Gulf Keystone Petroleum Ltd. (AIM: GKP)

("GKP" or "the Company")

ETAMIC Announcement

After extensive recent discussions with interested parties,GKP has negotiated with the Kurdistan Regional Government (KRG) toreorganise the Company's interest in Gulf Keystone Petroleum International (GKPI) following a material default by ETAMIC.

The reorganisation and transactions detailed are subject to KRG approval and signature and therefore the terms may change. Discussions regarding the proposed re-organisation remain ongoing. The main components of the proposed re-organisation and transaction as they currently stand are:

· The 50% shareholding of GKPI held by ETAMIC reverts to GKP. GKPI will then be a 100%
subsidiary of GKP.

· Following default by ETAMIC, GKPI will pay $40 million to the KRG which is an Infrastructure Support Payment due and owing by ETAMIC ($10 million of which is payable within 30 days of the signature of an Infrastructure Support Payment Agreement by the KRG and the remaining $30 million of which is payable within 90 days of signature), in return for GKPI maintaining its 80% interest in Sheikh Adi and 40% interest in Ber Bahr.

· GKP will make a termination payment of $12 million to ETAMIC in full and final settlement of all of their rights which is payable within 30 days of completion by GKP of a significant fundraising after Q1 2010.

· The KRG shall also be entitled to receive an Additional Infrastructure Support Payment to be
allocated to social programs, amounting to 40% of GKPI's entitlement to Profit Petroleum derived from GKPI's share of profits in all four production sharing contracts (PSC's).

The net effect of the total expenditure of $52 million is that GKP's net share in each of the four PSC's will be as follows:

(1) Minimum GKPI holding subject to Government back-in right of 20% and Third Party back-in right of 15% if exercised in full.

(2) Minimum GKPI holding subject to Government back-in right of 20% and Third Party back-in right of 20% if exercised in full.

(3) Subject to KRG 40% share of GKPI's profit petroleum.

The reorganisation and transactions detailed above are subject to KRG approval and signature and therefore the terms may materially change. The Company will update the market at the appropriate time when final agreements have been signed by all relevant parties. The need for additional funding is recognised and the Company is considering its funding strategy in this regard.