Strong performance by Gulf Indonesia in the third quarter

Gulf Indonesia Resources Limited today reported substantial achievements in the third quarter including:

- Initialing of the gas sales agreement for supply of natural gas to Singapore beginning in 2003,

- Agreement in principle on the terms for additional gas deliveries to the Duri Steamflood commencing during 2002,

- Substantial progress on the West Natuna Gas Project with agreement in principle on the terms of early gas sales scheduled to commence before year end 2000,

- Completion of drilling on the Suban 4 delineation well in South Sumatra with initial test results extending the reservoir over 400 metres deeper than previous testing in the field, and

- Continued success from onshore oil development activities in the Corridor TAC and Jambi EOR contract areas, setting the stage for increased onshore oil production in the fourth quarter of 2000.

"The progress that we have made this year thus far takes us a big step towards achieving our goal of being the pre-eminent non-LNG gas producer in Indonesia," said W.T. (Bill) Fanagan, President and Chief Executive Officer. "And we have set a new record for cash generated from operations in each of the three quarters of 2000, eliminating our net debt and providing us with the financial strength to fund our planned exploration and development programs for the next eighteen months without external financing."

The financial highlights of the third quarter of 2000 were as follows:

- Cash generated from operations of $76 million ($0.86 per share), a company record, and up 65 per cent compared to the third quarter of 1999, representing the seventh quarter of growth out of the last nine quarterly periods. Over the past four quarters, cash generated from operations has totaled nearly $250 million, or $2.80 per share.

- Earnings of $17 million ($0.20 per share), up 32 per cent compared to the third quarter of 1999, reflecting the increase in cash generated from operations partially offset by exploration costs associated with the Sawangan 1X well that was plugged and abandoned.

- Gross oil and gas revenue of $113 million, up 57 per cent from the third quarter of 1999, representing the ninth consecutive quarter of growth in gross revenue.

- An average realized combined price of $27.00 per barrel of oil equivalent, an increase of 66 per cent over the same period of 1999 and an increase of 13 per cent over the second quarter of 2000, reflecting higher world oil prices and increased demand for Indonesian crude types.

- A net positive cash position of $7 million at September 30, 2000, eliminating the $142 million of net debt from year-end 1999.

- Renegotiation of the Corridor Loan facility to alter the terms such that disbursements occur quarterly rather than semi-annually, providing more timely access to the restricted funds.

The high level of cash generated from the Corridor Gas Project to date has accelerated the repayment of certain costs incurred by the company on behalf of Pertamina's working interest share of Project development. The company has been recording an increased share of production as repayment of these costs. Full repayment is expected in the next few months (with the precise timing dependent on the cash flows of the Project) which will reduce the company's reported share of Project results from 60 per cent to 54 per cent (the company's working interest share of the Corridor PSC). The high level of cash generated from the Project has also served to increase the present value of the tax pools related to the Corridor PSC by accelerating their recovery. At current price and anticipated spending levels, the company expects to fully utilize the available tax pools of the Corridor PSC in the fourth quarter of 2000 and begin paying cash income taxes.

Gas Production and Development

Corridor Gas Project

In the third quarter of 2000, gas volumes from the Corridor Gas Project averaged 165 million cubic feet per day (mmcf/d) compared to 168 mmcf/d in the same period last year. In the nine months of 2000, gas volumes averaged 166 mmcf/d, up four per cent over the same period last year. Operating costs for Corridor Gas production continue to decline as a result of efficiencies at the plant.

Utilization of a new amine solution at the Grissik gas plant in the third quarter has enhanced the processing capability of the gas plant by 10 to 15 per cent or more and will allow for greater operational flexibility in the future.

West Natuna Gas Project

Development of the West Natuna Gas project continues under budget and ahead of schedule towards startup of gas deliveries by the end of the fourth quarter of 2000. In the third quarter, work continued on the 650-kilometre West Natuna pipeline system which is expected to be ready to accept first gas deliveries by early December. Installation of the Kakap upstream gas facilities required for the project has been completed. The commissioning process began in late October, and it is expected that these facilities will be placed into service during November. Agreement in principle has been reached with the buyer of the West Natuna gas for the early sales of gas starting in late 2000 prior to commencement of the full sales contract in mid-2001. Gas volumes during the early gas period will be dependent on the requirements of the buyer.

South Sumatra Gas to Singapore

During the third quarter, Pertamina (the Indonesian state oil and gas company) and a wholly owned subsidiary of Singapore Power initialed a detailed gas sales agreement and supporting schedules for gas to be supplied to Singapore from South Sumatra. Execution of the required agreements is planned for later in November 2000 and first gas is targeted for mid-2003 at rates of 40 to 45 mmcf/d (net to Gulf), increasing over time to over 100 mmcf/d (net to Gulf) by 2009.

