Groundstar Resources has entered into an asset exchange agreement with Karl Thomson Energy Limited (KTE), its partner in two Egyptian blocks. This exchange is mainly driven by the Company's desire to increase its interest in the West Komombo (WKO) block where Groundstar is operator and has a major working interest, and which is in an area that has been experiencing a high level of activity. Dana Gas Egypt announced on January 11, 2010 the completion of the Al Baraka-4 well, with a potential flow rate with artificial lifting, of 1,300 bopd, on the block adjacent to the east.
According to this agreement, Groundstar is exchanging its 20% working interest in the West Esh El Mallaha (WEEM) block, where KTE has been funding drilling and completion operations solely as of November 27, 2009, for a 20% interest in the WKO block. Groundstar will also receive approximately US$800,000 in adjustments. As a result of this agreement Groundstar's interest in WKO will increase to 80% and its interest in WEEM will be nil. As a result of this asset exchange agreement, Groundstar's net land interest will increase by over 6,000 square kilometres in the WKO block. This agreement is subject to approval of Egyptian Regulatory Authorities.
Aminex Egypt Petroleum Limited (APEL), the operator of the WEEM block, reported the results of the drilling of South Malak-1 that was accordingly announced on January 4, and is currently in the process of conducting multi fracturing and production testing of the South Malak-1 well, and Groundstar extends its best wishes for successful results.
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