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Melrose Resources opens new fields in Bulgaria
Date: 17/08/2010
Source: Financial Times
Melrose Resources opens new fields in Bulgaria

The opening of new fields in Bulgaria will boost production by 7,500 barrels of oil equivalent per day, Melrose Resources said, as interim pre-tax profits at the Edinburgh-based oil and gas group jumped by more than a third.

Melrose, which has operations in Egypt, Bulgaria, Romania and Turkey, said it produced an average of 40,000 boe/d in the first half of this year, driven by its offshore Egyptian assets.

The group expects to receive a boost when the first of two Bulgarian fields begins production in September, and the income will help pay down the company’s $459m (£294m) of net debt.

For the six months to June 30, pre-tax profit rose 32 per cent to $26.2m – up from $19.8m in the same period last year – on sales that rose from $97.6m to $110m.

Diluted earnings per share rose from 1.7p to 3.5p, while the interim dividend jumps from 1.6p to 3.1p.

Dave Thomas, chief executive, said the Bulgarian fields were crucial to increasing the company’s cash flow.

“Cash from operations will grow steeply. As soon as these Bulgarian developments come on, we’re on a strong growth curve – assuming a $70 barrel of oil, [we’re expecting] $240m in cash flow from our operations in 2013,” said Mr Thomas.

Melrose plans to maintain current production levels in Egypt, bring two Romanian fields onstream in two years and divest assets in North America.

Debt concerns have shadowed the company, which is more highly geared than many of its competitors. According to the company, debt has been cut by $15m in the past six months and Mr Thomas said money raised from the US asset sale would go towards paying down debt.

Nick Copeman, an oil analyst at Oriel Securities, said the results were in line with expectations and he does not expect Melrose’s high level of debt to become a problem.

“Production was slightly better than expected and the second half will be driven by Bulgaria. As for the net debt, Melrose sells fixed-price gas and if the oil price stays buoyant I don’t see it as an issue,” Mr Copeman said.

Melrose was in the news last week when the High Court ruled that Robert Adair, chairman, breached a contract by failing to put more money into Advantage Capital’s buy-out fund. Mr Adair, who owns more than half of Melrose, faces a hearing to determine damages, with Advantage Capital seeking tens of millions of pounds in lost fees and expected carried interest – a profit share – from the fund.

Last week Mr Adair said: “This issue will be determined in due course at trial ... I have yet to file my defence and counterclaim.”

Topic: Investments

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