Melrose Reviews 4Q Operations in Egypt, Bulgaria & Romania
Melrose has provided an operational update for the quarter ended December 31, 2009.
In Egypt, the South Damas No.1 discovery well has been flow tested at a rate of 14.3 MMcfpd of gas with small amounts of condensate and completed for production. As previously announced, the preliminary estimate of the discovered reserves is 30 Bcf and the field is expected to be brought on stream within six months via the nearby Damas field infrastructure. The well rate is expected to average in excess of 12 MMcfpd for the first year of production.
The West Dikirnis Phase II development activity is drawing to a close and commissioning activities have commenced on the gas re-injection facilities, with compression start-up due later this week.
The EDC-9 rig is currently preparing to spud the Tall Rak No.1 well which will test a Sidi Salim prospect in the South East Mansoura concession with gross unrisked reserves of 190 Bcfe and a chance of success of 34 percent.
Following the Tall Rak well, the EDC-9 rig will be used to recomplete the Salaka No.1 production well away from the depleted Abu Madi reservoir into a new untapped interval in the Kafr El Sheik reservoir. The new interval has a net gas pay of 27 feet and contains estimated reserves of approximately 3 Bcf. It is anticipated that the well will produce at an average rate of around 6 MMcfpd during its first year on production and reach payback within 4 months.
Elsewhere, the 2-D seismic survey on the 57,000 square kilometer Mesaha concession is underway and to date some 352 kilometers of data have been acquired in the south-western area of the concession. The preliminary interpretation indicates the presence of a strong shallow seismic reflector which suggests that the maximum depth of the sedimentary basin in this area of the concession may be around 3500 feet. The seismic data are, however, inconsistent with the available aero-magnetic and gravity data which indicate a deeper basin and further studies are required to resolve the apparent uncertainties. In the interim, the seismic crew will move to the north-western area of the concession to continue the regional survey.
Melrose has signed a letter of intent with a Bulgarian gas trading entity, under which the Company will sell 4.24 Bcf of gas from the Kavarna field during the first year of the development. A proportion of the gas will be purchased in advance, with a cash payment of $10.2 million due prior to first production, and the remaining volume will attract the Published State price less adjustments. The Company expects to achieve an average gas sales price in excess of $6.50 per Mcf for the first year of production from the field, assuming that the Brent oil price averages over $70 per bbl in the near term.
In Romania, the Company remains cautiously optimistic that the assignment of its interests in the Pelican and Midia offshore concessions will be approved by the Government within the next month or two and on this basis is preparing to drill an exploration well in the third quarter of 2010. The well will test the Eugenia South oil prospect (formerly known as Gasca) in the Pelican concession and will be drilled to the Cretaceous formation to target the reservoirs which are productive in the nearby Lebada fields.
Commenting on this report, David Thomas, Chief Executive, said, "It has been a good year for Melrose and we achieved a record production level of 38.6 Mboepd driven, in large part, by the successful fast-track development of a number of our recent Egyptian exploration discoveries. We were also very pleased to have finished the year with a net entitlement reserves replacement ratio of over 130 percent. It is significant that we have been able to more than replace our annual production volumes during a period when the exploration and appraisal drilling program was somewhat reduced in response to the low oil prices experienced at the end of 2008 and early 2009."
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