Syntroleum Issues Operations Update for Fourth Quarter and Full Year 2004; Reports Progress On Aje Project.

TULSA, Okla. -- Syntroleum Corporation (Nasdaq:SYNM) releases this operational update after its quarterly conference call. "During 2004, we more fully implemented our business strategy of moving from a pure energy technology company to an energy production company," said Jack Holmes, President and CEO of Syntroleum, "Specifically, we will use GTL technology to develop, own and produce stranded oil and gas reserves. The opportunity set looks increasingly strong and the competitive edge that GTL provides us is opening doors to those opportunities."

Following the successful completion of the fuel production for the DOE ultra clean fuels program at Syntroleum's Catoosa Demonstration Facility, Syntroleum is now directing its resources toward commercial opportunities.

On September 2, 2004, Syntroleum announced the acquisition of the rights to a 454,000 acre block offshore Nigeria that contains the Aje oil & gas discovery. The Company obtained these rights from Yinka Folawiyo Petroleum Company or YFP, the petroleum subsidiary of one of the largest industrial companies in Nigeria. The Company reported that its proposal was selected over several competing offers because of its ability to monetize the potential large natural gas reserves using its GTL technology.

Utilizing the industry's state of the art geophysical technology, Sovereign Oil & Gas, LLC, with whom Syntroleum has a Joint Development Agreement, re-evaluated the geologic and reservoir picture where two wells had been drilled and tested. In the process, a potentially major accumulation of oil and natural gas was identified. Both wells tested significant volumes of oil and gas. The evaluation indicated that this potentially major accumulation could be confirmed with one or more delineation wells.

Based on Sovereign's geological and geophysical interpretation and an independent evaluation performed by reserve engineering firm, Netherland Sewell, Syntroleum believes this discovery could contain as much as 200 million barrels of recoverable crude oil and 1.5 trillion cubic feet of liquid rich natural gas. These figures include proved, probable and possible reserves. The gas produced from Aje-1 and Aje-2 contained 45 barrels of condensate per million cubic feet of gas and 50 barrels of natural gas liquids per million cubic feet of gas. If these tests are indicative of the entire potential accumulation, this gas composition could yield more than 75 million barrels each of condensates and natural gas liquids over the project life. In addition, GTL fuels would add another 130 million barrels.

The goal of the company is to drill a delineation well, Aje-3, in the second or third quarter of 2005 depending on rig availability and approvals from the Nigerian government. If the Aje-3 well is successful, it could move a significant portion of the probable and possible reserves into the proved category and justify development. If the potential gas reserves are converted to liquids through Syntroleum's GTL process, the resulting liquid volumes, including crude oil, condensate, natural gas liquids and GTL products, could total approximately 480 million barrels. The Company also believes that there are other potential accumulations present on this block.

Syntroleum has attracted a group of companies into the Aje project to serve as working interest participants. The group consists of Lundin Petroleum, Challenger Minerals, Providence Energy, Howard Energy, and Palace Energy. Lundin is a publicly traded Swedish independent oil and gas company with extensive international operations. Challenger is the exploration and production subsidiary of Global Santa Fe, which is one of the largest drilling contractors in the world.

When the assignment of interests and drilling permit are approved by the Nigerian government, Syntroleum will receive a cash bonus of $5.7 million. Syntroleum will also pay 10% of the cost to drill, log and test the first two wells to earn a 32.5% working interest in the project. Syntroleum's share of the net revenues from the project or its net revenue interest, before payout is 31% and after project payout, this net revenue interest is reduced to approximately 25%. The current turnkey cost estimate, or the dry hole cost exposure, for drilling and logging the first delineation well is $20 million. If the well is successful, there will also be additional testing and completion costs for which Syntroleum will pay 10 percent. Syntroleum's interest also includes a one-half percent before project payout and one percent after project payout over-riding royalty interest from production on the block attributable to all working interest participants except YFP. In addition, a $2.8 million cash bonus will be paid to Syntroleum at first commercial production.

Syntroleum reported that this project will be treated using a royalty/tax type of fiscal system by the Nigerian Government. Under their sliding scale royalty system, this deepwater development is expected to enjoy a lower average royalty rate of only 4%. The oil and condensate is also subject to a maximum petroleum profits tax or PPT of 50%. This tax is applied to revenues that are net of royalties and capital and operating costs. Net revenues from gas-related products that include GTL fuels and NGLs are subject to a corporate income tax rate of 35%.

As currently interpreted, the crude oil and natural gas reservoirs are separate and can be produced independently. If this interpretation is confirmed by the Aje-3 delineation well, Syntroleum believes early crude oil production could commence in the first half of 2007. If successful, the company plans to drill a total of four oil wells and lease a Floating Production, Storage and Offloading vessel or FPSO, to produce an expected 40,000 barrels of oil per day. In its early planning, the Company is using a total cost of the four wells to be drilled, completed and tied back to the FPSO in the range of $150 to $160 million. Under its agreement with the other participants, Syntroleum would pay $35-$40 million of this total cost. Advanced Drilling Technologies Incorporated or ADTI is the drilling subsidiary of Challenger and is expected to be the turnkey drilling contractor for drilling the first two appraisal wells.

