GKP Shares Fall on Fundraising for Shaikan

Further funds will become available to the Company in the event that the Kurdistan Regional Government exercises its Third Party Assignment option under the terms of the Production Sharing Contracts regarding the Shaikan and Akri-Bijeel blocks.

In addition, the Company continues to evaluate the ongoing process of the sale of the Company's 20% interest in the Akri-Bijeel block as the forthcoming results of the three wells currently being drilled and planned early production from the Bijell discovery are taken into consideration.

The Convertible Bonds will be convertible into common shares of the Company. The Convertible Bonds are expected to carry a coupon of between 5.875% and 6.625% per annum payable semi-annually in arrear and the conversion price is expected to be set at a premium of between 25% and 30% to the volume weighted average share price of Gulf Keystone on the AIM market between opening and closing of the market today. The Convertible Bonds will be issued and redeemable at 100% of their principal amount and, unless previously redeemed, converted or cancelled, will mature on the fifth anniversary of the issue of the Convertible Bonds in 2017.

The final terms of the Offering will be determined at the time of pricing which is expected to be announced just after the close of the market today. Closing and settlement are expected on 18 October 2012. It is the Company's intention that an application will be made for the Convertible Bonds to be admitted to listing on the Official List of the UK Listing Authority and admitted to trading on the Professional Securities Market of the London Stock Exchange by no later than 30 November 2012.

BNP Paribas is acting as Sole Bookrunner and Lead Manager of the Offering.

Todd F Kozel (pictured), Executive Chairman and CEO of Gulf Keystone, commented:

"We welcome this important financing initiative, which, in addition to being an important milestone for the Company in support of our transition from the exploration and appraisal phase to the fully-fledged development of the world class Shaikan discovery, shows an increasing confidence of international markets in doing business in the Kurdistan Region of Iraq."

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