Gulf Keystone Petroleum Ltd. (Gulf Keystone Petroleum) has provided an update on the Shaikan-1 exploration well, Shaikan block, the Kurdistan region of northern Iraq. The Shaikan-1 well was spudded on April 27, 2009 with a planned total depth (TD), pending actual drilling results, of 3,000 to 3,500 meters. The range of TD depths reflects the under explored nature of the area and the lack of nearby correlation wells.

Following the setting of 20 surface casing at about 100 meters, the well plan called for the drilling of an 8-1/2 pilot hole down to the 13-3/8 intermediate casing point.

This decision was based on a number of operational considerations. Primarily, the fractured nature of many of the shallow geological formations and the resulting high likelihood that mud returns would be lost and thus much of the interval would have to be drilled without the information normally gained from drilling mud returns. Under these conditions it is more prudent to drill a smaller, easier to control pilot hole as a first step.

Much of this section was, indeed, drilled with little or no drilling mud returns. In addition, consistent with the active oil seeps in the area, much of the pore space in these shallow sections was filled with tar and very heavy, dead oil. At depths below 1,350 meters the well began to encounter lighter, live oil shows.

Subsequently, it was decided to log the entire open hole from 100 meters down to 1,510 meters. However, swelling shales prevented the logging tools from getting below 1,000 meters. Reverting to the planned well program, it was decided to open the pilot hole to the full 17-1/2 diameter necessary for the running of the intermediate casing.

Currently the well is drilling 17-1/2 hole at about 1,100 meters towards the planned intermediate casing point at 1350 meters. Oil shows have increased significantly as the larger hole approaches the deeper portions of the pilot hole. After setting the 13-3/8 casing at 1350 meters, Gulf Keystone Petroleum plans to log the remaining portion of the open hole down to 1,510 meters. It is this lower portion of open hole that has shown indications of porosity and from which we believe the oil inflow originates. Pending log results, a limited flow test may be warranted.

After evaluation of this unexpected shallow zone, the well will be drilled to the next casing point as planned. The primary zones of interest for this well are still below the depth of current activities. Plans are to reach the final TD of 3,000 to 3,500 meters, pending actual well results and any future testing, during September.

The Shaikan block is situated near the city of Dihok, about 85 kilometers North-West of Erbil and covers an area of 283 square kilometers. The partners in the Shaikan block are Gulf Keystone Petroleum International Limited (75% working interest and operator), Texas Keystone (5%) and MOL Group (20%).

Todd Kozel, executive chairman of Gulf Keystone Petroleum, commented: Although we are at an early stage in the drilling of this well, we are encouraged by these shallow zone live oil shows and by the good progress our drilling crew is making despite some difficult geological conditions. Subject to what we encounter in the primary zones, we expect Shaikan-1 to reach target depth in line with our planned schedule.