Corporate Update

  1. Home
  2. /
  3. News
  4. /
  5. News Releases
  6. /
  7. Corporate Update

Financial Position
Forward Strategy
Resignation of Chief Financial Officer

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, Tunisia, Italy and the USA, wishes to provide the following corporate update.



As previously reported, the Company and its 50% working interest partner in Block 26, Syria, Sinochem (together referred to as the “Contractor” under the Production Sharing Contract “PSC”)), declared force majeure in respect of Block 26 production operations on 11 December 2011, in response to the tightening of EU sanctions (the “Sanctions”) against Syria.
Since that date, the Contractor has had no involvement in any production from Block 26.

General Petroleum Company (“GPC”), the Syrian state-owned oil company which is effectively the Contractor’s joint venture partner under the PSC has continued since 11 December to produce oil from Block 26 at the rate of approximately 4,000 barrels per day. Contractor has received no payment in respect of such production.

As of the date hereof, inclusive of arrears of payments owed in respect of production up to 30 November the Contractor is owed approximately US$50 million of which half is owed to Gulfsands. This figure will continue to increase modestly at current levels of production.

Legal advice received by the Board is to the effect that the declaration of force majeure is entirely valid and that both the Company’s and the Contractor’s positions are protected under the terms of the PSC, a contract governed by both English and Syrian Laws. The conduct of all parties to date has been consistent with a mutual reservation of all rights pursuant to the PSC, pending a resolution of the present difficult situation.

Block 26 Exploration

Following successful testing of the KE102 Appraisal Well, the results of which were announced on 31 January 2012, the Board has decided to cease exploration activity within Block 26 for the duration of the Sanctions.

While the Sanctions do not explicitly preclude further exploration, the Board considers such cessation to be consistent with the intent of the Sanctions and a matter of financial and operational prudence in response to increasing difficulties in procuring access to essential technical services and supplies required for these activities. Accordingly, appropriate notices have been served under the Company’s drilling contracts.

It is disappointing to be obliged to cease exploration following a recent run of considerable success and with substantial exploration potential still untapped. The current Exploration Period for the Block 26 PSC expires in August this year and because the PSC’s minimum work obligations have long since been fulfilled, it is uncertain whether the remainder of the Exploration Period has also been suspended by the Company’s declaration of force majeure. However, the Board intends to retain a full exploration capability in country and remains hopeful that, when the present difficult situation is resolved, such capability combined with the previous track record of proven exploration success will be persuasive with the Syrian authorities in extending the Exploration Period to account for the period lost due to the Sanctions.

Local Staff and Creditors

The Company’s local staff in Syria is a highly valuable resource and has been in large part responsible for the success enjoyed in Syria to date. As previously stated and as reiterated to GPC and the Syrian Oil Ministry, it is the Company’s present intention, on behalf of Contractor, to retain substantially all local staff throughout this difficult period, to continue to pay them and to provide as best possible for their security.

In the same spirit, all bona fide trade creditors in respect of obligations predating the cessation of production activities are being paid.

The Board is convinced that this level of commitment, combined with the maintenance of a visible office and presence in Damascus, is not only necessary to the fulfilment of the Company’s legal, moral and humanitarian obligations but is also the best possible insurance that the Company will be well-positioned to recommence activities when the present difficult situation in due course resolves itself.

Financial Position

The Group at present has unrestricted cash balances in excess of US$120 million, substantially all of which are held in diversified short term money market funds in the UK, and has no debts. Gulfsands’ share of outstanding accounts payable in Syria in respect of obligations arising prior to the date of declaration of force majeure amounts to approximately $5 million while the “burn rate” inherent in continuing to pay our Syrian staff and maintain a local presence, absent any exploration activity, is estimated at approximately at US$500,000 per month (to the Company’s 50% interest.)

The Company is thus well-placed to endure a long period of continued uncertainty in its Syrian operations.

Forward Strategy

The Board believes that the situation in Syria will be resolved in due course and that the Company will be able to resume profitable operation. All efforts are being made and will continue to be made to that end. It is clearly not possible to estimate when such a resolution will occur.

In the interim, the Company enjoys the good fortune of possessing significant financial resources, highly competent human and technical resources (including the local staff in Syria whose members are keen to contribute to non-Syrian projects wherever possible and appropriate) and the credibility of having built a successful exploration and production operation. The Board and management are aware of numerous opportunities, especially in the present difficult capital markets climate, to acquire both exploration acreage and prospective production at an attractive cost of entry. Several such opportunities are being actively evaluated. In all cases the emphasis is upon cash conservation, the ability to fast-track early production and the opportunity to maximise the Company’s explicit operational strengths and experience. The overriding objective is to build, as quickly as practicable, a viable non-Syrian leg to the business, within the capacity of the Company’s present and prospective financial resources to sustain.

Resignation of Chief Financial Officer

Andrew Rose, the Company’s Chief Financial Officer, has informed the Board of his intention to leave the Company to pursue other interests. It has therefore, been agreed that his resignation will become effective from 30 April 2012.

