15th May 2006 07:02
Gulf Keystone Petroleum Ld15 May 2006 15 May 2006 Gulf Keystone Petroleum Limited (the "Company" or "Gulf Keystone") Reserves Update Further to its announcement of 20 February 2006, Gulf Keystone Petroleum, Ltd.(AIM-GKP), an independent oil and gas exploration company operating in theRepublic of Algeria, hereby provides a summary of the results of an independentassessment of the Company's reserve and resource potential, carried out by RPSEnergy Limited ("RPS"). This is an update of the previous review of theCompany's reserves contained in the Competent Persons Report ("CPR") ofSeptember 2004, set out in the Company's AIM admission document. The methodology employed for this present evaluation, and the classification ofresources set out below, is in line with the guidelines contained in the "Guidance Note for Mining, Oil and Gas companies" issued by AIM in March 2006.Consistent with these new guidelines and emerging industry practice, volumeshave been calculated on a probabilistic basis in contrast with the singledeterministic approach utilised in the above mentioned CPR. This is regarded byRPS as a more robust methodology for estimating hydrocarbon volumes as itacknowledges the inherent uncertainties in such estimates. The standard usedby RPS is the 2000 SPE/WPC/AAPG Petroleum Resources Classification System. Block 126a Following completion of the second Exploration Period in April 2006, and withregard to the relinquishment obligations associated with completion of thislicence phase, the Company elected to formally apply for licence extensions onlyin respect of the GKN, GKS and GRJ oil discoveries. The Company is presently inactive discussions with its partner Sonatrach regarding the forward programme onits GKN and GKS oil discoveries. Recently updated legislation, focused onreducing the flaring of gas, requires all oil development plans to incorporate aplan for utilization of any associated or non-associated gas. Various optionsfor the utilization of associated gas from GKN and GKS are therefore currentlybeing examined jointly by the Company and Sonatrach. The Company currently expects that production licences will be awarded for GKNand GKS following agreement to a gas utilisation plan. The Company has appliedfor a licence extension in respect of the GRJ discovery in order to complete thetesting of well GRJ-2 which, in the case of success, the Company expects wouldbe the subject of a production licence application. In assessing the remaining potential resources in GKN, GKS and GRJ full accounthas been taken by RPS of the results of all drilling and testing activitiescarried out since the issue of the CPR, revised expectations of required capitalinvestment and changes in product prices. RPS estimates reserves and resourcesfor these block 126a discoveries to be as follows: Recoverable Reserves (mmboe) Gross Entitlement 1P 2P 3P 2P 15.1 35.6 72.0 11.0 Contingent Recoverable Resources (mmboe) Gross Entitlement Low Best Estimate High Best Estimate (P90) (P50) (P10) (P50) 25.8 48.3 86.0 13.3 Notes 1. In respect of "Reserves" above, 1P refers to Proven, 2P refers toProven plus Probable and 3P refers to Proven plus Probable plus Possible. 2. "Reserves" above include remaining recoverable oil volumesassociated with the GKN and GKS discoveries. 3. "Contingent Resources" include recoverable hydrocarbon volumesassociated with the GRJ discovery which will remain Contingent pending thetesting of well GRJ-2. They also include recoverable gas volumes associated withGKS and GKN which remain contingent pending completion of a gas utilisationplan. 4. "Gross" refers to the remaining recoverable reserves from thelicence. 5. "Entitlement" means the Company's projected net share of GrossReserves as determined by the provisions of the relevant Production SharingContract (PSC). Entitlement as a percentage of Gross reserves depends on, and isparticularly sensitive to, amongst other factors, total combined production fromthe relevant block, the cumulative profitability of that block and the profilesfor recovering certain exploration and appraisal costs. Other Licences In respect of exploration and appraisal licences acquired by the Company in2005, including its interests in blocks 129 located in the Constantine Basin,and blocks 317b, 322b, 347b, 348 and 349b which together constitute the Hassi BaHamou Perimeter, to the north of the In Salah gas field, RPS has restricted itsevaluation to an assessment of "Gross" recoverable resources from the licences.Under the PSCs which govern these licences, the company holds a 75% interest andSonatrach a 25% interest. The Company's Entitlement will vary according to thespecific provisions of each PSC (see note 5 above). The Company has alsoidentified a number of discoveries and prospects in blocks 108 and 128 in theConstantine Basin, however, while contracts have been signed for these licences(Company: 75% Sonatrach: 25%), these licences are yet to be published in theAlgerian official gazette. Hence, these licences have not been included in theRPS review. RPS's estimates of the resources attributable to the above licences, excluding108 and 128, are in aggregate, as follows: Contingent Recoverable Resources (mmboe) Gross Recoverable Best Estimate (Mean) 201.7 Notes 1. Contingent Resources include: • Certain oil discoveries on block 129 which are Contingent pendingfurther technical evaluation. • A gas discovery within the Hassi Ba Hamou licence which isContingent pending further appraisal and conclusion of a gas sales contract. Prospective Resources Prospective Resources relates to the exploration potential contained within theCompany's Algerian licences and includes certain exploration leads and prospectswithin the Hassi Ba Hamou Perimeter (gas being the dominant phase) and blocks126a (prospect GKS-B) and 129 (oil being the dominant phase). Prospective Recoverable Resources (mmboe) Gross Unrisked Recoverable Gross Risked Recoverable Best Estimate (Mean) Best Estimate (Mean) 473.1 70.8 The information contained in this announcement has been reviewed by FrancisBoundy, Valuations Director of RPS Energy Limited, who has 15 years ofexperience as a Petroleum Engineer. Todd Kozel, Chief Executive Officer of Gulf Keystone Petroleum Ltd., commented: "The Company is pleased to be able to provide the market with an updated andindependent view of its current resource position. We are excited with what wenow understand to be the hydrocarbon bearing potential of the licences that thecompany acquired during 2005, in particular the gas potential of the Hassi BaHamou licence, and we look forward to being able to crystalise early value fromthese licences". Glossary 1P or Proven Reserves those reserve volumes that are estimated to have a 90 per cent chance of being exceeded 2P or Proven plus Probable Reserves those reserve volumes that are estimated to have a 50 per cent chance of being exceeded 3P or Proven plus Probable plus those reserve volumes that are estimated to have a 10 per centPossible Reserves chance of being exceeded Contingent Resources those quantities of petroleum which are estimated to be potentially recoverable from discovered accumulations but which are currently not demonstrated to be commercially recoverable. Lead a tentatively identified undrilled hydrocarbon trap that requires further technical evaluation prior to a decision to drill or not mmboe millions of barrels of oil equivalent Prospect a specific undrilled hydrocarbon trap that has been sufficiently defined to allow volumes and risks to be estimated Prospective Resources those quantities of petroleum which are estimated to be potentially recoverable from un-discovered accumulations Reserves those quantities of petroleum which are estimated to be commercially recoverable from discovered accumulations Enquiries Gulf Keystone Petroleum: 020 7514 1400Todd Kozel, CEOBill Guest, PresidentJon Cooper, Finance Director Evolution Securities: 020 7071 4300Rob Collins Citigate Dewe Rogerson: 020 7638 9571Media enquiries: Martin Jackson / George CazenoveAnalyst enquiries: Nina Soon or visit: www.gulfkeystone.com This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Gulf Keystone Petroleum