Additional Gas to the Duri Steamflood

On October 3, 2000 (the second anniversary of the startup of deliveries from the Corridor Gas Project), the company announced that agreement in principle had been reached on the terms for additional gas deliveries to the Duri Steamflood. Contract signing is targeted for the fourth quarter of 2000. Gas deliveries are expected to commence during 2002 after installation of compression facilities on the existing Grissik to Duri pipeline by PGN (the Indonesian state gas distribution/transmission company), and the company's construction of field facilities and a trunkline from the Suban field to the Grissik gas plant. The company's share of contract quantities under the two contracts with Caltex is expected to be around 225 mmcf/d by 2003.

Crude Oil and Condensate

Crude oil and condensate sales volumes from onshore and offshore operations averaged 18,100 barrels per day (b/d) during the third quarter of 2000, compared to 20,500 b/d for the same quarter in 1999. For the first nine months of 2000, the average crude oil and condensate volumes were 19,000 b/d compared to 21,000 b/d in the same period last year.

The continued success of the company's onshore oil development program contributed to the company's objective to optimize onshore crude oil sales volumes, helping to offset natural production declines in mature fields.

In the Corridor TAC area, the company focused its activities over the past six months on the Bentayan field, drilling six wells in the main area of the field and six wells in an area to the southeast, following up on the successful Bentayan 53 well drilled in late 1999. Notably, the Bentayan 68 well encountered a much thicker sand than had previously been encountered in the field and the company is currently developing further drilling opportunities based on the results to date and on seismic acquired over the area during the second quarter. Over 20 additional locations have been identified for drilling in the Corridor TAC over the next year.

In the Jambi EOR contract area, the company's share of incremental production increased to a record level of 2,800 b/d in the third quarter of 2000. Five wells were drilled during the quarter, including Tempino 202, the first horizontal well in this area, which is currently producing over 360 b/d net to Gulf's interest.

Offshore oil sales volumes declined to 3,800 b/d for the third quarter of 2000 from 6,200 b/d in the third quarter of 1999 due to the impact of the natural production declines and planned downtime at the Kakap offshore platforms for installation of gas processing facilities required for the upcoming startup of gas production for the West Natuna Gas Project.

Exploration

Onshore

Drilling of the Suban 4 delineation well in South Sumatra was completed in the third quarter and an extended testing program is now underway. Suban 4 was drilled to 3,200 metres, approximately 700 metres deeper than the lowest tested gas in the previous wells drilled into the Suban structure, in an attempt to determine the depth of the gas/water contact. During drilling, the well penetrated a thicker section of Baturaja limestone and a similar thickness of Talang Akar sandstone compared to the Durian Mabok 2 well, located four kilometres to the southeast.

Testing of the bottom hole section of the well has confirmed gas productive reservoir down to a drilling depth of 2,931 meters, or over 400 meters deeper than previous testing in the field. The initial test of an open-hole interval within fractured pre-Tertiary granites between 2,715 metres and 3,200 metres flowed at a rate of 24 million cubic feet of natural gas per day with approximately 156 barrels of condensate per day at 3,000 pounds per square inch flowing tubing pressure through a 5/8-inch choke.

Mechanical problems in the well prevented deeper testing to determine the gas/water contact for the field.

Additional testing of Suban 4 is underway in the shallower zones to determine productivity, reservoir continuity with other wells in the field, and to provide further information on gas reserves. Spudding of the Suban 5 well is planned for late in the fourth quarter of 2000 with potential further delineation drilling in 2001.

In the fourth quarter, the company plans to commence its delineation program on the Suban Baru oil accumulation that is located in shallow sands above the large Suban gas accumulation. If the delineation program is successful, the company intends to develop the field to bring it on production by late 2001.

In the Tungkal PSC, a seismic program was completed in the third quarter with a focus to provide drilling locations in the Mengoepeh field and on an adjacent prospect. The company plans a two well drilling program commencing in the fourth quarter with a goal to further delineate the extent of hydrocarbons in this part of the block.

Offshore

In the third quarter, the company completed the drilling of the Sawangan 1X well in the Sakala Timur block in the East Java area. The overlying section of the objective sands was present but was water bearing, and the well was plugged and abandoned.

Drilling of four wells in the Ketapang block and one well in the Sebuku block will commence in the fourth quarter and the program is expected to be completed over the next six months.

Other

In the third quarter of 2000, the company received approval from Corridor Loan lenders group to alter the terms of the loan such that disbursements will occur quarterly rather than semi-annually, thereby providing more timely access to the cash generated from the Corridor PSC. On November 8, 2000, the first quarterly disbursement will occur and funds will be disbursed from the restricted Corridor Loan offshore trust accounts for the scheduled quarterly loan repayment of $7 million and a mandatory early repayment of $25 million.

An additional $30 million will be released to the unrestricted cash category, which would not have been available to the company until February 8, 2001 if the change to quarterly disbursements had not occurred.

The company had planned to conclude a listing of Indonesian Depository Receipts (IDRs) on the Jakarta Stock Exchange during the fourth quarter of 2000. This process has been delayed until 2001 due to new plans by the Indonesian securities authorities to issue new regulations specific to IDRs.

For more information, visit Gulf Indonesia's website at www.gulfindonesia.com (*)