Melrose Focuses on Shallow Water Exploration

Melrose Resources says that following a review of recent Black Sea drilling results, the Company is in the process of withdrawing from its deep-water acreage position and refocusing its activities in the shallow water areas. As part of this process, the Company hopes to shortly secure the Galata Exploration Block which surrounds the Melrose operated Galata field and contains some attractive prospectivity. The Company has also now signed an agreement with Bulgargaz, the Bulgarian state-owned gas utility company, under which the two companies will conduct a joint feasibility study to evaluate the conversion of the Galata field into a gas storage facility.

In light of these business development initiatives, the Company plans to resume operations with the Atwood Southern Cross semi-submersible drilling rig to take advantage of the competitive rig day rates. The drilling rig will initially be used to complete an appraisal well, Galata East No. 2, in the eastern fault block of the Galata field. This region of the field is not being directly drained by any producing wells and the new well will provide reservoir pressure and deliverability data required for the Galata gas storage feasibility studies. The well will then be temporarily suspended for potential use as part of the gas storage scheme. Subsequently, contingent on ongoing discussions with the Bulgarian authorities, the rig may be used to drill an exploration prospect in the vicinity of the Galata field.

Following the completion of the above operations, the Company will conclude its outstanding commitments with the Southern Cross rig and prepare the unit for demobilization out of the Black Sea. The anticipated cost for the remaining rig program including mobilization, drilling and demobilization activities is approximately $15 million.

Commenting on the above, David Thomas, Chief Executive, said:

"The planned drilling program is consistent with Melrose's strategy of refocusing our Bulgarian activities on lower risk shallow water projects where we can leverage our existing field infrastructure and geologic knowledge.

Elsewhere in our portfolio, operations on the Egyptian West Dikirnis development continue to run smoothly and the project is in its final stages of pipe work and cabling hook-up. First oil is expected in November. We are currently drilling the Buhut exploration well in the west of the Mansoura concession, whilst operations with our second exploration dedicated Egyptian drilling rig have been temporarily suspended until around year end pending rig draw works repairs.

In East Texas, we expect to start drilling the first of our two planned gas field appraisal wells, Johnson No.1, in early December."