Gulfsands Makes Oil Discovery in Syria

- Gulfsands Makes Oil Discovery in Syria

Friday, August 26, 2011
Gulfsands Petroleum plc

Gulfsands provided this update on operations in Syria.

Block 26 Drilling Operations

Yousefieh East Exploration Well (Yous-6)

The Yousefieh East exploration well ("Yous-6") has been drilled using the Crosco-E401 rig to test an undrilled structural high in Cretaceous age carbonates located approximately 3 kilometers to the east of the Yousefieh field discovery well (note, this well was erroneously referred to as Yousefieh-8 in a Gulfsands Petroleum plc News Release dated July 11th 2011). The Yous-6 well was deviated at an angle of up to 36 degrees to the vertical in order to avoid obstructions to drilling operations on the surface directly above the target location.

The Yous-6 well encountered oil bearing Cretaceous Massive Formation reservoir at a depth of 2045 meters Measured Depth Below Rotary Table ("m MDBRT") or 1560 meters True Vertical Depth Sub-Sea ("m TVDSS"), 28 meters deep to prognosis. The well penetrated the hydrocarbon bearing Massive reservoir section at an angle of approximately 29 degrees to the vertical. Two twelve meter core sections, parts of which were oil stained, were recovered from the wellbore over the interval 2055-2079m MDBRT (1569-1590m TVDSS). Interpretation of wireline logs indicates a gross porous reservoir interval of 18.1 meters was encountered overlying a non-porous interval, and having a net oil column of 12.8 meters, average porosity of 18% and average oil saturation of 69%.

Pressure data obtained via wireline logs indicates that the oil bearing reservoir is slightly depleted versus initial reservoir conditions, indicating that the Yousefieh East structure is likely to represent an eastern flank extension of the Yousefieh field which is currently on production at approximately 2,600 barrels of oil per day ("bopd"). Reservoir permeability in the Yous-6 net reservoir section is interpreted to be of similar quality to that encountered in the main producing areas of the Yousefieh field.

The Yous-6 well was production tested and produced at an average oil flow rate of approximately 250 bopd of 20 degree API oil for 4 hours on 2 inch choke under nitrogen assisted lift conditions with no water production. The well will be tested further following acidization of the reservoir in a rig-less operation.

Due to a thinner oil column encountered in this well versus other Yousefieh wells, the Yous-6 well will require the installation of permanent artificial lift facilities in order to flow continuously. The Yous-6 well is located within the Yousefieh field Development License Area and can be quickly tied back and produced into the existing Yousefieh field production facilities once artificial lift facilities are secured. Procurement of the relevant equipment is in progress.

The impact of Yous-6 on Yousefieh reserves will be evaluated as part of the year-end reserves review.

Safa-1 Exploration Well

Operations have been completed on the Safa-1 exploration well which was drilled using the Crosco M-501 rig. This well targeted a fault-bound dip closed structure of Cretaceous aged reservoir on trend and approximately 7 kilometers north of the Khurbet East Field.

The Safa-1 well is interpreted to have encountered the Cretaceous Shiranish Formation at 1937m MDBRT (1448m TVDSS) and the Cretaceous Massive Formation at 1953m MDBRT (1464m TVDSS). Three consecutive core sections were cut between 1942m and 1975m MDBRT (1453m and 1486m TVDSS), with a total recovery of 31.4 meters of core, sections of which were stained with viscous oil. Evaluation of wireline logs indicates a net reservoir interval of 9.9 meters with an average porosity of 13% and an average oil saturation of 74%.

Well testing operations were conducted in open hole over sections of the gross reservoir column in three stages, however only formation water of low salinity plus traces of viscous oil were recovered to surface, even after an acidification of the net reservoir interval was performed.

The Safa-1 exploration well therefore has been plugged and abandoned as a non-commercial heavy oil discovery.

Forward Drilling Program

Gulfsands drilling operations in Syria Block 26, using the Crosco E-401 and M-501 drilling rigs, will continue as planned with the drilling of one development and one exploration well.

The Khurbet East-20 well is planned as a delineation well to further evaluate the northern flank of the Khurbet East field. The Wardieh-1 exploration well will target a new exploration play, a combined structural/ stratigraphic trap located on the southern flank of the Souedieh Field at the Cretaceous "Massive" level.

