18 Nov 2011 07:00
FOR IMMEDIATE RELEASE
18 November 2011
Melrose Resources plc
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 covering the period 1 July 2011 to 30 September 2011 ("the third quarter") and an operations update. This information is unaudited and may be subject to further review.
Egypt
As previously announced, the North East Abu Zahra-2 production well has been successfully drilled as a high angle well at the crest of the reservoir structure. The well is currently being completed for production and will be flowed at a restricted rate of approximately 15 MMcfpd to maximise gas recovery.
The EDC-9 drilling rig will subsequently be used to drill two further development wells on the Mansoura concession namely, West Khilala-8 and South Khilala-2 before mobilising to the South East Mansoura concession to drill the Al Hajarisah Cretaceous oil prospect in Q2 2012.
In the Mesaha concession in southern Egypt, processing and interpretation of the 2D seismic data acquired earlier in the year is continuing and is expected to be completed in early 2012. In the interim, Melrose and its joint venture partners have been granted a three year extension to the Mesaha licence through to October 2014. The extension work programme commitment includes 1,500 kilometres of 2D seismic or 500 square kilometres of 3D seismic data and one well which is scheduled to spud in mid 2012. Melrose's net financial commitment for the extension period is $7.2 million.
Bulgaria
The planned 3D seismic acquisition programme over the central region of the offshore Galata exploration concession has been completed ahead of schedule. A total of 512 square kilometres of data were acquired over the area, which contains the Chaika prospect with prospective resources of 80 Bcf (P50) and a 26 percent chance of success as well as two other exploration leads.
Melrose is reviewing the development of the Kavarna East gas field offshore Bulgaria to ensure that the Company maximises the economic return of the investment. This is a relatively straightforward tie-in to existing facilities which can be completed quickly and at low cost.
Romania
The Company received formal notification from the Romanian Government that the concession agreements pertaining to the Muridava and Est Cobalcescu blocks, offshore Romania, had been ratified by the Council of Ministers on 24 October 2011. The Company can now embark on the first phase of its exploration programme on the blocks, which will involve the acquisition of 900 kilometres of 2D seismic and 1,300 square kilometres of 3D seismic data over the various exploration plays which exist on the concessions. The Company is planning to commence the seismic survey during the first half of 2012.
France
A 7,500 kilometre 2D seismic survey was successfully acquired over the Rhone Maritime concession, offshore southern France in the first half of the year. During the third quarter, the seismic processing has been continuing and is expected to be completed in February 2012.
Production and Product Prices
Melrose's production in the third quarter 2011 averaged 17.7 Mboepd on a net entitlement basis, as compared to 17.8 Mboepd during the third quarter in 2010. The total net entitlement production volumes were 8.4 Bcf of gas and 182 Mbbl of oil, condensate and LPG. On a working interest basis, third quarter production totalled 14.3 Bcf of gas and 430 Mbbl of oil, condensate and LPG, giving an average rate of 31.4 Mboepd.
A summary of the Company's net entitlement and working interest production by country for the third quarter is as follows:
Egypt | Bulgaria | US | Total | |
Total Volume | ||||
Gas (Bcf) | 4.2 | 4.1 | 0.1 | 8.4 |
Liquids (Mbbl) | 182 | - | - | 182 |
Average Daily Rate | ||||
Gas (MMcfpd) | 45.7 | 44.3 | 1.2 | 91.2 |
Liquids (Mbopd) | 2.0 | - | - | 2.0 |
Oil equivalent (Mboepd) | 9.9 | 7.6 | 0.2 | 17.7 |
Working Interest
Egypt | Bulgaria | US | Total | |
Total Volume | ||||
Gas (Bcf) | 10.1 | 4.1 | 0.1 | 14.3 |
Liquids (Mbbl) | 430 | - | - | 430 |
Average Daily Rate | ||||
Gas (MMcfpd) | 109.4 | 44.3 | 1.2 | 154.9 |
Liquids (Mbopd) | 4.7 | - | - | 4.7 |
Oil equivalent (Mboepd) | 23.5 | 7.6 | 0.2 | 31.4 |
The average product prices realised by the Company in the third quarter were as follows:
Egypt | Bulgaria | US | Group | |
Gas ($ per Mcf) | 2.81 | 7.41 | 4.58 | 5.07 |
Oil and condensate ($ per bbl) | 111.42 | - | 84.71 | 111.33 |
Financial Position
Total capital expenditure in the third quarter amounted to $21.5 million, comprising $10.7 million for exploration activities, mainly in Bulgaria and Turkey, and $10.8 million for Egyptian development drilling.
There have been no major changes in the Company's balance sheet since 30 June 2011 and the net debt at 30 September was $368.6 million with a net debt to equity ratio of 105 percent.
Business Outlook
The Company's firm 2011 capital expenditure forecast has been reduced from $87 million to $78 million, of which approximately 40 percent relates to exploration seismic and drilling activity and the remainder to field development work programmes. The capital expenditure reduction primarily relates to adjustments to the Egyptian drilling schedule.
Revenue generation in Bulgaria remains strong and in Egypt, EGPC have contractually committed to increase Melrose's oil and gas sales receipts in the fourth quarter (as compared to the third quarter). The Company remains on track to achieve its target to reduce financial gearing to around 100 percent by year end.
The Company has continued to maintain stable operations in Egypt during the year, unaffected by the current political change process, and is monitoring the situation in the country closely as the Parliamentary elections approach.
Details of the Company's 2012 Budget and Work Programme will be provided in a subsequent press release. In the interim, the main components of the work plan will include: in Egypt, the West Dikirnis LPG plant expansion and West Khilala compression projects, the West Khilala-8 and South Khilala-2 development wells, and the Al Hajarisah and Mesaha exploration wells; in Bulgaria, the processing and interpretation of the new Galata block 3D seismic data with a view to drilling the Chaika prospect in 2012; in Romania, 2D and 3D seismic acquisition on the Muridava and Est Cobalcescu blocks and in France, completing the 2D seismic data interpretation on the Rhone Maritime concession and optimising the future work programme.
Commenting on this report, David Thomas, Chief Executive, said:
"Melrose has continued to generate strong cash flow during the third quarter and we remain on track to deliver our financial targets for 2011. We are looking forward to pursuing an active exploration and development work programme in 2012 and, in particular, to commencing the Company's first exploration operations in Romania in the first half of the year.
For further information please contact:
Melrose Resources plc David Thomas, Chief Executive Diane Fraser, Finance Director
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0131 221 3360 |
Pelham Bell Pottinger |
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Mark Antelme Henry Lerwill | 0207 861 3232 |
or visit www.melroseresources.com
Glossary:
Bcf - billion cubic feet of gas
Mbbl - thousand barrels
Mbopd - thousand barrels of oil per day
Mboepd - thousand barrels of oil equivalent per day
Mcf - thousand cubic feet
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.