Management Resource Solutions Regulatory News (MRS)

FOR IMMEDIATE RELEASE

17 February 2012

2011 Production and Year End Reserves Report and Operational Update

Melrose Resources plc (LSE: MRS) ("Melrose" or "the Company"), the oil and gas exploration, development and production company, today reports annual production figures for 2011 and a summary of the Company's oil and gas reserves as at 31 December 2011. This information is provisional and unaudited and may be subject to further review.

The Company will announce its results for the year ended 31 December 2011 on Wednesday 28 March 2012. 

2011 Production

Melrose's net entitlement production in 2011 totalled 35.4 Bcf of gas and 0.7 MMbbl of oil, condensate and LPG equating to an average daily production rate of 18.7 Mboepd. This reflects a five percent increase compared to 17.9 Mboepd in 2010.

On a working interest basis, the Company's 2011 production totalled 62.9 Bcf and 1.7 MMbbl of oil, condensate and LPG giving an average daily rate of 34.3 Mboepd. This compares to current guidance of 36.0 Mboepd and the difference is primarily due to delays experienced placing the North East Abu Zahra-2 development well on production late in the year.

The annual production figures reflect a shift of balance within the portfolio, with increased volumes from the Kaliakra and Kavarna gas fields, offshore Bulgaria, being offset by production declines in Egypt.

In Egypt, the Company's working interest production totalled 47.0 Bcf and 1.7 MMbbl of oil, condensate and LPG, averaging 26.8 Mboepd. Net entitlement production was 19.5 Bcf and 0.7 MMbbl of oil, condensate and LPG giving an average rate of 11.2 Mboepd. Working interest production from Bulgaria totalled 15.5 Bcf, at an average rate of 7.3 Mboepd. In the USA, production totalled 0.5 Bcf of gas contributing an average rate of 0.2 Mboepd, which represents eleven months of production prior to disposal.

The average realised prices received by Melrose during the year were as follows:

Proved and Probable Reserves

The Company's total Proved plus Probable reserves at 31 December 2011 were 35.6 MMboe on a net entitlement basis and 84.4 MMboe on a working interest basis.

The net entitlement reserves of 35.6 MMboe exclude the volume of hydrocarbons which the Egyptian Government takes under the terms of the Company's Production Sharing Contracts in lieu of taxes and royalties. A detailed breakdown of the reserves by category and country is as follows:

The year end 2011 figures reflect the annual production volume of 6.8 MMboe, the previously reported Kaliakra reserves downgrade of 2.4 MMboe and US East Texan asset disposal and write-offs of 1.9 MMboe, offset by an increase in the Company's net entitlement reserves in Egypt of 0.8 MMboe.

The year end 2011 net entitlement reserves for Egypt were calculated assuming a Brent oil price of $90 per barrel (flat) whereas $70/bbl was used for the year end 2010 figures. If the 2011 figures were re-stated using a $70/bbl price assumption to allow direct comparison to the prior year they would be 1.2 MMboe higher.

A detailed breakdown of the working interest reserves of 84.4 MMboe by category and country is as follows:

The year end 2011 working interest reserves reflect the annual production volume, the Kaliakra and US East Texan revisions and a combined reduction of 4.0 MMboe on the Company's Egyptian fields.

The reduction in the Egyptian working interest reserves has not resulted in lower net entitlement reserves. This is because reserves additions have been made in the South East Mansoura Concession, which benefits from a high net entitlement percentage (46 percent) whereas reserves reductions were in the Mansoura Concession with a lower net entitlement percentage (circa 24 percent late in the field lives). The most material reserves movements were an addition of 4.3 MMboe in South Damas and downgrades of 3.3 MMboe and 3.0 MMboe in West Khilala and North East Abu Zahra, respectively.

Operational Update

Egypt

2011 was a year of significant political change in Egypt, commencing with a period of civil unrest which catalysed the resignation of President Mubarak, the formation of an interim government and, most recently, free parliamentary elections. While these important events were unfolding, Melrose experienced no material disruption to its production and drilling operations and continued to receive regular payments from EGPC for its hydrocarbon sales.

On the Mansoura concession, the EDC-9 drill rig has completed operations on the West Khilala-8 development well which encountered 102 feet of net gas pay with excellent reservoir properties. The well will shortly be tied back for production.

The rig is now in the process of moving to drill the South Khilala-2 well, targeting 10 Bcf of reserves in the southern lobe of the South Khilala structure which is interpreted to be only in partial pressure communication with the existing production well in the north of the field.

