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, provide the following update on oil production in Syria.
As previously referred to in the Company’s news release of 6 October, 2011, Gulfsands Petroleum was instructed by the Syrian Oil Ministry to reduce Block 26 production in line with reduced availability of crude storage capacity within the country. In addition, routine refinery maintenance operations are currently underway within Syria, with the result that the Company has been instructed by the Syrian authorities for the time being to continue to confine Block 26 gross daily production to approximately 6,000 barrels of oil per day (“bopd”). It is expected that this reduced level of production will continue until the end of October at the earliest and therefore average Block 26 gross production for the month is anticipated to be approximately 6,000 bopd.
The Company and its partner in the Block 26 joint venture, Sinochem, have received payment in full for all production through the end of July. Receipt of payment for August production (average 24,112 bopd) would routinely have been expected in the course of the past week but at the date hereof remains outstanding.
In the context of the inevitable short term disruption occasioned by the EU imposition of sanctions on Syrian oil exports, the Board anticipated some corresponding dislocation to the historical pattern of production and payment. The Company’s strong cash position means that it is well-placed to manage the consequential short term diminution in revenue.
Further updates will be provided as information becomes available.
This release has been approved by Richard Malcolm, Chief Executive of Gulfsands Petroleum Plc who has a Bachelor of Science degree in Geology with 30 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.
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. The Khurbet East oil field was discovered in June 2007 and commenced commercial production within 13 months of the discovery. This field has been producing at an average gross production rate of approximately 21,500 barrels of oil per day through early production facilities during August 2011. A second field discovery, the Yousefieh field, was brought on-stream in April 2010, and has been producing at approximately 2,600 barrels of oil per day. Current restrictions on Block 26 oil production which came into force during September 2011 are discussed elsewhere in this release. 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.
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 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. Drilling operations were recently completed at the Lambouka-1 well 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 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’ work commitment for the Chorbane permit included the drilling of one exploration well, the Sidi Dhaher- 1 well, which was concluded recently with the announcement on 3rd October, 2011 of a potential oil discovery. Gulfsands was responsible for paying 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 indentified 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.
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. The Company is actively engaged in discussions with respect to financing and potential equity partners. Gulfsands has no reserves in Iraq.
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 (2P) working interest reserves at 31 December 2010 of 2.1 mmboe (figures adjusted for the disposal of non-core properties in December 2010 and September 2011).
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.