Gulf Keystone Updates Drilling Program in Iraq

Gulf Keystone today provides an update on its ongoing exploration and appraisal programme in the Kurdistan Region of Iraq, which includes the Shaikan block, a major discovery with independently audited gross oil-in-place volumes of between 8 billion barrels to 13.4 billion barrels calculated on the P90 to P10 basis with a mean value of 10.5 billion barrels.

Shaikan-4 Appraisal Well

Gulf Keystone continues a well testing programme for the Shaikan-4 appraisal well, drilled 6 km to the west of the Shaikan-1 discovery well, targeting several formations in the Jurassic and Triassic. One well test in the Triassic has been completed and six further tests are planned. Once the testing programme has been completed in all target formations the Company will make the appropriate announcement.

Shaikan-5 Appraisal Well

The Shaikan-5 appraisal well, 6 km to the north-east of the Shaikan-2 appraisal well, is currently drilling at a measured depth of 1,008 meters. After slower than expected drilling progress due to temporary hole stability issues encountered in the shallow formations, the well is now drilling ahead to the estimated total depth of 3,500 meters subject to technical conditions.

Shaikan-6 Appraisal Well

The Shaikan-6 appraisal well, 9 km to the east of the Shaikan-2 appraisal well, has drilled to a measured depth of 362 meters and 26" casing has been set. The well will drill to the estimated TD of 3,800 meters subject to technical conditions.

Shaikan Extended Well Test

As part of the ongoing Extended Well Test on the Shaikan block, the output from the Shaikan-1 & 3 EWT facility has been at an average level of 2,520 barrels gross of oil per day from the latter part of November through to the end of 2011, totalling 103,328 barrels gross as of 31 December 2011.

At the end of 2011, Shaikan test production levels were in excess of 4,000 barrels gross of oil per day and are due to increase further after the ongoing upgrade of the Shaikan-1 & 3 EWT facility has been completed and additional test production facilities have been designed and built. The upgraded and additional EWT facilities will allow test production of Shaikan crude to export specification and a subsequent ramp-up of the Company's export operations.
Gulf Keystone is the Operator of the Shaikan block with a working interest of 75 per cent and is partnered with Kalegran Ltd. (a 100 per cent subsidiary of MOL Hungarian Oil and Gas Plc.) and Texas Keystone Inc., which have working interests of 20 per cent and 5 per cent respectively.

Akri-Bijeel Block

According to the Operator's Akri-Bijeel block operational update and 2012 outlook issued on 28 December 2011, the exploration and appraisal programme will continue with two exploration wells (Barkman-1 and Gulak-1) and four appraisal wells (Aqra-1, Bijell-2, Qalati-1 and Qandagul-1) to be drilled in 2012. Following the completion of the Bekhme-1 exploration well testing programme, after the well reached TD at 5,000 meters in the Triassic, the rig is currently moving to the Aqra-1 appraisal well drilling location with the well expected to be tested in H2 2012.

While no commercial inflow of hydrocarbons was encountered in Bekhme-1, new data gained during the well testing programme is a significant contribution to the continuously improving knowledge of this unexplored region, decreasing uncertainty for the remaining Akri-Bijeel prospects.

In addition to the envisaged acquisition of a significant amount of 3D seismic data over the Bijell discovery area, an extended well test is planned for the Bijell-1 discovery well in 2012, similar to the ongoing successful Shaikan-1 & 3 extended well test. The Operator plans to build a surface facility with 10,000 barrels of oil equivalent gross capacity and a 30,000 barrels storage capacity by Q3 2012.

Gulf Keystone has a 20 per cent working interest in the Akri-Bijeel block operated by Kalegran Ltd., a 100 per cent subsidiary of MOL Hungarian Oil and Gas Plc., which holds 80 per cent working interest in the block. Operator's P50 resource estimate for the Akri-Bijeel block is 2.4 billion barrels of oil-in-place.

Ber Bahr-1 Exploration Well

The first exploration well on the Ber Bahr block is drilling at a measured depth of 2,418 meters in the Triassic to the estimated TD of 3,000 meters subject to technical conditions.

Gulf Keystone has a 40 per cent working interest in the Ber Bahr block operated by Genel Energy, which holds a 40 per cent working interest in the block. The Kurdistan Regional Government has a 20 per cent carried interest in the Ber Bahr Production Sharing Contract. The Operator's resource estimate for the Ber Bahr block is 1.5 billion barrels of oil equivalent-initially-in-place.

John Gerstenlauer, Gulf Keystone's Chief Operating Officer commented:

"As an important addition to Gulf Keystone's aggressive exploration and appraisal campaign, the Shaikan Extended Well Test provides us with an opportunity to continue to gain new data and better understanding of this world-class discovery in the Kurdistan Region of Iraq. This early test production is also important to enhance the Company's already extensive commercial and marketing relationships on the ground in anticipation of further optimization of the Shaikan test production facilities and the commencement of the Bijell-1 extended well test on the Akri-Bijeel block in 2012."  

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