Melrose Resources has provided a review of its 2010 production outlook and capital expenditure program.
The Company currently forecasts an average daily production rate in 2010 of 40.0 Mboepd on a working interest basis, which is approximately 4% higher than current 2009 market guidance of 38.5 Mboepd. On a net entitlement basis the 2010 production forecast will be 17.5 Mboepd (assuming a Brent oil price of $70 per barrel) comprising 20 percent hydrocarbon liquids and 80 percent gas.
The forecast is based on production from Melrose's existing oil and gas fields in Egypt and the USA, and the new Kavarna and Kaliakra field developments in the Galata Area of Bulgaria, which are scheduled to come on stream in the second half of the year. The relative contributions from Egypt, Bulgaria and the USA to the production total are estimated to be 78 percent, 17 percent and 5 percent, respectively.
Capital Work Program
Melrose is planning a very active exploration and development work program for 2010 with total capital expenditure of approximately $169 million. Of this amount, $114 million is considered to be firm and $55 million is contingent upon the receipt of Government approvals to complete the planned farm-in to the offshore Romanian Midia XV and Pelican XIII concessions and to initiate the Bulgarian Galata gas storage project.
During 2010 the Company will dedicate a significant proportion of its capital investment to exploration activities and some 33 percent of the firm budget is allocated to seismic acquisition and exploration drilling. This compares to 19% in 2009.
The seismic acquisition program will be used to prepare for near term drilling activity on the Company's high potential frontier exploration blocks, namely Mesaha in southern Egypt and South Mardin in Turkey. New data will also be acquired on the South East Mansoura concession in the Egyptian Nile Delta, which has significant remaining exploration potential in a number of geologic horizons including the under-explored Cretaceous formation which may be oil prone.
The seismic plans are well advanced and a contract has been signed with Western Geco to acquire 2,000 kilometers of 2D data on the Mesaha block, commencing in January 2010. The seismic survey is being positioned using the results of a recent ground gravity survey which were highly encouraging and confirmed the presence of a major unexplored sedimentary basin in the concession area with sufficient depth to potentially be hydrocarbon generative. The Company is also currently negotiating contracts for the acquisition of up to 500 kilometers of 2D seismic data on South Mardin (to be shot in two phases) and approximately 500 square kilometers of 3D seismic data on South East Mansoura, with both surveys commencing in the second quarter 2010.
On the drilling program in Egypt the EDC-9 rig is moving on to location to drill the first of two prospects in the South East Mansoura concession; South Damas and Tall Rak. These two prospects have combined unrisked reserves of 222 Bcfe and an averaged chance of success of 44 percent and one of them, Tall Rak, could potentially be oil prospective. The North West Nabarouh well, which was the first well to be drilled as part of the same drilling campaign, has been completed ahead of schedule but did not encounter commercial hydrocarbons in the target Qawasim formation. Following the two wells in South East El Mansoura, the EDC-9 rig will move south to the Mesaha concession in Upper Egypt to spud an exploration well in the fourth quarter 2010.
In Bulgaria, the Company plans to drill the East Kaliakra exploration prospect in mid year while a jackup drill rig is on location to complete the Kaliakra development well. The prospect is adjacent to the Kaliakra field and contains unrisked reserves of 59 Bcf and has chance of success of 34 percent.
The 2010 exploration budget also envisages exploration drilling activity in Romania, which is contingent on completion of the planned farm-in. The well, or wells, to be drilled will be selected from three good quality prospects, namely, Clara, Gasca (also known as Eugenia) and South East Midia (also know as Ioana) which contain gross unrisked reserves potential of over 0.5 Tcf of gas and around 20 MMbbls of oil.
The majority of the firm planned development capital expenditure, some $51.0 million, will be allocated to the Kavarna and Kaliakra field developments which are due on production 1 July and 1 October 2010, respectively. The remaining budget, $25.0 million, will be used for facilities upgrades and the West Dikirnis gas re-injection project in Egypt (due to complete January 2010) and minor waterflood investments in the USA. The contingent budget includes a provision of $20.6 million for the Romanian Ana and Doina field developments and $27.0 million to complete Phase 1 of the Galata gas storage project.
Commenting on the above, David Thomas, Chief Executive, said, "We are looking forward to 2010 when we should start to reap the benefits of our recent development programs in Egypt. During the year we expect to generate significant operating cashflow which will provide us with a platform to re-focus on exploration and business development initiatives. Key investment areas for the year will be our development projects in the Western Black Sea and progressing high potential frontier exploration programs in the Mesaha concession in Egypt and the South Mardin blocks in Turkey."
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