Exploration company Petroceltic is taking a controlling interest in the UK company Melrose Resources.

Petroceltic has operations in Algeria, Italy and the Kurdistan area of Iraq, and it recently made a big gas discovery in Africa.

The new company will now have existing production fields in Egypt and Bulgaria.

The merger values Melrose at about £165m sterling, while the enlarged group will be well capitalised with a new $300m loan facility provided by HSBC.

Petroceltic said the merger will create a regionally focused North Africa, Mediterranean and Black Sea independent oil and gas company with a balanced and diversified portfolio comprising production, development and high impact exploration assets.

Under the terms of the deal, Melrose shareholders will get 17.6 new Petroceltic shares for very Melrose share. A special dividend of 4.7 pence per Melrose rose will also be paid by Melrose to its shareholders.

When the deal is complete existing Melrose shareholders will hold 46% of the enlarged company and existing Petroceltic shareholders will hold 54%. The new company would have combined proven and probable reserves of 84 million barrels of oil equivalent.

It will be led by a management team comprising Brian O'Cathain of Petroceltic as CEO, David Thomas of Melrose as chief operating officer and Tom Hickey of Petroceltic as chief financial officer.