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Quarterly Operations Update for the Period Ended 30 September 2014
Magnolia Petroleum, an AIM quoted US focused oil and gas exploration and production company, has announced a quarterly update on its operations across proven and producing US onshore hydrocarbon formations, including the Bakken/Three Forks Sanish in North Dakota and Montana, and the Mississippi Lime and the Hunton/Woodford in Oklahoma.
Quarter Highlights:
· 161 producing wells as at end of Q3 2014 a further 67 at various stages of development – elected to participate in 24 new wells:
– Strong initial production rates from Mississippi Lime wells highlighting the formation’s potential – Cummings 31-28-12 1H (525.52 boepd)
· Net daily production increased to 257 boepd as at 1 July 2014, up from 150 boepd as at 1 April 2014 due to a number of wells in which Magnolia holds larger than average NRIs commencing production:
– Sale of 24 small interests in non-core wells for US$240,750, a 190% increase on the US$83,000 value assigned to the combined proved and developed producing reserves of these wells as at 1 July 2014
– Demonstrates market value of non-operated US onshore properties
– Net PDPs estimated at 162 Mbbl of oil and condensate and 540 MMcf gas with NPV10 of US$9.143 million in Reserves Report as at 1 July 2014 – up from US$8.416 million as at 1 April 2014
· Total net proved reserves (‘1P’) of 719 Mbbl of oil and condensate and 2,093 MMcf gas with NPV10 of US$31.832 million as at 1 July 2014
· Report does not reflect Woodford formation’s potential, which lies below the Mississippi Lime and is at an earlier stage of development
· New US$6 million Credit Facility secured with initial borrowing base limit of US$4,596,944 to accelerate drilling activity and prove up reserves on leases following increase in the value of PDP reserves
· 93% increase in half year revenues to US$1,755,459 (H1 2013: US$910,721)
· Half year EBITDA of US$699,397 compared to US$237,552 (after removing gain on foreign exchange) during six months to 30 June 2013
Outlook:
· New wells due to come into production in Q4 2014 – including several infill wells on the Company’s leases held by production in North Dakota and Oklahoma to maximise recovery of reserves on individual spacing units:
– Further participations in new wells and infill drilling with leading operators expected
– On-going lease acquisition and management activity in line with strategy to grow and diversify portfolio
Magnolia COO, Rita Whittington said, “Aside from further operational progress on the ground, which has seen the number of producing US onshore wells in which we have an interest increase to 161 with a further 67 under development, a number of milestones were achieved during the quarter, including the securing of a new US$6 million credit facility. In our view, however, the sale of 24 small interests in non-core wells for three times the value of their PDP reserves is the quarter’s key event, as this demonstrates how the market values US onshore producing properties. The sale and the price achieved validates our business model which is focused on proving up the value of our US onshore reserves through drilling.
“With our US$6 million credit facility in place and our rapidly growing revenues, which at the half year stage almost doubled year on year to US$1,755,459, we will continue to participate in new drilling activity alongside established operators such as Devon Energy. We have put in place a platform from which we can accelerate the roll-out of our strategy, and in the process deliver on our objective to generate value for shareholders.”
