Management Resource Solutions Regulatory News (MRS)

FOR IMMEDIATE RELEASE

 17 May 2012

Interim Management Statement

Melrose Resources plc ("Melrose" or "the Company"), the oil and gas exploration, development and production company, today issues its Interim Management Statement to cover the period 1 January 2012 to 31 March 2012 ("the first quarter") and an operations update. This information is provisional and unaudited and may be subject to further review.

Egypt

During the first quarter the Company continued to progress its development and exploration programmes in Egypt, with operations unaffected by the ongoing political changes in the country and oil and gas sales receipts on schedule.

The West Dikirnis LPG plant expansion project is well under way with all major equipment and project services contracts awarded. The plant chiller unit is currently being fabricated in Canada and the turbo expander is being prepared for shipment from the USA to Egypt. The project remains on schedule for completion in late 2012. The West Khilala front end gas compression project is currently being tendered with a view to start-up in mid 2013.

The West Khilala-8 development well has been completed by the EDC-9 drilling rig and came on stream on 8 March at a rate of 8.5 MMcfpd. The well was drilled at a high angle near the crest of the field and encountering 102 feet of net vertical gas pay with excellent reservoir properties. The open hole logs from the well were positive and indicated that the initial field-wide gas water contact has moved approximately 15 feet since field start up in February 2007 confirming a weak aquifer influx and re-affirming the field reserves estimate.

The EDC-9 rig is currently drilling the South Khilala-2 development well which is targeting approximately 10 Bcf of reserves contained in the southern lobe of the field. The well has reached its planned total depth and open hole logs indicate a net vertical gas pay of 68 feet which is slightly better than prognosed. The well is currently being completed prior to tie back for production.

Following the South Khilala-2 well operations, the drilling rig will be moved to East Dikirnis to complete the original field discovery well for production. The discovery well was drilled in 2009 and encountered 38 feet of gas pay overlying an 11 feet thick oil rim and has estimated P50 reserves of 0.3 MMbbl of liquids and 3 Bcf of gas. A field development plan has been approved by the Egyptian authorities and the field is expected to commence production in early 2013.

During the first quarter, the Company has been in discussions with the Egyptian authorities regarding a possible extension to the term of the Mansoura exploration concession. The authorities have confirmed a minimum extension of 6 months, until December 2012, and indicated a willingness to consider further extensions beyond this date. This positive development provides the Company with additional time to review the remaining prospectivity in the concession and potentially to include the planned North West Zahayra exploration well in future license period discussions.

Elsewhere, the Company is preparing to drill its first exploration well on the frontier Mesaha exploration concession in southern Egypt. The joint venture partnership has agreed a well location to test a large intra-basinal structure and the access road and well site construction activities are underway. The well is expected to spud during September 2012.

Bulgaria

The strong production performance of the Kaliakra and Kavarna fields has continued and the fields have produced at an average rate of 41 MMcfpd during the first quarter, in line with agreed gas sales nominations.

The Company has recently conducted a reservoir data acquisition programme on the shut-in Galata field to confirm the remaining reserves and gather information required to update the gas storage feasibility study. The results of the programme were positive and confirmed remaining reserves of at least 6 Bcf and more limited aquifer movement than previously predicted. Furthermore, the field data indicate that the field could be placed back on production as early as next year and this will be discussed with the Bulgarian authorities over the forthcoming months.

The interpretation of the recent Galata Block 3D seismic survey is being finalised and a number of structures have been identified within three high graded areas in the central area of the concession. The interpretation is expected to complete in June when the Company will be in a position to provide details of the survey findings and confirm the future drilling plans. An independent prospective resource report is also being prepared for the block by the Company's reserves auditors.

Romania

In line with its previously stated strategy, during the first quarter Melrose agreed to farm-out a 40% interest in the offshore Muridava concession to a wholly-owned subsidiary of Sterling Resources Limited. Post transaction, Melrose has retained a 40 percent working interest in the concession and operatorship. The Company is also considering the possibility of farming out a 30 percent interest in the neighbouring Est Cobalcescu concession with a view to equalising its equity position across both blocks.

