Drilling with aerated muds is becoming more often and essentially used while drilling depleted, low pressured and highly fractured formations. One of the major challenges that have to be faced in such operations is the selection of the proper flow rates for gas and liquid phases. Also, estimation of the physical behavior of aerated fluids inside the annulus is another task that needs to be considered. Although flow of two-phase fluids is studied in detailed for pipes, not much is known for annular geometries. This study aims to identify the flow schemes of gasified fluids flowing inside a horizontal annulus. Experiments have been conducted at METU Multiphase Flow Loop using air-water mixtures with various in-situ air and water flow velocities of 0-120 ft/s and 0-10 ft/s, respectively. A digital high speed camera is used for recording each test dynamically for identification of the liquid holdup and flow patterns. A flow pattern map is developed as a function of superficial flow velocities of liquid and gas phases, and the developed map is compared with existing flow pattern maps, such as Beggs & Brill and Taitel & Dukler. Then, a new classification of two-phase flow patterns by using discriminant analysis is proposed. Observed two-phase flow patterns are: Smooth Stratified (SS), Wavy Stratified (WS), Plug (PL), Slug (SL), Churn (CH), Wavy Annular (WA), Dispersed Annular (DA) and Dispersed Bubbles (DB). When developed flow pattern map is compared with existing flow pattern maps used for pipes, it is observed that existing flow patterns are not accurate for horizontal annular geometries.