Block 26 Oil Production

Production operations on Block 26 continue without interruption. Combined gross oil production from the Khurbet East and Yousefieh fields has averaged in excess of 24,000 bopd to date during the month of August following commissioning of an additional Khurbet East sub-station facility on August 6, 2011.

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Gulfsands: Fully Compliant With Syrian Sanctions

- Gulfsands: Fully Compliant With Syrian Sanctions

Wednesday, August 24, 2011
Gulfsands Petroleum plc

Gulfsands provided the following information on the Company's activities in Syria.

In light of the recent sanctions against Syria, and following certain comments in the press concerning the relationship between the Group, Mr. Rami Makhlouf and corporate entities in which Mr Makhlouf and other members of his family are involved (collectively the "Makhlouf Interests"), Gulfsands wishes to provide the following clarifications.

US and EU Sanctions

Gulfsands notes that the US and EU have imposed a number of sanctions against Syria and various named individuals and organizations. Gulfsands is fully compliant with all applicable sanctions and is committed to continuing compliance with any sanctions that may apply from time to time.

Background to the Group's involvement in Syria

The Group first entered Syria in 2000, as the junior partner of Ocean Energy in a collaborative venture which was subsequently awarded a license to explore and develop Block 26 ("the Block 26 Joint Venture"). This followed a public tender in 2002 in which several other international oil companies participated, with the resultant Production Sharing Contract ("PSC") eventually being signed in May 2003. The PSC was ratified by the People's Assembly and signed into Syrian law via presidential decree. The public tender for Block 26 was the first such tender in Syria, all previous oil and gas licenses having been awarded by direct negotiation.

Following the takeover of Ocean Energy by Devon Energy in 2003, the latter elected to withdraw from the Middle East in 2005, as a result of which Gulfsands was able to increase its interest to 50% and assume operatorship of Block 26. The remaining 50% interest was assumed by a Russian company which was subsequently purchased by Emerald Energy, which in turn was taken over by Sinochem in 2009.

The Group's Syrian interests are held in a subsidiary of Gulfsands Petroleum PLC, which is a UK incorporated, British managed and UK domiciled public company. Gulfsands Petroleum PLC has not changed its place of incorporation or domicile since incorporation, and recent press reports that might suggest otherwise are incorrect.

Relationships with the Makhlouf Interests.

Since the time of its first entry into Syria, the Group has had constructive commercial relationships with various Makhlouf Interests. All such relationships have been conducted on arms-length commercial terms, have been properly documented and have been disclosed as required by pertinent laws and regulations, including the AIM Rules of The London Stock Exchange ("the AIM Rules.")

The Group has fulfilled all contractual obligations pertaining to such commercial relationships and has behaved at all times with absolute propriety.

Following the imposition by the UK in May 2011 of sanctions against certain individuals and organizations in Syria, including Mr. Rami Makhlouf and members of his family, the Group has suspended all payments to the Makhlouf Interests under the commercial agreements noted below, and has suspended the voting, dividend and transfer rights pertaining to the shares in Gulfsands held by Al Mashrek.

The commercial relationships between the Group and the Makhlouf Interests are as follows:

Al Mashrek Shareholding

Al Mashrek Global Invest ("Al Mashrek"), a company owned beneficially by Makhlouf Interests, owns 5.75% of the Company's issued share capital. These shares were acquired in August 2007, at a premium to the then prevailing market price, in a placing that was disclosed at the time in accordance with the AIM Rules. Al Mashrek is not represented on the Board of the Company, has no influence over or involvement in the management of the Group's affairs and has at no time sought such influence or involvement.

Damascus Office Lease

The Group rents office premises in Damascus from a company owned beneficially by Makhlouf Interests. The lease is on terms negotiated at arms-length and considered normal for a commercial lease of this kind in Syria. The rent payable has been approved for cost recovery by Syria's General Petroleum Corporation, pursuant to the Block 26 Production Sharing Agreement.

Cham Holdings, a company in which Al Mashrek is reported to be a material shareholder (alongside other prominent Syrian businessmen and companies also rents space in the same building). Its lease is completely independent of the Group's lease, as are the operations of the two organizations.

