Recommended Acquisition

Gulf Keystone Petroleum Ld
13 April 2007


Gulf Keystone Petroleum Limited
13 April 2007


Not for release, publication or distribution in or into jurisdictions other than
the United Kingdom and Bermuda where to do so would constitute a contravention
of the relevant laws of such jurisdiction




Recommended acquisition of Gulf Keystone Petroleum Limited by RAK Petroleum PCL



Gulf Keystone (AIM: GKP) is an independent oil and gas exploration company
operating in the Republic of Algeria.



Summary



•         The board of directors of Gulf Keystone, RAK Petroleum and RAK
Bermuda, a wholly owned subsidiary of RAK Petroleum, announce the terms of a
recommended acquisition of Gulf Keystone by RAK Petroleum to be effected by way
of an amalgamation of Gulf Keystone with RAK Bermuda.



•         Under the terms of the proposed Amalgamation Gulf Keystone
Shareholders will receive:




          For each Gulf Keystone Share               74 pence in cash





•         At the Amalgamation Consideration of 74 pence per Gulf Keystone Share,
the value of the issued and to be issued Gulf Keystone Shares (including Gulf
Keystone shares that may be issued under the Gulf Keystone Executive Bonus
Scheme) to be cancelled pursuant to the Amalgamation, together with the Cash
Cancellation Consideration for other Gulf Keystone Options, is approximately
£208 million.



Background to the Amalgamation



•         Notwithstanding the success of Gulf Keystone in building its portfolio
of assets within Algeria, the Directors believe that for a company of Gulf
Keystone's size and resources, the generation of future cash flow and the
realisation of the full potential of the Company's portfolio in a timely and
predictable manner will continue to be challenging given the operational
environment in which it is working.



•         The Amalgamation Consideration represents a premium of approximately:



•          17.5 per cent. to the average Closing Price of approximately 63.0
pence per Gulf Keystone Share for the one month period ended on 5 February 2007,
being the last dealing day prior to the date of Gulf Keystone's announcement
that it was in discussions which may or may not lead to an offer being made for
the whole of the issued and to be issued share capital of the Company;



•          20.9 per cent. to the average Closing Price of approximately 61.2
pence per Gulf Keystone Share for the three month period ended on 5 February
2007; and



•         19.4 per cent. to the Placing Price of 62 pence per Gulf Keystone
Share on 17 August 2006.



Overview of RAK Petroleum



•         RAK Petroleum is an unlisted public company incorporated in the Ras Al
Khaimah Free Zone, and was established in late 2005 funded by an initial capital
of approximately AED 3 billion raised by private placement.  RAK Petroleum has a
further unissued authorised capital allocation of AED 2 billion to be utilised
in future fundraisings.  The vast majority of RAK Petroleum's issued share
capital is held in the United Arab Emirates and Saudi Arabia.



•         RAK Petroleum was founded with the objective of initiating,
participating, investing and developing energy related projects, assets,
ventures and businesses in the highly prospective Gulf Cooperation Council
markets and beyond. RAK Petroleum is strategically focused on developing into an
international, integrated oil and gas company.



The Amalgamation



•         The Amalgamation is subject to a number of conditions, including the
approval by a simple majority of votes cast by Gulf Keystone Shareholders voting
in person or by proxy at a general meeting and Algerian regulatory approvals.



•         The effect of the Amalgamation will be that, conditional upon
satisfaction or waiver of the Conditions, Gulf Keystone and RAK Bermuda will
amalgamate and on the Effective Date the Gulf Keystone Shares will be cancelled
in exchange for the payment of the Amalgamation Consideration to Gulf Keystone
Shareholders.



•         Full details of the Amalgamation and the conditions precedent to
completion of the Amalgamation are set out in Appendix I and Appendix II to this
Announcement.



Irrevocable undertakings



•         RAK Petroleum and RAK Bermuda have received irrevocable undertakings
to vote in favour of the Amalgamation Resolution from the Directors, Gulf
Keystone Petroleum Co. LLC, GIBCA, Ali Al-Qabandi, and Ibrahim Al-Khaldi in
respect of 90,973,366 Gulf Keystone Shares (representing approximately 33 per
cent. of the Gulf Keystone issued share capital). All of the irrevocable
undertakings will cease to be binding if a person other than RAK Petroleum, or a
subsidiary or parent of RAK Petroleum, formally announces via a Regulatory
Information Service a Competing Proposal or the Company has served confirmation
in writing to RAK Petroleum of a Superior Proposal to acquire all of the Gulf
Keystone Shares, other than any Gulf Keystone Shares already owned by the person
making such offer, provided that the value of the consideration under such
transaction represents, in the reasonable opinion of the Independent Directors,
an improvement of five per cent. or greater to the value of the Amalgamation
Consideration and, within seven days of such announcement, RAK Petroleum does
not formally announce a revised offer to acquire all of the Gulf Keystone Shares
which is, in the reasonable opinion of the Independent Directors, on no less
favourable terms.



Recommendation of the Independent Directors



•         Hoare Govett and Tristone Capital have acted as financial advisers to
the Company in connection with the Amalgamation and Tristone Capital has
provided the Independent Directors with an independent opinion in relation to
the fairness of the value, from a financial point of view, of the Amalgamation
Consideration to be received by the Gulf Keystone Shareholders (other than those
Gulf Keystone Shareholders holding Excluded Shares).  In providing their
independent advice, Hoare Govett and Tristone Capital have taken into account
the commercial assessments of the Independent Directors. Based upon such advice
and consideration, the Independent Directors have unanimously resolved to
recommend that the Amalgamation Agreement be approved by the Gulf Keystone
Shareholders and that the Amalgamation Consideration be confirmed as
representing fair value for the Gulf Keystone Shares.




Todd Kozel, Chief Executive of Gulf Keystone Petroleum Limited said:



"The Gulf Keystone Board is pleased to support this transaction as we believe it
delivers fair value to our shareholders for the portfolio of assets that the
Company has built up over the last six years and that RAK Petroleum PCL offers
enhanced opportunities for our employees and benefits to Algeria given RAK
Petroleum PCL's ability to more rapidly develop the country's strategic
resources."



Mr Abdul-Aziz Al Ghurair, Chairman of RAK Petroleum said:



"We are delighted to have reached agreement on the acquisition of Gulf Keystone.
When combined with our recently announced acquisition of the majority of
Indago Petroleum's assets, we believe this creates a strong platform for future
growth within the strategic focus areas of RAK Petroleum."



This summary should be read in conjunction with the full text of the
announcement. The Amalgamation will be subject to the terms and conditions set
out in Appendix I to this Announcement. Appendix III contains the definitions of
certain terms used in this Announcement.



The Circular including a letter from the Chairman of Gulf Keystone and a notice
convening a Special General Meeting of the Company to approve the terms of the
Amalgamation Agreement will be posted to Gulf Keystone Shareholders today.


Enquiries:


Gulf Keystone Petroleum                                                            [phone]
Bill Guest
Todd Kozel
Jon Cooper

Hoare Govett - NOMAD, joint adviser and broker to Gulf Keystone                    [phone]
Andrew Foster
Stephen Bowler
Bertie Whitehead

Tristone Capital - Joint adviser and broker to Gulf Keystone                       [phone]
Simon Ashby-Rudd
Nick Morgan

Citigate Dewe Rogerson - financial PR adviser to Gulf Keystone                     [phone]
Media enquiries: Martin Jackson
Analyst enquiries: Nina Soon


RAK Petroleum                                                                           [phone]
Philip Turberville

Goldman Sachs International - sole financial adviser to RAK Petroleum PCL          [phone]
Suhail Sikhtian                                                                         [phone]
Jan Laubjerg



This Announcement does not constitute an offer to sell or the solicitation of an
offer to subscribe for or buy any security, nor is it a solicitation of any vote
or approval in any jurisdiction, nor shall there be any sale, issuance or
transfer of the securities referred to in this Announcement in any jurisdiction
in contravention of applicable law.



Goldman Sachs International, which is authorised and regulated in the United
Kingdom by the Financial Services Authority, is acting exclusively for RAK
Petroleum PCL and RAK Petroleum (Bermuda) Limited and for no-one else in
connection with the transaction and will not be responsible to anyone other than
RAK Petroleum PCL and RAK Petroleum (Bermuda) Limited for providing the
protections afforded to clients of Goldman Sachs International or any advice in
relation to the transaction nor any other matter referred to in this
Announcement.



Hoare Govett Limited, which is authorised and regulated in the United Kingdom by
the Financial Services Authority, is acting exclusively for Gulf Keystone
Petroleum Limited and for no-one else in connection with the transaction and
will not be responsible to anyone other than Gulf Keystone Petroleum Limited for
providing the protections afforded to clients of Hoare Govett Limited or any
advice in relation to the transaction nor any other matter referred to in this
Announcement.



Tristone Capital Limited, which is authorised and regulated in the United
Kingdom by the Financial Services Authority, is acting exclusively for Gulf
Keystone Petroleum Limited and for no-one else in connection with the
transaction and will not be responsible to anyone other than Gulf Keystone
Petroleum Limited for providing the protections afforded to clients of Tristone
Capital Limited or any advice in relation to the transaction nor any other
matter referred to in this Announcement.



This Announcement has been prepared for the purposes of complying with English
and Bermuda law and information disclosed in them may not be the same as that
which would have been prepared in accordance with the laws of jurisdictions
outside England or Bermuda.



The distribution of this Announcement in jurisdictions other than the United
Kingdom and Bermuda may be restricted by law and therefore persons into whose
possession this Announcement comes should inform themselves about and observe
such restrictions. Any failure to comply with these restrictions may constitute
a violation of securities laws of any such jurisdictions.



The Amalgamation is subject to Bermuda law and is not subject to the rules of
the City Code on Takeovers and Mergers and this Announcement has not been
prepared for the purpose of complying with the City Code on Takeovers and
Mergers.



In this announcement, unless otherwise stated, US dollar and AED amounts have
been converted into Sterling using the closing mid-point spot exchange rates set
out in the Financial Times on 12 April 2007, being the latest practicable date
prior to the publication of this announcement, as follows: US$1.9789 : £1.00 and
AED 7.2661 : £1.00.





Recommended acquisition of Gulf Keystone Petroleum Limited by RAK Petroleum PCL



                                                                   13 April 2007



1. Introduction



The boards of directors of Gulf Keystone and RAK Petroleum today announce the
terms of a recommended acquisition of Gulf Keystone by RAK Petroleum to be
effected by way of an amalgamation (pursuant to the Companies Act) of Gulf
Keystone with RAK Bermuda, a wholly-owned subsidiary of RAK Petroleum.
Accordingly, Gulf Keystone, RAK Petroleum and RAK Bermuda have entered into the
Amalgamation Agreement and the Implementation Agreement, which are the documents
that govern the terms of the Amalgamation. The effect of the Amalgamation will
be that Gulf Keystone will continue to exist in the form of the Resulting
Company (a wholly owned subsidiary of RAK Petroleum) and, in accordance with the
Companies Act, the contractual status of Gulf Keystone will remain unchanged
with the Resulting Company succeeding to all property, rights, powers and
privileges and becoming liable for all debts, liabilities and obligations of
both RAK Bermuda and Gulf Keystone existing as at the Effective Date.



2. Summary of the terms of the Amalgamation



Completion of the Amalgamation is conditional upon satisfaction or waiver of the
Conditions, including approval of the Amalgamation Resolution by the Gulf
Keystone Shareholders. On Completion, all Gulf Keystone Shares will be cancelled
(including those of Gulf Keystone Shareholders at the Amalgamation Record Date
who did not vote in favour of, or abstained from voting on, the Amalgamation
Resolution) and each Gulf Keystone Shareholder (other than those Gulf Keystone
Shareholders holding Excluded Shares) will receive, in consideration for the
cancellation of the Gulf Keystone Shares held by them (either directly or
through Depositary Interests):


     for each Gulf Keystone Share                        74 pence in cash





At the Amalgamation Consideration of 74 pence per Gulf Keystone Share, the value
of the issued and to be issued Gulf Keystone Shares (including Gulf Keystone
shares that may be issued under the Gulf Keystone Executive Bonus Scheme) to be
cancelled pursuant to the Amalgamation, together with the Cash Cancellation
Consideration for other Gulf Keystone Options, is approximately £208 million.



The Board of Gulf Keystone has determined pursuant to the rules of the Gulf
Keystone Share Option Plan and the Gulf Keystone Executive Bonus Scheme that
Gulf Keystone Options may become exercisable conditional upon the Amalgamation
becoming effective.  Accordingly, the holders of Gulf Keystone Options have been
invited today to exercise their outstanding Gulf Keystone Options (conditional
upon the Amalgamation becoming effective) up to the date of the Special General
Meeting to acquire Gulf Keystone Shares and participate in the Amalgamation.



In addition, a proposal has also been made today by Gulf Keystone and RAK
Petroleum to holders of Gulf Keystone Options granted under the Gulf Keystone
Share Option Plan that they may elect prior to the date of the SGM that such
Gulf Keystone Options be cancelled on the Effective Date in return for the Cash
Cancellation Consideration.



