Melrose Resources Secures Financing for Galata Project

Melrose Resources announces that the Board of the management company of the AIG Emerging Europe Infrastructure Fund L.P. has approved the terms of the provision of mezzanine finance of up to $23 million to the Melrose Group for the development of the Galata gas field, offshore Bulgaria. Terms have already been agreed with the Black Sea Trade and Development Bank and the International Finance Corporation for the provision of up to $34 million of senior debt for the Galata development. It is expected that 100% of the cost of the Galata development, which is budgeted at around $52 million, will be financed by a combination of senior and mezzanine debt. Provision of the funds under the senior and mezzanine debt facilities is subject to certain pre-conditions and to the completion of loan documentation but it is hoped that all of the facilities will be available for drawdown before the end of the year. Under the terms of a gas sales contract with Bulgargaz, the state-owned gas distribution and supply company, sales of gas from the Galata field will be approximately 14 Bcf per year for the first three years of production.

Chairman of Melrose, Robert Adair, commented: 'We are very pleased to have secured the support of EEIF for our Galata project. With the project now fully funded, we have awarded some of the major contracts and we are on track for production of first gas by 1st January 2004. Once the Galata gas field is on production, Melrose Group's production is expected by the directors to increase by over 6,000 boepd, which compares with Melrose's current production of around 1,000 boepd. Melrose's revenue from the Galata field, net of operating costs but before debt service, is projected by the directors at $25 - $30 million per year.'