Groundstar Acquires Stake in West Kom Ombo Block in Upper Egypt

Groundstar Resources has entered into a preliminary farm-in agreement with Pan Pacific Petroleum Egypt Pty Ltd. in respect of the West Kom Ombo Block 3 in Upper Egypt (hereinafter called Block 3). Block 3 covers 42,291 sq. km. (approximately 10.5 million acres).

According to the Agreement, Groundstar will pay 75% of the cost of the first two exploration phases to acquire a 42.5% working interest in Block 3. The initial exploration phase of 2 years has a gross financial commitment of US$3 million (US$2.25 million net to Groundstar) for seismic acquisition, reprocessing and interpretation. The first extension exploration period of 3 years has a gross financial commitment of US$4 million (US$3.0 million net to Groundstar) to drill two wells. After the gross expenditure of US$7 million (US$5.25 million net to Groundstar), the Company will pay 42.5% of expenditures to retain its 42.5% working interest.

Kom Ombo Block 2, which is situated immediately to the east of Block 3, is operated by Centurion Energy International Inc., one of the most successful operators in Egypt currently producing approximately 30,000 boepd. In March 2006, Centurion acquired 516 km. of new 2D seismic data complimenting the previous seismic data shot on Block 2. Centurion has identified eleven prospects and leads and has announced plans to drill one or more wells on the block by early 2007. The Kom Ombo #1 well drilled by Repsol (the previous operator) on Block 2, tested 39 degree API oil, which establishes the presence of an active petroleum system in the area.

The Nuqra Block, which is located to the east of said Block 2, is controlled by TransGlobe Energy Corp. and Arsenal Energy Inc. An 800 km. 2D seismic acquisition program was completed in April 2006. Up to eight prospects and leads have been identified and TransGlobe is preparing for a two well exploration drilling program to commence in late 2006.

The foregoing Block 3, Block 2, and Nuqra Block; collectively, represent the entire Kom Ombo-Kharit Basin in Upper Egypt, which Basin possesses strong similarities to the prolific and oil producing rift basins in the neighboring Sudan.

The block immediately north of Block 3 is held by the German exploration and production company RWE. Their work program and plans for the block are unknown.

Exploration studies on Block 3 to date which includes a 2D seismic grid of 835 km. and a aeromagnetic survey shows that the basinal trends being actively pursued by Centurion and TransGlobe continue northwest onto Block 3 and possibly further northward onto the RWE block. Additionally, aeromagnetic data supports a second basinal trend on Block 3 to the southwest.

Kam Fard, President and CEO of Groundstar states "We are extremely excited to acquire a significant working interest on the West Kom Ombo Block 3 in an area of Egypt that is the focus of exploration programs by successful international operators like Centurion, TransGlobe and RWE. Our staff will work aggressively with Pan Pacific Petroleum Egypt Pty. Ltd., to develop a suitable work program for the Block, which will be reported in due course."

Formal documents with respect to the Farm-in on Block 3 are expected to be signed during the next four weeks.

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