BANGALORE: Melrose Resources cut its full-year production forecast for the second time in four months, as the oil and gas explorer was hit by mechanical problems and disappointing well results at some of its fields in Egypt.
Melrose found water at some of its fields in Egypt and was drilling replacement wells to offset the loss in production, Chief Executive David Thomas told Reuters.
"Also in our big field West Kilala (in Egypt), we’ve had some mechanical workovers to perform on three wells and just correct some casing, pressure leaks," Thomas said.
Egypt currently contributes about half of Melrose’s overall revenue.
The news prompted Brewin Dolphin to reduce its price target on the stock to 215 pence from 260 pence, and the brokerage termed the production guidance as "disappointing."
"Given recent exploration disappointments we would not expect a step change in rating ahead of exploration success or new business developments coming to the fore," Brewin Dolphin analysts said in a note.
Melrose is also looking to boost its future production profile by buying interests in oil and gas fields in the Mediterranean and Black Sea region, CEO Thomas said.
The company, which also has operations in Romania and Turkey, reduced its full-year production forecast to 36.0 thousand barrels of oil equivalent per day (mboepd) on a working interest basis, from its previous forecast of 40.5 mboepd.
In May, Melrose lowered its production forecast for 2011, hurt mainly by disappointing output at one of its wells and an upgrade of facilities at its key West Dikirnis field in Egypt that disrupted normal output.
Earlier on Wednesday, Melrose posted a higher first-half pretax profit of $61.8 million, on revenue of $155.8 million. Average production climbed 23 percent to 20.2 mboepd.
First-half capital expenditure was $30 million, and the company expects full-year capital expenditure of $87 million.
Edinburgh, Scotland-based Melrose’s shares, which have shed about 22 percent of their value over the last three months, were down nearly 3 percent at 187 pence at 0840 GMT on Wednesday on the London Stock Exchange.
