Khurbet East Development Approval
Gulfsands Petroleum plc
Gulfsands
to develop Khurbet East Oil Discovery
Khurbet
East Field Reserves estimate completed for the Massive Reservoir
London, 5th
February, 2008: Gulfsands Petroleum plc
("Gulfsands", the "Group" or the "Company" - AIM: GPX), the oil and
gas production, exploration and development
company with activities in the U.S.A., Syria and Iraq is pleased to
announce
that the Company has received approval from the Syrian Ministry of
Oil and
Mineral Resources and the Syrian Petroleum Company ("SPC") for
commercial
development of the Khurbet East Field.
Development of the Cretaceous Massive Reservoir ("Massive Reservoir")
within the Field will commence immediately.
The Khurbet East Oil Field is within
Block 26 in North East Syria. Gulfsands is
the operator, on behalf of the Block 26 Contractor group
("Contractor"), and
owns a 50% working interest in Block 26 subject to the terms of the
Contract
for the Exploration and Development and Production of Petroleum for
Block 26
(the "Contract"). A map and details of the Khurbet East Oil Field are
available
on the Company's website: www.gulfsands.net.
The Company has also received the
first Reserves report for the Massive Reservoir in the Khurbet East
Field which
estimates gross life-of-field Proved and Probable ("2P") Reserves of
the
Massive Reservoir as 66 million barrels of oil and gross
life-of-field Proved,
Probable and Possible ("3P") Reserves as 143 million barrels of oil.
Gulfsands'
share of net attributable reserves is explained below in the section
of this
announcement headed "Khurbet East Reserves".
Reserves estimates for the Butmah
Formation and the Kurrachine Dolomite reservoirs discovered in the
KHE-1 well
will be made once further drilling and appraisal work has been
completed.
The Reserves report was prepared by
independent consultants, RPS Energy Ltd. ("RPS") of London.
The standard used by RPS in preparing its Reserves report was the
SPE/WPC/AAPG/SPEE Petroleum Resources Management System (SPE-PRMS).
The Khurbet East Oil Field was
discovered in the second quarter of 2007 with the KHE-1 well. Two
appraisal wells, KHE-2 and KHE-3 have
since been drilled in the Field. The
KHE-3 well flowed oil to surface on drill-stem test at
an average stabilized rate of 3,420 barrels of oil per day ("bopd").
Initial Development Plan
Gulfsands and its partners intend to
commence Field development immediately and establish early production
from the
shallow Massive Reservoir as soon as an Early Production Facility
("EPF") can
be installed at the site, and prior to any further appraisal of the
Triassic
discoveries within the Khurbet East Field.
The Company expects that an EPF
capable of producing some 10,000 bopd can be operational by the
fourth quarter
of 2008 and will be followed by the Full Field Development ("FFD")
facility
installation in 2009. Production through
the EPF will provide valuable information about reservoir performance
that will
be integrated into the design of the FFD facilities as well as
generate cash
flow. Engineering and construction of the EPF is scheduled to
commence this
quarter with drilling of the first development well expected to
commence
shortly.
Initial modeling of the Massive
Reservoir shows that horizontal wells should provide the most
efficient
production method in the Field.
Utilizing horizontal wells, the Company expects that the FFD facility
will be designed to produce some 30,000-40,000 bopd.
As a consequence of the substantial
SPC infrastructure already available in close proximity to the
Khurbet East
Field and the excellent working relationship the Company enjoys with
SPC which
has extended to invaluable assistance with the development of the
EPF, the
estimated costs for the EPF, which includes the drilling of three
wells and
construction of facilities, are not expected to exceed $10 million,
or a net $5
million to Gulfsands. The Company further
anticipates that the FFD costs, including all future development
wells within
the Massive Reservoir, can be met from the substantial cash flows
expected to
be generated by early production from the Field.
Khurbet East Reserves
Gulfsands commissioned RPS in London to provide an
independent Proved, Probable and Possible Reserves report of the
Massive
Reservoir in the Khurbet East Field as of 31 December 2007. RPS
estimated gross life-of-field 2P Reserves
of the Massive Reservoir as 66 million barrels of oil with gross
life-of-field 3P
Reserves totaling 143 million barrels of oil (see note 1 below).
These Reserves
are subject to the terms of the Contract in which Gulfsands owns a
50% working
interest.
The net barrels recoverable and
attributable to the Contractor and to Gulfsands (as to its 50% share)
have been
calculated by reference to the terms of the Contract which call for a
royalty
to be paid to the Government of the Syrian Arab Republic and an after
tax
profit share of the oil produced, to be provided to Gulfsands. The
Contractor is also entitled to recover
its costs through a cost recovery pooling of revenues from
production. The fiscal
terms of the Contract are referred to in the Company's corporate
presentation which
is available on the Company's website.
The Contractor's net attributable
(after royalties, taxes and government share) 2P Reserves are
estimated at 22.5
million barrels of oil. The Contractor's
3P Reserves have been estimated as 44.8 million barrels of oil.
Therefore, Gulfsands net attributable (after
royalties, taxes and government share) 2P Reserves have been
estimated as 11.3
million barrels of oil and net attributable (after royalties, taxes
and
government share) 3P Reserves have been estimated as 22.4 million
barrels of
oil.
The RPS Reserves report related only
to the Reserves estimates for the Massive Reservoir and a full
Reserve report
will be carried out on both the Triassic Butmah and Triassic
Kurrachine
Dolomite Formations upon appraisal of these formations which is
expected to
commence in the second half of 2008 following first production from
the Massive
Reservoir. Until the appraisal of the
Triassic reservoirs is completed and a development plan prepared,
these
formations have been classified as containing Contingent Resources.
