Management Resource Solutions Regulatory News (MRS)

10 Oct 2007 07:01

Melrose Resources PLC10 October 2007 For immediate release 10 October 2007 MELROSE RESOURCES PLC ("Melrose" or "the Company") Operations update Melrose Resources plc (LSE:MRS), the oil and gas exploration, development andproduction company, today provides an update on the results of its Egyptianexploration program, new concession awards, a potential Bulgarian gas storageproject and the Company's oil and gas reserves. Egypt Exploration Following completion of the development drilling activity on the West Khilalaand West Dikirnis fields, Melrose has recommenced its exploration drillingprogram in the Nile Delta. The near term program contains 9 wells and a further22 leads and prospects have been identified for drilling in 2008 and 2009. Therisk-adjusted reserves being targeted by this program are 440 Bcf and 77 Mbbls(note: all reserves quoted herein are on a working interest basis unlessotherwise stated). The first two exploration wells in the program have now been drilled on astructural trend, north of the West Dikirnis field, and have resulted in twosuccessful gas discoveries with high condensate yields. The South Zarqa No.1 well penetrated 56 feet of net pay in the Qawasim sandstoneformation and has been flow tested at rate of 17.1 MMcfpd of gas and 660 bpd ofcondensate on a 36/64" choke. The post-drill reserves estimate for the discoveryis approximately 50 Bcfe, however, an appraisal well will be required on thestructure to further refine the volumetric estimate. The North East Abu Zahra No.1 well encountered 73 feet of net pay, also in theQawasim formation, and has been flow tested at a rate of 20.0 MMcfpd of gas and640 bpd of condensate on a 36/64" choke. The post-drill reserves estimate forthis discovery is approximately 20 Bcfe and follow-on exploration potentialexists in two other prospects located in the immediate vicinity. The EDC-9 drilling rig is now moving from the North East Abu Zahra No.1 locationto drill an Abu Madi prospect, East Abu Kahdra, with unrisked reserves potentialof 50 Bcf. After completing South Zarqa No.1, the EDC-53 drilling rig will moveto drill a Qawasim prospect, Buhut, which has unrisked reserves of 30 Bcf andwhich, if successful, will open a new Qawasim play system in the west of theMansoura concession. Site preparation activities are also underway to expeditethe drilling of two other Qawasim prospects in the east of the concession, SouthTarif and West Zahira. These are material and have combined unrisked reservesapproaching 250 Bcf, plus hydrocarbon liquids potential. The Company has recently received new and reprocessed 3-D seismic data coveringa large part of the Mansoura concession and it is anticipated that this willlead to a further expansion in Melrose's prospect inventory. The development of the West Dikirnis field is proceeding well and the Companyexpects to announce first production in late October/early November followingfinal hook-up activities. New Concession Awards - Egypt and Turkey On 9 October 2007, the Egyptian Mesaha concession was officially assigned toMelrose and its joint venture partners, Hellenic and Oil Search, at a ceremonyattended by his Excellency the Minister of Petroleum, Eng. Sameh Fahmy. Theconcession, which covers an unexplored sedimentary basin, is bounded by theSudanese border in Upper Egypt and has an area of 57,000 km(2). The initialexploration period is 4 years and the licence can be extended to cover a maximumof 9 years. The gross financial commitment is $14.3 million and Melrose holds a40% operated working interest in the block. On 3 September 2007, Melrose and its joint-venture partner, GYP, were awardedeight exploration concessions in the South Mardin basin in south-east Turkey onthe border with Syria. These concessions cover a combined area of 3,910 km(2)and the initial exploration period is 4 years, with two optional 2 yearextensions. The gross financial commitment is $5 million and Melrose holds a 75%operated working interest in the concessions. These new frontier exploration initiatives have limited capital commitments andare consistent with Melrose's strategy of maintaining a balanced portfolio whichincludes geologically diversified, high potential exploration assets. Bulgaria Gas Storage The requirement for gas storage facilities in Europe is continuing to increasedue to gas supply uncertainties and legislative changes. In recognition of this,Melrose and Bulgargaz Holdings, the Bulgarian state-owned gas utility company,are finalising an agreement under which the two parties will conduct a jointfeasibility study to evaluate the conversion of the Galata field to a gasstorage facility. Company Reserves In its 2007 Interim Report, Melrose incorporated a downward revision to theproved plus probable net entitlement reserves on the material West Khilala, WestDikirnis and South Batra fields in Egypt of 37.6 Bcfe (equivalent to 10.2% ofthe Company's net reserves). The Company has now completed a comprehensivereview of the reserves on all its remaining assets and does not expect to makeany further downward net reserves revisions on its US or Egyptian assets.However, based on pressure data obtained during a one-month field shut-down inJuly the Galata gas field reserves are likely to be reduced by 11 Bcf. Commenting on the above, David Thomas, Chief Executive, said: "The results from the first two exploration wells in our new Egyptian drillingcampaign are highly encouraging and we are particularly pleased by the highcondensate yields. The well results demonstrate the value of using sophisticated3-D seismic data analysis techniques to identify prospects in the onshore NileDelta setting. Using this technology, we are confident that we can achieve worldclass exploration success rates going forward and will continue to focus ourexploration efforts on this region on the near to medium term. We are also encouraged by the ongoing dialogue with the Bulgarian authoritiesregarding the potential use of the Galata field for gas storage and look forwardto delivering additional shareholder value from this project." For further information please visit www.melroseresources.com or contact: Melrose Resources plc David Thomas, Chief Executive 0131 221 3360Robert Adair, Executive ChairmanMunro Sutherland, Finance Director Buchanan CommunicationsTim Thompson 0207 466 5000Ben Willey Glossary: Bcf - billion cubic feet of gasMbbls - million barrels of oil or condensateBcfe - billion cubic feet of gas equivalentbpd - barrels per day of oil or condensateMMcfpd - million cubic feet per day This information is provided by RNS The company news service from the London Stock Exchange