3. Approval of the Amalgamation



For the Amalgamation to take effect, the Amalgamation Agreement must, inter
alia, be approved by a simple majority of votes cast by Gulf Keystone
Shareholders voting in person or by proxy at a general meeting. Accordingly, the
Directors are convening the SGM for the purposes of considering and, if thought
fit, passing the Amalgamation Resolution. RAK Petroleum and RAK Bermuda have
received irrevocable undertakings to vote in favour of the Amalgamation
Resolution from each of the Independent Directors, Gulf Keystone Petroleum,
GIBCA, Ali Al-Qabandi, and Ibrahim Al-Khaldi in respect of 90,973,366 Gulf
Keystone Shares (representing approximately 33 per cent. of the Gulf Keystone
issued share capital).



Completion of the Amalgamation is also conditional on certain other Conditions.
Subject to the passing of the Amalgamation Resolution and the satisfaction or
waiver of all other Conditions, the Amalgamation is currently anticipated to be
completed no later than 11 August 2007.



Gulf Keystone Shareholders should be aware that, if the Amalgamation Resolution
is passed by a simple majority of the votes cast at the SGM in person or by
proxy, subject to the other Conditions to the Amalgamation being satisfied or
waived in accordance with the terms of the Implementation Agreement, the
Amalgamation will become effective, all Gulf Keystone Shares will be cancelled
and the trading of Gulf Keystone Shares on AIM will be cancelled. If the
Amalgamation becomes effective, all Gulf Keystone Shareholders at the Effective
Date will be bound by the Amalgamation, irrespective of whether or not they
voted in favour of the Amalgamation Resolution or if they are Dissenting
Shareholders.



Following Completion, Gulf Keystone Shares will cease to exist and, accordingly,
Gulf Keystone has today applied to the London Stock Exchange for the
cancellation of the trading of Gulf Keystone Shares on AIM on the Effective
Date. On the basis that the Amalgamation, if approved by the passing of the
Amalgamation Resolution by a simple majority of Gulf Keystone Shareholders,
binds all Gulf Keystone Shareholders, Gulf Keystone has received a derogation
from the London Stock Exchange from the requirement under Rule 41 of the AIM
Rules to have the cancellation of trading of Gulf Keystone Shares on AIM
approved by 75 per cent. of Gulf Keystone Shareholders voting in general
meeting.



Gulf Keystone Shareholders have a right of dissent under the Companies Act,
further details of which are set out in paragraph 12 below.



RAK Petroleum, as sole shareholder of RAK Bermuda, has approved the Amalgamation
Agreement and the Amalgamation.



4. Background to the Amalgamation and reasons for the recommendation of the
Independent Directors



Gulf Keystone was established to pursue the exploration, development and
production of oil and gas in the Republic of Algeria and elsewhere in North
Africa and the Middle East. The focus has been on exploration in proven
hydrocarbon-bearing basins and on the appraisal and exploitation of existing
undeveloped discoveries.



Since the Company began operating in Algeria, the Company has established a
substantial onshore acreage position in Algeria with approximately 27,400 sq km
under licence. These interests are held under the PSCs with the Company's
partner, SONATRACH, the Algerian national oil enterprise. Gulf Keystone was
awarded these licences as sole foreign partner to SONATRACH and hence, under the
terms of the PSCs, the Company has been responsible for the entire cost of the
exploration and appraisal activities undertaken to date on behalf of itself and
SONATRACH.



Gulf Keystone currently holds interests in nine blocks: four in the oil prone
Constantine Basin in North Eastern Algeria (Blocks 126a, 108/128b and 129), and
five in the gas prone Allal Dome area of Central Algeria, constituting the Hassi
Ba Hamou Concession ("HBH").



As part of Gulf Keystone's strategy to introduce strategic partners into its
portfolio, Gulf Keystone farmed out 49 per cent. of its interest in HBH to BG
North Sea Holdings Limited ("BG"), a subsidiary of BG Group Plc, in August 2006.
This farm out was completed in January 2007. The introduction of BG brought a
partner with highly complementary technical and commercial expertise and
facilitated, in the Directors' opinion, a material expansion of the near term
exploration and appraisal work programme.



Gulf Keystone's exploration and appraisal activities have so far been focused
principally on Block 126a. This block contains the two oil discoveries, GKN and
GKS, for which field development plans have been prepared, and one oil discovery
on GRJ, a separate structure on Block 126a, which still remains to be tested. On
the basis of an independent reserves review carried out in May 2006, RPS Energy
estimated gross remaining Proved plus Probable oil reserves for the GKN and GKS
discoveries of 35.6 MMbbls and Proved oil reserves of 17.7 MMbbls. Under the
terms of the Block 126a PSC, Gulf Keystone's net entitlement to oil reserves
attributable to its 60 per cent. equity interest in the block will depend on the
overall profitability of the development.



The Directors currently expect that the GKN and GKS discoveries will be
developed as a single integrated project in a phased manner. Plans for the Phase
1 development (which are dependent on a formal declaration of commerciality in
respect of the GKN and GKS fields by the relevant Algerian Authorities), which
will target 11.5 MMbbls of oil, have been agreed with SONATRACH and development
start-up is planned for the first half of 2007. Plans and timing of the second
and third phases of development of GKS and GKN will depend on the performance
of, and data gathered from, Phase 1. The Company is still awaiting formal
ratification of GKN and GKS commerciality by the Algerian Authorities before it
can commence the Phase 1 development.



With regard to the GRJ discovery, data from discovery well GRJ-2 indicates that
there are three separate potential reservoir intervals which may have the
potential to contain hydrocarbons. Testing of the well was deferred pending
formulation of an optimal test programme and the granting of a licence extension
by the Algerian Authorities to facilitate completion of the work. A licence
extension has now been granted until 29 July 2007 and testing is expected to
commence in Q2 2007.



The other Northern Area blocks, in which Gulf Keystone retains a 75 per cent.
working interest, being Blocks 129 and 108/128b, are in the exploration and
appraisal licence phase and contain a number of exploration leads and prospects
for oil and gas and certain discoveries previously made by SONATRACH that have
hitherto not been appraised or comprehensively tested. The remaining work
commitments covering Blocks 108/128b include the drilling of one appraisal well
on the Ras Toumb oil field and the drilling of one exploration well. The
remaining work commitment on Block 129 consists, principally, of the drilling of
one exploration well.  The 2007 work programme on these blocks includes
geological and geophysical studies, the acquisition of 2D seismic data and the
re-entry and testing of the HEK oil discovery on Block 129, which is being
carried out in conjunction with the testing of well GRJ-2.



Under these planned operations, the first well to be tested will be HEK-3, which
was drilled by SONATRACH in 2004, in the southern part of Block 129. Immediately
following this test, the operations are planned to move to well GRJ-2 (c. 20 km
to the west) which was drilled by Gulf Keystone in 2005. Well GRJ-2 was not
tested at the time of drilling due to the lack of suitable test equipment in the
country.



Operations are expected to commence in April 2007 and last approximately 4-5
weeks. The aims of the two well tests are: (i) to obtain stable flow rates from
the wells and potentially enhance these rates by acid fracturing, a technique
that has not previously been undertaken in Algeria; (ii) to obtain key crude
properties from the wells including GOR / API / viscosity / PVT quality samples;
(iii) to obtain information on the reservoir (including deliverability,
boundaries and potential volumes); and (iv) to be

in a better position to determine a forward plan in both areas.



The 18,380 sq km HBH concession contains the HBH gas discovery and certain leads
and prospects. RPS Energy, as part of their May 2006 review, estimated that the
HBH field contains contingent gas reserves of 995 bcf with a low estimate of 406
bcf and a high estimate of 1,690 bcf (these are classified as Contingent
Resources, pending future commercialisation of the gas). An extensive work
programme of six exploration and appraisal wells, together with the acquisition
of 2,000 km of 2D seismic data and 500 sq km of 3D seismic data, is planned to
be completed prior to conclusion of the initial exploration phase of the licence
in September 2008. The seismic acquisition programme is underway and is
currently expected to be completed during Q4 2007.



Notwithstanding the success of Gulf Keystone in building its portfolio of assets
within Algeria, the Directors believe that for a company of Gulf Keystone's size
and resources, the generation of future cash flow and the realisation of the
full potential of the Company's portfolio in a timely and predictable manner
will continue to be challenging, given the regulatory and operational
environment in which it is working.



In particular, progress towards securing the necessary declarations and consents
to achieve first oil production from Block 126a has been significantly slower
than expected and the Directors believe that active portfolio management will
continue to be a challenge for the Company. The Directors believe that Gulf
Keystone cannot necessarily expect to be able to pursue the further risk
spreading activities that would be an important part of the strategy of a
company of its size. This, together with the relatively short exploration
licence periods that govern the Company's present PSCs, leads the Directors to
conclude that the timely realisation of the full value of Gulf Keystone's
portfolio would be best achieved by a company of greater scale and wider
financial and operational resources.



Given the challenges facing the Company and the conclusions drawn by the
Independent Directors, as described below, the unsolicited approach by RAK
Petroleum to acquire the whole of the issued and to be issued share capital of
Gulf Keystone led to detailed discussions and negotiations resulting in the
proposed acquisition by way of Amalgamation.



At the first Gulf Keystone Board meeting at which the approach of RAK Petroleum
was discussed, held on 15 December 2006, Sheikh Sultan Bin Saqr Al Qassimi
declared that he had beneficial and non-beneficial holdings amounting to
approximately 2.0 per cent. of the issued share capital of RAK Petroleum. As a
result of Sheikh Sultan Bin Saqr Al Qassimi's interests in RAK Petroleum, an
independent committee of the Board was established, which consisted of all the
Directors except Sheikh Sultan Bin Saqr Al Qassimi, to consider the approach by
RAK Petroleum. Accordingly, Sheikh Sultan Bin Saqr Al Qassimi has not taken part
in any of the consultations or discussions leading up to the recommendation of
the Independent Directors to vote in favour of the Amalgamation Resolution or
the formation of the opinion of the Independent Directors that the Amalgamation
Consideration constitutes fair value for the Gulf Keystone Shares.



As discussions with RAK Petroleum developed, the Independent Directors formally
engaged, on behalf of the Company, its existing financial advisers, Hoare Govett
and Tristone Capital, to advise with respect to a possible transaction with RAK
Petroleum and to evaluate the merits of RAK Petroleum's proposal. Following
several weeks of further discussions and detailed negotiations of, inter alia,
the terms of the Amalgamation Agreement and the Implementation Agreement, the
Independent Directors met on 16 March and again on 11 April 2007 to formally
consider the terms which had been negotiated with RAK Petroleum.



In considering the approach and subsequent offer by RAK Petroleum to acquire
Gulf Keystone, the Independent Directors have taken account of a number of
positive and negative factors, including, without limitation, the factors listed
above and the following:



•         the slower than expected rate of progress towards achieving production
from Gulf Keystone's existing oil field interests in Algeria, and thus receipt
of cash inflows, which impacts particularly severely on a company with no other
regular source of revenues;



•         the exploration and appraisal nature of the assets of Gulf Keystone,
which contain a significant level of technical uncertainty;



•         the fact that no other party seeking to acquire the Company has made
any approach beyond making preliminary enquiries since the announcement on 6
February 2007 of RAK Petroleum's unsolicited approach;



•         the financial advice of Tristone Capital and Hoare Govett in
connection with the Amalgamation and the independent opinion of Tristone Capital
in relation to the fairness of the value, from a financial point of view, of the
Amalgamation Consideration to be received by the Gulf Keystone Shareholders. In
providing advice to the Independent Directors, Hoare Govett and Tristone Capital
have taken into account the commercial assessments of the Independent Directors;



•         the level of the Amalgamation Consideration in comparison to previous
Closing Prices. The Amalgamation Consideration represents a premium of
approximately 17.5 per cent. to the average Closing Price of approximately 63.0
pence per Gulf Keystone Share for the one month period ended on 5 February 2007,
being the last dealing day prior to the date of Gulf Keystone's announcement
that it was in discussions which may or may not lead to an offer being made for
the whole of the issued and to be issued share capital of the Company;
approximately 20.9 per cent. to the average Closing Price of approximately 61.2
pence per Gulf Keystone Share for the three month period ended on 5 February
2007; and approximately 19.4 per cent. to the Placing Price of 62.0 pence per
Gulf Keystone Share on 17 August 2006;



•         the fact that the Amalgamation Consideration is all in cash and held
in the Escrow Account providing certainty of value to the Gulf Keystone
Shareholders;



•         the fact that as at 10 April 2007 Gulf Keystone held total cash
balances of US$102.0 million, of which US$21.6 million is held as guarantees to
SONATRACH for Gulf Keystone's committed exploration and evaluation programmes
stipulated within its contracts. As at the same date Gulf Keystone had no
borrowings;



•         the terms of the Amalgamation Agreement and the Implementation
Agreement which were negotiated on an arms-length basis and with the advice of
Gulf Keystone's financial advisers;



•         the fact that the Implementation Agreement permits Gulf Keystone to
consider any unsolicited Competing Proposal prior to the SGM, to communicate or
enter into discussions and/or negotiations with any third party in relation to
any such unsolicited Competing Proposal, to liaise with and provide necessary
assistance to such third party in relation to the production of documentation
relating to any such Competing Proposal, and (subject to RAK Petroleum's right
to match) to communicate with or make recommendations to the Gulf Keystone
Shareholders in respect of such a Competing Proposal;



•         the fact that, on Completion of the Amalgamation, Gulf Keystone
Shareholders would not benefit from any potential future increase in the
Company's value beyond the value of the Amalgamation Consideration;



•         the Conditions and RAK Petroleum's right to terminate the Amalgamation
Agreement and the Implementation Agreement in specified circumstances
(summarised in Appendix I to this Announcement);



•         the restrictions that the Implementation Agreement would impose on
Gulf Keystone's ability to operate its business until completion or termination
of the Amalgamation (summarised in Appendix I to this Announcement); and



•         the possibility of disruption to Gulf Keystone's operations and
personnel following the announcement of Gulf Keystone's potential acquisition
and the potentially adverse effect on Gulf Keystone if the Amalgamation were not
to complete.



