Gulf Keystone Looks Ahead to 2011/2012 Exploration Program

Gulf Keystone provided an update on its ongoing exploration and appraisal program for the Shaikan, Ber Bahr and Akri-Bijeel blocks in the Kurdistan Region of Iraq. Shaikan is a major discovery with independently audited gross oil-in-place volumes of between 4.9 billion barrels to 10.8 billion barrels calculated on the P90 to P10 basis with a mean value of 7.5 billion barrels.

Shaikan-2 Well Test

The testing program for the Shaikan-2 appraisal well, drilled approximately nine km to the south-east of the Shaikan-1 discovery well, is currently in the Butmah formation of the middle Jurassic and once the testing program has been completed in all target formations the company will make the appropriate announcement. Following the completion of the Shaikan-2 testing program, the WDI 842 rig will move to the location of the Shaikan-6 appraisal well.

Shaikan-4 Drilling Operations

The Shaikan-4 appraisal well, drilled six km to the west of the Shaikan-1 discovery well, is currently drilling ahead at a measured depth (MD) of 3,265 meters to an expected total depth (TD) of 3,400 meters. An extensive testing program will follow.

Shaikan-5 Appraisal Well

The Discover-1 rig has arrived from the Sheikh Adi-1 site to the location of the Shaikan-5 appraisal well and is currently rigging up. The well, which will be drilled six km to the north-east of the Shaikan-2 appraisal well, is scheduled to spud in October 2011. Estimated TD for Shaikan-5 is approximately 3,500 meters subject to technical conditions.

Shaikan-6 Appraisal Well

Location for the Shaikan-6 appraisal well is currently under construction. The well, which will be drilled nine km to the east of the Shaikan-2 appraisal well, is due to spud later in 2011, after the WDI 842 rig has arrived from the Shaikan-2 site. Estimated TD for Shaikan-6 is approximately 3,800 meters subject to technical conditions.

Oil sales

The tender process for the procurement of the equipment required to upgrade the Shaikan-1 & 3 Extended Well Test production facilities is near completion, which will allow the Company to ramp up exports of oil which meet export pipeline specifications in the first half of 2012.

The Company awaits guidance from the Kurdistan Regional Government on further oil sales into the domestic market.

3D Seismic Processing and Interpretation

The Shaikan and Sheikh Adi 3D seismic data acquired by the Company in 2010 has now been fully processed and interpreted. As indicated in the Company's AGM Operational Update of 16 June 2011, results of the 3D data interpretation indicate a larger Shaikan structure (by 5-10%) than originally mapped based on the earlier 2D seismic data. The Company will continue to analyze the obtained results using it as input into future oil-in-place estimates and as part of the ongoing work on the Shaikan Field Development Plan.

Gulf Keystone is the Operator of the Shaikan Production Sharing Contract with a 75 percent working interest in the block and is partnered with the MOL subsidiary, Kalegran Ltd., and Texas Keystone Inc. which have the remaining 20 and 5 percent working interests respectively.

Ber Bahr-1 Exploration Well

The first exploration well on the Ber Bahr block spudded on October 10, 2011 and 20'' casing is currently being set at a measured depth (MD) of 371 meters.

Gulf Keystone has a 40 percent working interest in the Ber Bahr block operated by Genel Energy International Limited, which holds a 40 percent working interest in the block. The Kurdistan Regional Government has a 20 percent carried interest in the Ber Bahr Production Sharing Contract.

Bekhme-1 Exploration Well

Bekhme-1, the second exploration well on the Akri-Bijeel block drilled 20 km to the north-east from the Bijell-1 discovery well, is currently testing in the Triassic.

Gulf Keystone has a 20 percent working interest in the Akri-Bijeel block operated by Kalegran Ltd., 100% subsidiary of MOL Hungarian Oil and Gas Plc., which holds 80 percent working interest in the block.

John Gerstenlauer, Gulf Keystone's Chief Operating Officer commented, "Further to the announcement of Gulf Keystone's forward strategy and our recent fully subscribed fund-raising of US $200 million, we are firmly focused on the 2011/2012 exploration and appraisal program. We expect the results from the ongoing drilling and testing operations at Shaikan-4 and Shaikan-2, which will be followed by the Shaikan-5 and 6 appraisal wells shortly, to provide the basis for yet another upgrade of the Shaikan oil-in-place numbers. Our ongoing work also includes the upgrade and expansion of the Shaikan Extended Well Test production facilities required to facilitate stabilised exports of Shaikan crude to the international market. The work on the upgrade will be completed in the first half of 2012 and will be followed by the development of the pipeline project to connect the Shaikan field with the Kirkuk-Ceyhan export pipeline."

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