Interim Results

Gulf Keystone Petroleum Ld
25 September 2006

                        GULF KEYSTONE PETROLEUM LIMITED

             INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2006


Gulf Keystone Petroleum Limited ("Gulf Keystone" or the "Company"), an
independent oil & gas exploration company operating in the Republic of Algeria,
today announces its interim results for the period ending 30 June 2006.


Highlights

   • BG joins as strategic partner to the HBH licence

   • Adoption of a significantly accelerated exploration and appraisal
     programme for HBH

   • HBH seismic programme to commence in October

   • Block 126a licence extension granted for testing of GRJ-2 oil discovery

   • Significant progress towards granting of GKN/GKS production licence

   • Upstream initiatives accelerated by successful £13.4 million placing


Todd Kozel, CEO of Gulf Keystone said:

"The first half of 2006 witnessed a transformation in the Company's prospects.
The introduction of BG as a strategic partner, both for HBH and for our pursuit
of new gas in Algeria, together with the refinancing of the Company and the
building of a first rate management team have placed the Company in a strong
position going forward. I look forward, with great optimism to the next phase of
the Company's growth"

Enquiries

Gulf Keystone Petroleum: 020 7514 1400
Todd Kozel, CEO
Bill Guest, President
Jonathon Cooper, FD

Citigate Dewe Rogerson: 020 7638 9571
Media enquiries: Martin Jackson / George Cazenove
Analyst enquiries: Kate Delahunty / Nina Soon

Or visit: www.gulfkeystone.com
Gulf Keystone Petroleum Limited


Chairman's Statement


2006 has, so far, proven to be a pivotal period in Gulf Keystone Petroleum's
development. The recent introduction of BG Group plc ("BG") as a partner in our
key Hassi Ba Hamou licence has been an important step in the execution of the
Company's strategy. In addition, the Company has made significant progress
towards securing a Production Licence for its Block 126a oil discoveries and we
have completed the building of a highly experienced and capable management team.
Finally, we completed a successful funding which has provided us with the
resources to immediately accelerate various upstream initiatives.


Hassi Ba Hamou Concession


The 18,380 sq km onshore concession was awarded to Gulf Keystone in April 2005
and includes the HBH gas discovery and a number of significant leads and
prospects. On the basis of a subsequent full technical and economic review, Gulf
Keystone and SONATRACH identified a significant potential gas resource base
within this large licence area and in 2006 RPS Energy Limited ("RPS"), as part
of a wider independent assessment of Gulf Keystone's resource base, carried out
a review of the concession. RPS estimated that the HBH field contains
recoverable gas reserves of 995 bcf with a Low Estimate of 406 bcf and a High
Estimate of 1690 bcf (these are classified as "Contingent Resources", pending
commercialisation of gas). RPS also confirmed a minimum of four undrilled leads
and prospects containing a further potential 1,935 bcf in place (Mean
unrisked case) with a Low Estimate of 500 bcf and a High Estimate of 3,758 bcf
(1).


As a consequence, it was concluded by the Company that a substantially greater
exploration and appraisal work programme would be needed to optimally evaluate
the licence area. Consistent with the Company's portfolio management strategy,
BG has therefore joined Gulf Keystone and SONATRACH as a strategic partner in
the licence to support this expanded and accelerated work programme and to lead
the rapid commercialisation of gas from this area.


Under the farm-out agreement, BG will acquire 49% of Gulf Keystone's interest in
HBH and assume the role of operator. Following completion of this transaction,
which is conditional upon final ratification by the relevant Algerian
authorities, Gulf Keystone will hold a 38.25% interest, BG a 36.75% interest and
Sonatrach a 25% interest in HBH.