The discussion of the factors considered by the Independent Directors as set out
above is not, and is not intended to be, exhaustive, but sets forth the material
factors considered. In light of the variety of factors considered in connection
with their evaluation of the Amalgamation and the complexity of these matters,
the Independent Directors did not find it practicable to, and did not quantify
or otherwise attempt to assign relative weights to the various factors
considered in reaching their determination, nor did they undertake to make any
specific determination as to whether any particular factor (or any aspect of any
particular factor) was favourable or unfavourable to their final determination.
Rather, the Independent Directors reached their conclusions and recommendation
based on their evaluation of the entirety of the information presented,
considered and analysed. In considering the factors set out above, individual
Independent Directors may have ascribed differing importance to different
factors.



Against this background, the Independent Directors have approved the terms of
the Amalgamation and unanimously recommend that the Gulf Keystone Shareholders
vote in favour of the Amalgamation Resolution.



5. Overview of RAK Petroleum and RAK Bermuda



RAK Petroleum



RAK Petroleum is an unlisted public company incorporated in the Ras Al Khaimah
Free Zone, and was established in late 2005, funded by an initial capital of
approximately AED 3 billion raised by private placement. RAK Petroleum has a
further unissued authorised capital allocation of AED 2 billion to be utilised
in future fundraisings. The vast majority of RAK Petroleum's issued share
capital is held in the United Arab Emirates and Saudi Arabia.



RAK Petroleum was founded with the objective of initiating, participating,
investing and developing energy related projects, assets, ventures and
businesses in the highly prospective Gulf Cooperation Council markets and
beyond. RAK Petroleum is strategically focused on developing into an
international, integrated oil and gas company.



The RAK Petroleum board of directors is chaired by Mr Abdul Aziz Al Ghurair who
is also the Chairman of Mashreq Bank psc and was recently elected Speaker of the
House of the 14th Legislative Chapter of the Federal National Council in the
United Arab Emirates.



RAK Bermuda



RAK Bermuda is a wholly owned subsidiary of RAK Petroleum that was incorporated
as a Bermuda exempted company on 8 February 2007 for the purpose of implementing
the Amalgamation.



6. Irrevocable undertakings to vote in favour of the Amalgamation Resolution



RAK Petroleum and RAK Bermuda have received irrevocable undertakings to vote in
favour of the Amalgamation Resolution from the Independent Directors in respect
of 20,841,144 Gulf Keystone Shares (representing approximately 8 per cent. of
the Gulf Keystone Shares in issue).



In addition, all of the Directors, Ali Al-Qabandi (Gulf Keystone's Business
Development Officer) and Ibrahim Al-Khaldi (Gulf Keystone's Chief Operating
Officer) who hold Gulf Keystone Options have irrevocably undertaken to RAK
Petroleum and RAK Bermuda to elect that, where applicable, Gulf Keystone Options
held by them under the Gulf Keystone Share Option Plan will be cancelled prior
to the Effective Date in return for the Cash Cancellation Consideration and
where applicable, they will exercise their outstanding rights under the Gulf
Keystone Executive Bonus Scheme and participate in and vote in favour of the
Amalgamation, conditional upon completion of the Amalgamation and the documents
required by law relating to the Amalgamation being filed with the Bermuda
Registrar of Companies.



In addition, irrevocable undertakings to vote in favour of the Amalgamation
Resolution have been received by RAK Petroleum and RAK Bermuda from:



•         Gulf Keystone Petroleum1 in respect of 40,000,000 Gulf Keystone Shares
(representing approximately 14 per cent. of the Gulf Keystone Shares in issue);



•         GIBCA2 in respect of 20,000,000 Gulf Keystone Shares (representing
approximately 7 per cent. of the Gulf Keystone Shares in issue);



•         Ali Al-Qabandi in respect of 5,000,000 Gulf Keystone Shares
(representing approximately 2 per cent. of the Gulf Keystone Shares in issue);
and



•         Ibrahim Al-Khaldi in respect of 5,152,222 Gulf Keystone Shares
(representing approximately 2 per cent. of the Gulf Keystone Shares in issue)



1         Sheikh Sultan Bin Saqr Al Qassimi is a director; Todd Kozel, Ali
Al-Qabandi and Ibrahim Al-Khaldi are directors and shareholders; and GIBCA is a
shareholder of Gulf Keystone Petroleum;


2         Sheikh Sultan Bin Saqr Al Qassimi is a shareholder in, and a director
of, GIBCA.





Accordingly, RAK Petroleum and RAK Bermuda have received irrevocable
undertakings to vote in favour of the Amalgamation Resolution in respect of an
aggregate of 90,973,366 Gulf Keystone Shares (representing approximately 33 per
cent. of the Gulf Keystone Shares in issue).



All of the irrevocable undertakings will cease to be binding if a person other
than RAK Petroleum, or a subsidiary or parent of RAK Petroleum, formally
announces via a Regulatory Information Service a Competing Proposal or the
Company has served confirmation in writing to RAK Petroleum of a Superior
Proposal to acquire all of the Gulf Keystone Shares, other than any Gulf
Keystone Shares already owned by the person making such offer, provided that the
value of the consideration under such transaction represents, in the reasonable
opinion of the Directors, an improvement of five per cent. or greater to the
value of the Amalgamation Consideration and, within seven days of such
announcement, RAK Petroleum does not formally announce a revised offer to
acquire all of the Gulf Keystone Shares which is, in the reasonable opinion of
the Independent Directors, on no less favourable terms.



7. Conditions precedent to Completion of the Amalgamation



The obligations of the Company, RAK Petroleum and RAK Bermuda to complete the
Amalgamation are subject to the satisfaction of certain Conditions set out in
the Implementation Agreement and incorporated into the Amalgamation Agreement.
These Conditions include, inter alia:



•         the approval of the Amalgamation Resolution by a simple majority of
votes cast by the Gulf Keystone Shareholders voting in person or by proxy at the
SGM, delivery to the Bermuda Registrar of Companies by or on behalf of Gulf
Keystone and RAK Bermuda of all documentation and consents required by the
Bermuda Registrar of Companies pursuant to the Companies Act to implement the
Amalgamation and issue by the Bermuda Registrar of Companies of the Certificate
of Amalgamation;



•         Gulf Keystone having received and provided to RAK Petroleum:



(i)         the Minister's Confirmation; or



(ii)       a written confirmation from the Minister meeting all requirements of
a Minister's Confirmation save only for omitting the express statement that the
"Amalgamation is governed by Article 4 of the Decree",



or the 3 month period, commencing on the date of receipt by the Minister of the
Minister Letter, for objection by the Minister to change of control under
Article 4 of the Decree having expired without objection being made;



•         Gulf Keystone having received and provided to RAK Petroleum
SONATRACH's Confirmation;



•         the GKN and GKS fields having been declared commercially exploitable
in accordance with the Final Discovery Report by a valid and unanimous decision
of the management committee (Conseil de Gestion) in accordance with the relevant
provision of the Block 126a PSC and within the time limits set forth in the
Block 126a PSC, as evidenced by the unanimously signed minutes of the relevant
meeting of the management committee;



•         RAK Petroleum not having terminated the Implementation Agreement due
to an Algerian Material Adverse Change having occurred between the date of the
Announcement and the passing of the Amalgamation Resolution;



•         RAK Petroleum not having terminated the Implementation Agreement due
to the aggregate number of Gulf Keystone Shares held by all Dissenting
Shareholders amounting to 10 per cent. or more of the total issued share capital
of Gulf Keystone prior to the SGM; and



•         RAK Petroleum not having terminated the Implementation Agreement due
to a breach of one or more of the conduct of business obligations undertaken by
Gulf Keystone (as set out in Appendix II to this Announcement) by a member of
the Gulf Keystone Group.



If such Conditions are not fulfilled or, where applicable, waived by RAK
Petroleum in accordance with the terms of the Implementation Agreement on or
before the Long Stop Date (or such later date as RAK Petroleum, RAK Bermuda and
Gulf Keystone may agree), the Implementation Agreement and Amalgamation
Agreement will terminate and the Amalgamation will not occur. If the
Amalgamation does not complete, it is the Directors' current intention that Gulf
Keystone will continue to trade and maintain its quotation on AIM.



8. Right of RAK Petroleum to match a Superior Proposal



Under the terms of the Implementation Agreement, RAK Petroleum has a right to
match a Superior Proposal. Further details of the right to match are set out in
Appendix I to this Announcement.



9. Financing of the Amalgamation Consideration and source of funds



The total cost required under the Amalgamation to effectively cancel all of the
issued and to be issued share capital of Gulf Keystone, together with the Cash
Cancellation Consideration, will be approximately £208 million, assuming no Gulf
Keystone Shareholders successfully exercise their rights under section 106(6) of
the Companies Act. RAK Petroleum will finance the Total Consideration from cash
resources and a loan facility currently available to it for the purpose of
financing this transaction. These funds have been and are deposited in an Escrow
Account to satisfy the Total Consideration. The escrow arrangements are
summarised in Appendix I to this Announcement.



10. Break Fee



Under the terms of the Implementation Agreement, the Company will pay to RAK
Petroleum a termination fee of US$4 million if: (a) a Competing Proposal (or any
amendment, variation or revision of such Competing Proposal) is announced prior
to the termination of the Implementation Agreement, and such Competing Proposal
or any other Competing Proposal becomes unconditional in all respects or is
otherwise completed within six months of the termination of the Implementation
Agreement; or (b) the Independent Directors withdraw or adversely modify their
recommendation of the Amalgamation and the Amalgamation subsequently fails to
complete, lapses, or is withdrawn.



11. London Stock Exchange delisting



Following the Amalgamation, Gulf Keystone Shares will cease to exist and,
accordingly, Gulf Keystone has today applied to the London Stock Exchange for
the cancellation of trading of Gulf Keystone Shares on AIM on the Effective
Date.



On the basis that the Amalgamation, if approved by the passing of the
Amalgamation Resolution, binds all Gulf Keystone Shareholders, Gulf Keystone has
received a derogation from the London Stock Exchange from the requirement under
Rule 41 of the AIM Rules to have the cancellation of trading of Gulf Keystone
Shares on AIM approved by 75 per cent. of Gulf Keystone Shareholders voting in
general meeting.



If the Amalgamation does not complete, it is the Directors' current intention
that Gulf Keystone will continue to trade and maintain its quotation on AIM.



12. Dissenters' rights under section 106(6) of the Companies Act



Any Gulf Keystone Shareholder who is not satisfied that he has been offered fair
value for his Gulf Keystone Shares and who does not vote in favour of the
Amalgamation Resolution is entitled under the Companies Act, prior to 15 May
2007, to apply to the Court to appraise the fair value of his Gulf Keystone
Shares. Within one month of the Court appraising the value of such Gulf Keystone
Shares, if the value of the Amalgamation Consideration is less than that
appraised by the Court, the Resulting Company must pay to such Dissenting
Shareholder the value appraised by the Court.



Gulf Keystone Shareholders should note that, if they exercise their rights of
dissent under section 106(6) of the Companies Act, and if the Amalgamation is
effected, their Gulf Keystone Shares will be cancelled and they will be bound by
the Amalgamation. Furthermore, pending appraisal by the Court of the fair value
of their Gulf Keystone Shares, Dissenters will not receive any Amalgamation
Consideration in respect of the cancellation of their Gulf Keystone Shares until
such time as the Court has appraised the value of their Gulf Keystone Shares.



Gulf Keystone Shareholders should note that if they do not hold their Gulf
Keystone Shares in their own name, for example, if a nominee holds their Gulf
Keystone Shares on their behalf, they are not entitled to exercise their rights
of dissent under section 106(6) of the Companies Act directly. Any Gulf Keystone
Shareholders who do not hold Gulf Keystone Shares in their own name and who wish
to pursue a dissent action under section 106(6) of the Companies Act, should
speak with the nominee who holds the legal title to their Gulf Keystone Shares.



Gulf Keystone Shareholders who hold their interest in Gulf Keystone Shares
through Depositary Interests and who wish to dissent must first convert their
holding in Gulf Keystone Shares into certificated form. In order to convert
their holding, Gulf Keystone Shareholders must request their broker to withdraw
their position from CREST. The withdrawal process will be achieved by the input
of a stock withdrawal message in CREST. A stock withdrawal will be deemed to
constitute an instruction to the Depositary to cancel the Depositary Interests
and effect a transfer of the Gulf Keystone Shares to the person specified in the
instruction.



Failure by a Dissenting Shareholder to adhere strictly to the requirements of
section 106(6) of the Companies Act may result in the loss of such Dissenting
Shareholder's rights under that section.



