Shares in Gulf Keystone (LSE: GKP)jumped 5.5% in London on Wednesday after the company announced the completion of drilling and testing operations on its Shaikan-3 shallow appraisal well. This well was designed to drill and test the Cretaceous intervals in the immediate vicinity of the Shaikan-1 discovery well. The Company has a 75 percent working interest in the Block and is partnered with the MOL subsidiary, Kalegran, and Texas Keystone which have the remaining 20 and 5 percent working interests respectively.
The well drilled the entire Cretaceous interval and on into the Jurassic Sargelu formation. A total of two open hole and two cased hole flow tests were conducted in the Cretaceous. As a result of these tests, log evaluations and recovered fluid samples, the Company's current P50 to P10 estimate of Garagu oil in place volumes is 220 million to 2.2 billion barrels. These Garagu resources are in the lower portion of the Cretaceous (between 1060m and 1157m). The Shaikan partner group will formulate a development plan for these resources.
The large spread between P50 and P10 volumes is due to the uncertainty with respect to the exact nature of the Cretaceous down dip, on the flanks of the Shaikan structure. If the Cretaceous is oil bearing near the flanks, then the P10 volumes become more likely and it is possible that the oil will also be less viscous and of higher API gravity.
In the mean time, due to the different characteristics of the Cretaceous oil, the Shaikan-3 well has been completed as a second Jurassic producer from the Sargelu formation and will flow into the same test facilities as the Shaikan-1 well.
John Gerstenlauer, Gulf Keystone's Chief Operating Officer commented:
"The Cretaceous resources evaluated by the Shaikan-3 well are massive by any standard. They represent a significant oil resource for Kurdistan and Iraq. It is a further demonstration of the huge hydrocarbon potential of the area."