Management Resource Solutions Regulatory News (MRS)

29 Oct 2008 07:00



Melrose Resources plc

Exploration and Production Update

Melrose Resources plc (LSE: MRS) ("Melrose" or "the Company"), the oil and gas exploration, development and production company, today announces a successful exploration well offshore Bulgaria and provides an update on its drilling and production operations.

Drilling Activity

Bulgaria

The Prometeu jack-up rig is currently engaged in drilling operations on the Kavarna No.1 exploration well, which is located approximately 7 km to the east of the Melrose-operated Galata field gas field.

The well was drilled to total depth of 2,899 feet and encountered the top of the Paleocene reservoir target at a depth of 2,628 feet. The mud log obtained while drilling established that the reservoir formation was well developed and gas bearing and the initial reserves estimate for the discovery is 24 Bcf.

While conditioning the wellbore to run open-hole logs a strong gas influx occurred and for safety reasons it became necessary to plug the well which will immediately be re-drilled. The incremental costs associated with the remedial operations are estimated at $6 million, the majority of which is expected to be recovered from insurance.

Following the completion of operations on Kavarna, the Prometeu rig will be used to perform an extended well test on the GE3-Kaliakra No.1 discovery well announced earlier this year. The Kaliakra discovery is located approximately 15 km to the east of the Galata field and is estimated to contain reserves of up to 47 Bcf.  

Kaliakra is being developed using a subsea tie-back to the Galata platform with first gas production scheduled for the third quarter 2009. Plans are also now being formulated for the development of the Kavarna discovery and first production is expected in 2010. 

Egypt

The EDC-9 drilling rig is currently completing the West Dikirnis No.7 well as the first horizontal oil producer to be drilled in the West Dikirnis field. The well has reached a total depth of 11,587 feet and a horizontal wellbore 890 feet long has been drilled within the reservoir section. Some operational delays have been experienced drilling the well but completion operations are now ongoing with a view to bringing the well on production next month.

  The West Zahayra No.2 well has been drilled using the EDC-54 rig to appraise the West Zahayra No.1 Qawasim discovery and to test a deeper Sidi Salim exploration target. The well reached a total depth of 10,532 feet and although hydrocarbon shows were evident, they were considered to be non commercial and the well has been plugged and abandoned. 

The EDC-54 rig will now move to drill the East Dikirnis (also known as North Tariff) exploration prospect in the El Mansoura concession which has unrisked reserves potential of 49 Bcfe with an estimated chance of success of 48%. The rig will then be used to drill a horizontal production well on the Tamad oil field where the Company sees the potential to add in excess of 1.0 MMbbls of oil reserves through further field development investment.

The EDC-9 rig will next be used to drill the North Dikirnis prospect which lies in between the West Dikirnis and the South Zarqa fields and has unrisked reserves of 33 Bcfe and a chance of success of 32%.  It will then drill a second horizontal well in the West Dikirnis field. 

United States 

In East Texas, the Company is preparing to spud the Ramsey No.1 well in mid-November 2008 to test a Reklaw deep gas prospect with unrisked reserves potential of 26 Bcf and a chance of success of 50%. Subsequently, the rig will drill the Nunan No.1 well which has multiple pay targets with a total unrisked reserves of 117 Bcfe and an averaged chance of success of 25%.

Production Outlook

In Egypt, the Company has completed the Qantara field facilities redevelopment and the Qantara No.4 sidetrack well was brought on stream on 12 October. The well is currently flowing at a condensate rate of 510 Bpd and 3.5 MMcfpd of gas. The East Abu Khadra field development has slipped by approximately six weeks due to delays experienced accessing the preferred pipeline route and the field is now expected to be on stream in early-December. The operational delays experienced drilling the West Dikirnis No.7 horizontal well have also resulted in a slight reduction to the West Dikirnis production forecast for this year. 

In Bulgaria, Melrose continues to pursue the Galata field gas storage project and in early November will submit the commercial development plan to the Bulgarian authorities for approval. Pending receipt of the approval, the Company has reduced the Galata production rate to around 11 MMcfpd to ensure sufficient gas is left in the reservoir to implement the project and expects to cease production from the field at the end of this year. 

Based on the above, the Company believes it is prudent to reduce its 2008 net entitlement production guidance from 19,200 boepd to 18,300 boepd.

Commenting on the update, David Thomas, Chief Executive said:

"We are very pleased with the result of the Kavarna No.1 well which significantly de-risks the remaining exploration potential in the geologic trend running from Galata to the Kaliakra discovery and beyond. We look forward to seeing the results of the Kaliakra well test later this year and we then have three additional prospects on the trend identified as potential drilling candidates in 2009 and 2010. The regional reserves potential, coupled with the planned Galata gas storage project, should add material value to the company going forward."

For further information please contact

or visit www.melroseresources.com

Glossary:

Bcf - billion cubic feet of gas 

Bcfe - billion cubic feet of gas equivalent 

bpd - barrels of oil or condensate per day

boepd - barrels of oil equivalent per day 

MMbbls - million barrels of oil or condensate 

MMcfpd - million cubic feet of gas  per day