13. Application of the City Code



The Amalgamation does not fall within the auspices of the City Code and is
outside the jurisdiction of the Panel as Gulf Keystone is a company incorporated
in Bermuda and controlled outside of the UK and hence is not a company to which
the City Code applies. Accordingly, Gulf Keystone Shareholders should note that
they do not have the benefit of the protections of the City Code.



14. Recommendation of the Independent Directors



In making their recommendation, the Independent Directors have considered a
number of factors, including the circumstances regarding the background to and
reasons for the recommendation of the Independent Directors, together with the
advice of Hoare Govett and Tristone Capital.



Hoare Govett and Tristone Capital have acted as financial advisers to the
Company in connection with the Amalgamation and Tristone Capital has provided
the Independent Directors with an independent opinion in relation to the
fairness of the value, from a financial point of view, of the Amalgamation
Consideration to be received by the Gulf Keystone Shareholders (other than those
Gulf Keystone Shareholders holding Excluded Shares).  In providing their
independent advice, Hoare Govett and Tristone Capital have taken into account
the commercial assessments of the Independent Directors.



Based upon such advice and consideration, the Independent Directors have
unanimously resolved to recommend that the Amalgamation Agreement be approved by
the Gulf Keystone Shareholders and that the Amalgamation Consideration be
confirmed as representing fair value for the Gulf Keystone Shares.



Accordingly, the Independent Directors unanimously recommend that all Gulf
Keystone Shareholders vote in favour of the Amalgamation Resolution at the SGM,
as they have irrevocably undertaken to do in respect of their own holdings of
Gulf Keystone Shares representing approximately 8 per cent. of Gulf Keystone's
existing issued share capital.



At the first Gulf Keystone Board meeting at which the approach of RAK Petroleum
was discussed, held on 15 December 2006, Sheikh Sultan Bin Saqr Al Qassimi
declared that he had beneficial and non-beneficial holdings amounting to
approximately 2.0 per cent. of the issued share capital of RAK Petroleum. As a
result of Sheikh Sultan Bin Saqr Al Qassimi's interests in RAK Petroleum, an
independent committee of the Board was established, which consisted of all the
Directors except Sheikh Sultan Bin Saqr Al Qassimi, to consider the approach by
RAK Petroleum. Accordingly, Sheikh Sultan Bin Saqr Al Qassimi has not taken part
in any decision relating to the recommendation of the Independent Directors to
vote in favour of the Amalgamation Resolution or the formation of the opinion of
the Independent Directors as to the fair value of Gulf Keystone Shares as set
out above. Sheikh Sultan Bin Saqr Al Qassimi is a shareholder in, and director
of, GIBCA which has provided an irrevocable undertaking to vote in favour of the
Amalgamation Resolution in respect of 20,000,000 Gulf Keystone Shares
(representing approximately 7 per cent. of the Gulf Keystone Shares in issue).



Sheikh Sultan Bin Saqr Al Qassimi is also a director of Gulf Keystone Petroleum
(in which Todd Kozel is a shareholder) which has also provided an irrevocable
undertaking to vote in favour of the Amalgamation Resolution in respect of
40,000,000 Gulf Keystone Shares (representing approximately 14 per cent. of the
Gulf Keystone Shares in issue).


Enquiries:


Gulf Keystone Petroleum                                                            [phone]
Bill Guest
Todd Kozel
Jon Cooper

Hoare Govett - NOMAD, joint adviser and broker to Gulf Keystone                    [phone]
Andrew Foster
Stephen Bowler
Bertie Whitehead

Tristone Capital - joint adviser and broker to Gulf Keystone                       [phone]
Simon Ashby-Rudd
Nick Morgan

Citigate Dewe Rogerson - financial PR adviser to Gulf Keystone                     [phone]
Media enquiries: Martin Jackson
Analyst enquiries: Nina Soon


RAK Petroleum                                                                           [phone]
Philip Turberville

Goldman Sachs International - sole financial adviser to RAK Petroleum PCL          [phone]
Suhail Sikhtian                                                                         [phone]
Jan Laubjerg





Goldman Sachs International, which is authorised and regulated in the United
Kingdom by the Financial Services Authority, is acting exclusively for RAK
Petroleum PCL and RAK Petroleum (Bermuda) Limited and for no-one else in
connection with the transaction and will not be responsible to anyone other than
RAK Petroleum PCL and RAK Petroleum (Bermuda) Limited  for providing the
protections afforded to clients of Goldman Sachs International or any advice in
relation to the transaction nor any other matter referred to in this
Announcement.



Hoare Govett Limited, which is authorised and regulated in the United Kingdom by
the Financial Services Authority, is acting exclusively for Gulf Keystone
Petroleum Limited and for no-one else in connection with the transaction and
will not be responsible to anyone other than Gulf Keystone Petroleum Limited for
providing the protections afforded to clients of Hoare Govett Limited or any
advice in relation to the transaction nor any other matter referred to in this
Announcement.



Tristone Capital Limited, which is authorised and regulated in the United
Kingdom by the Financial Services Authority, is acting exclusively for Gulf
Keystone Petroleum Limited and for no-one else in connection with the
transaction and will not be responsible to anyone other than Gulf Keystone
Petroleum Limited for providing the protections afforded to clients of Tristone
Capital Limited or any advice in relation to the transaction nor any other
matter referred to in this Announcement.



This Announcement has been prepared for the purposes of complying with English
and Bermuda law and information disclosed in them may not be the same as that
which would have been prepared in accordance with the laws of jurisdictions
outside England or Bermuda.



The distribution of this Announcement in jurisdictions other than the United
Kingdom and Bermuda may be restricted by law and therefore persons into whose
possession this Announcement comes should inform themselves about and observe
such restrictions. Any failure to comply with these restrictions may constitute
a violation of securities laws of any such jurisdictions.



The Amalgamation is subject to Bermuda law and is not subject to the rules of
the City Code on Takeovers and Mergers and this Announcement has not been
prepared for the purpose of complying with the City Code on Takeovers and
Mergers.



                                   Appendix I



TERMS AND CONDITIONS OF THE AMALGAMATION



1. Effect of the Amalgamation



The Amalgamation, which is being carried out pursuant to section 104 of the
Companies Act, will be effected in accordance with the Amalgamation Agreement
and the Implementation Agreement summarised in paragraphs 2 and 3 below. Subject
to the passing of the Amalgamation Resolution at the

SGM and the satisfaction or waiver (in accordance with the terms of the
Implementation Agreement) of

all other Conditions and the issuance of a Certificate of Amalgamation by the
Bermuda Registrar of Companies, the Amalgamation will become effective on the
Effective Date.



On the Effective Date:



•         Gulf Keystone and RAK Bermuda will amalgamate and the Resulting
Company will continue as an exempted company registered in Bermuda;



•         each issued and outstanding Gulf Keystone Share will be cancelled and
will cease to exist and each Gulf Keystone Shareholder as at the Amalgamation
Record Date (other than those Gulf Keystone Shareholders holding Excluded
Shares) will, subject to the rights of a Gulf Keystone Shareholder to dissent
under section 106(6) of the Companies Act, be entitled to receive from RAK
Petroleum in respect of each Gulf Keystone Share held, 74 pence in cash (subject
to the terms of the Implementation Agreement); and



•         RAK Petroleum will be the sole holder of all shares in the Resulting
Company.



In accordance with the Companies Act, upon the Certificate of Amalgamation
becoming effective:



•         the amalgamation of Gulf Keystone and RAK Bermuda and their
continuance as the Resulting Company shall become effective;



•         the property of each of Gulf Keystone and RAK Bermuda as at the
Effective Date shall continue to be the property of the Resulting Company;



•         the Resulting Company shall continue to be liable for the existing
obligations of each of Gulf Keystone and RAK Bermuda as at the Effective Date;



•         an existing cause of action, claim or liability to prosecution of Gulf
Keystone or RAK Bermuda as at the Effective Date shall be unaffected;



•         a civil, criminal or administrative action or proceeding pending by or
against Gulf Keystone or RAK Bermuda as at the Effective Date may be continued
to be prosecuted by or against the Resulting Company;



•         a conviction against, or ruling, order or judgment in favour of, or
against, Gulf Keystone or RAK Bermuda as at the Effective Date may be enforced
by or against the Resulting Company; and



•         the Certificate of Amalgamation shall be deemed to be the certificate
of incorporation of the Resulting Company; however, the date of incorporation of
a company is its original date of incorporation and its amalgamation with
another company does not alter its original date of incorporation.



2. Summary of the Implementation Agreement



The following summary of the material terms of the Implementation Agreement has
been included to provide you with information regarding its material terms. This
summary is not intended to provide you with any other factual information about
the Company, RAK Petroleum or RAK Bermuda. Such information can be found
elsewhere in this Announcement.



Conditions precedent to Completion of the Amalgamation



The obligations of the parties to effect the Amalgamation are subject to the
following conditions precedent being satisfied on or before the Long Stop Date:



•         the Amalgamation Resolution being passed by a simple majority of the
votes cast by Gulf Keystone Shareholders voting in person or by proxy at the
SGM;



•         the delivery to the Bermuda Registrar of Companies of all
documentation and consents required to implement the Amalgamation; and



•         the issue by the Bermuda Registrar of Companies of the Certificate of
Amalgamation.



The parties are not entitled to waive the above Conditions.



In addition, the obligations of RAK Petroleum and RAK Bermuda to effect the
Amalgamation are further conditional on the satisfaction or waiver of the
following conditions precedent on or before the Long Stop Date:



•         Gulf Keystone having received and provided to RAK Petroleum:



(i)         the Minister's Confirmation; or



(ii)       a written confirmation from the Minister meeting all requirements of
a Minister's Confirmation save only for omitting the express statement that the
"Amalgamation is governed by Article 4 of the Decree",



or the 3 month period, commencing on the date of receipt by the Minister of the
Minister Letter, for objection by the Minister to change of control under
Article 4 of the Decree having expired without objection being made;



•         the GKN and GKS fields having been declared commercially exploitable
in accordance with the Final Discovery Report by a valid and unanimous decision
of the management committee (Conseil de Gestion) in accordance with the relevant
provision of the Block 126a PSC and within the time limits set forth in the
Block 126a PSC, as evidenced by the unanimously signed minutes of the relevant
meeting of the management committee;



•         Gulf Keystone having received and provided to RAK Petroleum
SONATRACH'S Confirmation;



•         RAK Petroleum not having terminated the Implementation Agreement due
to an Algerian Material Adverse Change having occurred between the date of the
Announcement and the passing of the Amalgamation Resolution; RAK Petroleum not
having terminated the Implementation Agreement due to the aggregate number of
Gulf Keystone Shares held by all Dissenting Shareholders amounting to 10 per
cent. or more of the total issued share capital of Gulf Keystone prior to the
SGM; and



•         the Gulf Keystone Group having complied with certain obligations in
relation to the conduct of their business (full details of which are set out in
Appendix II to this announcement).



Except as otherwise mentioned, RAK Petroleum may waive, in whole or in part, any
of the above Conditions.



Each of Gulf Keystone, RAK Petroleum and RAK Bermuda shall use all reasonable
endeavours with effect from the making of the Announcement to achieve fulfilment
of the Conditions and the consummation of the Amalgamation by no later than the
Long Stop Date (including without limitation to provide all information required
by the Algerian Authorities in order to achieve the satisfaction of the
Conditions set out in paragraphs 2(a), 2(b) and 2(c) of the Conditions.



The full text of the Conditions is set out in Appendix II to this Announcement.



Satisfaction of the SONATRACH Condition



At any time prior to the receipt of SONATRACH's Confirmation, Gulf Keystone may
from time to time provide other evidence to RAK Petroleum that no right of
pre-emption or right of approval with respect to an assignment under any of the
PSCs applies to the Amalgamation, such evidence to include, but not be limited
to:



•         written confirmation from the Ministry or ALNAFT;



•         oral confirmation from the Ministry, ALNAFT or SONATRACH; or



•         such other evidence as may be provided by Gulf Keystone,



and within three days of its receipt of such evidence RAK Petroleum shall be
entitled (but shall not be obliged) to waive the SONATRACH Condition in
accordance with the Implementation Agreement.



The SONATRACH Condition shall be deemed to be satisfied if:



•         during the period of 90 days from the date of receipt by SONATRACH of
the SONATRACH Letter, SONATRACH has not exercised, or notified Gulf Keystone or
RAK Petroleum of its ability to exercise, any right of pre-emption or right of
approval with respect to an assignment under any of the PSCs; and if, and only
if,



•         the Condition set out in paragraph 2(a) of the Conditions has been
satisfied by the receipt by the parties of the Minister's Confirmation in
accordance with paragraph 2(a)(i) of the Conditions.



Break Fee



Gulf Keystone has agreed to pay RAK Petroleum the sum of US$4,000,000 within
five Business Days

following RAK Petroleum's written demand in the following circumstances:



•         if a Competing Proposal (or any amendment, variation or revision of
such proposal) is announced prior to the termination of the Implementation
Agreement and such Competing Proposal or any other Competing Proposal becomes
unconditional in all respects or is otherwise completed within six months of the
termination of the Implementation Agreement; or



•         if the Independent Directors withdraw or adversely modify their
recommendation of the Amalgamation in this Announcement or otherwise and the
Amalgamation subsequently fails to complete, lapses or is withdrawn.



