Melrose Resources Finds More Gas in Egypt

Initial testing of the West Dikirnis No.1 exploration well, which was drilled to a depth of 8,570 ft, has been completed. The logs over the Miocene Qawasim interval indicated a 147 ft gross gas filled interval from 8,171 ft to 8,318 ft with no water contact. Three separate intervals totaling 101 ft net were identified and the lowest interval of 24 ft from 8,292 ft to 8,316 ft was tested while the rig was on site. The well flowed from this lowest interval at a final stabilized rate of 21.7 MMcfpd and 894 bcpd with no water on a 32/64ths choke, with a well-head flowing pressure of 2,368 psi. The PD-104 rig has been released to move to the location of the North Aga No.1 exploration well. The remaining two upper intervals will be perforated and tested incrementally over a longer period using a workover rig. It is expected that a steady production rate of over 30 MMcfpd plus 1,400 bcpd should be achieved when this well is put on production through the South Batra plant facilities. The initial recoverable reserves assigned to the immediate structural closure at West Dikirnis are 120 Bcfe of gas and condensate but the final figure could be considerably higher. The location of an initial appraisal well on the West Dikirnis structure is being identified. Further significant similar prospects, based on the interpretation of seismic anomalies, are currently being evaluated in the greater West Dikirnis area.

The South Batra No.24 appraisal well was drilled to a depth of 10,102 ft using the EDC-09 rig. The Abu Madi Level II target was encountered on prognosis with approximately 60 ft of gross reservoir section above the water contact. An interval from 9,550 ft to 9,594 ft was perforated and the well was flowed on a 28/64ths choke at a rate of 10.7 MMcfpd with 180 bcpd. The well will be hooked up to the South Batra production facilities immediately. The rig has now moved to drill the Biyala No.1 exploration well.

The Turbay No.1 sidetrack encountered the top reservoir section at 6,396 ft, 30ft higher than the Turbay No. 1 well, in a new sand with wireline logs indicating an overall dry gas column of 42 ft. The base of the sand was, as expected, close to the gas oil contact seen in the straight hole. A net interval of 18 ft was perforated and flowed at 10 MMcfpd plus 111 bopd on a 28/64ths choke at a well-head flowing pressure of 2,270 psi. The oil rate is expected to increase and the gas rate to decrease when the well is put on production.

The ECDC-1 rig has been moved to the Tummay No.1 location and has already drilled to a depth of 5,031 ft encountering the top Sidi Salim at 5,003 ft. The Pliocene section will now be logged prior to running casing and then drilling the Sidi Salim formation where the target may be oil. Mud logs are indicating a potential 40 ft gas reservoir interval in the Pliocene section at 3,400 ft.

On the West Khilala No.1 discovery well, a 14 km tie-line is being built to an existing pipeline already connected to the South Batra plant facilities. The initial production rate is expected to be 30 MMcfpd of dry gas with a further 30 MMcfpd expected from the planned West Khilala No.2 well.

Interpretation of the well test data from the discovery well is indicating that the recoverable reserves could be well in excess of 150 Bcfe and a third well at West Khilala is now being proposed.

In view of these recent discoveries and taking account of wells currently waiting to go on production, current gross production of around 62 MMcfpd and 450 bpd is expected to increase to over 180 MMcfpd and 2,800 bpd by mid-2006.

Commenting on this, Robert Adair, Chairman, said:

"The West Dikirnis discovery represents another sizable reserves addition and the high condensate yield will also contribute significantly to our oil production. The identification of further seismic anomalies on trend with this discovery along the fault system is very encouraging.

In the Sidi Salim oil play in the south all four wells drilled have now encountered the target hydrocarbon column. Further wells and some production performance data will be required to establish the full reserve potential along a trend which extends southwards into our South East El Mansoura Concession.

The next wells to be drilled using the deep rigs, the Biyala and the North Aga wells, are higher risk wells testing new play types. The Biyala No.1 will test a Miocene Qawasim target in the northwest of the concession and the North Aga No.1 will test an Abu Madi "pinch-out" in the southwest of the concession.

It is very significant that the initial interpretation of the new 3-D seismic data which we have been acquiring over the last fifteen months is being reflected in our recent exploration success. We are now able to target prospects which are deeper and larger than the more obvious but relatively small Pliocene anomalies. We will now be extending our interpretation of the new 3-D seismic over the east of the concession where a large area is still relatively unexplored. I expect our exploration program to gain further momentum and I am confident of continuing exploration success in 2006."