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Fox-Davies Capital Newsflash including Stratic Energy, Melrose Resources, Coastal Energy and African Eagle Resources

6th Nov 2009, 8:04 am Fox-Davies Capital Newsflash including Stratic Energy, Melrose Resources, Coastal Energy and African Eagle Resources

Iraq has awarded the right to develop the giant West Qurna oil field to ExxonMobil and Shell. This follows the award by Iraq of the Zubair field to a consortium led by ENI last month and is a great encouragement for the Iraqi oil minister who came under criticism after the failed auction in June. Such a high interest from international players bodes very well for the remaining fields to be offered in a new auction round in December. Those developments will boost current Iraqi production of about 2MMb/d to over 10MMb/d in the next 5-10 years.
 
Stratic Energy  (SE)  announced the sale of its Italian business to Enel Trade SpA, a subsidiary of one of Italy's largest companies. The sale to Enel involves Stratic's entire portfolio of assets in Italy, including its interest in the Longanesi gas field and other exploration acreage in the country, for a total cash consideration of EUR34.3m, and the assumption of existing obligations relating to the assets. Stratic is entitled to receive a further payment of EUR6.6m provided the commencement of first production takes place before the end of 2011, reducing pro-rata by month, with no payment due if  production commences after the end of 2012. The Company also provided an update on West Don where Stratic now considers that 2009 gross production from the field will be approximately 1.75MMbbl (net 0.30MMbbl), compared with previous estimate of 2.1MMbbl (net 0.36MMbbl). The reduction reflects continuing gas lift and water injection performance below expectation. Work is well underway on the export pipeline tie-back to the Thistle facilities, with completion on-track for February 2010. Stratic plans to provide a further update on West Don production and reserves in the Q3 interim results, to be released in late November 2009.
 
Melrose Resources  (MRS)  provided an update on its operational activities in Bulgaria, Romania and Egypt. In Bulgaria, Melrose announced that the Bulgarian Government issued a Certificate of Commerciality for the Kavarna gas field and the Company has now submitted an application for a similar Certificate of Commerciality for the Kaliakra field. During October the Company also received approval from the Romanian National Agency of Mineral Resources to conduct petroleum operations in the country under new administrative guidelines.

This is an important step towards receiving the Romanian Government’s approval to complete the farm-in transaction with Sterling Resources. In Egypt, development activity on Melrose’s fields in the Nile Delta has continued and the Company announced that the South Khilala field, which contains estimated reserves of 36Bcf, was successfully brought on stream on 16 October 2009. The field was discovered in the Mansoura concession in April 2009 and has been tied back to the West Khilala production facilities using a 10km, 6” flow line. The Company is also pleased to announce that it has completed the commissioning activity on the West Dikirnis LPG Fractionation Towers and Vapour Recovery Plant. The construction activity on the Gas Reinjection facilities is now expected to be completed in early January due to delays related to the delivery of equipment from the Far East.

The EDC9 drill rig is currently completing the fourth West Dikirnis horizontal development well and will then commence a four well drilling program in the Nile Delta, comprising three exploration wells and one further West Dikirnis horizontal well. Following the completion of the Nile Delta drilling sequence, the EDC9 rig will be mobilised to Upper Egypt to spud the first exploration well on the 40% owned Mesaha exploration concession in late 2010. In preparation for the well, in early 2010 the Company plans to acquire a 2,000 km 2D seismic survey over the western area of the concession, where a recent gravity survey has confirmed the presence of a major untested sedimentary basin.
 
Coastal Energy  (CEO)  has completed its previously announced public offering of common shares. The underwriting syndicate exercised the full over-allotment option resulting in the issuance by Coastal of 6,900,000 common shares for gross proceeds of C$34,500,000.  Macquarie Capital Markets Canada Ltd., Canaccord Capital Corporation and Thomas Weisel Partners Canada Inc. acted as co-lead underwriters of a syndicate which also included Paradigm Capital Inc., RBC Dominion Securities Inc., and CIBC World Markets Inc. The Company expects to use the net proceeds of the Offering to fund further development of its assets in the Gulf of Thailand, for working capital and to reduce short-term debt. After closing of the Offering, the Company will have 106,387,299 common shares issued and outstanding. The Offered Shares will commence trading on the TSX-V immediately, and admission of the Offered Shares to trading on AIM will take place at 7:00 am (GMT) on 6 November 2009.
 
Mining Corporate News
 
African Eagle Resources (AFE)  announced that it had successfully completed its drilling programme to define the margins of the Wamangola Hill Deposit at the Dutwa Nickel Project in Tanzania. Preliminary assay results from the first few drill holes, which are in line with our expectations. The rig will now move to Ngasamo Hill, where our recently completed surface surveys have confirmed that the laterite is nickel bearing. As a result, we have exercised our option to earn an interest in Ngasamo. Key intersections include 18m at 1.2% nickel and 15m at 1.1% nickel.

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