Mr Rose has committed to ensure an orderly transition prior to his departure, including supervising all work necessary to sign off the Group’s financial statements for the year ended 31 December, 2011.

While it is with regret that we acknowledge Mr Rose’s decision to leave the Company, his departure is entirely amicable on both sides. Over the past three and a half years, Mr Rose has done an outstanding job of building a financial reporting and control function which will stand the Company in good stead for the future and which certainly provides a sound platform for the diversification already mentioned. Mr Rose now wishes to take on new challenges and the Board wish him every success in whatever role he next assumes.

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

For more information please contact:

Gulfsands Petroleum (London)
Richard Malcolm, Chief Executive Officer
Kenneth Judge, Director –¬†Corporate Development & Communications
+44 (0)20 7434 6060

Buchanan (London)
Bobby Morse
Ben Romney
+44 (0)20 7466 5000

RBC Capital Markets (London)
Josh Critchley
Tim Chapman
Matthew Coakes
+44 (0)20 7653 4000


Gulfsands is listed on the AIM market of the London Stock Exchange.

Gulfsands owns a 50% working interest and is operator of Block 26 in North East Syria. Block 26 covers approximately 5,414 km2 and encompasses existing fields which currently produce over 100,000 barrels of oil per day, and are operated mainly by the Syrian Petroleum Company. Gulfsands’ working interest 2P reserves in Syria at 31 December 2010 were 53.6 mmbbls.

The Khurbet East oil field was discovered in June 2007 and commenced commercial production in July 2008. A second field, the Yousefieh field, was discovered in November 2008 and brought on-stream in April 2010. Prior to the introduction of European Union sanctions that have curtailed the export of Syria’s oil to the European Union, these fields were producing at a combined gross production rate of approximately 24,000 barrels of oil per day. The impact of European Union sanctions has resulted in the Yousefieh field being temporarily shut in and production from the Khurbet East field being reduced to approximately 4,000 barrels of oil per day.

On 11 December 2011, the Company issued a notice of “force majeure” in respect of oil production activities on these fields and as a consequence, Gulfsands will be unable to receive payment for oil produced from either field until such time as the European Union’s sanctions would permit it to do so. Further, while these sanctions do not directly prevent the continuation of exploration activities on Block 26, the Company’s drilling programme has been suspended due to difficulties in sourcing the required materials and services that would enable those activities to continue. It is unclear whether the exploration programme will re-commence prior to the expiry of the current exploration license for Block 26 in August 2012.

Gulfsands is acquiring working interest positions in two exploration permits in Tunisia (Chorbane and Kerkouane Permits) and one exploration permit in Southern Italy (G.R15.PU) from ADX Energy Ltd the operator of all three permits. The Company’s interest in these permits remains subject to the completion of the Company’s farm-in obligations and various approvals from the governments of Tunisia and Italy.

Kerkouane Permit – Offshore Tunisia
G.R15.PU Permit (Pantelleria Permit) – Offshore Italy

G.R15.PU, is located offshore the island of Pantelleria southwest of Sicily in Italian waters and the Kerkouane Permit is located offshore northeast Tunisia. The two permits are contiguous and comprise a total area of approximately 4,500 km2. The operator has identified multiple leads and targets on these permits.

Gulfsands has completed its’ earn-in commitments with respect to the Kerkouane and Pantelleria Permits with the drilling of the Lambouka-1 well. Gulfsands has earned a 30% working interest in both permits by paying approximately 35% of the cost the Lambouka-1 well and reimbursing the operator for a portion of various pre-drill costs that include a recently completed 3D seismic programme.

Chorbane Permit – Onshore Tunisia

The Chorbane permit is located in central Tunisia and covers an area of 2,428 km2. The permit is surrounded by several producing oil fields and extensive oil & gas infrastructure. Gulfsands hold a 40% interest in the permit.

A number of prospects and leads have been indentified within the permit, the most prospective being a large tilted horst block (“Sidi Daher”) where the operator has recently drilled, logged and completed the Sidi Daher-1 well as an oil discovery. A well test programme is being drawn up for early in 2012 to assess the commercial potential of this discovery.

Gulfsands signed a Memorandum of Understanding in January 2005 with the Ministry of Oil in Iraq for the Maysan Gas Project in Southern Iraq, following completion of a feasibility study on the project, and is negotiating details of a 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. Gulfsands has no reserves in Iraq.

Gulfsands has also been pre-qualified by Iraq’s Oil Ministry to participate in the Iraq’s 4th Bid Round which will offer qualified bidders the opportunity to acquire up to 12 exploration licences in southern, western and central Iraq with bids anticipated to be required by the end of May, 2012.

Gulf of Mexico, USA
The Company owns interests in 14 leases offshore Texas and Louisiana, which include 9 producing oil and gas fields with proved and probable working interest reserves at 31 December 2010 of 2.4 mmboe (figures adjusted for the disposal of non-core properties in December 2010).

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.

Stay Up to Date

Connect with us on LinkedIn and Twitter