Gulf Keystone Petroleum reports live oil shows in Shaikan-1 Exploration Well

Gulf Keystone Petroleum (AIM: GKP) wetted the appetite of its substantial private investor base this morning, reporting live oil shows in the shallow zone of the Shaikan-1 Exploration Well on th Skaikan Block which lies in the Kurdistan region of Iraq.

The partners in the Shaikan block are Gulf Keystone Petroleum (75% working interest and operator), Texas Keystone (5%) and MOL (20%).

The Shaikan-1 well was spudded on 27 April with a planned total depth of 3000 to 3500 metres to test multiple target zones. The original drill plan was to drill a 8-1/2' pilot hole from 100 metres to the 13-3/8' intermediate casing point due to the fractured characteristics of the shallow formations and high probability that mud returns would be lost. Today Gulf Keystone confirmed that its assumptions were correct, with little or no mud returns. The company did however report that most of the pore space in the shallow zone is filled with tar and "very heavy, dead oil". However, from 1350 metres, live oil shows of lighter oil.

As a result, Gulf Keystone opted to log the entire open hole sequence from 100 metres to 1510 metres. Swelling shales have prevented logging tools from testing below 1000 metres, so the decision has been made to open the pilot hole to a 17-1/2' diameter for the running of the intermediate casing. The 17-1/2' hole is currently at 1100 metres.

"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 metres, GKP plans to log the remaining portion of the open hole down to 1510 metres. 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," the company reported.

Once the shallow zone is tested, drilling will continue to test the deeper targets.

Todd Kozel, Executive Chairman of Gulf Keystone, 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."

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