Syria Operations UpdateMay 12th, 2011

Oil Discovery in KHE-101 Triassic Aged Reservoir

Gross Oil Production from Khurbet East and Yousefieh Fields Remains Steady at 20,700 bopd 

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., is pleased to provide this update on operations in Syria.

Operations have recently been completed on the Khurbet East 101 (“KHE-101”) appraisal well. The well has been suspended as a potential future oil production well following a drill-stem test (“DST”) that achieved a potentially commercial stabilized flow rate of 447 barrels of oil per day (“bopd”) of 34 deg API oil from the Triassic aged Butmah Formation reservoir.

KHE-101 commenced drilling operations on 19 January 2011 utilising the Crosco E-501 rig. The well was planned to be drilled to a total depth of 3200 metres in order to provide information on reservoir continuity as well as volume and type of hydrocarbons within two specific targets, the Butmah and Kurrachine Dolomite Triassic aged reservoirs. These reservoirs had been found to be hydrocarbon bearing in the original Khurbet East field discovery well (“KHE-1”) in which the Kurrachine Dolomite reservoir flowed oil to surface on DST whilst the Butmah reservoir was found to be gas bearing. The KHE-101 well was drilled in a location that is structurally down dip and approximately 1.3 km south east of KHE-1 in order to evaluate the possibility of an oil column below the gas accumulation found within the Butmah Formation at KHE-1.

The well encountered the Triassic Butmah Formation at 2866 metres Measured Depth (“m MD”), 2456 metres True Vertical Depth sub-sea (“m TVD ss”), and encountered a gross vertical oil column of 69 metres with a net to gross ratio of approximately 35% and average porosity of 21% based on preliminary interpreted wireline logs. Pressure data obtained via wireline sampling from this oil column in the KHE-101 well-bore indicates that the reservoir is in communication with the gas cap, indicating reservoir continuity between the two well locations.

An open-hole DST was performed over a 32 metre gross interval between 2866 and 2898m MD. A stable flow rate of 447 bopd of 34 deg API oil was recorded on a 48/64″ choke over an 11 hour period with average water content of 0.3% by volume, an average gas-oil ratio of 1839 cubic feet per barrel, at an average flowing wellhead pressure of 185 pounds per square inch. Subsequent interpretation of down hole gauge pressure data suggests that the reservoir has suffered significant formation damage through the drilling and evaluation operations, and would be capable of a flow rate of over 1000 bopd were all of the damage to be removed via future acid stimulation of the reservoir interval.

Preliminary, probabilistic in-house analysis suggests that the Khurbet East Triassic Butmah reservoir contains a Mean gross recoverable oil resource in the order of 15 million stock tank barrels (“MMstb”). The well has been suspended as a potential future producer and Government approval will now be sought to develop this reservoir within the Khurbet East field area.

Following completion of testing operations on the Butmah reservoir, the well was drilled ahead to the Kurrachine Dolomite, which was encountered at 3138m MD (2728m TVD ss). Upon drilling ahead, strong oil shows were detected and coring operations were undertaken from 3138m to 3193m MD (2806m to 2783m TVD ss ). Following coring operations, the well was drilled to a total depth of 3216m MD (2806m TVD ss). Based on wireline log interpretation, a net oil column of 6 metres was assessed for the Kurrachine Dolomite reservoir.

An open-hole DST was conducted over the interval 3138-3213m MD within the Kurrachine Dolomite reservoir, but only minor amounts of oil, gas and formation water were recovered. The lack of flow is believed to be due to relatively few natural fractures being present within the Kurrachine Dolomite reservoir section, compared to those found in this interval at the KHE-1 location.

The Crosco E-501 rig will now be moved to the Yousefieh 7 (“Yous-7”) well location on the northern flank of the Yousefieh field. This well is located approximately 400 metres north of the horizontal production well Yous-4H which is currently producing 1330 bopd and is the most prolific well on the field. The Yous-7 vertical well will provide information on reservoir extent and quality of the undrilled northern flank in anticipation that it will be tied-back for production.

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 Abu Ghazal are ongoing and 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 Khurbet East during April 2011 was approximately 18,000 bopd, which is at or near the maximum possible based on current surface facility capacity. Daily average production at the Yousefieh Field during April 2011 was approximately 2,700 bopd.

We expect 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 encounter an oil column within the Butmah reservoir at Khurbet East. This reservoir appears to be of higher quality than the underlying Kurrachine Dolomite and the oil gravity is lighter than that currently produced from the overlying Massive Formation. The associated gas will aid in providing reservoir energy during production and may eventually be utilized for facility power requirements.

Production from the Khurbet East and Yousefieh fields continues to meet or exceed expectations, with total cumulative production since July 2008 of over 15 million barrels of oil.”

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.

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. This field is producing at an average gross production rate of approximately 18,000 barrels of oil per day through an early production facility. A second field discovery, the Yousefieh field, was brought on-stream in April 2010, and is currently producing approximately 2,700 barrels of oil per day. 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 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’ forward work commitment for the Chorbane permit includes the drilling of one exploration well in the first quarter of 2011 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 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.

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. 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 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.