Gulf Keystone and BG have additionally agreed to study the potential for further
co-operation with respect to gas exploration, appraisal and development projects
within Algeria


This important transaction with BG, the terms of which are required to be kept
confidential, not only allows the Company to radically accelerate the
exploration and appraisal of this highly prospective area, it also places the
Company in a strong position to develop further its upstream business. Of equal
significance, bringing this transaction to a successful conclusion will reflect
the continuing strong and collaborative relationship that the Company enjoys
with its Algerian partners.


The work programme that the HBH partnership now plan to carry out during the
remaining two years of the first exploration period includes the acquisition of
2,000kms of 2D seismic data, 500 sq km of 3D seismic data, and the drilling of
at least six exploration and appraisal wells. A seismic contract has already
been concluded with Global Geophysical Services Limited and the extensive
programme of acquisition is expected to begin during October. The tendering
process for the provision of drilling services from mid 2007 onwards is well
advanced.


Northern Blocks (Constantine Basin)


Significant progress has been made towards the granting of a Production Licence
for the GKN and GKS oil discoveries located in block 126a. All documentation
relating to the future plans for these two discoveries has now been fully
reviewed by and discussed with our partner SONATRACH and their formal
recommendation relating to the grant of a Production Licence is now with the
Minister of Energy and Mines.


It has been agreed that GKS and GKN will now be the subject of a single
Production Licence. The GKN field is already linked by pipeline to the Ras Toumb
field and the GKS field discovery well, GKS-2, will be tied into the GKN
pipeline as soon as is practicable following the necessary pipeline capacity
upgrades. One additional development well will be drilled on each of the
discoveries as part of the first phase of development. Subsequent phases of
development will depend on production and other information gained during this
initial phase.


An oil discovery was made on the GRJ structure in 2005. Data from the discovery
well, GRJ-2, indicated 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, in relation to the GRJ structure, has now been granted
until the end of December 2006 and a testing programme has been prepared. In
addition, the Company has now acquired an option to access a drilling rig for
the operation.


The full technical review of the Bottena Perimeter, Block 129 in the south of
the Constantine Basin adjacent to Block 126a, has now been completed and plans
are in place to move forward the evaluation of that block in 2007. With regard
to the Ben Guecha blocks, 108 / 128b, the Company looks forward to early
ratification of these licences by the Algerian authorities.


Financial Results


The Company reports a loss before tax of $8.1 million for the period compared to
$1.1 million for the same period last year. This loss is after exploration costs
of $1.8 million and general and administrative costs of $6.8 million. These
exploration costs relate to relinquished acreage. The increased G&A costs over
the comparable period reflect a full period of costs for the UK subsidiary, the
London office and increased personnel costs.


Capital expenditure on exploration and evaluation activities was $0.9 million.


At 30 June 2006 the Company had $39 million in cash of which $34.7 million was
pledged against the issue of bank guarantees to SONATRACH. The Company has $5
million of short term debt. Post period end the Company raised £13.4million
(approximately $25 million) before expenses via an issue of 21,600,000 common
shares.


Outlook


The completion of the transaction with BG will place the Company in a strong
position to accelerate the exploration and appraisal of its existing portfolio,
and to begin to expand its upstream business.


However, securing a Production Licence for GKN and GKS and achieving early first
oil production remains an important priority, not only to secure income but
also, of equal importance, to demonstrate the Company's continuing ability to
crystallise value from its Algerian portfolio.


The Company has now completed the building of its management team with three
recent key appointments; Jon Cooper and Iain Patrick joining in March as,
respectively, Finance Director of Gulf Keystone Petroleum Limited and Director
of Commercial and Legal Affairs for Gulf Keystone Petroleum (UK) Limited, and
David Mackertich joining us in August as Executive Vice President of Exploration
and Technical. With this significantly strengthened team, the Company is well
placed to not only expand its position in Algeria but also to consider a limited
number of selected upstream opportunities elsewhere in the Middle East and North
Africa where the Company considers that it has a potential competitive edge at
the point of access of such opportunities.


