Interim Management Statement

FOR IMMEDIATE RELEASE

19 May 2010

Interim Management Statement

Melrose Resources plc (LSE: MRS) ("Melrose" or "the Company"), the oil and gas exploration, development and production company, today issues its Interim Management Statement to cover the period 1 January 2010 to 31 March 2010 ("the first quarter") and an operations update. This information is provisional and unaudited and may be subject to further review.

Exploration

During the first quarter Melrose has drilled two exploration wells in Egypt in the onshore Nile Delta and commenced 2D seismic data acquisition programmes in two frontier areas, namely, the Mesaha concession in southern Egypt and the South Mardin concessions in Turkey.

In Egypt, the South Damas-1 exploration well was drilled to test a prospect in the Sidi Salim formation close to the Damas field in the South East Mansoura concession. The well encountered the top reservoir at a depth of 4,345 feet and penetrated 76 feet of net gas pay with good reservoir properties. The preliminary estimate of the discovered reserves is 30 Bcfe, which is in line with the pre-drill analysis. During the first quarter the Tall Rak-1 exploration well was also drilled to test a Sidi Salim prospect but no hydrocarbon indications were found and the well was plugged and abandoned. Two further wells Sakr-1 and South East Dikirnis-1 are planned to be drilled in the second half of the year targeting combined unrisked reserves of 53 Bcfe with an average chance of success of 51%.

The Mesaha 2D seismic survey has been completed with 1,047 kilometres of data being acquired over the western side of the concession, which contains an undrilled Palaeozoic sedimentary basin. The seismic data indicates the presence of a strong shallow reflector and this is now interpreted as being the top of the Palaeozoic section. The data quality below the reflector is variable but ongoing processing studies indicate the presence of stratigraphic layering beneath the reflector and the overall basin architecture is consistent with the findings of earlier gravity and aeromagnetic surveys. The technical analysis of the data is still ongoing and, depending upon the results, further 2D seismic may be acquired prior to drilling an exploration well in the block.

Melrose has also commenced a 2D seismic acquisition programme over the large Kanun oil lead in the South Mardin concessions in Turkey. To date 210 kilometres of data have been acquired out of a planned total of 245 kilometres and the initial results should be available by mid year. Assuming that the Kanun lead is confirmed as a good quality prospect, it will be scheduled for drilling as early as practicable in 2011. Alternatively, the Company will acquire a second phase of seismic data in late 2010 over other oil leads which have been identified in the concession area.

In Bulgaria, Melrose has contracted the GSP Jupiter jack-up rig to drill the Kavarna East prospect in July 2010. This prospect is located between the existing Kavarna and Kaliakra discoveries and contains unrisked reserves of 12 Bcf with a high chance of success of 80%. An option has been negotiated in the rig contract to the drill the Kaliakra East prospect as part of the same drilling programme assuming that this is operationally feasible. This prospect has unrisked reserves of 59 Bcf and a chance of success of 34%, however, the water depth at the selected location is close to the operating limit of the jack-up unit. 

Field Developments

In Egypt, the South Damas development is progressing well and the construction of the 6.5 kilometre tie-back line to the existing Damas facilities is nearing completion. The field is expected to be on stream by late June, approximately six weeks ahead of schedule, and should produce at gas rates of around 12 MMcfpd. The existing Salaka-1 production well has also been successfully recompleted into an untapped reservoir interval in the Kafr El Sheik formation and is producing at 5.5 MMcfpd. During the first quarter, Melrose completed its West Dikirnis Phase II development programme in Egypt through the installation of the Liquid Petroleum Gas ("LPG") and Gas Re-injection ("GRI") facilities.

In Bulgaria, Melrose has now received Certificates of Commerciality for both the Kavarna and Kaliakra fields from the Bulgarian Government and the development plans for both fields are well advanced. The Jupiter jack-up rig is due on location to install the Kaliakra subsea tree at the end of June (before drilling the Kavarna East exploration well) and the Bigfoot lay barge will simultaneously commence work on the flow lines. The Kavarna first gas date is now expected to be in August with Kaliakra to follow in early October.

The Bulgarian authorities have requested additional independent feasibility studies to be carried out on the proposed conversion of the Galata gas field into a storage facility. Melrose is supporting these studies whilst maintaining a clear focus on delivery of the Kavarna and Kaliakra developments which are viewed as the Company's key 2010 projects.

