Management Resource Solutions Regulatory News (MRS)

31 Jul 2006 07:02

Melrose Resources PLC31 July 2006 FOR IMMEDIATE RELEASE 31 July 2006 MELROSE RESOURCES PLC Exploration and development activity in Egypt Melrose Resources plc today gives the following update of exploration anddevelopment activity on the El Mansoura Concession located in the Nile Delta inEgypt. As previously announced, the West Khilala No.2 well was drilled to a depth of10,400 ft using the PD-104 Rig and has been tested and completed as a producer.The Miocene sand interval was encountered from 9,925 ft to 10,090 ft and the gas/water contact established at 10,053 ft giving a gross hydrocarbon column of 128ft (122 ft net). The intervals perforated were from 9,925-9,959 ft and9,969-9,983 ft (48 ft in total). The well flowed at 25 MMcfpd and 75 bcpd on a36/64th choke and at flowing well-head pressure of 3,700 psi. The test data arebeing incorporated into a re-evaluation of the field and four further appraisaldrilling locations are being identified: with two wells to be drilled as soon aspossible. Melrose has committed to an 80 MMcfpd start up process facility, withthe equipment to be delivered and installed and a 15 km pipeline constructedover the next six months. Process capacity can be increased in units of 40MMcfpd as required (contingent upon future appraisal drilling results). Firstproduction is targeted for January 2007. Also as previously announced, the West Dikirnis No.2 well was drilled to a depthof 8,570 ft using the EDC-09 rig and has also been tested and completed as aproduction well. A single sand unit was encountered from 8,266 ft to 8,415 ft(149 ft gross). The interval from 8,266 ft to 8,398 ft (138 ft) is a hydrocarboncharged reservoir with an oil column from 8,325-8,397.5 ft (72.5 ft net) andwith the water contact interpreted at 8,398 ft. The well was perforated from8,357-8,377 ft and flowed at 2,234 bopd with 2.25 MMcfpd at on a 24/64th chokeand flowing well-head pressure of 1,970 psi. It is estimated that the well couldbe produced at up to 9,000 bopd through the existing 31/2" tubing completion. On the basis of the current most likely gas and oil in place estimates of 177Bcf of gas and 70 MMbbls of oil and condensate an outline fast track developmentplan has been adopted. Liquid recovery factors will be derived from modellingwork still in progress but a minimum figure of 40% recovery for the oil shouldbe expected. Gas and oil (two-phase) production will be flowed back to theexisting South Batra process plant through a 20 km, 10" pipeline. A 6" pipelinewill also be constructed with the 10" line in order to provide options shouldseparation facilities be required at the production site and separate gas/oilexport lines be required in the future. The existing South Batra plant will bemodified to accept up to 30,000 barrels fluid per day (20,000 bopd and 10,000bwpd) plus associated gas. Two firm plus two contingent development drillinglocations have been identified and the firm locations will be drilled before endQ2 2007 as part of this plan. First production from the field is targeted forJuly 2007. The development of the Salaka gas/condensate discovery is now well underway. Production will be processed at the nearby South Mansoura plant with most of theequipment required coming from South Batra (where the plant is being modified totake West Dikirnis production) and Mansouriya (which is now tied directly to theSouth Batra gathering system). The development plan anticipates production fromtwo wells at a combined rate of 25 MMcfpd and 300 bcpd. First production istargeted from the existing well for November 2006 at 13 MMcfpd and 150 bcpd. The West Abu Khadra No.1 exploration well was drilled using the EDC-9 rig to aTD of 10,642 ft. A gas column was encountered in the target Abu Madi level IIhorizon at 9,785-9,870 ft in a fluvial channel reservoir section similar to theAbu Madi sections in the South Batra field. In the light of experience gained atthe South Batra field it is believed that drilling horizontal drainholes fromthe outset may significantly improve recoveries in this type of reservoir. TheWest Abu Khadra well was, therefore, suspended while this option is furtherevaluated. The West Abu structure will be re-mapped, integrating the West AbuKhadra well data, as will the much larger East Abu Khadra structure which isscheduled to be drilled in October. The ECDC-1 rig was used to drill two shallow Pliocene exploration wells in thesouth of the El Mansoura concession. Both the Shawa No.1 and the SW Tamad No.1wells were plugged and abandoned. The rig has been moved to the Tamad No.3location and the well is currently drilling the surface hole at 3,000 ft. Thisis a development well being drilled from the Tamad No.1 location, where theexisting production facilities are located, and is expected to add around 500bopd production. Field performance to date has been very encouraging with only a30 psi pressure drop for 80,000 barrels of oil (plus associated gas) recovered.A second drill pad is being prepared to the east of Tamad No.1 and the TamadNo.4 development well will be the next well to be drilled from this pad and withthe ability to drill the anticipated No.5 and No.6 wells from the same pad. Commenting on this, Robert Adair, Chairman, said: "Evaluation of the West Dikirnis and West Khilala appraisal well test resultshas confirmed the initial expectations for these fields. We will select furtherappraisal/development well locations for these fields as part of fast trackdevelopment programmes. The equipment for West Khilala is already starting to bedelivered and first equipment orders for West Dikirnis will be issued in thecoming weeks. Aggregate production from these fields on the initial evaluationis expected to be approximately 100 MMcfpd and 10,000 bopd by July 2007 with thepotential to increase to 140 MMcfpd and 20,000 bopd by year end. This representsa step change in the production profile from our Egyptian operations and thecontribution of significant liquids production is particularly meaningful forvalue and cash flow. The Shawa and SW Tamad well results were disappointing but these were low impactPliocene locations. In future we will be concentrating use of the shallow rig onthe Sidi Salim oil trend. The exploration success rate may be lower than ouraverage to date but it is expected that we will make more Tamad type oildiscoveries. The performance of the Tamad Field has been solid and has providedthe basis for a steady development/appraisal programme planned for the nexttwelve months. The West Abu Khadra discovery is within the established Abu Madi trend and willbring with it some development challenges as the reservoir is apparentlyrelatively low permeability and with a higher condensate yield: this is acombination which has caused difficulties at South Batra. The full potential ofthe Abu Khadra area will depend upon the outcome of the exploration well to bedrilled on the much larger East Abu Khadra prospect. We will now push ahead withtesting new production techniques on the existing South Batra wells and we willapply any lessons learned to the development of new discoveries in the Abu Madiplay. Development of the Salaka discovery, announced earlier this year, shouldbe more straightforward: the exploration well encountered relatively thickreservoir intervals with more modest condensate yields of 13 bbls/MMcf. The acquisition of Merlon Petroleum and the assumption of operatorship of ourEgyptian interests has now been completed. We look forward to working with ournew colleagues in Cairo and to embarking on further successful exploration andproduction operations with them." For further information please contact: Melrose Resources plc 0184 553 7037Robert Adair , Chairman 0131 221 3360David Curry, Chief Executive 0131 221 3360Munro Sutherland, Finance Director Buchanan Communications 0207 466 5000Tim ThompsonBen Willey or visit www.melroseresources.com This information is provided by RNS The company news service from the London Stock Exchange