|Melrose makes breakthrough with Egyptian discovery

Melrose Resources has made a significant breakthrough in Egypt with a gas discovery worth an estimated $ 20 mm (£ 12.51 mm) to the Edinburgh oil and gas minnow that dwarfs its existing operations in the region. The company, which last month launched a deeply discounted rights issue because it was running out of cash, reported that its new find at the South Batra exploration well in the onshore Nile Delta had tested at rates of up to 31 mm cfpd.
Melrose has a 50 % interest in the discovery, which is conservatively estimated at 150 bn cf equivalent (bcfe), 50 % larger than the company had previously thought. Its partner in the block on the El Mansoura concession, the Egyptian Merlon Petroleum, reckons there may be as much as 350 bcfe.

The independents, which focus on niches that are economically unattractive to the energy majors, encountered 74 ft of net pay at a depth of 10,300ft. Melrose CEO David Curry said: "This is the breakthrough we have been looking for in Egypt." He said the discoverymeant that the company would be drilling as deep in future as it explores further prospects in the block. Curry hopes to start commercial production from the well by July or August.
At about $ 5 mm (£ 3 mm) to bring it on-stream, Richard Slape at house broker Seymour Pierce said the new field should be very cheap to develop. "All of a sudden, Melrose and its operator appear to have got it right. There is a whole load of look-alike prospects on the block they should be able to get around to in the second half of the year and 2004," he added.

Melrose is in the throes of a 19-for-11 rights issue launched last month at a 54 % discount to the market. It is confident it can raise £ 13.9 mm by mid-March, especially as Robert Adair, the chairman who owns two-thirds of the company, has pledged his support. Melrose has another 220 private shareholders but has yet to attract any investment from institutions.
Melrose has small producing fields in the US and Egypt, but its largest gas field is Galata in Bulgaria, which is expected to produce 14 mm cfpd from next January.