Business Development

Melrose is in the final stages of receiving the regulatory approvals necessary to complete the farm-in transaction to acquire a 32.5% interest in the Midia and Pelican concessions, offshore Romania. The development plans for the two existing gas discoveries, Ana and Doina, are being finalised and approvals are being sought from the authorities to drill the Eugenia South exploration well in the fourth quarter of the year.

Production and Product Prices

Melrose's production in the first quarter totalled 16.6 Bcf of gas and 668 Mbbls of oil and condensate on a working interest basis, which represents a 17% increase compared with the same period in 2009. The increase is primarily due to a strong contribution from new discoveries brought on stream during the course of 2009. Average daily production in the first quarter was 38,131 boepd on a working interest basis. On a net entitlement basis, first quarter production totalled 6.9 Bcf of gas and 302 Mbbls of oil and condensate giving an average daily rate of 16,043 boepd.

A summary of the Company's working interest and net entitlement production by country in the first quarter is as follows:

Working Interest

Net Entitlement

The average product prices realised by the Company in the first quarter were as follows:

Financial Position

Total capital expenditure in the first quarter amounted to $29.8 million, of which $22.9 million was on development and $6.9 million on exploration activities.

There have been no major changes in the Company's balance sheet since 31 December 2009 and the net debt at 31 March was $483.5 million. The Company has a senior debt facility of $450 million and a subordinated debt facility of $70 million. Both facilities are committed until 2014. The margin on the facilities is competitive and would equate to 3.3% above US$ LIBOR assuming the loans were to be fully drawn.

During the first quarter, the Company proposed that a final dividend for 2009 of 3.1 pence per share would be paid to Shareholders. Assuming that this dividend is approved at the Annual General Meeting scheduled to be held on 10 June 2010 it will be paid on 20 July 2010.

Business Outlook

In light of the first quarter performance and ongoing development activities, the Company is maintaining its current 2010 production guidance at 40.0 Mboepd on a working interest basis. This equates to 17.5 Mboepd on a net entitlement basis assuming a Brent oil price of $70 per barrel. 

The 2010 capital expenditure forecast remains at $142 million of which 62% is dedicated to field development activity and the remainder to exploration and new business initiatives. Approximately 40% will be spent in Bulgaria, 33% in Egypt and the remainder split between Romania, USA and Turkey. 

The main components of the Company's short to medium work plans include: in Bulgaria, implementing the Kavarna and Kaliakra field developments and continuing the exploration drilling programme on the Galata/Kaliakra trend; in Egypt, drilling two exploration wells in the Nile Delta and completing the new Mesaha seismic data processing; in the USA, continuing the secondary recovery programme in the Permian Basin; in Turkey, completing the first phase of the seismic acquisition and processing programme over the South Mardin blocks and in Romania, completing the formal regulatory process to acquire the Midia and Pelican block interests prior to proceeding with the Ana and Doina field developments and the exploration drilling programme.

Commenting on this report, David Thomas, Chief Executive, said:

"Melrose's strong production performance has continued in the first quarter of the year, helping to underpin our exploration and development programmes. We are also pleased with the progress being made on our new field developments both in Egypt and the Western Black Sea, where the Kavarna and Kaliakra fields are expected to make a significant contribution to group revenues later this year. We also remain hopeful that our Romanian farm-in transaction will receive regulatory approval in the near future." 

For further information please contact:

or visit www.melroseresources.com

Glossary:

bbl - barrel of oil or condensate or natural gas liquids

Bcf - billion cubic feet of gas

Bcfe - billion cubic feet of gas equivalent

boepd - barrels of oil equivalent per day

bpd - barrels of oil or condensate per day

Mboepd - thousand barrels of oil equivalent per day

Mcf - thousand cubic feet

MMbbl - million barrels of oil or condensate or natural gas liquids

MMcfpd - million cubic feet per day

Disclaimer

This announcement contains certain forward-looking statements that are subject to the usual risk factors and uncertainties associated with the oil and gas exploration and production business. While Melrose believes the expectations reflected herein to be reasonable, the actual outcome may be materially different owing to factors either within or beyond Melrose's control, and accordingly no reliance may be placed on the figures contained in such forward looking statements.