Gulfsands Increases Reserves

Gulfsands Petroleum says that the Group's independent oil and gas engineering reserves firms have performed an updated reserves study as of January 1, 2006 for Gulfsands' Gulf of Mexico and onshore USA oil and gas properties. The proved and probable reserves for both the Gulf of Mexico and onshore USA properties are valued at $193 million. The offshore Gulf of Mexico properties represent $183 million of this total.

Gulf of Mexico Reserves

Gulfsands commissioned Netherland, Sewell & Associates Inc. to provide a reserves report for the offshore Gulf of Mexico properties owned by Gulfsands. The net present value of the Gulfsands proved and probable reserves in these properties as of January 1, 2006, discounted at an annual rate of 10%, is $183 million (87% of value is in proven reserves) This report shows a 42% increase in net present value from the reserves report issued on June 30, 2005. The increase in value is due to growth in proved and probable reserves through exploration and field re-development activities, as well as increased product prices.

The reserves report states that Gulfsands offshore Gulf of Mexico properties contain proved and probable reserves of 32.4 billion cubic feet of natural gas equivalents (BCFGE), consisting of 19.8 billion cubic feet of natural gas (BCFG) and 2.1 million barrels of oil (MMBO). The reserves report further classified an additional 2.8 BCFGE of possible recoverable reserves, with a net present value of $15.8 million.

Through ongoing exploration and field re-development activities, Gulfsands' reserves additions replaced 269% of its 2005 produced oil and gas volumes. This represents a year on year increase of 20% in Gulfsands' Gulf of Mexico reserves base.

Onshore USA Reserves

Gulfsands operates onshore in the USA through its 83% owned subsidiary company Darcy Energy LLC. As of January 1, 2006, Darcy Energy owned interests in two oil and gas fields onshore Texas, USA (Emily Hawes and Barb Mag). Collarini Associates has completed a reserves report on these fields. As of January 1, 2006, the net present value for the proved and probable reserves in these fields, net to Darcy Energy and discounted at an annual rate of 10%, is $9.5 million. The report states that the fields contain net proved and probable reserves of 1.6 BCFGE, consisting of 1.2 BCFG and 58,000 barrels of oil. The reserves report further classified an additional 2.2 BCFGE of possible recoverable reserves with a net present value of $7.9 million.

Block 26, Syria Reserves

Gulfsands announced on January 30, 2006 the results of a reserves study by Ryder Scott Company, L.P. (Ryder Scott), an independent petroleum engineering firm, on the Tigris structure. Ryder Scott developed two cases for this evaluation, an oil case and a gas case, as there was not sufficient data available at the time to determine the expected hydrocarbon fluid contained within the Tigris structure. This reserves study as of January 1, 2006 classified recoverable Probable and Possible Reserves and Prospective Resource as follows:

  • For primarily a natural gas accumulation, Ryder Scott has classified 442 BCFG as Probable Reserves, 442 BCFG as Possible Reserves, and a further 3447 BCFG as a Prospective Resource. In summary total reserves potential among Probable, Possible and Prospective Resource is 4330 BCFG (722 MMBOE).
  • For primarily an oil accumulation, Ryder Scott has classified 104 million barrels of oil and 64 BCFG as Possible Reserves and a further 408 MMBO and 245 BCFG as a Prospective Resource. In summary total reserves potential among Possible and Prospective Resource is 512 MMBO and 308 BCFG (combined 563 MMBOE).

Since the issuance of this reserves report the Company has commenced further work on the Tigris structure so that Ryder Scott can be engaged for a further review of the field development plan and costs, to quantify the economic value of the Probable and Possible Reserves and Prospective Resource. Gulfsands plans to commence drilling its first well on the Tigris structure in August 2006.

Gulfsands' CEO, John Dorrier, said:
"This is an outstanding result for Gulfsands' Gulf of Mexico and US onshore business operations. By adding significantly more reserves than our produced volumes in 2005 we are achieving our goal of steadily increasing the value of our US offshore and onshore assets. These volume and value increases provide solid asset backing for the Company while upside is provided by both the significant reserves and resource potential in our operated Block 26 in Syria and also the Misan Gas Project in Iraq."

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