Gulfsands Reports Strong Post-hurricane Progress
Gulfsands Petroleum plc said that current USA daily production is approximately 2974 barrels of oil equivalent (boe) per day.
Production in the U.S.A. Gulf of Mexico and onshore Gulf Coast for the three months ended 30 September 2006 totaled 225,995 boe (2,511 boepd) and for the first nine months of 2006 was 599,695 boe (2,221 boepd). Net revenue interest boe (working interest barrels less royalties) totaled 170,013 and 436,511 respectively for the three and nine month periods ended 30 September. Approximately 60% of the daily production was in natural gas and for the nine month period was priced at an average price of $6.28 per mcf, while 40% of the daily production was oil that was priced at an average price of $63.19 per barrel.
Gulfsands' current U.S.A. daily oil and gas production is approximately 2974 working interest boe per day. The Company is anticipating further increases in daily production in the Gulf of Mexico over the coming months as new well work-overs and recompletions are completed and those wells brought on stream.
The Company recently completed a work-over of a gas well in the East Cameron area of the Gulf and this well is now on stream but currently rate restricted at a gross production rate of approximately 0.5 million cubic feet of gas per day due to limitations with third party infrastructure. However, it is anticipated that this well will be capable of producing at rates far in excess of the current producing rate once third party infrastructure under repair is back to full capacity which is scheduled to occur within the next six months. Gulfsands owns a 48% working interest in this well.
Capital expenditures in the U.S.A. for the first nine months totaled $9.5 million.
Gulfsands' CEO, John Dorrier, said:
"We are very pleased with progress made in the Gulf of Mexico so far this year. Operations previously affected by post hurricane maintenance are now back on track, allowing significant production increases.
"With our field development work stimulating additional production growth, we look forward to ending the year on record production levels and income generation in the Gulf of Mexico. "
Gulf of Mexico, USA
The Company owns interests in 64 offshore blocks comprising approximately 216,000 gross acres which includes numerous producing oil and gas fields offshore Texas and Louisiana with proved and probable recoverable reserves of 32.4 BCFGE, consisting of 19.8 BCFG and 2.1 MMBO. As of 1st January 2006 these were estimated to have a net present value of $183 million. In addition, the Company's 2.8 BCFGE of possible recoverable reserves were estimated to have a net present value of $15.8 million.
Gulfsands owns a 50% working interest and is operator of Block 26 in North East Syria. Block 26 covers 11,000 square kilometers and encompasses existing fields which currently produce over 100,000 barrels of oil per day. These fields are operated by third parties including the Syria Petroleum Company.
In January 2006 the Company completed the acquisition of 1,155 kilometers of 2D seismic over Block 26 and following evaluation of this data, commenced drilling of the Tigris-1 prospect on 10 September, 2006. The Tigris structure is estimated to have the potential to contain in excess of 500 MMBOE. Gulfsands has identified numerous exploration prospects and leads within Block 26 with mean resources potential exceeding 1 billion barrels of recoverable oil.
Ryder Scott recently completed a reserves study on the Tigris structure (the report is available on the Gulfsands' website at www.gulfsands.net) and pending the Company's drilling and testing of the Tigris structure, classified these reserves as either oil or gas bearing. Ryder Scott assessed Gulfsands' net Probable Reserves were 102 BCFG and had a net present value of $233 million. Assuming a primarily natural gas accumulation, Ryder Scott estimated Gulfsands had an additional net 75 BCFG of possible reserves with a net present value of $261 million. All reserve estimations for Syria were calculated using a discount rate of 10% and after applying the terms of the Production Sharing Contract after Syrian taxes.
The Company has completed its own economic evaluation on the Prospective Gas Resource and has estimated the Company to have a net Prospective Gas Resource of 577 BCFG with a net present value of approximately $1.06 billion.
In summary, Gulfsands' total net gas reserves potential among Probable and Possible Reserves for the natural gas case is estimated at 177 BCFG (30 MMBOE) with a net present value of $494 million. When combined with the Prospective Gas Resource for an aggregate 754 BCFG (126 MMBOE), the net present value of Gulfsands' interest are estimated to be valued at approximately $1.55 billion.
Ryder Scott estimated that for a primarily oil accumulation, the Possible Reserves net to Gulfsands are 19.4 million barrels of oil with a net present value of $452 million. Gulfsands has completed its own economic evaluation on the Prospective Oil Resource and has estimated its net Prospective Oil Resource at 50.9 MMBO with a net present value of approximately $1.51 billion.
In summary Gulfsands total net oil reserves potential among Possible and Prospective Oil Resource for the oil case is estimated at 70.3 MMBO with a net present value of approximately $1.96 billion.
Gulfsands signed a Memorandum of Understanding in January 2005 with the Ministry of Oil in Iraq for the Misan Gas Project in Southern Iraq and following completion of a feasibility study on the project, is currently negotiating details of definitive contracts for this regionally important development. The project will gather, process and transmit natural gas that is currently a waste by-product of oil production and as a result of the present practice of gas flaring, contributes to significant environmental damage in the region.
Gulfsands operates onshore in the USA through its 100% owned subsidiary company Darcy Energy LLC which owns interests in two oil and gas fields onshore Texas, USA (34.375% working interest in Emily Hawes and 37.5% working interest in Barb Mag) with proved and probable recoverable reserves net to Gulfsands at 1 January 2006 of 1.6 BCFGE, consisting of 1.2 BCFG and 58,000 barrels of oil with an estimated net present value of $9.5 million. Additionally, these fields contain a further 2.2 BCFGE of possible recoverable reserves net to Gulfsands with an estimated net present value of $7.9 million.
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