Non-solicitation



Gulf Keystone has undertaken to RAK Petroleum that prior to the SGM it shall not
(and shall procure that the other members of the Gulf Keystone Group shall not)
directly or indirectly solicit, initiate or encourage any Competing Proposal.
However, prior to the SGM Gulf Keystone is not prevented from considering any
unsolicited Competing Proposal, communicating or entering into discussions and/
or negotiations with any third party in relation to any unsolicited Competing
Proposal, disclosing information relating to the Gulf Keystone Group (subject to
the provisions below) to such third party, liaising with and providing necessary
assistance to such third party in relation to the production of documentation
relating to such Competing Proposal or communicating with or making
recommendations to Gulf Keystone Shareholders in respect thereof (subject to the
'Competing Proposals' provisions summarised below). Following the passing of the
Amalgamation Resolution, Gulf Keystone must not, until the termination of the
Implementation Agreement, directly or indirectly, enter into, solicit, consider,
initiate, discuss or encourage any Competing Proposal.



Gulf Keystone has further undertaken to RAK Petroleum not to disclose any
information about Gulf Keystone or any member of the Gulf Keystone Group to any
third party in relation to a Competing Proposal other than:



•         information that is in the public domain;



•         following such third party entering into a confidentiality agreement
in a form substantially similar to the confidentiality agreement between RAK
Petroleum and Gulf Keystone; and



•         after notifying RAK Petroleum of the existence of the Competing
Proposal (but, except if the competing proposal is deemed or determined to
constitute a Superior Proposal, not the identity of the third party) and
undertaking to RAK Petroleum not to disclose any information to such third party
which has not already been disclosed to RAK Petroleum.



Competing Proposals



If Gulf Keystone considers, or the Independent Directors determine (whether
before or after the Announcement) that any Competing Proposal constitutes a
Superior Proposal, Gulf Keystone shall give RAK Petroleum written notice of such
determination, setting out the material details of such Competing Proposal (in
particular the offer price (or equivalent consideration) contained in the
Competing Proposal and the identity of the party making the Competing Proposal)
and the reasons that led the Independent Directors to determine that it
constitutes a Superior Proposal. Gulf Keystone must also confirm to RAK
Petroleum that it has convened a meeting of the Independent Directors to
consider whether or not to recommend the Superior Proposal to the Gulf Keystone
Shareholders, such meeting to be held no sooner than midday on the eighth day
after the date of receipt by RAK Petroleum of Gulf Keystone's written notice of
the Superior Proposal.



Gulf Keystone and the Directors must not recommend any Competing Proposal
(whether or not it is a Superior Proposal) until the first to occur of (i) the
board meeting to consider whether or not to recommend the Superior Proposal; or
(ii) the elapse of at least eight days after the date of the formal announcement
via a Regulatory Information Service of a Competing Proposal whether or not it
is a Superior Proposal (a "Competing Announcement").



If RAK Petroleum confirms in writing to the Independent Directors on or before
the first to occur of (i) 5.00 p.m. on the day prior to the board meeting to
consider whether or not to recommend the Superior Proposal; or (ii) 5.00 p.m. on
the seventh day after the date of the Competing Announcement in relation to the
Competing Proposal, that RAK Petroleum intends to increase the Amalgamation
Consideration to a level which would, in the reasonable opinion of the
Independent Directors (acting reasonably in accordance with their fiduciary
duties), be equal or superior in terms of the financial value and terms and
conditions offered to Gulf Keystone Shareholders in comparison to the Superior
Proposal or Competing Proposal and is otherwise on terms and conditions which
are, in the reasonable opinion of the Independent Directors (acting reasonably
in accordance with their fiduciary duties), substantially equal to or not
materially worse than those contained in the Superior Proposal or Competing
Proposal (the "Revised Transaction"), the Independent Directors shall make a
unanimous and unqualified recommendation of the Revised Transaction to the Gulf
Keystone Shareholders and the Independent Directors shall not recommend the
Superior Proposal or (as appropriate) the Competing Proposal set out in the
Competing Announcement. For a Revised Transaction to be valid, RAK Petroleum
must confirm to the Independent Directors that it is ready to be formally
announced immediately via a Regulatory Information Service.



If no such confirmation of a Revised Transaction is made by RAK Petroleum, Gulf
Keystone and the   Directors may at their election recommend the Superior
Proposal or (as applicable) the Competing Proposal set out in the Competing
Announcement and withdraw their recommendation of the Amalgamation, whereupon
the Implementation Agreement shall automatically terminate.



If a Competing Announcement is made or a notice of a Superior Proposal is served
on RAK Petroleum by Gulf Keystone, less than eight days prior to the date of the
SGM and a Revised Transaction is not announced by RAK Petroleum at least seven
days prior to the date of the SGM, Gulf Keystone will be entitled to procure,
and will if requested by RAK Petroleum in writing procure, that the SGM will be
adjourned until the date which is seven days after the earlier of: (i) if a
Revised Transaction has been announced via a Regulatory Information Service, the
date of such announcement; (ii) the date of the board meeting to consider
whether to recommend the Superior Proposal; or (iii) the eighth day after the
date of the Competing Announcement, provided that the parties acknowledge that,
under Bermuda law, unless a Revised Transaction constitutes simply an increase
in the Amalgamation Consideration without any other material amendment to the
terms of the Amalgamation, any Revised Transaction to  be effected by way of an
amalgamation will require the approval of Gulf Keystone Shareholders in a
freshly convened special general meeting.



Gulf Keystone has undertaken to RAK Petroleum that it shall not offer or agree
to any work fee, indemnity or inducement or break fee or other similar
arrangement (a "Competing Break Fee") to any person other than RAK Petroleum
provided that Gulf Keystone may offer or agree to provide a  Competing Break Fee
to a third party if:



•         the relevant third party submits to Gulf Keystone a Competing Proposal
or a Superior Proposal;



•         RAK Petroleum fails to confirm a Revised Transaction;



•         the relevant Competing Proposal or Superior Proposal is formally
announced via a Regulatory Information Service; and



•         the agreement to pay the Competing Break Fee will only become
effective, and the Competing Break Fee will only be paid, on or after the formal
announcement of the relevant Competing Proposal or Superior Proposal via a
Regulatory Information Service and not prior to any such announcement.



Termination



The Implementation Agreement shall (unless the parties to the Implementation
Agreement otherwise agree in writing) terminate prior to the Amalgamation
becoming effective in accordance with its terms on the earliest to occur of:



•         the date on which the Amalgamation lapses, terminates in accordance
with its terms, is withdrawn or otherwise ceases to be capable of becoming
effective, including if:



•       the Amalgamation Resolution is not passed by Gulf Keystone Shareholders
at the SGM;



•       an Algerian Material Adverse Change occurs between the date of the
Announcement and the passing of the Amalgamation Resolution and within the
earlier of ten Business Days of RAK Petroleum becoming aware of the occurrence
of an Algerian Material Adverse Change and the start time of the SGM, RAK
Petroleum, by notice in writing to Gulf Keystone, exercises its right to
terminate the Implementation Agreement, the Amalgamation Agreement and the
Amalgamation due to the occurrence of such Algerian Material Adverse Change;



•       the aggregate number of Gulf Keystone Shares held by all Dissenting
Shareholders exceeds 10 per cent. or more of the total issued share capital of
Gulf Keystone and prior to 5.00 p.m. (Bermuda time) on the Business Day prior to
the date of the SGM RAK Petroleum by notice in writing to Gulf Keystone
terminates the Implementation Agreement, the Amalgamation Agreement and the
Amalgamation due to such level of Dissenting Shareholders;



•       any of the matters set out in Appendix II to this Announcement occurs
and following the board of directors of RAK Petroleum becoming actually aware of
such matter (including all material details necessary for the board of directors
of RAK Petroleum to properly assess and form an opinion on such matter), if RAK
Petroleum decides to exercise its right to terminate the Implementation
Agreement, the Amalgamation Agreement and the Amalgamation due to the occurrence
of such matter, RAK Petroleum by notice in writing to Gulf Keystone exercises
such termination right within one Business Day of making such decision; or



•       either:



(i)    an Algerian Authority unequivocally and in writing denies any of the
consents, waivers or approvals contemplated by paragraphs 2(a), 2(b) or 2(c) of
the Conditions; or



(ii) the Minister (or another duly authorised Algerian Authority) provides a
written consent, waiver or approval contemplated by paragraph 2(a) of the
Conditions which does not constitute a Minister's Confirmation; or



(iii)      SONATRACH provides a written consent, waiver or approval contemplated
by paragraph 2(b) of the Conditions which does not constitute a SONATRACH
Confirmation; or



(iv)     an Algerian Authority imposes a cost, condition or charge in connection
with the Amalgamation that in any respect diminishes the value of the Algerian
Assets or that would increase the cost of the Amalgamation or the cost of
exploitation of the Hydrocarbon Rights where such cost, condition or charge
diminishes such value or increases such cost by an amount which, when taken
together with any other cost, condition or charge imposed by any other Algerian
Authority in connection with the Amalgamation is or may be more than 1 per cent.
of the Total Consideration;



unless within ten Business Days of Gulf Keystone providing RAK Petroleum with a
copy of such written communication from the Algerian Authority, or within such
shorter period as exists between the date of receipt by RAK Petroleum of such
communication and the date on which the parties would otherwise cause the
Amalgamation to be consummated in accordance with the provisions of the
Implementation Agreement, RAK Petroleum elects in accordance with the
Implementation Agreement to waive the application of paragraphs 2(a), 2(b) or 2
(c) of the Conditions (as applicable) in respect of such written communication,
to the extent that it is capable of waiver;



•         the Long Stop Date; or



•         the announcement by Gulf Keystone and/or the Directors of the
recommendation of a Competing Proposal or a Superior Proposal in accordance with
the 'Competing Proposals' provisions outlined above.



RAK Petroleum shall also be entitled to terminate the Implementation Agreement,
the Amalgamation Agreement and the Amalgamation by serving notice in writing on
Gulf Keystone if the recommendation of the Independent Directors contained in
this Announcement is withdrawn or modified adversely at any time prior to the
SGM.



RAK Petroleum shall not be entitled to terminate the Implementation Agreement,
the Amalgamation Agreement or the Amalgamation other than in accordance with the
provisions outlined above.



If the Amalgamation Resolution is passed at the SGM, Gulf Keystone shall not be
entitled to terminate the Implementation Agreement, the Amalgamation Agreement
or the Amalgamation after the passing of the Amalgamation Resolution.



Obligations of Gulf Keystone and RAK Petroleum



Following notification by Gulf Keystone to RAK Petroleum that Conditions 1(a)
and, unless waived by RAK Petroleum, 2(a), 2(b) and 2(c) have been satisfied,
provided that RAK Petroleum has not terminated the Implementation Agreement and
none of the matters specified in paragraph 2(f) of the Conditions has (unless
waived by RAK Petroleum) occurred, Gulf Keystone and RAK Petroleum shall procure
that their respective officers make the appropriate statutory declarations
pursuant to section 108(3) of the Companies Act and file all documents required
to consummate the Amalgamation with the Bermuda Registrar of Companies.



RAK Petroleum has undertaken from and after the Effective Time to cause the
Resulting Company to:



•         fulfil the existing obligations of the Gulf Keystone Group pursuant to
indemnities provided or available to present and former directors and officers
of Gulf Keystone or any member of the Gulf Keystone Group pursuant to the
provisions of the articles, byelaws or similar governing documents of such
companies and applicable law and to maintain directors' and officers' insurance
coverage for the present and former directors and officers of Gulf Keystone and
any member of the Gulf Keystone Group to the same level as currently provided by
the Gulf Keystone Group (including without limitation in relation to any run-off
directors' and officers' insurance provisions); and



•         honour and comply with the terms of all existing employment and
consultancy contracts and directors' terms of engagement between members of the
Gulf Keystone Group and the directors, officers, employees and consultants of
the members of the Gulf Keystone Group (including in relation to any severance
terms and notice provisions). The service agreements of Todd Kozel, Ibrahim Al
Khaldi and Ali Al Qabandi will cease at the Effective Time and each of Todd
Kozel, Ibrahim Al Khaldi and Ali Al Qabandi has entered into an individual
waiver letter dated 12 April 2007 waiving any entitlement he may have for
payment on cessation of employment.



RAK Petroleum has undertaken to Gulf Keystone that, subject only to completion
of the Amalgamation, it will not change the terms of the Computershare
appointment as paying agent and will use its reasonable endeavours to enforce
its rights under such terms of appointment so as to ensure that Computershare
complies with its obligations thereunder. RAK Petroleum has further undertaken
to  Gulf Keystone that, in accordance with the terms of the Computershare
appointment as paying agent, it will:



•         notify Computershare of the Record Time promptly once this has been
determined;



•         notify Computershare on the Effective Date that the Amalgamation has
become effective in accordance with its terms; and



•         provide to Computershare a list of the persons who hold Excluded
Shares which list is prepared in good faith and in accordance with RAK
Petroleum's knowledge of the identity of such persons.



Gulf Keystone and RAK Petroleum have also given undertakings to each other in
connection with the operation of the Escrow Account. These are summarised below.



