Melrose Starts Exploration Program in Nile Delta

Melrose Resources says that following completion of the development drilling activity on the West Khilala and West Dikirnis fields has recommenced its exploration drilling program in the Nile Delta. The near term program contains 9 wells and a further 22 leads and prospects have been identified for drilling in 2008 and 2009. The risk-adjusted reserves being targeted by this program are 440 Bcf and 77 Mbbls (note: all reserves quoted herein are on a working interest basis unless otherwise stated).

The first two exploration wells in the program have now been drilled on a structural trend, north of the West Dikirnis field, and have resulted in two successful gas discoveries with high condensate yields.

The South Zarqa No.1 well penetrated 56 feet of net pay in the Qawasim sandstone formation and has been flow tested at rate of 17.1 MMcfpd of gas and 660 bpd of condensate on a 36/64" choke. The post-drill reserves estimate for the discovery is approximately 50 Bcfe, however, an appraisal well will be required on the structure to further refine the volumetric estimate.

The North East Abu Zahra No.1 well encountered 73 feet of net pay, also in the Qawasim formation, and has been flow tested at a rate of 20.0 MMcfpd of gas and 640 bpd of condensate on a 36/64" choke. The post-drill reserves estimate for this discovery is approximately 20 Bcfe and follow-on exploration potential exists in two other prospects located in the immediate vicinity.

The EDC-9 drilling rig is now moving from the North East Abu Zahra No.1 location to drill an Abu Madi prospect, East Abu Kahdra, with unrisked reserves potential of 50 Bcf. After completing South Zarqa No.1, the EDC-53 drilling rig will move to drill a Qawasim prospect, Buhut, which has unrisked reserves of 30 Bcf and which, if successful, will open a new Qawasim play system in the west of the Mansoura concession. Site preparation activities are also underway to expedite the drilling of two other Qawasim prospects in the east of the concession, South Tarif and West Zahira. These are material and have combined unrisked reserves approaching 250 Bcf, plus hydrocarbon liquids potential.

The Company has recently received new and reprocessed 3-D seismic data covering a large part of the Mansoura concession and it is anticipated that this will lead to a further expansion in Melrose's prospect inventory.

The development of the West Dikirnis field is proceeding well and the Company expects to announce first production in late October/early November following final hook-up activities.