Management Resource Solutions Regulatory News (MRS)

13 Apr 2006 07:01

Melrose Resources PLC13 April 2006 FOR IMMEDIATE RELEASE 13 April 2006 Melrose Resources plc Proposed acquisition of additional interests in Egypt and the USA Melrose Resources plc ("Melrose" or "the Company"), the oil and gas explorationand production company with interests in Egypt, Bulgaria, France and the USA,today announces that it has entered into a conditional agreement to acquire theentire common stock of Merlon Petroleum Company ("Merlon"), a private UScorporation, for a cash consideration of $265 million (adjusted for net workingcapital less debt) ("the Acquisition"). It is intended that the purchase price will be funded entirely through a $320million loan facility being made available to the Company by Bank of ScotlandCorporate. Merlon is an oil and gas exploration and production company with interests inEgypt and in the USA. Merlon is the Company's partner and the operator of itsproperties in the Nile Delta region of northern Egypt. Merlon owns the balanceof the working interests of 50% in the El Mansoura and South East El Mansouraexploration concessions and in nine development leases in the Nile Delta. TheAcquisition will, therefore, result in Melrose owning 100% of the workinginterests in all of these concessions and leases. In addition, Melrose will takeover operatorship of these interests. The concessions cover an area ofapproximately 5,400 km2 in the Nile Delta. Over the last five years Merlon and Melrose have achieved significantexploration success on these concessions with discoveries of over 1 Tcfe ofgross recoverable reserves. 3-D seismic has been acquired over a largeproportion of this acreage and three multi-prospect exploration plays havealready been established with the deeper exploration potential still remainingto be targeted. The Acquisition will significantly increase Melrose's exposureto the exploration potential that has already been identified and to furtherplays that may be established in the future. Based on information currently available to Melrose, net entitlement proved plusprobable reserves attributable to Merlon's interests in Egypt as at 31 December2005 are estimated by Melrose to be approximately 125 Bcf of gas and 1.3 MMbblsof oil and condensate. Average net daily production from these interests in theyear ended 31 December 2005 amounted to 16.6 MMcfpd of gas and 158 bpd of oiland condensate. In addition, Merlon also owns working interests in, and is operator of, certainoil and gas properties in the onshore Gulf coast area of Texas, USA. Theseinterests, which cover an area of 18,000 net acres, include nine producing gaswells. Average net daily production from these interests in the year ended 31December 2005 amounted to 13.5 MMcfpd of gas and 150 bpd of oil and condensate.Based on information made available by Merlon to Melrose, the net provedreserves attributable to Merlon's interests in the USA as at 31 December 2005were estimated to be 10.7 Bcf of gas and 175 Mbbls of oil and condensate. The USassets will complement and add size to Melrose's existing US onshore asset basein Texas and New Mexico. These assets will balance Melrose's predominantly oilproducing portfolio with significant gas production and will add explorationupside. The Acquisition is conditional, inter alia, on approval by the shareholders ofboth Melrose and of Merlon. As soon as practicable, the Company intends to sendan explanatory circular to its shareholders and to convene an ExtraordinaryGeneral Meeting at which, inter alia, an ordinary resolution to approve theAcquisition will be proposed. Shareholders holding a majority of the outstandingvoting stock of the Company and Merlon have given irrevocable undertakings tovote in favour of the Acquisition. The Acquisition is expected to close inmid-June 2006 or as soon as possible thereafter. Melrose has paid Merlon $4.75 million to fund in part a break fee to be paid byMerlon to a previous bidder. In the event that Melrose does not complete theAcquisition under certain circumstances, primarily having to do with failure onits behalf, Melrose will forfeit the $4.75 million paid to Merlon. In addition,a refundable deposit of $11.25 million will shortly be paid by Melrose: thisdeposit is refundable in all circumstances if the Acquisition is terminatedprior to closing. Both the break fee and the refundable deposit will be appliedto the purchase consideration on closing of the Acquisition. Should thedirectors of Merlon, in exercising their fiduciary duties, accept a better offerat any time prior to the closing of the Acquisition, Merlon is obliged to payMelrose a termination fee of $7.35 million. Commenting on this, Robert Adair, Chairman, said: "I am very pleased to be able to announce this acquisition which will bring astep-change in our reserve base, production and cash flow in Egypt. Ouroperations in Egypt have made great progress over the last few years and we areparticularly excited by the exploration potential that remains to be exploitedon the concessions. We have worked very closely with Merlon for a number ofyears and our exploration and operations staff in Edinburgh will complement theteam that Merlon has established in Cairo. The acquisition cost is underpinnedby the value of the proved and probable reserves and I believe that theexploration upside offers the opportunity to add substantial value for Melroseshareholders." For further information please contact: Melrose Resources plc 0184 553 7037Robert Adair , Chairman 0207 462 1603David Curry, Chief Executive 0131 221 3360 Munro Sutherland, Finance Director 0207 462 1603Chris Thomas, Corporate Development Director Buchanan Communications 0207 466 5000Ben WilleyEleanor Williamson or visit www.melroseresources.com Notes 1. The gross assets of Merlon as at 31 December 2005, prepared in accordance with US GAAP, amounted to $117.4 million; 2. The profits after tax of Merlon for the year ended 31 December 2005, prepared in accordance with US GAAP, amounted to $12.5 million; 3. Bcf - billion cubic feet;, bpd - barrel per day; GAAP - Generally Accepted Accounting Principles; Mbbls - thousand barrels; MMbbls - million barrels; MMcf - million cubic feet; MMcfpd - million cubic feet per day; Mcf - thousand cubic feet; Tcfe - trillion cubic feet of gas equivalent; This information is provided by RNS The company news service from the London Stock Exchange