Consummation of the Amalgamation



The parties shall use all reasonable endeavours to procure that the Amalgamation
becomes effective in accordance with its terms as soon as practicable following
satisfaction or (as appropriate) waiver of all of the Conditions (save for the
Conditions as to filing set out in full in paragraphs 1(b) and 1(c) of Appendix
II to this Announcement).



Following satisfaction or (as appropriate) waiver of Conditions 1(a), 2(a), 2(b)
and 2(c), subject to the execution of appropriate statutory declarations
pursuant to section 108(3) of the Companies Act, Gulf Keystone, RAK Petroleum
and RAK Bermuda are obliged to cause the Amalgamation to be consummated by
filing all documents with the Bermuda Registrar of Companies in accordance with
section 108 of the Companies Act and by jointly executing the irrevocable
instructions to Mashreq Bank and by RAK Petroleum instructing Goldman Sachs
International in accordance with the term of the Hedging Arrangements (see
below).



Dissenting Shareholders and conduct of claims by Dissenting Shareholders



Gulf Keystone shall give RAK Petroleum (i) prompt notice upon it becoming aware
of the existence of any Dissenting Shareholders, details of any applications
made under section 106(6) of the Companies Act, copies of all pleadings and
documents served in relation thereto and details of any attempted withdrawals of
any such applications; and (ii) the opportunity to direct and conduct any and
all negotiations and proceedings with respect to demands for appraisal under
section 106(6) of the Companies Act at RAK Petroleum's cost and provided that
Gulf Keystone is indemnified to its reasonable satisfaction against all costs
and expenses which may be incurred in relation to such negotiations and
proceedings. Gulf Keystone must not, except with the prior written consent of
RAK Petroleum, voluntarily make any payment with respect to any applications
under section 106(6) of the Companies Act, offer to settle or settle any such
applications or approve any withdrawal of any such applications.



Covenants



The Implementation Agreement contains negative and positive covenants on the
part of Gulf Keystone in relation to the conduct of its business.



With effect from the making of the Announcement, pending termination of the
Implementation Agreement, Gulf Keystone has agreed, inter alia, that, save for
any action (i) required to give effect to the Amalgamation; (ii) disclosed to
RAK Petroleum prior to the date of the Implementation Agreement; (iii) in the
ordinary course of business of Gulf Keystone; or (iv) required to carry out
operations disclosed in Gulf Keystone's work programme and budget for the 2007
financial year, Gulf  Keystone and the Gulf Keystone Group will:



•         carry on its business in the same manner as it was operated prior to
the date of the Implementation Agreement and use all reasonable endeavours to
maintain its trade and trade connections;



•         take all reasonable steps to preserve and protect its business and
assets;



•         continue to take all normal and reasonable steps to obtain (and inform
RAK Petroleum when they have been obtained):



•      full release of the amount of US$13.1 million held as cash collateral by
Credit Agricole in respect of work commitments of Gulf Keystone under a
hydrocarbon research contract between Gulf Keystone and SONATRACH;



•       approval and acceptance by SONATRACH and all relevant management
committees of the costs submitted for 2005;



•      a completed environmental study in respect of the HBH block; and



•       approval by the management committees of the 2007 annual work programmes
and budgets, in amounts materially consistent with Gulf Keystone's work
programme and budget for the 2007 financial year;



and inform RAK Petroleum when any of these have been obtained; and



•         ensure that no member of the Gulf Keystone Group shall:



•       do any act or enter into any transaction or arrangement which may
reasonably be expected to result in Gulf Keystone or any member of the Gulf
Keystone Group being either resident for tax purposes in a jurisdiction other
than its country of incorporation or Algeria or subject to tax in such
jurisdiction;



•       take any action which is inconsistent with the provisions of the
Implementation Agreement or Completion as contemplated by the Implementation
Agreement other than where required by law;



•       do, allow or procure as far as it is reasonably able any act or omission
which would constitute or give rise to a breach of a Condition or provision of
the Implementation Agreement; or



•       agree, conditionally or otherwise, to do any of the foregoing.



•         carry on its business in accordance with all applicable laws,
regulations and other requirements having the force of law and in accordance
with good oil field practice;



•         consult with RAK Petroleum on a weekly basis in relation to
developments in Gulf Keystone's business and operations and keep RAK Petroleum
informed of any matters which, in the reasonable opinion of the Directors, are
material to the business of the Gulf Keystone Group and promptly to consult with
RAK Petroleum in relation to, and give full details of, any material change in
its business, expenditures, financial position and/or assets (together with any
proposed new activities not contemplated in Gulf Keystone's work programme and
budget for the 2007 financial year); and



•         following the SGM and, if a notice of a Superior Proposal is served on
RAK Petroleum, or a Competing Proposal is made, for the period between the time
of service of such notice or making of such announcement and the time of the SGM
and subject to the terms of an existing confidentiality agreement and to the
extent permitted by law, allow RAK Petroleum to re-assess due diligence
information previously provided by Gulf Keystone and provide RAK Petroleum with
access to appropriate officers and senior management of Gulf Keystone.



Treatment of Share Options



The Board has determined that pursuant to the rules of the Gulf Keystone Share
Option Plan and the Gulf Keystone Executive Bonus Scheme, Gulf Keystone Options
may become exercisable conditional upon the Amalgamation becoming effective.
Under the terms of the Implementation Agreement, Gulf Keystone must procure that
no Gulf Keystone Option (whether or not then vested or exercisable) to subscribe
for or purchase Gulf Keystone Shares or shares in any other member of the Gulf
Keystone Group that is outstanding prior to the Record Time (being 6.00 p.m.
(London Time) on the Business Day immediately prior to the Effective Date) shall
subsist at the Record Time by taking all steps necessary to procure that all
Gulf Keystone Options, if not exercised by the Record Time, lapse immediately
upon the Record Time. The holders of Gulf Keystone Options may exercise their
options conditionally up to the date of the SGM. Alternatively, the holders of
Gulf Keystone Options granted under the Gulf Keystone Share Option Plan may
accept the Cash Cancellation Consideration from RAK Petroleum for the surrender
of such Gulf Keystone Options. The payment of any Cash Cancellation
Consideration is conditional upon the Amalgamation becoming effective. All
outstanding Gulf Keystone Options will lapse at the Record Time.



Costs



In the event the Amalgamation is not completed by the Amalgamation coming into
effect by any way whatsoever (and save as otherwise stated in the Implementation
Agreement) each party shall bear its own costs in relation to the Implementation
Agreement and the transactions contemplated by it.



Escrow Arrangements

AED 1,544,193,764 (the "Escrow Amount") is being held by Mashreq Bank in the
Escrow Account subject to the terms of the Escrow Letter. Mashreq Bank is
instructed under the terms of the Escrow Letter to hold the Escrow Amount and
any interest accruing thereon (the "Deposited Sum") in RAK Petroleum's name and
to apply such amount in accordance with the provisions of the Escrow Letter.



The Escrow Letter provides that Mashreq Bank must only apply the Deposited Sum
in accordance with the joint written instructions of RAK Petroleum and the
Company to pay the Deposited Sum either to Goldman Sachs International or to RAK
Petroleum, and if no such written instructions have been received by Mashreq
Bank prior to 11 August 2007 (or such later date as RAK Petroleum and the
Company may jointly notify Mashreq Bank in writing) Mashreq Bank shall pay to
RAK Petroleum the Deposited Sum.



Under the terms of the Implementation Agreement, RAK Petroleum and the Company
have undertaken to each other to jointly instruct Mashreq Bank to pay the
Deposited Sum to Goldman Sachs International at the same time as filing the
relevant documents to consummate the Amalgamation with the Bermudan Registrar of
Companies and, in the event of the termination of the Implementation Agreement
to pay the Deposited Sum to RAK Petroleum.



The Escrow Amount is the minimum amount necessary to be converted into the Total
Consideration under the Hedging Arrangements entered into between RAK Petroleum
and Goldman Sachs International. Under the Hedging Arrangements, conditional
upon:



•         delivery of the joint instructions of the Company and RAK Petroleum to
Mashreq Bank under the Escrow Letter to transfer the Deposited Sum to Goldman
Sachs International; or



•         the transaction contemplated under the Implementation Agreement having
completed,



RAK Petroleum has irrevocably instructed Goldman Sachs International to pay
£208,318,720.60 (being the Total Consideration due under the Amalgamation) to
Computershare on the 'settlement date', being a date to be notified by RAK
Petroleum to Goldman Sachs International which must be no later than the
Business Day after the satisfaction of the above condition precedent.  Under the
terms of the Implementation Agreement RAK Petroleum undertakes to the Company to
provide such notification to Goldman Sachs International when the relevant
documents are filed with the Bermudan Companies Registry.



3. Summary of the Amalgamation Agreement



The following summary of the material terms of the Amalgamation Agreement is
qualified in its entirety by reference to the complete text of the Amalgamation
Agreement, which is set out in the Circular which is being sent to Gulf Keystone
Shareholders today.



Amalgamation



The Amalgamation Agreement is conditional on the passing of the Amalgamation
Resolution and the obligations of RAK Petroleum and RAK Bermuda are further
conditional on the satisfaction (or waiver by RAK Petroleum), on or before the
Effective Date, of the Conditions (set out in full in Appendix II to this
announcement).



The Amalgamation shall become effective and the Certificate of Amalgamation
shall be issued by the Registrar of Companies in Bermuda on the Effective Date.



Conversion and Cancellation of Gulf Keystone Shares



On the Effective Date:



•         each common share in the capital of RAK Bermuda in issue on the
Business Day preceding the Effective Date shall be converted into one validly
issued and fully paid common share in the Resulting Company;



•         each Gulf Keystone Share in issue on the Business Day preceding the
Effective Date shall be cancelled and converted into a right to receive the
Amalgamation Consideration (or such other sum as may be determined under the
Implementation Agreement) from RAK Petroleum instead of securities of the
Resulting Company; and



•         each Gulf Keystone Share held by a Dissenting Shareholder in issue on
the Business Day preceding the Effective Date shall be cancelled and converted
into a right only to receive the value thereof as appraised by the Court under
section 106(6) of the Companies Act.



Undertakings



Gulf Keystone, RAK Petroleum and RAK Bermuda undertake to do, execute and
perform such further acts, documents and things within their respective powers
as may be necessary to effect the Amalgamation, including: (i) holding all
necessary meetings of their shareholders; (ii) passing all necessary resolutions
of their directors; (iii) procuring that their subsidiaries pass all necessary
resolutions of their shareholders and directors; and (iv) filing all necessary
notices or other documents.





                                  Appendix II



CONDITIONS PRECEDENT TO COMPLETION OF THE ACQUISITION



1.                  The Amalgamation will become effective on all of the
following events having occurred on or before the Long Stop Date:

(a)                 the Amalgamation Resolution being passed by a majority of
the Gulf Keystone Shareholders voting in person or by proxy at the SGM;

(b)                 the delivery to the Bermuda Registrar of Companies by or on
behalf of Gulf Keystone and RAK Bermuda of all documentation and consents
required by the Bermuda Registrar of Companies pursuant to the Companies Act to
implement the Amalgamation;

(c)                 the issue by the Bermuda Registrar of Companies to RAK
Bermuda or its advisers of the Certificate of Amalgamation, pursuant to the
Companies Act;

2.                  The obligations of RAK Petroleum and RAK Bermuda to effect
the Amalgamation are further conditional on:

(a)                 Gulf Keystone having received and provided to RAK Petroleum:

(i)                 the Minister's Confirmation, or

(ii)                a written confirmation from the Minister meeting all
requirements of a Minister's Confirmation save only for omitting express
statement that the "Amalgamation is governed by Article 4 of the Decree",

or the 3 month period, commencing on the date of receipt by the Minister of the
Minister Letter, for objection by the Minister to change of control under
Article 4 of the Decree having expired without objection being made

(b)                 Gulf Keystone having received and provided to RAK Petroleum
SONATRACH's Confirmation;

(c)                 the GKN and GKS fields having been declared commercially
exploitable in accordance with the Final Discovery Report by a valid and
unanimous decision of the management committee (Conseil de Gestion) in
accordance with the relevant provision of the Block 126a PSC and within the time
limits set forth in the Block 126a PSC, as evidenced by the unanimously signed
minutes of the relevant meeting of the management committee;

(d)                 RAK Petroleum not having terminated this agreement (pursuant
to Clause 11.1(a)(ii)) due to an Algerian Material Adverse Change having
occurred between the date of the Announcement and the passing of the Gulf
Keystone Amalgamation Resolution;

(e)                 RAK Petroleum not having terminated this agreement (pursuant
to Clause 11.1(a)(iii)) due to the aggregate number of Gulf Keystone Shares held
by all Dissenting Shareholders amounting to 10 per cent. or more of the total
issued share capital of Gulf Keystone;

(f)                 no member of the Gulf Keystone Group having since 13 April
2007, except with the prior written consent of RAK Petroleum (which consent may
be granted or withheld at RAK Petroleum's absolute discretion);

(i)                 incurred expenditure other than:

(A)                 expenditure which is incurred in accordance with good oil
field practice and which is in the ordinary course of business including, for
the avoidance of doubt, advisers costs in relation to the Amalgamation; or

