Gulfsands Petroleum Regulatory News (GPX)

13 Jun 2006 07:01

Gulfsands Petroleum PLC13 June 2006 13 June 2006 Gulfsands Petroleum PLC("Gulfsands" or "the Company") Improved Production in the Gulf of Mexico Oil Hedges to Expire Two Successful Development Wells in Gulf of Mexico Upcoming Gulf of Mexico Activity Gulfsands Petroleum PLC (symbol GPX), the AIM listed oil and gas exploration,development and production company with activities in the USA, Syria and Iraq,is pleased to announce that production in the Gulf of Mexico has returned tolevels achieved prior to the hurricanes of 2005, and that natural gas has beendiscovered in two new development wells in the West Delta area. Gulf of Mexico Production Update Gulfsands' oil and gas production in the Gulf of Mexico continues to increaseand has reached pre-hurricane levels of approximately 2,850 working interestbarrels of oil equivalent per day (boepd). The improvement in daily productionresults from recommencement of oil production from the Vermillion 332 and 315oil fields after repair of a lateral pipeline in the area that was damaged byHurricane Rita. Further increase comes from completion and connection of twoexploration wells in the Eugene Island area drilled in 2005. Combined new andrestored incremental production from the Vermillion and Eugene Island areatotals some 1,270 boepd. Although daily production is back to pre-storm levelsthere remains shut-in production that the Company expects to have on stream inthe coming months to further increase daily production in the Gulf of Mexico. Oil and Gas Hedges All hedges on Gulfsands' oil production will expire at the end of June 2006 withsome hedges on natural gas production remaining in place through May 2007. Thenatural gas hedges represent approximately 12% of overall oil and gas productionon an oil equivalent basis, when the oil hedges expire at the end of June andapproximately 5% by year-end 2006. West Delta 64 Development Wells Gulfsands has successfully participated in the drilling of two development wellsin West Delta 64 following two exploration discoveries in West Delta 64 in 2005. The Company expects all 4 wells to commence production by September 2006. TheCompany's working interest in the West Delta 64 project is 6.575%. Other Gulf of Mexico Activity The next significant operation in the Gulf of Mexico is a recompletion of a wellin East Cameron 66 which is currently producing approximately 0.100 MMCFGD netto Gulfsands. The Company owns a 48% working interest in this well and asuccessful recompletion of this well would result in a significant increase tocurrent gas production. This recompletion is scheduled for August of this year. Additionally, the Company anticipates drilling two new exploration wells in theEugene Island 58 area during the fourth quarter of 2006 in which the Company hasa 25.64% working interest. Gulfsands' CEO, John Dorrier, said: "We are pleased to have production back at levels of last summer before thedisruptions caused by hurricanes Katrina and Rita. The higher production levelscombined with the expiration of the oil hedge position will have a positiveimpact on the performance of the Company in 2006. " Enquiries:Gulfsands Petroleum (Houston) 001-713-626-9564David DeCort, Chief Financial Officer College Hill (London) 020-7457-2020Nick ElwesPaddy Blewer Teather & Greenwood (London) 020-7426-9000James Maxwell (Corporate Finance)Tanya Clarke (Specialist Sales) NB: This release has been approved by the Company's geological staff who includeJason Oden, Gulfsands Exploration Manager who has a Bachelor of Science degreein Geophysics with 22 years of experience in petroleum exploration andmanagement and is registered as a Professional Geophysicist, for the purpose ofthe Guidance Note for Mining, Oil and Gas Companies issued by the London StockExchange in respect of AIM companies, which outline standards of disclosure formineral projects. Note to Editors • Gulf of Mexico, USA The Company owns interests in 64 offshore blocks comprising approximately216,000 gross acres which includes 39 producing oil and gas fields offshoreTexas 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 presentvalue of $183 million. Additionally, there is a further 2.8 BCFGE of possiblerecoverable reserves with a net present value of $15.8 million. • Syria 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 currentlyproduce over 100,000 barrels of oil per day from existing fields. In January2006 the Company completed the acquisition of 1,155 kilometers of 2D seismic andanticipates drilling two wells during 2006. The first well, known as SouediehNorth, commenced drilling in late April 2006 and was temporarily suspended inJune for further analysis. The second well known as Tigris is scheduled to spudin August of 2006 and has the potential to contain in excess of 500 MMBOE.Gulfsands has identified 31 total exploitation and exploration prospects withinBlock 26 with mean resources potential exceeding 1 billion barrels ofrecoverable oil. An independent reserves report was issued in January 2006 on the Tigrisstructure. The reserves were classified as either oil or gas bearing until suchtime as the Company drills and tests the Tigris structure. The reserve reportconcluded that there are 442 BCFG of probable recoverable reserves in the Tigrisstructure. Additionally, the report classified the possible reserves as eithernatural gas or oil. The gas case reflected an additional 442 BCFG in possiblerecoverable reserves and an additional 3447 BCFG as prospective resource. Theoil case reflects 104 MMBO and 64 BCFG in possible recoverable reserves and afurther 408 MMBO and 245 BCFG as prospective resource. In summary, the naturalgas case equates to total recoverable reserves potential among probablereserves, possible reserves and prospective resource as 4330 BCFG (722 MMBOE),while the oil case equates to 512 MMBO and 308 BCFG (combined 563 MMBOE). • Iraq Gulfsands signed a Memorandum of Understanding in January 2005 with the Ministryof Oil in Iraq for the Misan Gas Project in Southern Iraq and is currentlynegotiating the definitive contract for the project. The project will gather,process and transmit natural gas that is currently a waste by-product of oilproduction in the region and will end the environmentally damaging practice ofgas flaring. Gulfsands has completed a feasibility study and expects to conductfurther technical work and commercial discussions with the Iraq Oil Ministry. • Onshore USA Gulfsands operates onshore in the USA through its 83% owned subsidiary companyDarcy Energy LLC. As of 1 January 2006, Darcy Energy owned interests in two oiland gas fields onshore Texas, USA (Emily Hawes and Barb Mag) with proved andprobable recoverable reserves of 1.6 BCFGE, consisting of 1.2 BCFG and 58,000barrels of oil with a net present value of $9.5 million. Additionally, there isa further 2.2 BCFGE of possible recoverable reserves with a net present value of$7.9 million. This information is provided by RNS The company news service from the London Stock Exchange