Ramak Services Agreement

Ramak, a company owned beneficially by Makhlouf Interests, has since 2000 provided various support and administrative services to the Block 26 Joint Venture(s). Ramak was engaged by the original Ocean Energy (80%) and Gulfsands (20%) joint venture to provide advice and to assist in identifying, evaluating and pursuing E & P opportunities in Syria, including in connection with the successful public tender for Block 26.

These services, which are all in the ordinary course of business for an E & P venture operating in a foreign jurisdiction, are documented in a service contract with the original joint venture which is governed by English law and has been amended as appropriate from time to time. The fees payable in respect of these services, which today aggregate less than $250,000 per annum, have been borne by successive joint ventures pro rata to the participants' respective participating interests from time to time and are today the responsibility of the current 50/50 joint venture between the Company and Sinochem.

In addition, Ramak has since the commencement of the original agreement in 2000, received milestone payments totaling US$900,000 from these joint ventures. Gulfsands has been responsible for US$270,000 of these payments, reflecting the Company's, pro rata interest in these joint ventures at various points in time. Further, modest milestone payments may be earned by Ramak in the event various Block 26 production targets are reached. None of those production levels have been reached to date and only one such production level involving the potential payment of a US$500,000 milestone payment is anticipated to be reached.

The services agreement entered into with Ramak and documented at that time under the oversight of Ocean Energy's general counsel (as 80% participating interest holder and senior partner in the collaborative venture), provided Ramak with an entitlement to receive a 2.5% Net Profit Interest on Block 26 production attributable to the joint venture and Ramak began to receive payment in respect of this Net Profit Interest during 2010. The cost of the Net Profit Interest has been borne in equal proportions by the Group and Sinochem.

Lapsed 2007 Proposal for Joint Venture with Cham Holdings

In October 2007, as announced at the time pursuant to the AIM Rules, the Group proposed to establish a strategic joint venture in partnership with Cham Holdings. The purpose of the proposed joint venture was to pursue the acquisition of several high value energy projects in Syria and Iraq. The joint venture did not in fact proceed and no projects were acquired.

There are no other commercial relationships between the Group and Makhlouf Interests and no additional commercial relationships are currently in contemplation.

Block 26 Operations

To date the company's operations in Block 26 continue unaffected by events in Syria. Further, we have no information beyond that which has appeared in the press as would enable speculation as to the possible course of future events in Syria.

Andrew West, Chairman, said, "The Board of Gulfsands Petroleum recognizes the importance of the Company's interests in Syria and is satisfied that the Group is in compliance with the current US, EU and UK sanctions regime and that our commercial relationships with various Makhlouf Interests have at all times been conducted with propriety and in accordance with pertinent laws and regulations, including the disclosure obligations enshrined in the AIM Rules."

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Gulfsands Flows Rate of 5516 bopd at Khurbet East Well

- Gulfsands Flows Rate of 5516 bopd at Khurbet East Well

Monday, August 08, 2011
Gulfsands Petroleum plc

Gulfsands provided an update on operations in Syria.

Flow Testing of Khurbet East 19H ("KHE-19H")

The Khurbet East 19H ("KHE-19H") well has achieved a flow rate of 5516 barrels of oil per day ("bopd") on production test with an oil gravity of approximately 26 degrees API, similar in quality to the oil produced in the central portion of the Khurbet East Field. This production rate was obtained during a 2 hour main flow period under a 48/64th inch choke size and with an average wellhead pressure of 132 psi and with no associated production of formation water. The choke size was subsequently reduced to 32/64th inch, after which the well was flowed for a further 3 hours at an average rate of 3828 bopd, at an average wellhead pressure of 210 psi and with no production of water. The test was then terminated due to all available oil storage tank capacity being filled. The 67 meter horizontal productive section of this well is located in a sidetrack drilled in a south-southeasterly direction from the original KHE-19 vertical hole.

The oil flow rate of 5516 bopd from KHE-19H is the highest yet measured from any well within the Khurbet East field. This well has demonstrated that excellent reservoir quality exists from the central portion of the field all the way to the northern limit of the field.

Commissioning of Khurbet East Sub-station Production Facility

The oil processing capacity for the Khurbet East Field has been increased by approximately 3000 bopd after the construction and commissioning of a new oil processing sub-station ("EFP 2") with a design capacity of approximately 3000 bopd and located approximately 1.8 kilometers west of the Khurbet East Early Production Facility ("EPF"). At this new facility, gas is separated from the produced oil and the stabilized crude is pumped into storage tanks located within the EPF complex followed by subsequent delivery into the Khurbet East export pipeline. Well KHE-19H has been tied into the new sub-station and is estimated to be producing at a rate of more than 2900 bopd on a restricted choke.