(B)                 expenditure in relation to work or activities set out in the
Gulf Keystone 2007 work programme and budget; or

(C)                 expenditure incurred in conducting operations required under
the PSCs or to safeguard life or property in the event of emergency; or

(D)                 expenditure incurred with the prior written consent of RAK
Petroleum (which consent shall not be unreasonably withheld or delayed);

(ii)                issued or agreed to issue, or authorised or proposed the
issue of, additional shares of any class, or securities convertible into or
exchangeable for, or rights, warrants or options to subscribe for or acquire,
any such shares or convertible securities (save for options granted or offered
pursuant to current employment contracts and current offers of employment as
disclosed to RAK Petroleum prior to the date of this agreement, and for any Gulf
Keystone Shares allotted upon exercise of options granted under the Gulf
Keystone Share Schemes or between Gulf Keystone and wholly-owned members of the
Gulf Keystone Group and disclosed to RAK Petroleum before the date hereof);

(iii)               recommended, declared, paid or made or proposed to
recommend, declare, pay or make any bonus in respect of shares, dividend or
other distribution, whether payable in cash or otherwise;

(iv)               purchased, redeemed or repaid or announced any proposal to
purchase, redeem or repay any of its own shares or other securities or reduced
or made any other change to any part of its share capital;

(v)                 waived or compromised or settled any material claim;

(vi)               (other than in respect of a member that is dormant and was
solvent at the relevant time) taken any corporate action or had any order made
or legal proceedings started or threatened against it (other than where such
threat is frivolous or vexatious) for its winding-up (voluntary or otherwise),
dissolution or reorganisation or for the appointment of any receiver,
administrator, administrative receiver, trustee or similar officer of all or any
of its assets and revenues or any analogous proceedings or similar event having
occurred in any jurisdiction or any analogous person having been appointed in
any jurisdiction;

(vii)              been unable, or admitted in writing that it is unable, to pay
its debts or having stopped or suspended (or threatened to stop or suspend)
payment of its debts when due generally or ceased or threatened to cease
carrying on all or a substantial part of its business;

(viii)              made any alteration to its bye-laws or constitutional
documents or discontinued Gulf Keystone from Bermuda;

(ix)                made, committed to make, authorised, proposed or announced
an intention to propose any change in its loan capital or issued or authorised
the issue of any debentures (other than in the ordinary course of business or
between Gulf Keystone and/or any of its wholly-owned subsidiaries) or incurred
or increased any indebtedness or contingent liability to a material extent not
envisaged under the Gulf Keystone 2007 work programme and budget;

(x)                 acquired, disposed of, transferred, mortgaged, charged or
created any security interest over any material asset or any right, title or
interest in any material asset (including shares and trade investments) or
(except in relation to the Amalgamation or in accordance with the terms of this
agreement), implemented, authorised, effected, proposed or announced its
intention to implement, authorise, effect or propose any merger, demerger,
reconstruction, amalgamation, scheme or acquisition in relation to any body
corporate (in each case other than in the ordinary course of business);

(xi)                entered into, varied, terminated or authorised or become
bound by any contract, commitment, arrangement or transaction other than in the
ordinary course of business which is of a long-term, onerous or unusual nature
or magnitude or which results or might reasonably be expected to result in any
material adverse restriction of the scope of business currently carried on by
any member of the Gulf Keystone Group or which involves or might reasonably be
expected to involve an obligation of such a nature or magnitude, in each case
which is material.  For the avoidance of doubt the contracting by BG Group as
operator of the HBH PSC of a drilling rig to drill approximately six wells in
2007/2008, and the contracts placed by Gulf Keystone for the equipment and
services required to test the GRJ-2 well shall be deemed to be in the ordinary
course of business;

(xii)               entered into or made an offer (which remains open for
acceptance) to enter into, or materially changed the terms of, any agreement,
contract, commitment or arrangement with, or paid, awarded any bonuses, pensions
or benefits to, any of the directors, officers or senior executives of any
member of the Gulf Keystone Group (or any connected party of any such director,
officer or senior executive) save for the provision of run-off directors' and
officers' insurance for the Directors and management; or

(xiii)             entered into any contract, agreement or commitment or passed
any resolution or made any offer (which remains open for acceptance) with
respect to, or proposed or announced any intention to effect or propose, any of
the transactions, matters or events referred to in this condition 2(f).

For the purposes of these Conditions in Appendix II:

"Disclosed" shall mean (i) fairly disclosed in any of the documents, papers or
information made available to RAK Petroleum, any member of the wider RAK
Petroleum Group or any of the RAK Petroleum's financial or legal adviser by Gulf
Keystone and its financial and legal advisers prior to the date hereof or (ii)
disclosed by being publicly announced through a Regulatory Information Services
prior to the date hereof or (iii) disclosed in the annual report and accounts of
Gulf Keystone for the year ended 31 December 2005;

"subsidiary undertaking", "associated undertaking" and "undertaking" have the
meanings given by the UK Companies Act 1985;

"substantial interest" means a direct or indirect interest in 10 per cent. or
more of the equity or voting capital of an undertaking;

"the wider RAK Petroleum Group" means RAK Petroleum and its subsidiary
undertakings, associated undertakings and any other undertakings in which RAK
Petroleum and/or such undertakings (aggregating their interests) have a
substantial direct or indirect interest.



                                  Appendix III





DEFINITIONS


The following definitions apply throughout this Announcement unless the context 
otherwise requires:



"AED"                                 United Arab Emirates Dirham;


"AIM"                                 the AIM Market of the London Stock Exchange;


"AIM Rules"                           the AIM Rules published by the London Stock Exchange from
                                      time to time;


"ALNAFT"                              L'Agence Nationale pour la Valorisation des Resources en
                                      Hydrocarbures;


"Algerian Assets"                     the Hydrocarbon Rights and petroleum or natural gas reserves
                                      and resources, and other assets of Gulf Keystone in Algeria;


"Algerian Authorities"                SONATRACH, ALNAFT, the Algerian Ministry of Energy and Mines,
                                      the Council of Ministers, the President, and any other
                                      agency, office, department or instrumentality of the
                                      Government of Algeria or any political subdivision thereof;


"Algerian Material Adverse Change"    any event, occurrence, or change of circumstance specifically
                                      relating to Algeria (excluding, for the avoidance of doubt,
                                      the reports or results from any currently planned well
                                      testing being carried out by Gulf Keystone) which
                                      individually or together with other events, occurrences or
                                      circumstances in Algeria, has or is reasonably likely to have
                                      a material adverse effect on Gulf Keystone's Algerian
                                      business or on the Algerian Assets (such as (i) war or
                                      terrorism, (ii) official written notification of a change in
                                      the fiscal regime applicable to the Algerian Assets which
                                      represents a material adverse change to the laws and decrees
                                      as published in Algeria at the date of the Implementation
                                      Agreement or (iii) RAK Petroleum having become aware of any
                                      Materially Adverse Information regarding the validity,
                                      ownership, or scope of the Hydrocarbon Rights or Gulf
                                      Keystone's currently pending application for the declaration
                                      of commerciality in respect of the GKN and GKS fields);


"Amalgamation"                        the amalgamation of Gulf Keystone and RAK Bermuda under the
                                      provisions of the Companies Act and pursuant to the terms of
                                      the Amalgamation Agreement and the Implementation Agreement;


"Amalgamation Agreement"              the conditional agreement dated 12 April 2007 between the
                                      Company, RAK Petroleum and RAK Bermuda as summarised in
                                      Appendix I to this Announcement;


"Amalgamation Consideration"          the cash consideration to be paid by RAK Bermuda to Gulf
                                      Keystone Shareholders upon Completion, being 74 pence in cash
                                      per Gulf Keystone Share (without interest, subject to
                                      applicable withholding of all taxes, levies or other
                                      governmental charges), or such other amount as may be
                                      determined in accordance with the terms of the Implementation
                                      Agreement as described in Appendix I to this Announcement;


"Amalgamation Record Date"            5.00 p.m. (Bermuda time) on the Business Day prior to the
                                      Effective Date;


"Amalgamation Resolution"             the proposed resolution of the Gulf Keystone Shareholders to
                                      approve the terms of the Amalgamation Agreement in accordance
                                      with section 106 of the Companies Act;


"Announcement"                        this announcement made by Gulf Keystone via a Regulatory
                                      Information Service relating to the Amalgamation;


"bcf"                                 billion standard cubic feet of gas;


"Block 108/128b PSC"                  Contrat pour la recherche, d'appreciation et l'exploitation
                                      d'hydrocarbures entre Sonatrach et Gulf Keystone sur le
                                      perimetre Benguecha (Blocs 108/128b), dated 23 April 2005;


"Block 126a PSC"                      Contrat pour la recherche, d'appreciation et l'exploitation
                                      d'hydrocarbures entre Sonatrach et Gulf Keystone sur le
                                      perimetre Ferkane (Bloc 126), dated 28 February 2001, as
                                      amended by Amendments No. 1 and No. 2 thereto;


"Block 129 PSC"                       Contrat pour la recherche, d'appreciation et l'exploitation
                                      d'hydrocarbures entre Sonatrach et Gulf Keystone sur le
                                      perimetre Bottena (Bloc 129), dated 23 April 2005;


"Board" or "Directors"                the directors of the Company;


"Business Day"                        any day other than a Saturday or Sunday on which banks are
                                      open for business in London, UK and Hamilton, Bermuda;


"Cash Cancellation Consideration"     the amount, before any relevant taxes and social security
                                      contributions have been withheld, to be paid to each holder
                                      of Gulf Keystone Options for each Gulf Keystone Option
                                      granted under the Gulf Keystone Share Option Plan cancelled,
                                      a cash sum equal to the Amalgamation Consideration per Gulf
                                      Keystone Share less the exercise price per share of that Gulf
                                      Keystone Option;


"certificated form"                   not in uncertificated form (that is, not in CREST);


"Certificate of Amalgamation"         the certificate to be issued by the Bermuda Registrar of
                                      Companies evidencing the Amalgamation pursuant to section 104
                                      of the Companies Act;


"Circular"                            the circular to Gulf Keystone Shareholders, including the
                                      Notice of SGM;


"City Code"                           the City Code on Takeovers and Mergers;


"Closing Price"                       the closing middle market price of a Gulf Keystone Share as
                                      derived from the Daily Official List on any particular day;


"Companies Act"                       the Companies Act 1981 (Bermuda) as amended;


"Competing Proposal"                  a proposed: (i) offer for, or scheme of arrangement of, or
                                      amalgamation of Gulf Keystone or any transaction which would
                                      result in a change of control of Gulf Keystone in each case;
                                      (ii) sale, merger, business combination, amalgamation,
                                      demerger or liquidation (or similar transaction or
                                      arrangement) in respect of the whole or a material part of
                                      the business or assets of the Gulf Keystone Group; or (iii)
                                      transaction involving a takeover or acquisition by any member
                                      of the Gulf Keystone Group (by public offer, scheme of
                                      arrangement, amalgamation, merger or otherwise) of another
                                      company or business, the consideration for which is Gulf
                                      Keystone Shares and completion of which would result in a
                                      change of control of Gulf Keystone; in each case by any
                                      person or persons who is not a member of the RAK Petroleum CL
                                      Group and for these purposes "proposed" shall include an
                                      approach with a view to making a proposal with regard to the
                                      same;


"Completion"                          the completion of the Amalgamation;


"Conditions"                          the conditions precedent to Completion as set out in Appendix
                                      II to this Announcement and "Condition" means one or more of
                                      them as the context may require;


"Contingent Resources"                those quantities of petroleum which are estimated to be
                                      potentially recoverable from discovered accumulations but
                                      which are currently not demonstrated to be commercially
                                      recoverable;


"Court"                               the Supreme Court of Bermuda;


"CREST"                               the system for the paperless settlement of trades in
                                      securities and the holding of uncertificated securities
                                      operated by CRESTCo in accordance with the CREST Regulations;


"CREST Regulations"                   the UK Uncertificated Regulations 2001 (SI 2001No. 01/3755),
                                      as amended;


"CRESTCo"                             CRESTCo Limited, the operator of CREST;


"Decree"                              Decret ndegrees 87-158 du 21 juillet 1987 relatif aux
                                      modalites d'identification et de controle des societes
                                      etrangeres candidates a l'association pour la prospection, la
                                      recherche et l'exploitation des hydrocarbures liquides, p.
                                      767. (Ndegrees JORA : 030 du 22-07-1987), as amended, issued
                                      by the President of Algeria;


"Depositary"                          Computershare Investor Services PLC, The Pavilions,
                                      Bridgwater Road, Bristol BS13 8AE, in its capacity as
                                      depositary pursuant to a depositary agreement entered into
                                      with the Company in connection with the Amalgamation;


"Depositary Interests"                the depositary interests representing Gulf Keystone Shares
                                      held through CREST established pursuant to the deed poll
                                      dated 24 April 2004 executed by Computershare Investor
                                      Services PLC;


"Dissenting Shareholder" or           a registered Gulf Keystone Shareholder who, in connection
"Dissenter"                           with the Amalgamation Resolution, has (a) not voted in favour
                                      of the Amalgamation Resolution and (b) has applied to the
                                      Court pursuant to section 106(6) of the Companies Act in
                                      strict compliance with the provisions thereof to appraise the
                                      fair value of the Gulf Keystone Shares held by that Gulf
                                      Keystone Shareholder;