Roger Parsons
Non-executive Chairman
25 September 2006


(1)The methodology employed for this present evaluation, and the classification
of resources set out below, is in line with the guidelines contained in the
"Guidance Note for Mining, Oil and Gas companies" issued by AIM in March 2006.


The information contained in this announcement has been reviewed by Francis
Boundy, Valuations Director of RPS Energy Limited, who has 15 years of
experience as a Petroleum Engineer.



Consolidated Income Statement
                                       6 months ended  6 months ended 12 months ended
                                         30 June 2006    30 June 2005     31 December
                                                                                 2005
                                                             Restated
                                                 $000            $000            $000
                                Note
Continuing Operations
Revenue                                             -               -               -
Impairment provision                                -               -        (35,145)
Exploration Costs                             (1,847)               -               -
General and administration                    (6,808)         (2,043)         (7,325)
expenses
Share option expense                            (370)           (189)           (394)
Loss from operations                          (9,025)         (2,232)        (42,864)

Interest receivable                              892           1,161           2,213
Loss before tax                               (8,133)         (1,071)        (40,651)
Tax expense                       3             (120)              -            (135)
Loss after tax for the period                 (8,253)         (1,071)        (40,786)

Loss per share (cents)            4
 Basic                                         (3.25)          (0.42)         (16.08)
 Diluted                                       (3.25)          (0.42)         (16.08)





Consolidated Balance Sheet
                              30 June 2006    30 June 2005     31 December
                                                                      2005
                                                  Restated
                                      $000            $000            $000

Non-current assets
Property, plant and                27,066             764          25,594
equipment
Intangible assets                  29,494          48,895          28,651
                                   56,560          49,659          54,245

Current assets
Inventories                         5,091           3,208           3,472
Trade and other                     2,772           1,076           3,386
receivables
Cash and cash equivalents          39,208          79,322          51,439
                                   47,071          83,606          58,297
Total assets                      103,631         133,265         112,542

Current liabilities
Trade and other payables          (19,215)         (3,648)        (20,291)
Tax liabilities                      (120)              -            (135)
Provisions                         (2,050)              -          (2,050)
Total liabilities                 (21,385)         (3,648)        (22,476)

Net assets                         82,246         129,617          90,066

Equity
Share capital                       1,638           1,638           1,638
Share premium account             135,349         135,349         135,349
Share option reserve                  872             297             502
Exchange translation                    6             (16)            (57)
reserve
Accumulated losses                (55,619)         (7,651)        (47,366)
Total equity                       82,246         129,617          90,066





Consolidated Statement of Changes in Shareholders' Equity

                                        Share   Share    Share  Accumulated   Cumulative    Total
                                      capital premium   option      deficit  translation   equity
                                                       reserve                   reserve
                                        $'000   $'000    $'000        $'000        $'000    $'000

Balance at 1 January 2005              1,626  135,349      120       (6,580)           -  130,515
Loss for the period as previously          -        -        -       (2,910)           -   (2,910)
reported
Prior year adjustment                      -        -        -        1,839            -    1,839
-as restated                               -        -        -       (1,071)           -   (1,071)

Employee share option expense              -        -      189            -            -      189
Currency translation adjustments           -        -        -            -          (16)     (16)
Warrants subscribed                       12        -      (12)           -            -        -
Balance at 30 June 2005                1,638  135,349      297       (7,651)         (16) 129,617

Loss for the period                        -        -        -      (39,715)           -  (39,715)
Employee share option expense              -        -      205            -            -      205

Currency translation adjustments           -        -        -            -          (41)     (41)
Balance at 31 December 2005            1,638  135,349      502      (47,366)         (57)  90,066

Loss for the period                        -        -        -       (8,253)           -   (8,253)
Employee share option expense              -        -      370            -            -      370
Currency translation adjustments           -        -        -            -           63       63
Balance at 30 June 2006                1,638  135,349      872      (55,619)           6   82,246





