20 May 2011 07:00
FOR IMMEDIATE RELEASE
20 May 2011
MELROSE RESOURCES PLC
Interim Management Statement
Melrose Resources plc (LSE: MRS) ("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 2011 to 31 March 2011 ("the first quarter") and an operations update. This information is provisional and unaudited and may be subject to further review.
Exploration
During the first quarter Melrose continued to progress its various exploration initiatives, preparing for wells to be drilled in Turkey, Bulgaria and Egypt during 2011 and advancing a number of seismic study programmes.
In Turkey, the South West Kanun-1 exploration well on the Company's South Mardin concessions is drilling ahead at a depth of 1,310 feet and the next planned operation is to run and set the 20 inch casing string. The well is expected to reach its total depth of approximately 8,500 feet in mid to late July and is designed to test a four-way dip closed structure with oil potential in the Cretaceous and Ordovician formations. The prospect has combined P50 gross unrisked prospective resources of 55 MMbbl with a chance of success of 19 percent. Melrose holds a 66.7 percent interest in the licences.
In Bulgaria, Melrose is preparing to drill the Kaliakra East offshore exploration well in the third quarter 2011. This well will test a prospect which is on the same geologic trend as the Company's other existing fields and has unrisked prospective resources of 59 Bcf and a chance of success of 34 percent. Melrose is also preparing for the 500 square kilometre 3D seismic acquisition programme to be undertaken to the north of the existing fields during the second half of 2011.
In Egypt, the Company completed the acquisition of a new 2D and 3D seismic survey over the South East Mansoura concession to improve the definition of the Cretaceous oil play. As previously reported, the Company is finalising the data interpretation with a view to providing an update on the play potential and further details on the prospect selected for drilling in the third quarter.
On the Mesaha frontier exploration concession in southern Egypt, the ongoing 2D seismic survey is approximately 65 percent complete with 1180 kilometres of data having been acquired to date. The quality of the new seismic data is far superior to that of the regional 2D seismic lines acquired in 2010 and has already significantly improved the definition of the sedimentary basin. The preliminary field interpretation is confirming the presence of major structural features including tilted fault block geometries and intra-basinal highs.
In France, during the first quarter the Company completed the acquisition of a block-wide 7,500 kilometre 2D seismic survey over its offshore Rhone Maritime concession with its new partner, Noble Energy. The data is currently being processed and interpreted with the preliminary results due in the third quarter.
During the first quarter, the Company also announced that it had signed the Concession Agreements for two offshore blocks in Romania, namely, EX-27 (Muridava) and EX-28 (Est Cobalcescu). The Company holds an 80 percent interest in the blocks which are located in shallow water in the Western Black Sea. The licences contain multiple exploration plays and are on trend with other gas discoveries elsewhere in Romanian waters.
Field Developments
The Company continues to progress its development programme over its existing assets with a view to maximising the recoverable reserves and bringing new discoveries on stream.
In Egypt, as previously announced, the decision was taken to complete the pilot hole for the fifth West Dikirnis horizontal well as a vertical producer and this well is currently flowing at a steady rate of 310 bopd. Once the reservoir local to the wellbore has been depleted, the well will be sidetracked and completed as a horizontal well as planned. The pilot holes for the sixth horizontal well have been finished and the 800 feet horizontal well section is currently being drilled. This well is designed to drain a 40 foot thick sand interval in the oil rim to the north-east of the field in a region isolated from the central area of the field by a fault. The well is expected to come on stream in July and should produce at a rate of between 600 bopd and 800 bopd.
In Bulgaria, the Kavarna and Kaliakra field development was completed November 2010 and the fields are producing at a combined plateau rate of 46 MMcfpd. The Company is now commencing preparations to tie-in the Kavarna East discovery to the existing infrastructure, with production anticipated from the field in late 2012.
Production and Product Prices
Melrose's production in the first quarter averaged 40.7 Mboepd on a working interest basis. This represents a 7 percent increase compared with the same period in 2010, which is primarily due to production from our Kaliakra and Kavarna gas fields in Bulgaria. The total working interest production volumes were 18.7 Bcf of gas and 440 Mbbl of oil, condensate and LPG. On a net entitlement basis, first quarter production totalled 9.9 Bcf of gas and 190 Mbbl of oil, condensate and LPG giving an average daily rate of 21.0 Mboepd.
A summary of the Company's working interest and net entitlement production by country in the first quarter is as follows:
Working Interest
| Egypt | Bulgaria | US | Total |
Total Volume |
|
|
| |
Gas (Bcf) | 14.91 | 3.67 | 0.11 | 18.69 |
Liquids (MMbbl) | 0.43 | - | 0.01 | 0.44 |
Average Daily Rate |
|
|
|
|
Gas (MMcfpd) | 165.71 | 40.75 | 1.22 | 207.68 |
Liquids (bpd) | 4,873 | - | 11 | 4,884 |
Total Oil Equivalent (boepd) | 33,445 | 7,025 | 222 | 40,692 |
Net Entitlement
| Egypt | Bulgaria | US | Total |
Total Volume |
|
|
|
|
Gas (Bcf) | 6.07 | 3.67 | 0.11 | 9.85 |
Liquids (MMbbl) | 0.18 | - | 0.01 | 0.19 |
Average Daily Rate |
|
|
|
|
Gas (MMcfpd) | 67.49 | 40.75 | 1.22 | 109.46 |
Liquids (bpd) | 2,098 | - | 11 | 2,109 |
Total Oil Equivalent (boepd) | 13,734 | 7,025 | 222 | 20,981 |
The average product prices realised by the Company in the first quarter were as follows:
| Egypt | Bulgaria | US | Group |
Gas ($ per Mcf) | 2.81 | 7.18 | 4.37 | 4.45 |
Oil and condensate ($ per bbl) | 101.73 | - | 81.36 | 101.61 |
Financial Position
Total capital expenditure in the first quarter amounted to $14.0 million, of which $11.8 million was on development and $2.2 million on exploration activities.
There have been no major changes in the Company's balance sheet since 31 December 2010 and the net debt at 31 March was $412.8 million with a net debt to equity ratio of 121 percent (as compared to 133 percent at year end 2010).
The Company has already announced a proposed dividend of 3.4 pence per share for the year ending 31 December 2010. If approved by shareholders at the Annual General Meeting, scheduled to be held on 9 June 2011, it will be paid on 22 July 2011.
Business Outlook
The Company has recently updated its 2011 production guidance to 40.5 Mboepd on a working interest basis. This equates to 19.9 Mboepd on a net entitlement basis assuming a Brent oil price of $90 per barrel.
The 2011 capital expenditure forecast remains at $112 million of which approximately 50 percent is dedicated to exploration and field development activity, respectively. Some $21 million of the forecast is considered as contingent and relates to the optimisation of development projects in Egypt and seismic activity offshore Romania which may be re-phased into 2012.
Commenting on this report, David Thomas, Chief Executive, said:
"We are looking forward to the second half of the year when we will receive some key well results from Turkey, Bulgaria and Egypt and also see the product of our recent seismic programmes on the frontier exploration concessions in Mesaha and the Rhone Maritime. We are maintaining our focus on reducing the Company's financial gearing and are pleased to be reporting good progress towards our target of lowering it to around 100 percent by year end."
For further information please contact:
Melrose Resources plc David Thomas, Chief Executive Robert Adair, Executive Chairman Diane Fraser, Finance Director
|
0131 221 3360 |
Buchanan Communications Tim Thompson Ben Romney |
0207 466 5000
|
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.