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Gulf Keystone Petroleum Ltd (LON:GKP) report: Operational Update

Contributed by Daniel Stewart & Company

By Daniel Stewart & Co

- Shaikan-3 is at 1,229m and in the Garagu formation. The company reports that oil shows have been observed both while drilling and in the core. The wellbore is being conditioned prior to logging. Following logging the well will be drilled to TD and then the pay interval can be tested

- A total of 10 truckloads of oil have been sent to different refineries in Kurdistan. Following the analysis of the refined product a domestic price will be set for Shaikan, Sargelu oil

- Sheikh Adi-1is at 899m. As in other drill locations oil shows have been encountered in the core taken at the top Cretaceous. Oil shows have also been seen in surface returns. Log evaluation indicates high hydrocarbon saturations over a gross interval of 50m. As we have seen elsewhere, drilling is difficult with swelling and unstable shales encountered. Consequently Gulf Keystone will not test this zone and instead they will drill to the Jurassic and Triassic targets.

- Bijeel-1 is still testing. The rig is scheduled to be released in mid November and is scheduled to drill a deep appraisal well at Shaikan-2

- The rig tender process is still running and the company expects to announce the successful bidder in November which will be used on Shaikan-4.

- Acquisition of 3D seismic across Shaikan is 95% complete with processing and evaluation starting. On Sheikh Adi acquisition is 10% complete.

- Although it is still at a preliminary level, the early results coming back from Sheikh Adi and very encouraging and somewhat reminiscent of experiences encountered at Shaikan-1.

- Similar to what occurred with Shaikan-1 drilling is difficult. Clearly this is a factor not just for Gulf Keystone but for many of the operators in Kurdistan. While Gulf Keystone is making progress on its wells, there seem to be more delays at Akri Bijeel which is delaying the start of Shaikan-2. Shaikan-2 is the deep appraisal well which should go deep enough to encounter the oil-water contact point and provide more data on the volume potential at Shaikan.