Gulfsands has provided the following update on the drilling of the Yousefieh-1 well in Block 26, Syria.
YOUSEFIEH 1 WELL, BLOCK 26, SYRIA
The Yousefieh-1 well has encountered the target Cretaceous formation at approximately 1940 meters vertical depth. The formation was encountered at a slightly shallower depth than was projected prior to the commencement of drilling.
Core sampling operations over this reservoir section were successfully completed and together with oil recovered during drilling operations, have indicated the presence of oil. The recovered cores will be further evaluated and analysed by the Company's consultants in Egypt.
Following completion of these activities the Company will resume drilling to the original target depth of approximately 2300 meters. The Company intends to run a complete logging program on the well once drilled to target depth and expects drilling and testing operations will be completed within two weeks.
The Yousefieh-1 well is targeting Cretaceous aged reservoirs identified within a structure located immediately adjacent to the Khurbet East Field and was designed to evaluate the potential of a newly identified play type within the Cretaceous reservoir system. The well is located very close to existing infrastructure, with the surface location of the well lying within 3 kilometers of the Khurbet East Early Production Facility (EPF).
GULF OF MEXICO, USA
Hurricane Ike inflicted considerable damage to oil and gas infrastructure generally in the Gulf of Mexico in mid-September. The majority of the damage that impacts Gulfsands' interests and production in particular is related to third party pipeline infrastructure, repairs to which are estimated to take a further one to four months depending upon the individual facility and operator.
Gulfsands has been working with the operators of the properties in which it holds interests in the Gulf of Mexico to assess the extent of damage to those properties. The respective operators have now provided estimates of the cost of repairs to those facilities of which Gulfsands' share totals approximately US$2.5 million. The Company's interests in the Gulf of Mexico are insured for events such as the damage caused by hurricanes. However the first loss borne by the Company under its insurance policy in respect of any single windstorm is US$ 2.5 million and so any claim on the policy is not expected to be significant.
Initially, as a result of Hurricane Gustav at the beginning of September, production was partially shut in and then, as a result of Hurricane Ike two weeks later, production was effectively fully shut in. Current production (working interest ("WI") basis) is approximately 175 boepd (136 boepd on a net revenue interest ("NRI") basis) compared with the 1,740 boepd WI basis (1,333 boepd NRI basis) average in H1 2008. Shut-in production is expected to come back on stream progressively during November and December and is anticipated to reach a level broadly in line with the first half average by year-end. Accordingly our current estimates of hydrocarbon production for 2008 as a whole suggest this is likely to average approximately 1,400 boepd WI basis (1,080 boepd NRI basis).
Andrew West, Chairman of Gulfsands commented "The news from Syria in relation to both the drilling of the Yousefieh-1 exploration well and production from the Khurbet East Field is very pleasing indeed and we are looking forward to seeing the results of testing of the Yousefieh-1 well come through in the next few weeks. With production from Syria having already grown to more than 80% of the Company's overall production, we are obviously strongly positioned to handle any short term interruption to production from our interests in the Gulf of Mexico."
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