YOUSEFIEH-1, BLOCK 26, SYRIA, OPERATIONS UPDATE
Immediate Release 5 November 2008
GULFSANDS PETROLEUM PLC
YOUSEFIEH-1, BLOCK 26, SYRIA.
OPERATIONS UPDATE
Gulfsands Petroleum plc ("Gulfsands", the "Group" or the "Company" -
AIM: GPX), the oil and gas production, exploration and development
company with activities in Syria, Iraq, and the U.S.A., is pleased to
provide the following update on the drilling of the Yousefieh-1 well
in Block 26, Syria, where Gulfsands is operator and an update on
production from the Khurbet East Field (the "Khurbet East Field" or
the "Field") and our Gulf of Mexico operations:
YOUSEFIEH 1 WELL, BLOCK 26, SYRIA:
The Yousefieh-1 well has encountered the target Cretaceous formation
at approximately 1940 metres vertical depth. The formation was
encountered at a slightly shallower depth than was projected prior to
the commencement of drilling.
Core sampling operations over this reservoir section were
successfully completed and together with oil recovered during
drilling operations, have indicated the presence of oil. The
recovered cores will be further evaluated and analysed by the
Company's consultants in Egypt.
Following completion of these activities the Company will resume
drilling to the original target depth of approximately 2300 meters.
The Company intends to run a complete logging programme on the well
once drilled to target depth and expects drilling and testing
operations will be completed within two weeks.
The Yousefieh-1 well is targeting Cretaceous aged reservoirs
identified within a structure located immediately adjacent to the
Khurbet East Field and was designed to evaluate the potential of a
newly identified play type within the Cretaceous reservoir system.
The well is located very close to existing infrastructure, with the
surface location of the well lying within 3 kilometers of the Khurbet
East Early Production Facility (EPF).
KHURBET EAST FIELD, BLOCK 26, SYRIA:
During October, the results of the pressure monitoring survey
conducted in September on the Khurbet East field have been further
evaluated. When taken in conjunction with the production performance
of the Field, these suggest that the Massive reservoir parameters may
be better than was estimated at the time of development approval last
February. This, combined with the negligible amount of produced
water in the Field thus far, indicates that the Field reserves may be
understated. A re-evaluation of the Khurbet East Field reserves will
be undertaken by RPS Group Plc as of year-end 2008, with results
expected in Q1 2009.
During the month of October, additional pressure monitoring work was
carried out to further assess the performance of the Field's
reservoir which involved the shutting in of each of the producing
wells. During uninterrupted production, the Field continued to
average in excess of 11,000 bopd from 5 wells (2 horizontal and 3
vertical producers) with only trace amounts of water.
To 31st October 2008 over 840,000 barrels of oil have been produced
from the Field. Gulfsands invoices for oil produced and delivered to
the oil processing facilities of the Syrian Petroleum Company on a
monthly basis and Gulfsands has received payment for all invoiced oil
on a timely basis following marketing of the oil by the Government of
Syria in accordance with the provisions of the contract for the
Exploration and Development and Production of Petroleum (the
"Contract") under which Gulfsands is operating in Syria. Oil sales
have been achieved at prices in line with historic pricing of Syrian
Souedieh blend which historically has averaged a discount of
approximately 11 per cent to the price of Brent crude.
GULF OF MEXICO, USA
Hurricane Ike inflicted considerable damage to oil and gas
infrastructure generally in the Gulf of Mexico in mid-September. The
majority of the damage that impacts Gulfsands' interests and
production in particular is related to third party pipeline
infrastructure, repairs to which are estimated to take a further one
to four months depending upon the individual facility and operator.
Gulfsands has been working with the operators of the properties in
which it holds interests in the Gulf of Mexico to assess the extent
of damage to those properties. The respective operators have now
provided estimates of the cost of repairs to those facilities of
which Gulfsands' share totals approximately US$2.5 million. The
Company's interests in the Gulf of Mexico are insured for events such
as the damage caused by hurricanes. However the first loss borne by
the Company under its insurance policy in respect of any single
windstorm is US$ 2.5 million and so any claim on the policy is not
expected to be significant.
Initially, as a result of Hurricane Gustav at the beginning of
September, production was partially shut in and then, as a result of
Hurricane Ike two weeks later, production was effectively fully shut
in. Current production (working interest ("WI") basis) is
approximately 175 boepd (136 boepd on a net revenue interest ("NRI")
basis) compared with the 1,740 boepd WI basis (1,333 boepd NRI basis)
average in H1 2008. Shut-in production is expected to come back on
stream progressively during November and December and is anticipated
to reach a level broadly in line with the first half average by
year-end. Accordingly our current estimates of hydrocarbon
production for 2008 as a whole suggest this is likely to average
approximately 1,400 boepd WI basis (1,080 boepd NRI basis).
Andrew West, Chairman of Gulfsands commented "The news from Syria in
relation to both the drilling of the Yousefieh-1 exploration well and
production from the Khurbet East Field is very pleasing indeed and we
are looking forward to seeing the results of testing of the
Yousefieh-1 well come through in the next few weeks. With production
from Syria having already grown to more than 80% of the Company's
overall production, we are obviously strongly positioned to handle
any short term interruption to production from our interests in the
Gulf of Mexico."
This release has been approved by Richard Malcolm, Chief Executive of
Gulfsands Petroleum Plc who has a Bachelor of Science degree in
Geology with 29 years of experience in petroleum exploration and
management. Mr. Malcolm has consented to the inclusion of the
technical information in this release in the form and context in
which it appears.
For more information please contact:
Gulfsands Petroleum (London) +44 (0)20 7434 6060
Andrew Rose, Chief Financial Officer
Kenneth Judge, Director of Corporate Development +44 (0)7733 001 002
Buchanan Communications Limited (London) +44 (0)20-7466-5000
Bobby Morse
Sam Botterill
RBC Capital Markets (London) +44 (0)20-7653 4804
Andrew K. Smith
Sarah Wharry
ABOUT GULFSANDS:
Gulfsands is listed on AIM.
Syria
Gulfsands owns a 50% working interest and is operator of Block 26 in
North East Syria. The Khurbet East oil field was discovered
following the completion of drilling of the KHE-1 well in June 2007
and commenced commercial production within 13 months of the
discovery. This field is currently producing in excess of 11,500
barrels of oil per day through the Khurbet East Early Production
Facility (EPF). 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. On 23 August 2007, the Company
initiated the first extension period of exploration on Block 26 for a
further period of three years.
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 48 offshore blocks comprising
approximately 168,000 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 2007 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 2007 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.
More information can be found on the Company's website
www.gulfsands.net.
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