Melrose has provided an operational update for the quarter ended December 31, 2009.

Egypt 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.

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