Bulgaria Awards Melrose Exploration Rights to Block Galata

On December 6, 2007, the Bulgarian Government granted Melrose exploration rights to Block Galata, an exploration concession which surrounds the Melrose operated Galata producing gas field. Following the formalization of the concession award, the Company expects to reduce its working interest in the Block to around 60% in order to share the exploration drilling risks and costs.

Block Galata is prospective in a number of geologic horizons and contains three gas prospects in the same Paleocene formation as the Galata field reservoir. These three prospects have a combined unrisked reserves potential of approximately 100 billion cubic feet and are medium risk.

In light of the concession grant, Melrose will now use the Southern Cross semi-submersible rig to complete the drilling of a Paleocene prospect in Block Galata called Kaliakra. This follows the successful completion of an appraisal well in the eastern fault block of the Galata gas field, which has provided reservoir pressure and deliverability data required for the ongoing Galata field gas storage feasibility study. The appraisal well has been suspended for possible future use in the gas storage project.

The Kaliakra prospect is located approximately 15 kilometers east of the Galata platform and has unrisked reserves potential of 68 billion cubic feet and a chance of success of 35%. In the event of exploration success, a discovery could be rapidly tied back to the Galata platform where there is spare processing and transportation capacity.

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

"We are very pleased with the outcome of our discussions with the Bulgarian authorities regarding the Galata exploration concession. We are now well positioned to pursue our further shallow water exploration plans in the area and, in particular, to drill the Kaliakra prospect which we view as a key well to test the remaining Paleocene potential in the Block."