Consolidated Cash Flow Statement
                                  6 months ended   6 months ended      12 months
                                                                           ended
                                    30 June 2006     30 June 2005    31 December
                                                                            2005
                                                         Restated
                                            $000             $000           $000

Cash flows from operating activities
Loss from operations                     (9,025)          (2,232)       (42,864)
Adjustments for:                              -
Depreciation of property, plant &           110               54            142
equipment
Amortisation of intangibles                  24                -             27
Impairment of intangibles                     -                -         35,145
Share based payment expense                 370              189            394
Increase in inventories                  (1,619)            (723)          (987)
Increase in provision                         -                -          2,050
Decrease/(increase) in receivables          615             (651)        (2,961)
(Decrease)/increase in payables          (6,220)            (420)         6,922
Cash used in operations                 (15,745)          (3,783)        (2,132)

Operating Activities
Cash used in operations                 (15,745)          (3,783)        (2,132)
Interest received                           892            1,161          2,213
Net cash (used)/generated in operating  (14,853)          (2,622)            81
activities

Investing activities
Purchase of intangible assets              (867)          (7,214)       (37,663)
Purchase of property, plant and          (1,583)            (708)          (804)
equipment
Net cash used in investing activities    (2,450)          (7,922)       (38,467)

Financing activities
Short term loan                           5,009                -              -
Net cash generated in financing           5,009                -              -
activities

Net decrease in cash and cash           (12,294)         (10,544)       (38,386)
equivalents
Cash and cash equivalents at beginning   51,439           89,882         89,882
of year
Effect of foreign exchange rate              63              (16)           (57)
changes

Cash and cash equivalents at end of      39,208           79,322         51,439
period being bank balances and cash



Notes to the interim financial information



1. General Information


Gulf Keystone Petroleum Limited (the "Company") was incorporated and registered
in Bermuda on 29 october 2001 as an exempted company limited by shares. The
common shares of the Company were listed on the Alternative Investment Market
("AIM") on 8 September 2004. The Company maintains its registered office in
Bermuda.


This consolidated interim financial information of Gulf Keystone Petroleum
Limited for the six months ended 30 June 2006, comprise the Company and its
subsidiary (together the "Group"). The interim report was authorised for issue
by the directors on 25 September 2005. The financial information is un-audited
but has been reviewed by Baker Tilly and their report is set out below.


The figures for the year ended 31 December 2005 have been extracted from the
annual accounts which contained an unqualified audit opinion.


2. Principal Accounting Policies of the Group


This interim financial information has been prepared on the basis of existing
accounting policies and practices consistent with those adopted in the accounts
for the year ended 31 December 2005 and are also consistent with those which
will be adopted in the 2006 annual financial statements


In 2003 and 2004, not all attributable administrative and overhead costs were
capitalised according to the Group's policy. The financial statements to June
2005 have been restated to correct this. The impact of this has been to reduce
administrative expenses and loss before tax by $1,839,000 and increase
intangible asset by a corresponding amount. The decrease in loss per share is
0.73 cents. The corresponding figures in respect of the full year to 31 December
2005 were included in the annual accounts.


3. Taxation


Under current laws in Bermuda and Algeria, the Group is not required to pay
taxes on either income or capital gains. The tax charge relates to the profit of
the United Kingdom subsidiary.


4. Loss per share


Loss per share has been calculated in accordance with IAS 33 Earnings per share,
by dividing the loss attributable to shareholders by the weighted average number
of shares in issue during the financial period. The calculation of basic and
diluted loss per share is based on the following losses and number of shares:

                                  6 months to        6 months to       12 months to
                                 30 June 2006       30 June 2005   31 December 2005
                                                        Restated

Loss for the financial period           8,253              1,071             40,786
($'000)

Weighted average number of        253,732,140        253,388,732        253,677,757
shares

Basic loss per share (cents)             3.25               0.42              16.08



5. Subsequent events


Gulf Keystone Petroleum Limited has announced a major expansion of its
exploration and appraisal activities, in partnership with SONATRACH, within
Algeria and the introduction of BG North Sea Holdings Limited ("BG"), a
subsidiary of BG Group Plc, as strategic partner in the Hassi Ba Hamou Perimeter
exploration, appraisal and exploitation contract ("HBH").