"Effective Date"                      the date that the Amalgamation becomes effective in
                                      accordance with the terms of the Amalgamation Agreement,
                                      which, subject to satisfaction or (as appropriate) waiver of
                                      the Conditions, is anticipated to be no later than 11 August
                                      2007;


"Effective Time"                      the time on the Effective Date that the Amalgamation becomes
                                      effective;


"Escrow Account"                      the bank account operated by Mashreq Bank on the instruction
                                      of the Company and RAK Petroleum in which the Amalgamation
                                      Consideration and the Cash Cancellation Consideration
                                      (including the amount of interest accruing to such sum (less
                                      tax)) is held in RAK Petroleum's and Gulf Keystone's name
                                      pursuant to the provisions of the Escrow Letter;


"Escrow Letter"                       an escrow letter from Gulf Keystone and RAK Petroleum
                                      addressed to Mashreq Bank dated  12 April 2007;


"Excluded Shares"                     (i) any Gulf Keystone Shares that are owned by RAK Petroleum,
                                      RAK Bermuda or any other direct or indirect subsidiary of RAK
                                      Petroleum (not held on behalf of, or as security for
                                      obligations owed by, third parties), (ii) any Gulf Keystone
                                      Shares that are owned by any direct or indirect subsidiary of
                                      Gulf Keystone (not held on behalf, or as security for
                                      obligations owed by, third parties) and (iii) any Gulf
                                      Keystone Shares held by Dissenting Shareholders;


"Final Discovery Report"              the Final Discovery Report dated January 2007 as disclosed,
                                      as amended and finally submitted to the management committee
                                      (Conseil de Gestion);


FSMA"                                 "the United Kingdom's Financial Services and Markets Act
                                      2000;


"GIBCA"                               GIBCA Limited, a shareholder in Gulf Keystone Petroleum and
                                      of which Sheikh Sultan Bin Saqr Al Qassimi is both a director
                                      and shareholder;


"GKN and GKS fields"                  the Guerguit el Kihal Nord and Guerguit el Kihal Sud oil
                                      fields in Algeria, forming part of the contract area of the
                                      Block 126a PSC, as more specifically identified in the Final
                                      Discovery Report;


"gross"                               the remaining recoverable reserves from the licence; "Gulf
                                      Keystone" or the "Company" Gulf Keystone Petroleum Limited, a
                                      company incorporated and registered in Bermuda under the
                                      Companies Act with registered number 31165;


"Gulf Keystone Executive 
Bonus Scheme"                         the Gulf Keystone Executive Bonus Scheme; 


"Gulf Keystone Group"                 the Company, its subsidiary and any subsidiary undertakings;


"Gulf Keystone Options"               the options to acquire Gulf Keystone Shares outstanding under
                                      the Gulf Keystone Share Option Plan and the Gulf Keystone
                                      Executive Bonus Scheme;


"Gulf Keystone Petroleum"             Gulf Keystone Petroleum Co. LLC a company in which Todd
                                      Kozel, Ali Al-Qabandi and Ibrahim Al-Khaldi are directors and
                                      shareholders and in which GIBCA is a shareholder and Sheikh
                                      Sultan Bin Saqr Al Qassimi is a director;


"Gulf Keystone Shares"                the common shares of par value US$0.01 each in the capital of
                                      Gulf Keystone;


"Gulf Keystone Shareholders"          the holders of Gulf Keystone Shares from time to time
                                      (including persons who hold an interest in Gulf Keystone
                                      Shares by way of a holding of Depositary Interests in CREST);


"Gulf Keystone Share Option Plan"     the Gulf Keystone Share Option Plan;


"Gulf Keystone Share Schemes"         the Gulf Keystone Share Option Plan and the Gulf Keystone
                                      Executive Bonus Scheme;


"Hedging Arrangements"                foreign currency exchange arrangements which have been
                                      entered into between RAK Petroleum and Goldman Sachs
                                      International pursuant to which AED can, and will at the
                                      appropriate time, be converted into pounds Sterling at
                                      pre-arranged exchange rates and under which the minimum
                                      amount of pounds sterling into which the Escrow Amount (as
                                      defined in the Escrow Letter) can, and will at the
                                      appropriate time, be converted into is an amount equal to the
                                      Total Consideration;


"HBH PSC"                             Contrat pour la recherche, d'appreciation et l'exploitation
                                      d'hydrocarbures entre Sonatrach et Gulf Keystone sur le
                                      perimetre Hassi Ba Hamou, dated 23 April 2005, as amended by
                                      Amendment No. 1 thereto;


"Hoare Govett"                        Hoare Govett Limited, Nominated Adviser to Gulf Keystone;


"Hydrocarbon Rights"                  the exploration, production and other contractual and legal
                                      rights, privileges, licences, permits and/or authorities
                                      granted to Gulf Keystone or which Gulf Keystone has announced
                                      via a Regulatory Information Service as having been granted
                                      to Gulf Keystone in respect of the PSCs and the related
                                      licences granted or to be granted to SONATRACH or ALNAFT
                                      (insofar as the foregoing licences may affect Gulf Keystone's
                                      rights under the PSCs);


"Implementation Agreement"            the conditional agreement dated 12 April 2007 between the
                                      Company, RAK Petroleum and RAK Bermuda as summarised in
                                      Appendix I to this Announcement;


"Independent Directors"               the Directors other than Sheikh Sultan Bin Saqr Al Qassimi;


"London Stock Exchange"               London Stock Exchange Plc;


"Long Stop Date"                      11.59 p.m. Bermuda time on 11 August 2007 or such later date
                                      as the Company, RAK Petroleum and RAK Bermuda may agree;


"MMbbls"                              million barrels;


"Materially Adverse Information"      information as to adverse facts, circumstances, or
                                      occurrences that (i) Gulf Keystone was or becomes under a
                                      duty to announce via a Regulatory Information Service in
                                      accordance with the AIM Rules but has not so announced prior
                                      to the date hereof or (ii) would constitute a lawfully
                                      executed preemptive purchase by or a material challenge by
                                      the Algerian Authorities to the validity, ownership or scope
                                      of the Hydrocarbon Rights or (iii) would materially adversely
                                      affect the Resulting Company;


"Minister"                            the Algerian minister in charge of hydrocarbons, within the
                                      meaning of the Decree;


"Minister's Confirmation"             a written confirmation, in reply to the Minister Letter, from
                                      the Minister affirming that the Amalgamation is a transaction
                                      governed by Article 4 of the Decree and approving, or
                                      affirming no objection to, the Amalgamation, such
                                      confirmation having been provided without being subject to
                                      any condition or charge that in any respect diminishes the
                                      value of the Algerian Assets or that would increase the cost
                                      of the Amalgamation or the cost of exploitation of the
                                      Hydrocarbon Rights unless such condition or charge only
                                      diminishes such value or increases such cost by an amount
                                      which, taken together with any other condition, cost or
                                      charge imposed by an Algerian Authority in connection with
                                      the Amalgamation, is 1 per cent. or less of the Total
                                      Consideration;


"Minister Letter"                     the letter duly submitted by Gulf Keystone to the Minister in
                                      conformity with, and accompanied by information required by,
                                      Articles 2 and 3 of the Decree, seeking approval of the
                                      Amalgamation in accordance with Article 4 of the Decree, the
                                      absence of preemption, and commencing the 3 month period
                                      contemplated by Article 4 of the Decree, in a form and manner
                                      approved in writing by each of RAK Petroleum and Gulf
                                      Keystone acting in good faith and in a timely manner;


"Ministry"                            the Algerian Ministry of Energy and Mines;


"Notice of SGM"                       the notice of the SGM set out in the Circular;


"Panel"                               the Panel on Takeovers and Mergers;


"Placing Price"                       62 pence per Gulf Keystone Share paid by investors in the
                                      placing by the Company of 21,600,000 new Gulf Keystone Shares
                                      on 17 August 2006;


"prospect"                            a specific undrilled hydrocarbon trap that has been
                                      sufficiently defined to allow volumes and risks to be
                                      estimated;


"Proved plus Probable oil reserves"   those reserve volumes that are estimated to have a 50 per
or "2P"                               cent. or more chance of being extracted;


"Proved oil reserves" or "1P"         those reserve volumes that are estimated to have a 90 per
                                      cent. chance of being extracted;


"PSCs"                                the Block 126a PSC, the HBH PSC, Block 129 PSC, and the Block
                                      108/128b PSC;


"RAK Bermuda"                         RAK Petroleum (Bermuda) Limited, a wholly-owned subsidiary of
                                      RAK Petroleum, incorporated and registered in Bermuda under
                                      the Companies Act with registered number 39567;


"RAK Bermuda Resolution"              the resolution of RAK Petroleum as sole shareholder of RAK
                                      Bermuda to approve the Amalgamation Agreement pursuant to
                                      section 106 of the Companies Act;


"RAK Petroleum"                       RAK Petroleum Public Company Limited, a company incorporated
                                      under the laws of the United Arab Emirates;


"RAK Petroleum Group"                 RAK Petroleum and its subsidiaries and subsidiary
                                      undertakings;


"Regulatory Information Service"      the service approved by the London Stock Exchange for the
                                      distribution of AIM announcements and included within the
                                      list maintained on the website of the London Stock Exchange;


"reserves"                            those quantities of petroleum which are estimated to be
                                      commercially recoverable from discovered accumulations;


"Resulting Company"                   the company resulting from the Amalgamation and continuing
                                      following the Effective Time;


"RPS Energy"                          RPS Energy Limited a multi-disciplinary international
                                      consultancy providing technical advice on the global energy
                                      sector;


"SGM" or "Special General Meeting"    the special general meeting of Gulf Keystone Shareholders to
                                      be held at the offices of Cox Hallett Wilkinson, Milner
                                      House, 18 Parliament Street, Hamilton, Bermuda at 1.00 p.m.
                                      (Bermuda time) on 22 May 2007 to consider and, if thought
                                      fit, approve, the Amalgamation Resolution and to transact
                                      such other business as may properly come before the SGM, and
                                      any valid adjournments or postponements thereof;


"SONATRACH"                           La Societe nationale pour la Recherche, la Production, le
                                      Transport, la Transformation et la Commercialisation des
                                      Hydrocarbures, Algeria's national oil development enterprise,
                                      founded in 1963;


"SONATRACH Condition"                 the Condition set out in paragraph 2(b) of Appendix II;


"SONATRACH's Confirmation"            a written confirmation, in response to the SONATRACH Letter,
                                      from SONATRACH that no right of pre-emption or right of
                                      approval with respect to an assignment under any of the PSCs
                                      applies to the Amalgamation, such confirmation having been
                                      provided without being subject to any condition or charge
                                      that in any respect diminishes the value of the Algerian
                                      Assets or that would increase the cost of the Amalgamation or
                                      the cost of exploitation of the Hydrocarbon Rights unless
                                      such condition or charge only diminishes such value or
                                      increases such cost by an amount which, taken together with
                                      any other condition, cost or charge imposed by an Algerian
                                      Authority in connection with the Amalgamation, is 1 per cent.
                                      or less of the Total Consideration;


"SONATRACH Letter"                    the letter duly submitted by Gulf Keystone to SONATRACH
                                      notifying SONATRACH of the Amalgamation in accordance with
                                      the notification clauses in the PSCs and seeking SONATRACH's
                                      support, in a form and manner approved in writing by each of
                                      RAK Petroleum and Gulf Keystone acting in good faith and in a
                                      timely manner;


"Superior Proposal"                   means a bona fide Competing Proposal which the Independent
                                      Gulf Keystone Directors consider, in their sole discretion,
                                      acting reasonably and in accordance with their fiduciary
                                      duties and after consultation with their legal and financial
                                      advisers, is ready to be formally announced immediately via a
                                      Regulatory Information Service and capable of being completed
                                      in accordance with its terms taking into account all
                                      financial, regulatory and other aspects of such proposal
                                      (including the ability of the proposing party to consummate
                                      the transaction contemplated by such proposal) and which, if
                                      consummated, in the opinion of the Independent Gulf Keystone
                                      Directors, in their sole discretion, acting reasonably and in
                                      accordance with their fiduciary duties, would be a superior
                                      offer in terms of financial value and terms and conditions to
                                      the Gulf Keystone Shareholders in comparison with the
                                      Amalgamation and which the Independent Gulf Keystone
                                      Directors are therefore minded to recommend to Gulf Keystone
                                      Shareholders;


"Total Consideration"                 £208,318,720.60;


"Tristone Capital"                    Tristone Capital Limited;


"UK Listing Authority" or "UKLA"      the Financial Services Authority acting in its capacity as
                                      competent authority for the purposes of Part VI of the FSMA;


"UK" or United Kingdom"               the United Kingdom of Great Britain and Northern Ireland; and


"USA" or "United States"              the United States of America, its territories and possession,
                                      any state of the United States of America, the District of
                                      Columbia and any other areas in its jurisdiction.





CURRENCY

Unless otherwise indicated, all references to "$", "US$", "dollars" or "U.S.
dollars" in this Announcement are references to United States dollars, "£" or "
pounds" refers to British pounds sterling and "AED" refers to United Arab
Emirates dirham.



TIMES

Unless otherwise indicated, all references to times are to Bermuda time.








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