Gulfsands Improves Production in the Gulf of Mexico

Gulfsands Petroleum

Gulfsands Petroleum said that production in the Gulf of Mexico has returned to levels achieved prior to the hurricanes of 2005. In addition, the company reported that natural gas has been discovered in two new development wells in the West Delta area.

Gulfsands' oil and gas production in the Gulf of Mexico continues to increase and has reached pre-hurricane levels of approximately 2,850 working interest barrels of oil equivalent per day (boepd). The improvement in daily production results from recommencement of oil production from the Vermilion 332 and 315 oil fields after repair of a lateral pipeline in the area that was damaged by Hurricane Rita.

Further increase comes from completion and connection of two exploration wells in the Eugene Island area drilled in 2005. Combined new and restored incremental production from the Vermilion and Eugene Island area totals some 1,270 boepd. Although daily production is back to pre-storm levels, there remains shut-in production that the company expects to have on stream in the coming months to further increase daily production in the Gulf of Mexico.

Gulfsands has successfully participated in the drilling of two development wells in West Delta 64 following two exploration discoveries in West Delta 64 in 2005. The company expects all 4 wells to commence production by September 2006. The company's working interest in the West Delta 64 project is 6.575%.

The next significant operation in the Gulf of Mexico is a recompletion of a well in East Cameron 66, which is currently producing approximately 0.100 MMCFGD net to Gulfsands. The company owns a 48% working interest in this well and a successful recompletion of this well would result in a significant increase to current gas production. This recompletion is scheduled for August of this year.

Additionally, the company anticipates drilling two new exploration wells in the Eugene Island 58 area during the fourth quarter of 2006 in which the Company has a 25.64% working interest.

"We are pleased to have production back at levels of last summer before the disruptions caused by hurricanes Katrina and Rita," said John Dorrier, Gulfsands' CEO. "The higher production levels combined with the expiration of the oil hedge position will have a positive impact on the performance of the company in 2006."