As a result of these operational and construction activities, Block 26 oil production facility capacity is now more than 24,000 bopd. The reconciled production rate achieved at the expanded facilities as of 6th August, 2011 was 24,054 bopd, comfortably achieving and exceeding the Company's previously announced year-end 2011 production target of 24,000 bopd.

Block 26 Drilling Operations

Gulfsands drilling operations in Syria Block 26, using the Crosco E-401 and E-501 drilling rigs, are continuing as planned on the Yousefieh East and Safa exploration prospects. The results of these exploration drilling operations will be the subject of a future news release.

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Gulfsands Discovers Oil at Syrian Wells

- Gulfsands Discovers Oil at Syrian Wells

Monday, July 11, 2011
Gulfsands Petroleum plc

Gulfsands Petroleum provided an update on its operations in Syria.

Khurbet East 19 and Khurbet East 19 Sidetrack

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

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

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

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

Yousefieh 7

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

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

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

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

Yousefieh East Exploration Well (Yous-8)

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

Safa Exploration Well

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

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

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

Block 26 Oil Production

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

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

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

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

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Gulfsands Encounters Hydrocarbon Columns in Syria

- Gulfsands Encounters Hydrocarbon Columns in Syria

Thursday, June 02, 2011
Gulfsands Petroleum plc

Gulfsands announced that drilling and testing operations have recently been completed on the Abu Ghazal-1 ("AGZ-1") exploration well in Syria. Potentially significant hydrocarbon columns were encountered within the Triassic aged Butmah and Kurrachine formations. However, a series of drill-stem tests ("DST") undertaken on the well resulted in the recovery of sub-commercial quantities of heavy/viscous oil. The well has now been suspended pending detailed analysis of well results.

The AGZ-1 well commenced drilling operations on January 23, 2011, utilizing the Crosco E-401 drilling rig and was drilled to a depth of 3850 metres Measured Depth ("m MD"). The well was planned to evaluate potential reservoirs within the Cretaceous aged Massive and Triassic aged Butmah and Kurrachine Dolomite formations within a large, fault bound structure identified and mapped on 3D seismic data.

The well encountered the Massive Formation at a depth of approximately 2572m MD, but in spite of elevated gas readings observed while drilling, the section drilled at this location was found to contain relatively poor reservoir properties and drill cuttings indicated only traces of oxidized oil and asphalt.

The Triassic Butmah Formation was encountered at 3287m MD with elevated gas readings and traces of oil in the mud system. Interpretation of wireline logs indicated a significant oil column; however no formation fluids were recovered when testing. The lack of any fluid flow from the formation is currently interpreted to be due to low permeability within the reservoir.

The well encountered the top of the Triassic Kurrachine formations at 3456m MD. Substantially elevated gas readings were encountered while drilling through this section and live oil was recovered in coring operations. Interpretation of wireline logs indicated a significant oil column, with subsequent testing resulting in sub-commercial volumes of very heavy to heavy oil (approximately 12 degree API) being recovered along with highly saline formation water.

The Crosco E-401 rig will now be moved to the Khurbet East No. 19 ("KHE-19") well location on the northwest flank of the Khurbet East field. This well is planned as a further step-out from the successful KHE-18 delineation in the northwest, which encountered high quality karst reservoir in the Massive formation. The KHE-19 well will evaluate an area estimated to contain oil-in-place of approximately 30 MMstb and if the well is successful there will exist an opportunity for possible (3P) Khurbet East reserves to be matured to probable and proven reserves categories at year end 2011.

Gulfsands drilling operations in Syria Block 26, using the Crosco E-401 and E-501 drilling rigs, are continuing as planned and have continued without interruption during recent months.

Ric Malcolm, Gulfsands CEO, said, "While we are pleased to have encountered significant oil columns within the Abu Ghazal well, the production test results have been disappointing. We will now analyze all of the data prior to determining the extent of any further operations at this location. The rig will now move on to drilling the KHE-19 well as we continue with our very busy 2011 program of drilling exploration prospects and development wells."

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