Drilling Operations Update at Sidi Dhaher-1, Chorbane Permit, Onshore Tunisia

 

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, wish to provide the following update on the Company’s drilling activity in Tunisia.

The Sidi Dhaher-1 well has been drilled to a total depth of 2011 metres measured depth (m MD). A potential oil column has been identified in the well based on formation pressure data, and oil along with drilling mud and mud filtrate has been recovered from the reservoir via wireline sampling methods. After running casing to preserve the well-bore, the well will be suspended and a production testing operation will be undertaken after completion of programme design and mobilisation of the required equipment to the site. In the event that testing operations indicate a commercial oil discovery, Gulfsands has the option to become operator of the development.

Sidi Dhaher-1 Exploration

ADX Energy, the operator of the Chorbane licence onshore Tunisia, has confirmed that the Sidi Dhaher-1 well has been drilled to a total depth of 2011 m MD. Wire-line logs, as well as formation pressures and reservoir fluids, have been acquired over the open-hole interval from 999 to 2011 m MD in order to evaluate the quality and hydrocarbon content of several potential reservoirs encountered within this bore-hole section.

A potential hydrocarbon column has been identified based on formation pressure data and oil, along with drilling mud filtrate, being recovered from the reservoir via wireline sampling methods. After running casing to preserve well-bore integrity, the well will be suspended pending future production testing operations.

Formation pressure measurements indicated the presence of a possible oil column commencing at a depth of approximately 1156 m MD and within a Late Cretaceous aged reservoir. Subsequent wireline fluid samples recovered yielded a mixture of drilling mud filtrate and moveable oil. The mud filtrate recovery is consistent with fluid invasion into a permeable reservoir during the lengthy process of drilling the well to total depth.

A quantitative assessment of the parameters for this reservoir, including net thickness, porosity and oil quality, will be available when the full evaluation of the logs and samples is completed. The recovery to surface of oil from this reservoir is considered a positive result for the Sidi Dhaher prospect, as well as for further exploration within the Chorbane Permit.

In order to prepare the well for future production testing operations, 9 5/8″ casing will be run from surface to a depth of 1295 m MD, and the well will be suspended. Upon completion of the suspension operations, the current drilling rig will be released from the location. Production testing operations will be conducted following completion of the programme design and mobilisation of the appropriate equipment.

The Sidi Dhaher-1 well is located within the 2,428 km² Chorbane Exploration Permit onshore central Tunisia, near the port city of Sfax. It is surrounded by several producing oil fields and extensive oil and gas infrastructure.

Gulfsands is earning a 40% interest in the Chorbane permit by meeting 80% of the well costs for the Sidi Dhaher-1 well which are capped at US$5 million and thereafter meeting its pro rata (40%) share of any additional costs beyond US$5 million. In the event of a commercial success with the Sidi Dhaher-1 well, Gulfsands will be entitled to become the operator of the Chorbane permit.

This release has been approved by Jason Oden, Vice President of Gulfsands Petroleum Plc who has a Bachelor of Science degree in Geophysics with 25 years of experience in petroleum exploration and management. Mr. Oden 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
Richard Malcolm, Chief Executive Officer Andrew Rose, Chief Financial Officer Kenneth Judge, Director: Corporate Development & Communications
Buchanan (London)	+44 (0)20 7466 5000
Bobby Morse Ben Romney
RBC Capital Markets (London)	+44 (0)20 7653 4000
Josh Critchley Tim Chapman Matthew Coakes

ABOUT GULFSANDS:

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

Syria
Gulfsands owns a 50% working interest and is operator of Block 26 in North East Syria. The Khurbet East oil field was discovered in June 2007 and commenced commercial production within 13 months of the discovery. A second field discovery, the Yousefieh field, was brought on-stream in April 2010. Prior to the recent introduction of European Union sanctions restricting the import of Syria sourced oil into the European Union which has resulted in some required variability of production rates from all producing fields in Syria, these fields were producing at a combined average gross production rate of approximately 24,000 barrels of oil per day through early production facilities. 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. The current exploration license expires in August 2012. Gulfsands’ working interest 2P reserves in Syria at 31 December 2010 were 53.6 mmbbls.

Tunisia
Gulfsands has acquired or 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 the Chorbane permit remains subject to the completion of the Company’s farm-in obligations and the Company’s interest in each of these permits remains subject to final 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. Drilling operations were recently completed at the Lambouka-1 well in late 2010 where gas was encountered in the Abiod Formation. However, as a result of down-hole problems, no fluid samples or gas flow were established. The well was suspended with the intention of re-entering at a later date and drilling and testing the reservoir in a sidetrack hole, up-dip of the existing discovery.

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’ forward work commitment for the Chorbane permit includes the drilling of one exploration well for which Gulfsands will pay 80% of the first $5 million in drilling costs, and 40% of the drilling costs in excess of $5 million, so as to earn a 40% interest in the permit.

A number of prospects and leads have been identified within the permit, the most prospective being a large tilted horst block (“Sidi Daher”) where the operator has identified multiple potential targets estimated to hold recoverable mean un-risked prospective resources of 175 billion cubic feet of gas (“bcfg”) and 44 million barrels of oil from Tertiary and Cretaceous aged reservoirs. The Sidi Daher exploration well is anticipated to be drilled during the third quarter of 2011.

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, 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.

Gulf of Mexico, USA
The Company owns interests in 30 leases offshore Texas and Louisiana, which include 20 producing oil and gas fields with proved and probable working interest reserves at 31 December 2010 of 3.2 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.