If a successful development proceeds, the GTL plant is expected to be installed and started up two and a half years after the oil begins full production. When the GTL plant is online, the production could be increased to about 70,000 Bpd of total liquids including crude oil, condensate, natural gas liquids and GTL products. For its preliminary economics, Syntroleum has assumed a tolling fee of $15 per barrel of all gas-related liquids for capital recovery and operation of the GTL plant.

Syntroleum also announced that it has been working on a solution to the gas monetization which involves building the GTL plant on the same vessel as the oil production and storage facilities. "Initial studies have been encouraging." Holmes said, "This could give us the option of either building the GTL Barge separately as originally planned, or replacing the leased oil FPSO with a combination Oil and GTL FPSO. We believe the development of a combination Oil and GTL FPSO could provide significant competitive advantages on other stranded oil and gas reserves in deeper water."

Syntroleum reported that pursuant to its Joint Development Agreement with Sovereign, it has identified several additional projects to utilize its GTL technology in developing stranded oil and gas reserves. Syntroleum and Sovereign are pursuing some of those at this time and intend to apply the Aje business model where they would secure the block, farm-in third parties to pay a disproportionate share of the cost and maintain a significant working interest in the project. "We have identified in excess of 200 fields containing between 1 and 3 TCF of stranded gas. We have narrowed that list down to forty that are the most attractive. The aggregate potential reserves associated with those fields are 7.5 to 8 billion barrels of oil equivalent," said Greg Jenkins, Syntroleum's Executive Vice President of Finance and Business Development.

U.S. Gas Initiative

During 2004, Syntroleum pursued a low BTU gas development project in Central Kansas to begin to generate recurring revenue. Its objective is to develop low BTU gas volumes utilizing existing technologies to upgrade the gas to pipeline quality by removing impurities such as nitrogen and carbon dioxide.

To date, the Company has acquired in excess of 70,000 acres of leasehold and has drilled six wells and re-entered three previously drilled wells. Syntroleum is now producing and selling untreated gas from the first well at a rate of about 200 thousand cubic feet per day or 200 mcf per day. This untreated gas is being sold at a discount of 15% to pipeline quality natural gas. Syntroleum's existing sales agreement will allow it to sell up to 1,250 mcf per day of untreated gas. The second and third wells tested at rates between 300 mcf per day and 1,700 mcf per day during short term tests. Extended production tests are scheduled for these wells and two others. Two additional wells are scheduled for frac-ing and testing. The remaining two wells, one re-entry and one drilled well, appear to be non-commercial and Syntroleum anticipates plugging and abandoning them. Syntroleum also reported that it has ordered a nitrogen removal unit which it expects to be operating in July. This plant is of a larger capacity than what the Company initially planned and is expected to process 4 million cubic feet of low BTU natural gas a day. The cost of this plant is expected to be $3 million. The Company is currently negotiating additional gathering and processing arrangements that it believes will influence its development plans and potentially enhance project economics.

As Syntroleum acquires production history from these first wells and tests from those wells yet to be completed, it will advance its development plans. "We are in the early stages of this program and it is premature to forecast the ultimate impact that this project will have on the company. Importantly, we have confirmed the play concept, we have gas flowing with more wells to be hooked up and we are generating revenue today," Holmes said.

Syntroleum Corporation (Nasdaq:SYNM) owns a proprietary gas-to-liquids process for converting natural gas into synthetic liquid hydrocarbons. The company plans to use its technology, as well as other third party gas processing technologies, to develop and participate in gas monetization projects in a number of global locations. More information on Syntroleum is available at www.syntroleum.com.

This document includes forward-looking statements as well as historical information. Forward-looking statements include, but are not limited to, statements relating to cash flows, monetize non-core assets and raise cash, the testing, certification, characteristics and use of synthetic fuels and alternative fuels, the Syntroleum Process and related technologies and products, GTL plants and GTL Barges based on the Syntroleum Process (including the development and operation of the Catoosa plant and other planned plants), the economic use of such plants, the continued development of the Syntroleum Process, oil & gas wells and plant productivity, and costs, negotiations with potential joint ventures, service providers and governmental entities, development of oil and gas production, project financing and timing, and the receipt and amount of license and other project revenues. When used in this document, the words "anticipate," "believe," "estimate," "expect," "intent," "may," "project," "plan" "should," and similar expressions are intended to be among the statements that identify forward-looking statements. Although Syntroleum believes that its expectations reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Important factors that could cause actual results to differ from these forward-looking statements include the potential that commercial-scale GTL plants will not achieve the same results as those demonstrated on a laboratory or pilot basis or that such plants will experience technological and mechanical problems, the potential that improvements to the Syntroleum Process currently under development may not be successful, the impact on plant economics of operating conditions (including energy prices), construction risks, risks associated with investments and operations in foreign countries, the ability to implement corporate strategies, competition, intellectual property risks, Syntroleum's ability to obtain financing and other risks described in the company's filings with the Securities and Exchange Commission.

(R) "Syntroleum" is registered as a trademark and service mark in the U.S. Patent and Trademark Office.