The Company has applied to the Egyptian authorities for an extension to the remaining un-relinquished area of the Mansoura Concession which expires on 22 June 2012. Given the political changes currently taking place in the country there is some uncertainty whether the approvals process and extension award can be completed before the expiry date. With this in mind, the Company is planning to accelerate two well operations in the Mansoura Concession to ensure that the full value of the concession area is captured and these activities will follow the South Khilala-2 well completion.

The first operation will be to test and complete the East Dikirnis-1 discovery well which is required to secure the development lease for the field. The well was originally drilled in 2009, approximately eleven kilometres to the east of the West Dikirnis field, and encountered 38 feet of gas overlying an 11 feet thick oil rim. The estimated P50 reserves are 3 Bcf with 0.3 MMbbls of liquids and a low-cost tie back to the West Dikirnis facilities yields an attractive rate of return.

The second operation will be the drilling of the North West Zahayra-1 exploration well to test an oil prospect four kilometres to the north of the West Zahayra discovery. The prospect has P50 reserves of 1.4 MMbbl of oil with a 35 percent chance of success and could potentially be developed in tandem with the West Zahayra field.

In order to complete the above activities prior to relocating the EDC-9 rig to southern Egypt to drill the first exploration well on the Mesaha block, the drilling schedule has been re-sequenced. The Al Hajarisah-1 exploration well in South East Mansoura and further development wells in Mansoura are now scheduled to be drilled after the Mesaha well has been completed.

Bulgaria

As previously announced, gas sales contract amendments have been signed with Bulgargaz EAD and Agropolychim under which they will purchase the combined Kaliakra and Kavarna 2012 production volume (13.7 Bcf excluding fuel gas). The gas price equates to US$8.50 per Mcf at the current Euro/US$ exchange rate.

Regarding the Galata block exploration programme, the processing and interpretation of the new 3D seismic data set is underway and expected to be completed by the end of April 2012. The data will be used to update the prospect and lead inventory and to help formulate future drilling plans for the central area of the concession.

Romania

Tenders have been received from twelve contractors for the acquisition of 900 kilometres of 2D seismic data and 1,300 square kilometres of 3D seismic data on the Muridava and Est Cobalcescu blocks. Subject to a satisfactory outcome to the tender evaluation, the acquisition contract is expected to be negotiated and awarded by the end of March with a view to acquiring the survey over the summer months.

France

The interpretation of the 2D seismic survey which was acquired in early 2010 over the Rhone Maritime concession is nearing completion and the Company plans to meet with the Operator, Noble Energy, in the coming weeks to review the interpretation and discuss future work plans.

Commenting on this report, David Thomas, Chief Executive, said:

"The net production volumes from Bulgaria and Egypt last year, coupled with the strong commodity prices, have positioned the Company well to deliver good financial results. This coming year, with the benefit of increased gas prices in Bulgaria, we expect to see similar progress and look forward to achieving our new target of reducing financial gearing to below 60% by year end. Commensurate with the Company's improving financial outlook, we are highly focussed on delivering business development opportunities in the MENA region to supplement our existing asset portfolio."

For further information please contact:

or visit www.melroseresources.com

Note:

Proved and probable reserves are the estimated quantities of crude oil, natural gas and natural gas liquids which geological, geophysical and engineering data demonstrate with a specific degree of certainty to be recoverable in future years from known reservoirs and which are considered commercially producible. The figures are estimated on the basis that there should be a 90% probability that the actual quantity of recoverable reserves will be more than the amount estimated as proven and there should be a 50% probability that the actual quantity of recoverable reserves will be more than the amount estimated as proved and probable. The reserves estimates have been reviewed by expert independent petroleum engineers.

Glossary:

bbl - barrel of oil, condensate or natural gas liquids

Bcf - billion cubic feet of gas

Mbbl - thousand barrels of oil, condensate or natural gas liquids

MMbbl - million barrels of oil, condensate or natural gas liquids

MMboe - million barrels oil, condensate or natural gas equivalent

MMcfpd - million cubic feet of gas per day

Mboepd - thousand barrels of oil, condensate or natural gas liquids equivalent per day

Mcf - thousand cubic feet of gas

MMcf - million cubic feet of gas

MMcfpd - million cubic feet of gas per day

MMcfe - million cubic feet of gas equivalent

Disclaimer

This announcement contains certain operational and financial information in relation to 2011 that is subject to final review and has not been audited. Furthermore it contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the oil and gas exploration and production business. Whilst Melrose believes the expectations reflected herein to be reasonable, the actual outcome may be materially different owing to factors either within or beyond Melrose's control, and accordingly no reliance may be placed on the figures contained in such forward looking statements.