Melrose Goes Way Up, 64% Increase in Q1 2008
Melrose Resources' net entitlement production in the First Quarter totalled 8.7 Bcf of gas and 478 Mbbls of oil and condensate, representing an increase of 64% compared with the same period in 2007. The average daily net entitlement production rate was 127.3 MMcfepd (21,215 boepd).
In Egypt, Melrose has drilled four exploration wells in the period 1 January 2008 to date. As previously reported, two of the wells, East Abu Khadra No.1 and Damas No.1, were gas discoveries and two were dry holes.
Also early in the First Quarter, Melrose completed drilling the successful Kaliakra (Galata East No.3) exploration well offshore Bulgaria.
In the US in the year to date, Melrose has drilled six development wells as part of its ongoing infill drilling and secondary recovery program in the Permian Basin. The results of the wells drilled to date have been in line with expectations.
Total capital expenditure in the First Quarter amounted to $27.4 million, of which $18.3 million was spent on development and $9.1 million on exploration activities.
Melrose remains in a strong and well funded financial position and there have been no significant changes to its balance sheet since the publication of the 2007 Preliminary Results. Arrangements for increased bank facilities are currently being finalised and it is expected that the new facilities will be in place before the end of May.
The new facilities, coupled with increasing levels of cash generation from the business, will ensure that the Company is more than able to finance its planned investment program going forward.
Melrose currently has a high level of activity in Egypt with three drilling rigs operating in the country. Two of the rigs are drilling exploration wells, namely, Ar Rub No.1 and East Sindy No.1. The third rig is side-tracking an old development well with the objective of restoring production from the Qantara field, which benefits from high condensate yields and a high gas price. The defined drilling plan for Egypt includes 13 exploration wells and additional prospects are expected to be identified from new seismic data being acquired over the South East Mansoura concession in 2008.
With respect to development activity, the design work for the West Dikirnis Phase II Gas Re-injection and LPG facilities is well advanced and equipment procurement has commenced. Two horizontal wells are also expected to be drilled in the field over the next 12 months to further develop the oil rim reserves.
The South Zarqa and North East Abu Zahra field developments are underway, with first gas expected from these fields early in the second quarter 2009. In parallel, plans are being prepared to tie the recent East Abu Khadra and Damas discoveries back for production by the end of 2008.
In the United States, Melrose has one drilling rig and one workover rig active on the Jalmat field in the Permian Basin and a second drilling rig will commence work on the Turner Gregory field in mid year. The Holmes No.4 appraisal well in East Texas is expected to spud during May and an appraisal well, Riceland No.3, should spud in the third quarter to test an existing deep gas discovery.
In Bulgaria Melrose is moving forward with plans to develop the Kaliakra discovery using a sub-sea tie-back to the Galata platform and simultaneously conducting a joint feasibility study with Bulgargaz to evaluate the Galata field gas storage project.
Production in Egypt over the rest of 2008 is expected to at least maintain the rates achieved in the first quarter of the year. In Bulgaria, production from the Galata field is planned to be reduced in the second half of the year to an average of around 23.0 MMcfpd and the US production is projected to remain relatively steady over forthcoming months. The Company's net production guidance figure for 2008 of 20,000 boepd remains unchanged.
"Melrose has achieved strong operating results in the first quarter of the year," said David Thomas, chief executive of Melrose. "Production is in line with expectations and our increasing level of liquids production is particularly significant in view of the current strong oil prices. Our development activities in Egypt, the US and Bulgaria are all advancing well and we are making good progress with the Galata gas storage feasibility studies. At the same time we are maintaining the momentum on our Egyptian and US exploration drilling programs."
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