The work programme on the concessions is planned to commence in June 2012 with the acquisition of 1,920 square kilometres of 3D seismic, sufficient to cover both blocks. A contractor has been selected to conduct the seismic programme and detailed contract negotiations are ongoing.

France

The Company has experienced some delays receiving the approval of the French authorities for the Rhône Maritime exploration license extension and the transfer of operatorship to its new joint venture partner, Noble Energy Inc. This is thought to be associated with political developments during the run-up to the recent French presidential election and the Company is seeking clarification on the situation from the relevant government agencies.

Production and Product Prices

Melrose's production in the first quarter averaged 29.0 Mboepd on a working interest basis and the total production volumes were 13.1 Bcf of gas and 381 Mbbl of oil, condensate and LPG. On a net entitlement basis the average daily rate was 16.2 Mboepd with total volumes of 7.6 Bcf of gas and 160 Mbbl of oil, condensate and LPG.

A summary of the Company's working interest and net entitlement production by country in the first quarter is as follows:

Working Interest

Net Entitlement

The average product prices realised by the Company during the reporting period were as follows:

The Bulgarian gas price is expected to average around $8.50 per Mcf during 2012, with approximately 75 percent of the annual production volume being sold to Bulgargaz and 25 percent to an independent purchaser at a higher price. The price realised during the first quarter is lower than the average annual price forecast due to the structure of the gas sales contracts and the nominations schedules which provide for increased prices and higher sales volumes to the independent purchaser later in the year.

Financial Position

During the first quarter the net debt to equity ratio has been reduced to 81 percent (as compared to 89 percent at year end 2011). There have been no major changes in the Company's balance sheet since 31 December 2011.

Total capital expenditure in the first quarter amounted to $10.0 million, of which $9.2 million was on development and $0.8 million on exploration activities.

The Company has previously announced a proposed dividend of 3.6 pence per share for the year ending 31 December 2011. If approved by shareholders at the Annual General Meeting, scheduled to be held on 7 June 2012, it will be paid on 20 July 2012.

Business Outlook

The 2012 production guidance remains 28.0 Mboepd on a working interest basis. This equates to 15.4 Mboepd on a net entitlement basis assuming a Brent oil price of $90 per barrel. 

Based on the Bulgarian and Egyptian production revenues, Melrose's financial position continues to strengthen and the Company remains on track to achieve its financial gearing target of around 60 percent by year end 2012.

The 2012 capital expenditure forecast remains at $83 million of which approximately 45 percent is dedicated to exploration activity and the balance to development programmes.

Approximately $21 million of the capital forecast is contingent and relates to the timing of the planned Chaika exploration well in Bulgaria which may be rescheduled to 2013 to form part of a larger Western Black Sea drilling campaign ($9 million), the potential farm-out of a 30 percent working interest in Est Cobalcescu ($7 million) and expenditure phasing on the West Dikirnis LPG plant expansion project ($5 million).

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

"We are looking forward to progressing the Company's various exploration and development initiatives and, in particular, we are keen to finalise the results from the recent 3D seismic survey offshore Bulgaria and to commence seismic acquisition on our new licences in Romania. The Company will then be well placed to embark on a multi-well drilling programme in the Western Black Sea in 2013 and beyond. The second half of this year will also see us drill the first exploration well in the untested Mesaha sedimentary basin in southern Egypt."

For further information please contact:

or visit www.melroseresources.com

Glossary:

Bcf - billion cubic feet of gas

boepd - barrels of oil equivalent per day

bopd - barrels of oil per day

bpd - barrels of oil or condensate per day

LPG - liquid petroleum gas

Mbbl - thousand barrels of oil or condensate or liquid petroleum gas

Mboepd - thousand barrels of oil equivalent per day

Mcf - thousand cubic feet

MMbbl - million barrels of oil or condensate or liquid petroleum gas

MMcfpd - million cubic feet per day

Disclaimer

This announcement 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. While 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.