Egypt – WEEM Block
Groundstar Resources Limited (“Groundstar” or the “Company”) holds a 20% working interest in the onshore West Esh El Mallaha (WEEM) Block located within the prolific oil producing Gulf of Suez Basin.
Drilling of the Malak-1 exploration well has reached a total depth of 12,116 ft. Encouraging results were obtained from various intervals showing elevated gas readings. These gas readings are very positive, having proven the presence of hydrocarbons. Many of the producing wells in the adjacent areas have depths of seven to eight thousand feet. Groundstar has proven the basin is 4,000 feet deeper with the source rock ideally suited for generating hydrocarbons. Malak-1, the deepest well drilled in the area, confirms the presence of hydrocarbons to about 12,000 feet pointing to the potential for Early Tertiary and Cretaceous source rocks below 10,000 feet that are within the oil kitchen in the vicinity, providing future exploration opportunities on the WEEM Block. Well log analysis over the intervals of Malak-1 show tight reservoir properties that do not justify the expense of running production casing and a testing program at this time. Therefore, the Malak-1 well will be abandoned.
The rig is now being moved to the next exploratory well location on the WEEM Block, the Tanan NW Prospect that is on a separate structure, approximately 5.3 kilometers northeast of the Malak-1 location. The Tanan NW-1 well will be drilled to approximately 8,600 ft.
Guyana – Takutu Basin
Groundstar has operated a 7,800 square kilometer Petroleum Prospecting Licence over the Takutu Basin of Guyana, South America since July 2005. Groundstar has three large seismically defined prospects on the Petroleum Prospecting Licence.
Groundstar has now finalized fiscal terms of the Farm-In Agreement announced March 12, 2008. Under the terms of the Farm-In Agreement, the Farmee will pay 100% of all exploration expenses up to US$12 million to earn an undivided 55% working interest in the block. The Farmee has the option to increase its working interest by 10% to 65%, exercisable any time before July 22, 2008 by issuing CDN$1 million worth of Farmee’s securities to Groundstar. This Farm-In Agreement will lead to the drilling of a minimum of two exploratory wells commencing in the last quarter of 2008 or first quarter of 2009. Groundstar has started community consultation and environmental impact management studies and is procuring drilling and tubular services.