Melrose Builds Production Base in Egypt, to Accelerate Drilling in Bulgaria

Melrose Resources has provided an operations update on its activities in Egypt, Bulgaria and the USA.


The Damas field, which was discovered in the South East Mansoura Concession in 2008, has been successfully tied back to the South Mansoura production facilities using a 19 kilometer, 6 inch pipeline and was bought on stream on July 7, 2009.

Damas is the fifth new Melrose field to be brought on stream in Egypt over the past seven months and follows the South Zarqa, North East Abu Zahra, East Abu Khadra and North Dikirnis developments. The remaining development activity planned for 2009 will include completion of the West Dikirnis field Liquified Petroleum Gas plant and gas reinjection facilities in the third quarter and the tie back of the recent South Khilala discovery for production in the fourth quarter.

As a result of the recent field development activity, Melrose's Egyptian production has reached a new record of 261 MMcfpd of gas equivalent (on a working interest basis), comprising 198 MMcfpd of gas and 10570 bpd of oil and condensate.


In Bulgaria, Melrose is accelerating its plans to drill an appraisal well on the Kaliakra discovery in the Block Galata exploration concession in the Black Sea. The discovery is located approximately 15 kilometers east of the Galata field production platform and has estimated P50 gas reserves of 47 Bcf. The appraisal well has the potential to add significant reserves, since only 16 Bcf were booked by the Company at year end 2008, and will yield valuable information for the field development planning. The Prometeu jack-up drilling rig is available in the Black Sea to drill the well which is expected to spud during July 2009.

Meanwhile, the Company is waiting for approval from the Bulgarian Government to commence the development of the Kavarna gas field, which contains estimated reserves of 24 Bcf and is located approximately 7 kilometers east of the Galata platform. Also pending is finalization of the various agreements which need to be completed prior to initiating gas injection into the Galata field gas storage facility. The approval process for both these projects has been somewhat delayed by the build-up to the Bulgarian Government elections which were held on July 5, 2009.


As previously announced, the Nunan No.1 exploration well in East Texas reached its total depth in April 2009 and encountered gas shows in the Reklaw formation. Open hole logs indicated a gross gas column of up to 287 feet in the reservoir formation and the P50 gas in place estimate for the structure is 92 Bcf. The pay section comprises a tight laminated sequence of sandstones and siltstones and to ascertain whether commercial rates could be established from the well a large scale fracture stimulation treatment was conducted on the upper 110 feet of gross pay. Subsequently, a long term flow test was performed, at the end of which the flow rate stabilized at 0.3 MMcfpd of gas with minor amounts of condensate.

The Company has now temporarily suspended the well to evaluate the results and investigate whether the use of horizontal drilling technology, coupled with multiple fracture stimulation treatments, could potentially yield economic development well rates.

Interim Results

Melrose will be announcing its Interim Results on August 26, 2009 and the Company's operating performance is in line with expectations. First half production has averaged approximately 16,000 boepd on a net entitlement basis, as compared to the current full year production guidance of 15,700 boepd. The first half cumulative capital expenditure was approximately US $90 million, of which some 65% relates to development activity in Egypt which will be reduced in the second half of the year. The full year capital forecast remains in line with market guidance at US $165 million.

Commenting on the update, David Thomas, Chief Executive said, "Melrose has continued to build its production base in Egypt with first gas being achieved from the Damas field and an important new production milestone of over 260 MMcfpd of gas equivalent being set. Elsewhere our development projects in Bulgaria have been subject to some delays due to the recent Government elections but we anticipate making further progress with these projects in the third quarter this year. We are also looking forward to the results from the Kaliakra appraisal well which has the potential to add a significant volume of booked reserves for the Company."