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4 Jun 2008 11:30
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FOR IMMEDIATE RELEASE |
4 June 2008 |
MELROSE RESOURCES PLC
USΒ OperationsΒ Update
Melrose Resources plcΒ (LSE: MRS) ("Melrose"Β or "the Company")Β todayΒ gives the following update on its operations in theΒ USA.Β
Permian Basin Infill Drilling and Waterflood Programme
InΒ late 2007,Β the CompanyΒ announced its intention to implement a major infill drilling and waterflood development programme in itsΒ three principalΒ fields in theΒ PermianΒ Basin, theΒ Jalmat, Turner Gregory and Artesia fields. TheΒ objective of theΒ programmeΒ is toΒ accessΒ 9.0Β MMbbls and 7 BcfΒ of proved undevelopedΒ oil and gasΒ reserves and to increaseΒ theΒ Company'sΒ productionΒ in theΒ PermianΒ BasinΒ from 750 bopd to in excess of 3,000 bopdΒ over the next two years.Β The project will involve drilling approximately 120 new wells and converting around 50 wells to water injection and theΒ capitalΒ investmentΒ is expected toΒ be approximatelyΒ $55 million.Β
DevelopmentΒ drillingΒ activity commenced in the Jalmat field inΒ Lea County,Β New MexicoΒ inΒ late FebruaryΒ 2008. TenΒ wells have been drilledΒ to dateΒ and theΒ eleventhΒ wellΒ will spud shortly.Β Drilling operations are going smoothlyΒ andΒ theΒ timeΒ spentΒ on location for each wellΒ is averagingΒ 7 days.Β SixΒ of theΒ newΒ wellsΒ haveΒ alreadyΒ been completed,Β fourΒ as permanent producers andΒ twoΒ as temporaryΒ producers. The latterΒ twoΒ wells will eventually beΒ converted toΒ water injectionΒ butΒ will be flowed in the short to medium termΒ to take advantage ofΒ theΒ better than expectedΒ reservoir pressure andΒ qualityΒ which theyΒ encountered.Β The four other new wellsΒ will beΒ completedΒ as injectorsΒ shortly.
In the Turner Gregory field in Mitchell County, Texas,Β larger pump units have been fitted on ten wells and surface facilities have been upgraded to accommodate the planned water injection programme.Β A second drilling rig is being contracted to commenceΒ the infillΒ drilling operations in this fieldΒ inΒ the third quarterΒ 2008.Β
In the Artesia fieldΒ in Eddy County,Β New Mexico, workΒ is progressingΒ on the installation of water injection facilities. A new tank battery has been completedΒ in the southern area of the fieldΒ and the building pad forΒ aΒ newΒ injectionΒ water pumping station is being prepared. Development plansΒ forΒ this field are now being finalised with a view toΒ accelerating the work programme andΒ commencing drilling operationsΒ with a third rigΒ in the fourth quarter ofΒ the year.Β
TheΒ combined fieldΒ productionΒ rate is currently averagingΒ just overΒ 1,000Β bopd, representing anΒ increaseΒ of approximately 35%Β overΒ theΒ pre-investment programme production rate.Β
In parallel with the development activity,Β detailedΒ reservoirΒ evaluationΒ work is continuing on all three fieldsΒ with a view to better quantifying theirΒ probable reservesΒ whichΒ MelroseΒ has not previously booked. TheseΒ additional reservesΒ may beΒ materialΒ since the assumed waterflood recoveries appear conservativeΒ by comparisonΒ withΒ local field analogues. In addition, there is potential toΒ increase reservesΒ further throughΒ aΒ follow-onΒ infill drillingΒ campaignΒ to decreaseΒ the well spacingΒ fromΒ the 20 acre patterns being targeted by the current investment programmeΒ to 10 acre spacing. The economics of this are particularly attractive at current oil prices. In the longer term, possibleΒ tertiary recoveryΒ projectsΒ involving CO2Β injectionΒ willΒ be studied for the fields.Β
East TexasΒ ExplorationΒ
On the Company's properties in East Texas, the Holmes No.4 appraisal wellΒ inΒ HarrisΒ CountyΒ willΒ spudΒ later this week.Β The well, which willΒ test anΒ extension ofΒ theΒ Holmes field,Β hasΒ unriskedΒ incremental reservesΒ ofΒ 9 Bcf with a chance of success of 44%.Β In the event that the well is a success, a number of similar appraisal well locations mayΒ subsequently beΒ drilledΒ as follow-on targets.
Also inΒ HarrisΒ County,Β two furtherΒ deep gasΒ explorationΒ prospects are being brought forward for drillingΒ in the third and fourth quarters ofΒ 2008, respectively.Β Each of these wellsΒ willΒ target unriskedΒ reservesΒ of overΒ 25Β Bcf,Β withΒ a chance of success of over 50%,Β and hasΒ significantΒ upside potential.Β
Commenting on this,Β David Thomas,Β ChiefΒ Executive,Β said:
"We are pleased thatΒ PermianΒ BasinΒ development programmeΒ is yieldingΒ suchΒ positiveΒ earlyΒ results andΒ we are confident that this projectΒ will add material value forΒ MelroseΒ over the next two years.Β The ongoingΒ technicalΒ evaluation of ourΒ East TexasΒ acreage hasΒ alsoΒ generatedΒ a number ofΒ attractiveΒ prospectsΒ and we look forward to testingΒ theΒ deepΒ explorationΒ potentialΒ inΒ this areaΒ duringΒ the second half of the year."
For further information please contact:
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Melrose Resources plc David Thomas, Chief Executive Robert Adair,Β ExecutiveΒ Chairman Munro Sutherland, Finance Director |
0131 221Β 3360 |
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Buchanan CommunicationsΒ Ben Willey |
0207 466 5000 |
Ben Romney
or visit www.melroseresources.com
Glossary
Bcf - billion cubic feet of gasΒ
bopd - barrels of oil per day
MMbblsΒ - millionΒ barrels ofΒ oilΒ
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