Gulfsands Discovers Oil at Syrian Wells

Gulfsands Petroleum provided an update on its operations in Syria.

Khurbet East 19 and Khurbet East 19 Sidetrack

Rig-based operations have recently concluded on the Khurbet East 19 ("KHE-19") and Khurbet East 19 Sidetrack ("KHE-19 ST1") utilizing the Crosco E-401 rig. The KHE-19 ST1 well has been completed as a potential future oil production well and awaits a flow testing trial which will be conducted shortly via a rig-less operation. The productive section of this well is located in a horizontal side-track drilled in a south-southeasterly direction from the original KHE-19 vertical hole, which is interpreted to have encountered the primary reservoir section outside of the limits of the Khurbet East Field.

The KHE-19 vertical well encountered the Massive Formation at 1967 meters Measured Depth ("m MD") or 1561 meters True Vertical Depth sub-sea ("m TVD ss"). The well encountered a gross vertical oil column of approximately 4 meters, however formation pressure data obtained via wireline sampling in the KHE-19 well-bore indicates that the Massive section in this well is not in communication with the Khurbet East field. A flow test was not undertaken on the vertical section and the well was plugged back in order to proceed with a sidetrack contingency operation that was included in the pre-drill plan as part of the field delineation strategy.

The KHE-19 ST1 encountered the Cretaceous Massive Formation of the Khurbet East field at 2206 m MD (1545m TVD ss). A complete loss of drilling fluids was experienced soon after drilling into the Massive formation, indicating that the excellent quality vuggy reservoir of the producing Khurbet East Massive Formation had been encountered. A gross horizontal reservoir section of 67 meters was drilled before reaching a total depth of 2273m MD (1545m TVD ss). The well has since been completed with a 3.5 inch production string. Production flow testing trials will commence shortly, the results of which will be the subject of a future news release.

The Crosco-401 rig will now move to the Yousefieh East exploration well location.

Yousefieh 7

The Yousefieh 7 ("Yous-7") vertical well located on the northern flank of the Yousefieh field was spudded on the May 19, 2011 utilizing the Crosco E-501 rig. The Yous-7 well location was selected in order to gain information on reservoir extent and quality in the undrilled northern flank of the Yousefieh field.

The Yous-7 well encountered the Massive Formation at 1972 m MD (1554 m TVD ss), 18 meters deep to prognosis. The well encountered a gross reservoir pay interval of approximately 34 meters and a net oil column thickness of approximately 27 meters with average porosity of 17%. Pressure data obtained via wireline sampling in the Yous-7 well-bore indicates that the oil bearing Massive section in this well is in good pressure communication with the main producing area of the Yousefieh field with reservoir pressure showing depletion of between 30-40 psi, which is in line with expectations.

A production liner was cemented over the reservoir section of the well and following perforation of a 15 meter oil bearing reservoir section and an acid wash operation, a flow test was conducted. The well flowed at an average rate of 528 barrels of oil per day ("bopd") of 22 degree API oil on a 2" choke at an average wellhead pressure of 25 psi utilizing nitrogen lift over a period of 7 hours. It is likely that this well will require the installation of artificial lift facilities in order to produce at the planned rate of 500 bopd on a continuous basis, and discussions are underway with vendors for procurement of the equipment. Further perforation and acid stimulation operations are also planned for this well in order to improve well performance.

The results of the KHE-19 and Yous-7 wells will be considered, along with the results of the other development and exploration wells in the 2011 drilling program, in the year end re-assessment of the Khurbet East and Yousefieh field's recoverable reserves.

Yousefieh East Exploration Well (Yous-8)

The Yousefieh East exploration well ("Yous-8") will target an untested structure in Cretaceous age carbonates located approximately 3 kilometers to the east of the Yousefieh field discovery well with estimated mean unrisked oil resources of approximately 14 million barrels. The Yousefieh East well is located within the Yousefieh field Development License Area and, in the success case, could be quickly tied back and produced into the existing Yousefieh field production facilities.

Safa Exploration Well

The Crosco E-501 rig has been moved to the Safa exploration well location. This well will target

a prospect with fault bound dip closure potentially containing a Cretaceous age reservoir on trend with the Khurbet East Field. The pre-drill Mean unrisked resource estimate for the Safa area is calculated to be 27 million barrels of oil. The well will test the potential for a wider distribution of the high quality Massive karst reservoir encountered in Khurbet East.

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 the Yousefieh East and Safa exploration prospects 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 both fields combined during June 2011 was in excess of 21,000 bopd. Cumulative gross oil production from the Yousefieh field now exceeds 1 million barrels and cumulative production from the Khurbet East field exceeds 15 million barrels.

Gulfsands expects 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 have encountered high quality, oil bearing reservoirs in both the Yous-7 and KHE-19st wells and expect that these wells will soon add incremental volumes to the production capacity of the Khurbet East and Yousefieh fields.

We also look forward to the resumption of our exploration drilling program with the drilling of the Safa and Yousefieh East prospects. If successful, these prospects are ideal candidates for rapid development due to their proximity to existing Gulfsands operated infrastructure."


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