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Further to the announcement dated 14 July 2009 that Gulf Keystone had suspended further investment in the Hassi Ba Hamou Permit ("Permit"), the Company has now been duly notified by BG North Sea Holdings Limited (BG), as Operator, that it is exercising certain of its rights under the terms of the Joint Operating Agreement ("JOA") which could, subject to certain Permit conditions lead to the Company's withdrawal from the JOA and the Permit and forfeiture of all rights there under. BG also claim a cash sum due of $7,457,041. The Company has filed for arbitration under the JOA relating to a dispute over the validity of cash calls and breach by BG of certain conditions.

The Company contends that the rights which BG seeks to exercise are unenforceable and will seek all remedies available to it to oppose such exercise. The Company also disputes liability for the amount claimed.

Gulf Keystone confirms its intention to seek a buyer for its interest in the Permit. A sale of the Company's interest in the Permit is subject to approvals from the Algerian Government and Gulf Keystone's partners, Sonatrach and BG.