Melrose Completes 3-D Seismic Work in Bulgaria

Initial fast-track processing of the 3-D seismic data survey of 1,470 km(2) over the southern area of Block 91-III and Block Kaliakra 99 in Bulgaria has been completed and the new data set is proving to be of excellent quality. Detailed interpretations will become available over the next two months. The data set over the deeper water area, particularly in the Kaliakra 99 Concession area, is looking extremely interesting and prospects for drilling are already being identified.


Three drilling rigs are currently operating on the El Mansoura Concession in Egypt. The EDC-9 rig spudded the South Batra No.8 Pliocene appraisal well in November. The well was drilled to a depth of 7,605 ft and the reservoir interval was encountered at 7,152 ft. A gross reservoir interval of 60 ft was confirmed and a 25 ft interval has been perforated and flowed briefly to clean up the well prior to gravel pack completion. The well will be production tested directly into the gas plant once the tie-in to the gathering system has been completed.

The EDC-9 rig subsequently drilled the South Batra No.18 well to a depth of 8,058 ft targeting the same reservoir as South Batra No.8. This well encountered the top of a 168 ft gross gas-bearing interval in the Pliocene at 6,936 ft and the whole interval was perforated. The zone is currently being gravel-pack completed prior to tie-in to the production facilities. The rig will then move to the South Batra No.20 location which will be drilled to 10,500 ft to test the southern limits of the South Batra Abu Madi Channel system.

The SF-104 rig drilled the South Batra No.2A well, which is a sidetrack of the original No.2 well, to an updip location in the Abu Madi Level II reservoir. The well was tested and completed and is now on production. The rig has also drilled the South Batra No.19 well which is currently being tested. An Abu Madi interval of 95 ft gross (50 ft net) has been identified and confirmed by wireline tests. In addition to the main Abu Madi target, the well has also encountered a significant hydrocarbon column in the Pliocene Kafr El Sheikh and three intervals totalling 129 ft gross are being tested. The rig will move next to the South Batra No.21 location which is on the east side of the Production Lease and has both Abu Madi and Pliocene targets.

The ECDC-1 rig commenced side-track operations at the South Bilqas well location at the end of November. While a gas-bearing interval was encountered, the reservoir section appeared relatively poor and the interval was not completed. Further options are now being considered for the optimum well location for this proven structure. In December the rig then drilled the Al Arab well in the southern area of the concession. This well encountered a Kafr El Sheikh reservoir section at 5,090 ft: a 30 ft net interval was perforated and briefly flow tested. The well has been gravel-pack completed and is awaiting hook-up. The drilling of the Shubra exploration well commenced in January 2005 and the main target was encountered between 3,700-3,800 feet. While gas shows were encountered, the well did not flow on open-hole test and is therefore being abandoned.

The new production gathering facilities at the South Batra No.11 site are complete and the upgraded process equipment at the South Batra No.1 site can now handle up to 120 MMcfpd plus condensate production. Total gas-processing capacity on the concession (South Batra, Mansouriya and South Mansoura) is 150 MMcfpd. The production target on the concession by the end of next month, after the 6 new wells have been tied into the production facilities, is 120 MMcfpd with 150 MMcfpd targeted by mid-year.

The 3-D seismic acquisition program over the El Mansoura Concession is continuing and the final phases, 13 and 14, of the survey are now active. Over 1,600 km(2) of 3-D seismic covering the most of the concession will have been acquired as the survey is completed in March. Detailed interpretation is now under way as the final processing of the data sets is received. Channel systems analogous to that encountered in Mansouriya are the main target in the Pliocene and further extensions of the major Abu Madi channel system have already been identified. In the near term, appraisal drilling of the South Batra area will continue to be the main focus for the two deeper-rated rigs while the smaller ECDC rig will be used for exploration of the shallow Kafr El Sheikh play.


A further 7 new wells were drilled on the Jalmat field in the 4th quarter of 2004 and all these wells are now on production. Gross production from these new wells is currently approximately 800 boepd (600 boepd net). Production rates initially decline quite quickly, but these initial rates have been at the top end of expectations. These wells have also confirmed the extension of the field to the south and the west which will result in additional proved reserves being booked.

Water injection programs have now been activated on all three principal fields and these programs will be systematically expanded during 2005.

Commenting on this, Robert Adair, Chairman, said:

'In Bulgaria, the new 3-D seismic data set is looking very interesting and clear prospects are already emerging in the south-eastern area of the survey.

In Egypt, the main focus remains the South Batra appraisal and development program with drilling success in the Kafr El Sheikh Mansouriya Channel trend and the Abu Madi Channel. A very active drilling program is ongoing with three drilling rigs under contract. The anticipated expansion of El Mansoura production to 150 MMcfpd by mid-2005 is exciting and I expect to see significant expansion beyond that later in the year. The final processed data sets for the 3-D seismic survey are now becoming available and these new data sets are expected to greatly enhance our understanding of the concession area.

The results from our most recent drilling program in the USA are excellent and we are making good progress towards achieving our medium term objectives there.

2004 has been a year of consolidation with a good production base being established in Bulgaria and Egypt and further development in the USA. We now look forward to a stronger focus on exploration in 2005.'

Melrose has 100% ownership of Block 91-III and Block Kaliakra 99, offshore Bulgaria. It also owns a 50% interest in the El Mansoura Concession and a 46% interest in the Qantara Concession in Egypt and has approximately 100% working interests in three main field areas in west Texas and eastern New Mexico in the USA.