Gulfsands Provides Reserves Results for Syrian Block 26 Fields


Block 26, Syria
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Gulfsands has announced the results of the reserves updates for the Khurbet East and Yousefieh Fields in Syria Block 26.

An independent estimate of Khurbet East Field Reserves as of December 31, 2008 has been completed by RPS Energy Group Plc (RPS). The RPS estimate was based on data acquired up to 14th April, 2009 which includes data acquired in the KHE-8 well but not from the successful flow test of that well. In addition, an independent estimate of Yousefieh Field Reserves as of December 31, 2008 has been completed by Fugro Robertson Limited (FRL). RPS and FRL based their estimate of reserves on the resource definitions jointly set out by the Society of Petroleum Engineers (SPE), the World Petroleum Congress (WPC), the American Association of Petroleum Geologists (AAPG) and the Society of Petroleum Evaluation Engineers (SPEE) in April 2007 in a document entitled "Petroleum Resources Management System" (PRMS).

As of December 31, 2008 and in comparison to December 31, 2007, Proved (1P) Gross Reserves have increased 82%, from 19.4 million barrels of oil (mmbbls) to 35.4 mmbbls. Proved plus Probable (2P) Gross Reserves have increased 20%, from 58.7 mmbbls to 70.4 mmbbls.

Block 26 Reserves

  • Proved (1P) Gross Reserves for Block 26 have increased from 19.4 mmbbls to 35.4 mmbbls, an increase of approximately 82%. Gulfsands' corresponding 50% Working Interest 1P Reserves increased from 9.7 mmbbls to 17.7 mmbbls.
  • Proved plus Probable (2P) Gross Reserves for Block 26 have increased from 58.7 mmbbls to 70.4 mmbbls, an increase of 20%. Gulfsands' corresponding 50% working interest 2P Reserves increased from 29.4 mmbbls to 35.2 mmbbls.
  • Proved (1P) Entitlement Reserves net to Gulfsands have increased from 5.0 mmbbls to 8.1 mmbbls, an increase of approximately 64%.
  • Proved plus Probable (2P) Entitlement Reserves net to Gulfsands have increased from 11.3 mmbbls to 14.3 mmbbls, an increase of approximately 27%.
  • Proved plus Probable plus Possible (3P) Entitlement Reserves net to Gulfsands have decreased from 22.4 mmbbls to 21.9 mmbbls, a decrease of approximately 2%.
  • The Reserves in Block 26 include contributions from the Khurbet East Field as well as the adjacent Yousefieh Field. Working interest reserves are those estimated to be produced within the life of the Production Sharing Contract, as extended. Estimation of Net Entitlement Reserves (Reserves after royalties, taxes and government share) was completed by Gulfsands, and is based on the Gross Reserve estimates provided by RPS and FRL as well as internal estimates for future oil price, development costs, operating costs and other metrics. Key assumptions include a Brent crude price of $45 per barrel in 2009 rising to $70 per barrel after 2012. It is assumed that the oil supplied from Block 26 trades at an average $11 per barrel discount to Brent. As there is a single cost recovery pool for oil production in Block 26, Net Entitlement Reserves are consolidated rather than split out on a field by field basis.

Khurbet East Field Reserves

The reserve estimates for the Khurbet East Field take into account that the gross production in the Khurbet East Field to 31st December 2008 was approximately 1.4 million barrels of oil (mmbbls). A summary of the reserves is given in the table below.

Reserves (mmbbls) Proved Proved plus Probable Proved plus Probable plus Possible
Gross 34.2 59.2 99.7
Working Interest 17.1 29.6 49.9

In comparison to December 31, 2007,

  • Proved (1P) Gross Reserves for the Khurbet East Field have increased from 19.4 mmbbls to 34.2 mmbbls, an increase of approximately 76%. Gulfsands' corresponding 50% Working Interest 1P Reserves increased from 9.7 mmbbls to 17.1 mmbbls.
  • Proved plus Probable (2P) Gross Reserves for the Khurbet East Field have increased from 58.7 mmbbls to 59.2 mmbbls, an increase of 1%. Gulfsands' corresponding 50% Working Interest 2P Reserves increased from 29.4 mmbbls to 29.6 mmbbls.
  • Production to date is in excess of 2.6 mmbbls with only trace amounts of water.
  • Production of the Khurbet East 2P Reserves is now anticipated to occur much more rapidly than was previously predicted. The current estimate predicts that approximately 62% of the 2P Reserves will be recovered by year end 2015 versus the previous estimate of approximately 34%.
  • As a result of the improved field performance, the estimate for the Khurbet East Field recovery factor has increased in the 2P case from 28% to 35%.
  • The increase in recovery factor more than offsets the impact of a reduction in 2P STOOIP from 232 mmbbl to 181 mmbbl as a consequence of the inconclusive results of the northern (KHE-7) delineation well. Oil volumes observed in this well from wire-line logs and core during drilling were excluded from the STOOIP calculation for the Khurbet East Field on account of the assessed poor reservoir quality. Well KHE-7 was not tested during drilling and is now planned to be flow tested during 2009 to assess whether the encountered oil volumes are capable of being produced.

Yousefieh Field Reserves

A summary of reserves is given in the table below.

Reserves (mmbbls) Proved Proved plus Probable Proved plus Probable plus Possible
Gross 1.2 11.3 16.7
Working Interest 0.6 5.7 8.4

The Yousefieh Field was discovered in November 2008 with the Yousefieh-1 discovery well which flowed at rates of up to 1460 barrels of oil per day. A single appraisal well, Yousefieh-2, was drilled in February 2009 and while an oil column was encountered in this well, oil flow to surface was not established. The well will now be re-tested during 2009 and potentially subjected to acid stimulation and other assisted production techniques in use in producing fields within Block 26.

Reserves assessments for the Yousefieh Field have therefore been based on estimates of recoverable oil in the vicinity of the Yousefieh-1 discovery well only. STOOIP and recovery factor in the 2P case are estimated as 75 mmbbls and 15% respectively. The Company is proceeding with plans to bring the Yousefieh Field into production during 2009.

Ric Malcolm, Gulfsands CEO, said, "We are very pleased with the overall increase in the Proved (1P) and Proved plus Probable (2P) Reserves in Block 26. The production performance of the Khurbet East Field has meaningfully exceeded our pre-development expectations and we are looking forward to completing the expansion of the capacity of the Early Production Facility to take advantage of this increased performance."
 

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