Meridian Petroleum plc, the US-focused oil and gas company provides the following update on its strategy and operations in advance.

Operations Update

Orion

After a record month in January, production from Orion 36 has continued to increase in February. Average daily production for the month so far is 3.92mmcfd with a new peak production level of over 4mmcfd on several days. Production of natural gas liquids has continued at the high level established in January, averaging 53bbls/day in February to date.

The Company also benefited from better than expected gas prices in January and gross revenue in the month exceeded $1 million, with the Company’s share after royalties and taxes exceeding $700,000.

The second change-out of the Sulfatreat material is underway. The Company is working with the local authorities in Michigan to minimise inconvenience to the local community from odours, and the change-out is consequently taking place over an extended period. Following the first change-out in November 2007, the Company invested some $200,000 in improvements to the processes and equipment, in particular installing a polishing sponge. This investment has produced an immediate return, extending the life of the Sulfatreat material to well over 200mmcf of production and enabling the second change-out to take place without interruption to production.

The Orion 36 well has now been producing for nearly 6 months and cumulative output is approaching 0.5bcf of gas. During this period the Company has been strongly committed to maintaining good operational performance with high standards of safety and environmental care. This has been achieved but has resulted in higher than expected monthly operating costs during the first few months of production. These costs are expected to be lower in 2008 but, as Orion is the Company’s only significant producing asset, the Board believes that the continued good performance of this well remains a key priority.

Milford 36

Discussions with partners and the operator have been resolved and the Company will now proceed with testing of the well, in which Meridian will take a 30% working interest. The operator expects to commence testing once personnel are available following the change-out of the Sulfatreat at Orion. The Company will make a further announcement to confirm this in due course.

Calvin Field

The Company has decided to take steps to plug and abandon the Calvin 36-1 well, most likely by assigning its working interest to another operator and paying a contribution towards abandonment costs. The Company’s investment in this well of approximately $2 million will be written off in the 2007 accounts.

Following the re-assignment back to the Company of EnSight’s interest in the Calvin Deep prospects, the Company is actively seeking a new partner to exploit this asset. The Company has a 70% interest in several potential levels of reserves in the field and the attraction to potential partners is enhanced by remaining uncommitted on drilling plans in the short-term. Consequently, the Company has not yet committed any funds to the re-entry of the 5-29 well or any other drilling plans.

Asset Disposals

Negotiations to sell the Company’s Australian assets continue. The Board believes that the terms tabled are attractive, but we have not yet secured the level of legal and financial commitment required from the buyer. If the disposal proceeds on the terms proposed, the Board believes that there is likely to be a tax liability on the resultant capital gain.

The Company is also making progress on the sale of its Mississippi assets, but would seek to retain a royalty as part of any transaction.

Stephen Gutteridge, Chairman, said, "We took a major step forward last year by bringing Orion into production, and that gives us a platform to look at more aggressive approaches to delivering value to our shareholders. Our current asset portfolio presents limited opportunities to move quickly, so we plan to keep momentum going by adding production through acquisition or merger. We have solid US operating experience and contacts and we are already seeing good potential opportunities in our chosen areas."

Tags: Meridian Petroleum