Gulf Keystone Updates on Iraqi Operations

On Monday, Gulf Keystone announced the arrival of the initial loads of production facility equipment to the Shaikan field location and the commencement of the rig move by the AOS Discover-1 drilling rig to the Sheikh Adi-1 exploration well site.

The first pre-packaged production equipment units have arrived at the production facility construction site near the Shaikan-1 well location. This equipment together with the oil storage tanks and truck loading facility will form the basis of an 18,000 bopd capacity oil production treating and truck loading facility.

This facility will be used during the long term production testing of the Sargelu (upper Jurassic) oil reservoir in the Shaikan-1 discovery well (reference 12 July 2010 announcement with respect to workover rig operations). Production testing will last for at least 18 to 24 months and accumulate valuable data related to reservoir characteristics and oil recovery factors. The test volumes (estimated at 8,000 to 10,000 bopd) will generate Gulf Keystone's first oil production revenue in Kurdistan.

In addition, the AOS Discoverer-1 drilling rig has arrived at the Sheikh Adi-1 well site and rig up is 10% complete. This well will be Gulf Keystone's first exploration well on the Sheikh Adi block in which the Company has an 80% working interest. The well is planned to spud in August and will target the Cretaceous, Jurassic and Triassic formations. Planned total depth, depending on well results, is 3,850 meters and drilling is expected to take 6 months. The Company's estimated oil-in-place resource potential for the Sheikh Adi structure is in excess of one billion barrels.

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