Melrose raises price for gas it sells to Bulgaria above analysts’ forecast

MELROSE Resources, the Edinburgh-based gas driller, has raised the price it charges for selling to Bulgaria.

It signed two deals with Bulgargaz, the state-owned gas utility company, and Agropolychim, one of the Scottish firm’s industrial customers.

Melrose now expects to get an average of $8.32 (£5.38) for each thousand cubic feet of gas it produces this year, higher than analysts’ previous estimates and up from $7.35 last year.

David Thomas, Melrose’s chief executive, said the extra cash would be used to fund this year’s drilling programme and also to pay down the company’s debt.

In a production update before Christmas, Melrose said it aimed to reduce its gearing from 100 per cent to below 60 per cent by the end of this year.

The firm also revealed it plans to spend £53.4 million on exploration and development work this year, with some £24m being spent on exploration wells in Bulgaria and Egypt and on a seismic survey in Romania.

The remainder will go towards investing in the company’s main producing fields in Egypt.

Analysts at Oriel Securities had previously assumed Melrose would receive about $8 per thousand cubic feet of gas in 2012.

Oriel said gas prices in Eastern Europe can be “uncertain” and added: “We retain our ‘buy’ recommendation but note the company will need to demonstrate payments are being made in Egypt and that the investment programme is on track for the shares to perform from here.”