PU) from ADX Energy Ltd the operator of all three permits. The Company's interest in these permits remains subject to the completion of the Company's farm obligations and various approvals from the governments of Tunisia and Italy.

Kerkouane Permit - Offshore Tunisia

G.R15.PU Permit (Pantelleria Permit) - Offshore Italy

G.R15.PU, is located offshore the island of Pantelleria southwest of Sicily in Italian waters and the Kerkouane Permit is located offshore northeast Tunisia. The two permits are contiguous and comprise a total area of approximately 4,500 km².

The operator has identified multiple leads and targets on these permits. Drilling operations were recently completed at the Lambouka-1 well where gas was encountered in the Abiod Formation. However, as a result of down-hole problems, no fluid samples or gas flow were established. The well was suspended with the intention of re-entering at a later date and drilling and testing the reservoir in a sidetrack hole up-dip of the existing discovery. 

Gulfsands has completed its earn commitments with respect to the Kerkouane and Pantelleria Permits with the drilling of the Lambouka-1 well. Gulfsands has earned a 30% working interest in both permits by paying approximately 35% of the cost the Lambouka-1 well and reimbursing the operator for a portion of various pre-drill costs that include a recently completed 3D seismic programme.

Chorbane Permit - Onshore Tunisia

The Chorbane permit is located in central Tunisia and covers an area of 2,428 km². The permit is surrounded by several producing oil fields and extensive oil & gas infrastructure. Gulfsands' forward work commitment for the Chorbane permit includes the drilling of one exploration well in the first quarter of 2011 for which Gulfsands will pay 80% of the first $5 million in drilling costs, and 40% of the drilling costs in excess of $5 million, so as to earn a 40% interest in the permit. 

A number of prospects and leads have been indentified within the permit, the most prospective being a large tilted horst block ("Sidi Daher") where the operator has identified multiple potential targets estimated to hold recoverable mean un-risked prospective resources of 175 billion cubic feet of gas ("bcfg") and 44 million barrels of oil from Tertiary and Cretaceous aged reservoirs.

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 30 leases offshore Texas and Louisiana, which include 20 producing oil and gas fields with proved and probable working interest reserves at 31 December 2010 of 3.2 mmboe (figures adjusted for the disposal of non-core properties in December 2010).

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

 

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