|August 15, 2006|
Annual General Meeting
|Gulfsands Petroleum PLC is an oil and gas exploration, development and production company with activities in the USA, Syria and Iraq.|
The Following comments were made by Andrew West, Chairman of Gulfsands, at the Company's Annual General Meeting, held at 11.00am today:
"Gulfsands has made significant progress in what has been a very active and successful 2005 and 2006 to-date. Despite the impact on production last year, in what can only be described as an extreme hurricane season, it is particularly pleasing to note that the company produced strong operational and financial results.
Our Syrian operations have been particularly active and whilst the recent hostilities in the Middle East were a concern, this did not hinder our operations in any way and work on Block 26 has continued. We are also delighted to have increased our ownership of the Block to 50%, becoming operator in 2005. Over 1,000 km of 2D seismic was acquired primarily in 2005 and two contracts for the drilling of three wells on the block were signed. Whilst the results of the Souedieh North Well were disappointing, where we did not recover movable oil after initially encountering good shows, the geological and operational data that we have gained will certainly stand us in good stead for the drilling of the Tigris-1 well in September. Furthermore, the Company is in discussions for contracting another drilling rig for drilling two further wells during the first half of 2007. After the work that we have carried out in this region it is also particularly gratifying that Ryder Scott has recently completed a reserves valuation whereby they indicated the NPV of Gulfsands net probable reserves in Block 26 at $233 million.
Considerable progress has also been made in the Gulf of Mexico and the restructuring of Northstar Gulfsands LLC has now been completed leaving Gulfsands with direct ownership of approximately 52.6% of those properties previously owned by Northstar Gulfsands LLC. The Company participated in seven wells, five of which were successful discoveries, with two further development wells drilled in West Delta 64 since May 2005. It is anticipated that we will have four wells commencing production by September. After the difficulties of the fourth quarter of last year our production is now back to pre- hurricane disruption levels. As at 1 January 2006 the NPV of the Group's proved and probable reserves increased to $183 million, primarily resulting from the four successful exploration wells and numerous re-completions that have been carried out.
Work is continuing in Iraq on the Misan Gas Project and we are delighted to have increased our ownership to 100%. Discussions have progressed recently with the Iraqi Oil Ministry with a view to Gulfsands gaining a definitive contract by early 2007.
The Board believes that the outlook for the Company remains strong and our current activities in the Gulf of Mexico, Syria and Iraq provide significant potential for further development and expansion, creating further value for Gulfsands and its shareholders. Whilst we remain cautious in the onset of the current hurricane season, the Board remains confident that with the continuing high oil prices and with the expiration of our hedges in June that Gulfsands can look forward to another exciting year ahead."
Gulfsands is pleased to report that at the Annual General Meeting all the resolutions outlined in the notice of the meeting dated 9 June 2006 were duly passed.
Gulfsands Petroleum (Houston)
David DeCort, Chief Financial Officer
College Hill (London)
Teather & Greenwood (London)
James Maxwell (Corporate Finance)
Tanya Clarke (Specialist Sales)
NB: This release has been approved by the Company's geological staff who include Jason Oden, Gulfsands Exploration Manager who has a Bachelor of Science degree in Geophysics with 22 years of experience in petroleum exploration and management and is registered as a Professional Geophysicist, for the purpose of the Guidance Note for Mining, Oil and Gas Companies issued by the London Stock Exchange in respect of AIM companies, which outlines standards of disclosure for mineral projects.
Note to Editors
The Company owns interests in 64 offshore blocks comprising approximately 216,000 gross acres which includes 39 producing oil and gas fields offshore Texas and Louisiana with proved and probable recoverable reserves of 32.4 BCFGE, consisting of 19.8 BCFG and 2.1 MMBO as of 1 January 2006 with a net present value of $183 million. Additionally, there is a further 2.8 BCFGE of possible recoverable reserves with a net present value of $15.8 million.
In Syria, Gulfsands owns a 50% working interest in Block 26 and is the operator. The block covers 11,000 square kilometres and surrounds areas which currently produce over 100,000 barrels of oil per day from existing fields. In January 2006 the Company completed the acquisition of 1,155 kilometres of 2D seismic and anticipates drilling two wells during 2006. The first well, known as Souedieh North, commenced drilling in late April 2006 and was temporarily suspended in June for further analysis. The second well known as Tigris is scheduled to spud in September 2006 and has the potential to contain in excess of 500 MMBOE. Gulfsands has identified 31 total exploitation and exploration prospects within Block 26 with mean resources potential exceeding 1 billion barrels of recoverable oil. Ryder Scott completed a reserves study on the Tigris structure in 2006 and these reserves were classified as either oil or gas bearing until such time as the Company drills and tests the Tigris structure. As of 1 July 2006 Ryder Scott determined that the Probable Reserves net to Gulfsands after applying the terms of the Production Sharing Contract is 102 BCFG with a net present value discounted at 10% of $233 million. For primarily a natural gas accumulation, an additional 75 BCFG of possible reserves net to Gulfsands were estimated to have a 10% discounted net present value of $261 million. Furthermore, the Company completed its own economic evaluation on the Prospective Gas Resource and has estimated that Prospective Gas Resource net to Gulfsands is 577 BCFG with a net present value of approximately $1.06 billion. In summary total gas reserves potential net to Gulfsands among Probable and Possible Reserves for the natural gas case is 177 BCFG (30 MMBOE) with a net present value of $494 million and when combined with the Prospective Gas Resource it totals 754 BCFG (126 MMBOE) with a net present value of approximately $1.55 billion. For primarily an oil accumulation, Ryder Scott determined the Possible Reserves net to Gulfsands after applying the terms of the Production Sharing Contract are 19.4 million barrels of oil having a net present value discounted at 10% of $452 million. Furthermore, the Company completed its own economic evaluation on the Prospective Oil Resource and has estimated that Prospective Oil Resource net to Gulfsands is 50.9 MMBO with a net present value of approximately $1.51 billion. In summary total oil reserves potential net to Gulfsands among Possible and Prospective Oil Resource for the oil case is 70.3 MMBO with a net present value of approximately $1.96 billion.
Gulfsands signed a Memorandum of Understanding in January 2005 with the Ministry of Oil in Iraq for the Misan Gas Project in Southern Iraq and is currently negotiating the definitive contract for the project. The project will gather, process and transmit natural gas that is currently a waste by-product of oil production in the region and will end the environmentally damaging practice of gas flaring. Gulfsands has completed a feasibility study and expects to conduct further technical work and commercial discussions with the Iraq Oil Ministry.
Gulfsands operates onshore in the USA through its 83% owned subsidiary company Darcy Energy LLC. As of 1 January 2006, Darcy Energy owned interests in two oil and gas fields onshore Texas, USA (Emily Hawes and Barb Mag) with proved and probable recoverable reserves of 1.6 BCFGE, consisting of 1.2 BCFG and 58,000 barrels of oil with a net present value of $9.5 million. Additionally, there is a further 2.2 BCFGE of possible recoverable reserves with a net present value of $7.9 million.
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