Melrose has provided the following production guidance for 2009 and information regarding its planned capital expenditure program for the year.
Melrose forecasts that its average daily production rate in 2009 will be 34 Mboepd on a Working Interest basis and 15 Mboepd on a Net Entitlement basis. The split between gas and hydrocarbon liquids production is as follows:
The forecast is based on production from Melrose's existing oil and gas fields and assumes the timely completion of current development projects. It does not, however, assume any contribution from future exploration successes.
Melrose has prepared its exploration and development work programme for 2009 and currently plans total capital expenditures of approximately $165 million during the year. This compares with expected capital expenditures of around $220 million in 2008. The reduced expenditure level reflects the Company's desire to focus its investments on high capital efficiency projects during a time of oil price weakness. In addition, a number of non-essential work programme items have been deferred in order to take advantage of the expected decline in the cost of oil field materials and services over the forthcoming months.
Approximately 75% of the Company's capital investment in 2009 will be dedicated to field development activities and the remaining 25% to exploration initiatives. The capital allocation by country to Egypt, the USA, Bulgaria and Turkey is $105 million, $31 million, $27 million and $2 million, respectively.
The planned field development programmes for 2009 are summarised as follows: in Egypt, the West Dikirnis Phase II project and the tie-back of recent exploration discoveries; in the USA, a continuation of the Permian Basin infill and waterflood programme (with an average of one rig operating during the year); and in Bulgaria, the Kavarna field development and Galata gas field storage project. Planned Bulgarian expenditures reflect the Company's intention to bring in a strategic partner, at a 40% equity level, to the Galata exploration block and to the Galata gas storage project.
Exploration activities include 3D and 2D seismic acquisition in Egypt (on the SE El Mansoura and Mesaha concessions) and Turkey (South Mardin) and six exploration and appraisal wells to be drilled in Egypt, the USA and Bulgaria.
Commenting on this, David Thomas, Chief Executive, said, "Our production guidance for 2009 reflects the Group's strong asset base, although net entitlement volumes next year will be lower than in 2008 since we will shortly be shutting in the Galata field in order to prepare for its planned conversion to a gas storage facility. We expect production volumes to increase again in 2010 when we will benefit from a full year of contribution from our new Bulgarian discoveries and the West Dikirnis field in Egypt should be on peak production.
"We are very pleased that the Company is in full control of its capital expenditure programme at this time of oil price volatility and uncertainty in the financial markets. We plan to continue with key development expenditures and to maintain a sensible level of exploration activity consistent with operating within our current loan facilities. If we increase our loan facilities, or if revenues are higher than expected, we will consider increasing the work programme later in the year or making selective investments to take advantage of new business opportunities which are likely to arise as a result of current market conditions."
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