Gulf Keystone and its partner SONATRACH, the Algerian state oil company, have
signed an agreement with BG under which BG will be introduced as a partner in
the HBH Perimeter, onshore Algeria. In addition, agreement has been reached by
all parties on a significant expansion of the planned exploration and appraisal
activities on HBH.


Under the agreement, BG will acquire 49% of Gulf Keystone's interest in HBH and
assume the role of Operator. Following completion of this transaction, which is
conditional upon the final approval of the relevant Algerian authorities
("Completion"), Gulf Keystone will hold a 38.25% interest, BG a 36.75% interest
and SONATRACH a 25% interest in HBH.


On August 17th, Gulf Keystone announced the successful completion of a Placing
for a total of 21,600,000 new common shares of US$0.01 each (the 'Placing
Shares'), representing approximately 8.5 percent of Gulf Keystone's existing
issued share capital, by Hoare Govett Limited and Tristone Capital Limited with
institutions at a price of 62 pence per share, raising approximately £13.4
million before expenses.


The Placing Shares were issued credited as fully paid and rank pari passu in all
respects with the existing common shares of Gulf Keystone, including the right
to receive all dividends and other distributions declared, made or paid after
the date of issue of the Placing Shares. The placing shares were admitted to
trading on AIM on 22 August 2006.


6. Bank guarantee


As part of the contractual terms of the Algerian contracts, the Group has given
bank guarantees to SONATRACH of $34.7 million. These are cash backed guarantees
which effectively reduce the free cash available that the Group has on its
balance sheet. That is $6 million for the Bottena ("129 Contract") work
programme, $15.6 million for the Ben Guecha ("108/128b Contract") work programme
and $13.1 million for the Hassi Be Hamou (Blocks 317b, 322b3, 347b, 348 and
349b) work programme. These guarantees are against the exploration and
evaluation programmes stipulated in the contracts and are reduced as the work
programmes are completed.


7. Further information


An electronic version of the Interim Statement has been sent to the London Stock
Exchange and posted to the Group's website: www.gulfkeystone.com. Hard copies of
the Interim Statement are available c/o Gulf Keystone Petroleum (UK) Limited, 16
Berkeley Street, London 1WJ 8DZ.



          INDEPENDENT REVIEW REPORT TO GULF KEYSTONE PETROLEUM LIMITED


Introduction

We have been instructed by the group to review the financial information for the
six months ended 30 June 2006 which comprises Consolidated Income Statement,
Consolidated Balance Sheet, Consolidated Statement of Changes In Shareholders'
Equity and Consolidated Cashflow Statement and the related notes. We have read
the other information contained in the interim statement and considered whether
it contains any apparent misstatements or material inconsistencies with the
financial information.

This report, including the conclusion, has been prepared for and only for the
group for the purpose of their interim statement and for no other purpose. We do
not, therefore in producing this report, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent in writing.

Directors' responsibilities

The interim statement, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the AIM Market
Rules which require that the accounting policies and presentation applied to the
interim figures must be consistent with those adopted in the group's annual
accounts.

Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom, as if that
Bulletin applied. A review consists principally of making enquiries of group
management and applying analytical procedures to the financial information and
underlying financial data and based thereon, assessing whether the disclosed
accounting policies have been consistently applied unless otherwise disclosed. A
review excludes audit procedures such as tests of controls and verification of
assets, liabilities and transactions. It is substantially less in scope than an
audit and therefore provides a lower level of assurance. Accordingly, we do not
express an audit opinion on the financial information.

Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2006


Baker Tilly
Chartered Accountants
2 Bloomsbury Street
London WC1B 3ST

25 September 2006



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