Gulf Oil and Gas accountACCOUNT

Acceleration of Kurdistan Drilling Activity

Source: www.gulfoilandgas.com 10/18/2010, Location: Middle East

Gulf Keystone Petroleum Ltd. the Kurdistan focused independent oil and gas exploration company, is pleased to announce it has successfully raised through Mirabaud Securities LLP gross proceeds of £109,239,200 through an oversubscribed placing of 78,028,000 new Common Shares of US$ 0.01 each in the Company at a placing price of 140 p per share.

Use of Proceeds
In order to accelerate the Company's active drilling programme across its four blocks in Kurdistan, the net proceeds will primarily be applied towards:

∑ Contracting a third Gulf Keystone operated deep drilling rig, in addition to the Weatherford 842 and AOS Discoverer-1 rigs.
∑ Ensuring three rigs are contracted under Gulf Keystone operatorship until the Shaikan Field is fully appraised, now expected by the end of H1 2012.
∑ Shaikan- 5, Shaikan-6 and Shaikan-7 wells to now be added to the drilling programme.
∑ Drilling of previously delayed Shaikan-2 and Shaikan-4 wells.
∑ Additional testing and production facilities, in anticipation of success from current drilling of Sheikh Adi-1 and / or one or more of the Shaikan appraisal wells.
∑ Gulf Keystone's share of the first exploration well on the Ber Bahr block, and a further exploration well on Akri-Bijeel (Bekhme-1). (It is intended that further rigs will be contracted by the respective Ber Bahr and Akri-Bijeel operators for future wells on these production sharing contracts).

This additional funding, along with anticipated income from test production, will significantly strengthen the Company's financial position and will allow flexibility in the work programme. As such, the Company will have the opportunity to take advantage of any appropriate opportunities to further add value to its working interest position in Kurdistan.

Commenting on today's announcement, Executive Chairman, Todd Kozel, said:

"As a Board we are very pleased to have successfully completed today's fund raising and are delighted with the response from existing shareholders, as well as from a number of new blue chip institutional investors. This strengthening of our balance sheet marks another important step towards our full understanding of the true scale of the world class Shaikan Field. With access to a third dedicated drilling rig, we will now be able to complete the appraisal drilling campaign earlier than previously envisaged. Furthermore, we are looking forward to continuing our exploration work across the Ber Bahr and Akri-Bijeel Blocks, whilst also enjoying the financial flexibility to be able to move quickly should other opportunities arise."

The Placing Shares were placed by the Company's broker, Mirabaud Securities LLP, with both new and existing institutional investors. The Placing is conditional on admission of the Placing Shares to trading on AIM.

The Placing Shares will represent 11.54 per cent. of the enlarged issued share capital of the Company. The Placing Shares will be fully paid and will rank pari passu in all respects with the existing Common Shares of US$0.01 each in the Company. Application has been made for the Placing Shares to be admitted to trading on AIM ("Admission"). It is expected that Admission will become effective and that dealings in the Placing Shares will commence at 8.00 a.m. on 21 October 2010. The total number of Common Shares in issue following completion of the Placing, and the total number of voting rights, will be 754,243,161.

The above figure of 754,243,161 Common Shares may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, Gulf Keystone under the FSA's Disclosure and Transparency Rules.

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