Melrose Resources hit by Egyptian performance

A drop in production at its Egyptian assets has seen oil and gas player Melrose Resources deliver half year revenues down year-on-year.

Turnover for the six months to the end of June was $128m against $156m at the same point in 2011.

Profits before tax came in at $52.1m versus $61.8m in the prior year while at the period end net debt stood at $263m, down significantly on the overdraft of $367m the firm was running last year.

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Robert Adair, the Executive Chairman, was keen to point out debt repayments meant the company would have a gearing ratio of around 60% by the year's end.

Political difficulties in Egypt have made life complicated for Melrose since last year, with the firm uncertain it would be paid for the fuel it was providing to the Egyptian government. Happily, the authorities have kept to the agreed payment schedule despite political uncertainty.

Melrose was also hit by industrial action at its South Batra plant in late May. Overall income from Egypt dropped from $97.1m in the first half of 2011 to $70.3m by the end of June. This is the major reason for the drop in group revenues.

The main issue for the firm now is its recently announced merger with resources peer Petroceltic International. The idea is to form a regionally focused group targeting north Africa, the Mediterranean and the Black Sea. Adair admitted news of that merger had "somewhat eclipsed" Wednesday's interim results. Nevertheless, the market has certainly been watching, the shares were down 2.6% by 9:51.

BS