Additionally,
the Reserves estimate for the Massive Reservoir will be updated
annually or
more frequently if appropriate.
Gulfsands' CEO, John Dorrier,
said:
"We are very pleased to have
received rapid approval for commercial development of the Khurbet
East Field
from the Syrian Government. With the
active cooperation and support of the Oil Ministry and SPC, the
Company and its
partners will proceed immediately with development activities and
seek to
achieve early production from the Field by the fourth quarter of
2008. We are
also very pleased to confirm a substantial reserves estimate for the
Khurbet
East Field at this early stage of Field appraisal following the
excellent
results obtained in the first three wells in the Field."
Notes:
(1)
RPS based its estimate of reserves on the resource
definitions jointly set out by the Society of Petroleum Engineers
(SPE), the
World Petroleum Congress (WPC), the American Association of Petroleum
Geologists (AAPG) and the Society of Petroleum Evaluation Engineers
(SPEE) in
April 2007 in a document entitled "Petroleum Resources Management
System"
(PRMS).
Reserves are those quantities
of petroleum anticipated to be commercially recoverable by
application of
development projects to known accumulations from a given date forward
under
defined conditions.
Proved Reserves are those
quantities of petroleum, which, by analysis of geoscience and
engineering data,
can be estimated with reasonable certainty to be commercially
recoverable, from
a given date forward, from known reservoirs and under current
economic
conditions, operating methods, and government regulations.
Probable Reserves are
those additional Reserves which analysis of geoscience and
engineering data indicate
are less likely to be recovered than Proved Reserves but more certain
to be
recovered than Possible Reserves.
Possible Reserves are
those additional Reserves which analysis of geoscience and
engineering indicate
are less likely to be recoverable than Probable Reserves.
This release has been approved by
Jason Oden, Gulfsands Exploration Manager, who has a Bachelor of
Science degree
in Geophysics with 23 years of experience in petroleum exploration
and
management and is registered as a Professional Geophysicist. This
release has also been approved by Rick
Bresler, Gulfsands Vice President of Project Engineering, who has a
Bachelor of
Science degree in Chemical Engineering with 29 years of experience in
petroleum
facilities design and construction. Mr.
Oden and Mr. Bresler have consented to the inclusion of the technical
information in this release in the form and context in which it
appears.
ABOUT GULFSANDS:
Syria
Gulfsands owns a 50% working
interest and is operator of Block 26 in North East Syria. Block 26
covers approximately 8,250 square
kilometres and encompasses existing fields which currently produce
over 100,000
barrels of oil per day. These fields are operated mainly by the Syria
Petroleum
Company. In the first half of 2007
Gulfsands announced an oil and gas discovery on Block 26 called
Khurbet
East. This discovery is currently under
appraisal with development to commence in 2008 with first production
targeted
for the fourth quarter of 2008. On 23
August 2007, the Company initiated the first extension period of
exploration on
Block 26 for a further period of three years.
The Company has also formed a strategic partnership with Cham Holding
for acquiring oil and gas projects in Syria
and Iraq.
Iraq
Gulfsands signed a Memorandum of
Understanding in January 2005 with the Ministry of Oil in Iraq for
the Maysan Gas Project in Southern Iraq and following completion of a
feasibility
study on the project is negotiating details of definitive contract
for this
regionally important development. The
project will gather, process and transmit natural gas
that is currently a waste by-product of oil production and as a
result of the
present practice of gas flaring, contributes to significant
environmental
damage in the region.
Gulf of Mexico, USA
The Company owns interests in 54
offshore blocks comprising approximately 193,000 gross acres which
includes
numerous producing oil and gas fields offshore Texas and Louisiana
with proved
and probable recoverable reserves net to Gulfsands at 31 December
2006 of 41.5
BCFGE (6.9 MMBOE), consisting of 27.3 BCFG and 2.36 MMBO.
Onshore
USA
Gulfsands owns interests in two oil
and gas fields onshore Texas, USA (98.5% working interest in Emily
Hawes Field
and 37.5% working interest in Barb Mag Field) with proved and
probable
recoverable reserves net to Gulfsands at 31 December 2006 of 3.1
BCFGE (0.5
MMBOE), consisting of 2.8 BCFG and 57,000 barrels of oil.
Certain statements included herein
constitute "forward-looking statements" within the meaning of
applicable securities legislation. These forward-looking statements
are
based on certain assumptions made by Gulfsands and as such are not a
guarantee of future performance. Actual results could differ
materially from
those expressed or implied in such forward-looking statements due to
factors
such as general economic and market conditions, increased costs of
production or a decline in oil and gas prices. Gulfsands is under
no obligation to update or revise any forward-looking statements,
whether as a
result of new information, future events or otherwise, except as
required by
applicable laws.
For
further information, please refer to the Company's website
www.gulfsands.net or contact:
Gulfsands Petroleum (Houston) + 1-713-626-9564
John
Dorrier, Chief Executive Officer
David
DeCort, Chief Financial Officer
Gulfsands Petroleum (London) +44 (0)20-7182-4016
Kenneth +44 (0)7733-001-002
Judge, Director of Corporate Development
Gulfsands Petroleum (Syria) +963-9-8888-7788
Mahdi
Sajjad, President
Buchanan Communications Limited (London) +44 (0)20-7466-5000
Bobby
Morse
Ben
Willey
Landsbanki Securities (UK) Limited (London) +44 (0)20-7426-9000
Jeff
Keating
Tom
Hulme
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