permian basin update out, page-3

Golden Gate Petroleum Ltd (ASX: GGP) (“Golden Gate” or the “Company”) is pleased to provide an operational update on activities in our Permian Project Texas, USA.
VALLEY No 1 WELL DRILLING DATE
Permian Project, Reagan and Irion Counties, Texas, Operator, 100% WI

SRH #5H Well
The SRH #5H well, Golden Gate’s first horizontal well is being prepared to commence drilling operations in October 2012. The current work schedule has the rig on site around the 26th October. A rig contract with Western Drilling is prepared for the use of their Rig No.6. It will take approximately 3 weeks to drill the horizontal well. The well plan calls for a full suite of electric logs to be run in order to assist with the planning process for the fracture stimulation program.

Upon completion of the recent secured convertible note offering, of up to $5 million, these proceeds will be used for the drilling and completion of the SRH #5H well. Any delays in completing the funding of the note program will mean cancelling the current drilling date and rescheduling at a later time.

In preparation for the fracture stimulation of this well, a 100 x 100 meter frac pond has been constructed (see the photo below). This pond has been lined with plastic and is being filled with water from two already drilled water wells. It will take another 3 weeks to accumulate sufficient water for the well’s fracture stimulation program.

In addition, permitting continues for a salt water disposal well. The cost of trucking large volumes of frac water and production fluid to a water disposal facility is quite high. The cost savings from having an injector well just for the frac fluid will more than cover the cost of drilling the well.

For and on behalf of the Board
Stephen Graves Executive Chairman