Oil & Gas Corporate News

Gulfsands Petroleum (LON:GPX) (HOLD, £3.00) (330p, ? (0.0%)) announced that operations have concluded on the Hanoon-1 exploration well, the second well in the 2010 exploration drilling programme. The well has been interpreted as having a non-commercial oil reservoir and has been plugged and abandoned. The Hanoon-1 well, located approximately 8km to the north of the Khurbet East field, targeted the Cretaceous Shiranish and Massive Formations, the latter being the producing formation in the Khurbet East field. The well targeted a structure with pre-drill estimated reserves of 5-15MMbbl. Hanoon-1 encountered the top of the Cretaceous Shiranish Formation at approximately 1885m Measured Depth ("MD"), or 1440m True Vertical Depth ("TVD") below mean sea level, approximately 30m deeper than the pre-drilling prognosis. A few metres below this depth hydrocarbon gas was detected and oil shows were observed on drill cuttings. On the basis of these oil and gas shows drilling operations were suspended and two sequential coring operations were undertaken. 24 metres of core were recovered which were intermittently coated with viscous oil. The well was then open hole tested, however no hydrocarbons were recovered to surface. Drilling operations resumed and the well was deepened to the top of the Massive Formation which was encountered at 1975m MD (1530m TVD bmsl), also 30m deeper than the pre-drilling prognosis. The presence of oil shows and oil on drill cuttings shakers at 1989-1992m MD (1544 and 1547m TVD bmsl) prompted a further coring operation to be conducted, and an additional 3.5m of core were recovered. The formation generally consisted of tight dolomite and limestone with spotted viscous oil shows. It is considered likely that the quantities of oil observed at surface had emanated from oil filled natural fractures that were detectable from wireline logs. Further testing operations were then conducted in open hole over the Shiranish and Massive Formations combined, inclusive of acidification of both intervals with lift assistance provided via nitrogen injection. These operations recovered non-commercial amounts of viscous oil to surface along with formation water. The cost to Gulfsands for its 50% share of the Hanoon-I exploration well is estimated at approximately US$2.0m before cost recovery and approximately US$700,000 after cost recovery.

Comment: This is the second dry well on the licence as part of the 2010 exploration programme and the results vindicate our view that the Block has limited exploration potential left. We…

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