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Production increases lift Melrose into the black

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Date: Thursday 28 Aug 2008

LONDON (ShareCast) - A substantial increase in production of the black stuff lifted oil and gas outfit Melrose Resources into the black.

Production in the first half of 2008 rose to a daily net rate of 21.3m barrels of oil equivalent per day (boepd), up from 14.5m boepd in the first half of last year.

As a result, the company was able to take full advantage of higher oil prices and drive revenues 209% higher to $234m, up from $75.8m.

Earnings Before Interest, Taxes, Depreciation, Depletion, Amortisation, and Exploration Expenses (EBITDAX) soared to $213.1m from $59.5m, while the company recorded a profit after tax of $76m versus a loss of $41.3m a year earlier.

The company has achieved “over 150% reserves replacement” of its predicted full-year production level of 38.5m boepd, and pledged to continue with its exploration programme, with six more prospects due to be drilled by the end of the year.

Higher oil prices allowed the company to recover past investments in the El Mansoura concession in Egypt faster than anticipated, as a result of which it will receive a lower share of production from this concession in the second half of the year. Accordingly, the group is revising its net entitlement full-year production forecast down by 4% to 19.2m boepd, though it stressed the net effect of the higher oil prices and the reduced production share is positive for Melrose from a financial perspective.

An interim dividend of 1.2p per share has been proposed. The board expects to recommend a final dividend of 1.6p per share, subject to continued favourable trading results.

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