Magnolia Petroleum Plc / Index: AIM /
Epic: MAGP / Sector: Oil & Gas
13 February 2018
Magnolia Petroleum
plc (‘Magnolia’ or ‘the Company’)
New Leases
Acquired in Oklahoma as part of
US$18.5 Million Agreement
Magnolia Petroleum plc, the AIM quoted US focused oil and gas
exploration and production company, is pleased to provide an update
on the ongoing investment of the first US$500,000 tranche of capital it has received as
part of its exclusive US$18.5 million
capital management agreement with Western Energy Development LLC
(‘WED’). Under the terms of the agreement with WED, Magnolia
invests each US$500,000 tranche of
capital into oil and gas properties in Oklahoma that qualify under the US Immigrant
Investor Programme in return for fees and equity in new wells and
leases.
The first tranche of capital under the WED Agreement was
received in December 2017 and to date
has been invested by Magnolia in the following units:
Unit |
Working Interest (‘WI’) / Net
Revenue Interest (‘NRI’) Acquired |
25% of Acquired WI / NRI assigned
to Magnolia |
Operator |
Status |
Bartenbach Unit |
0.21%/0.167% |
0.053%/0.0416% |
Tapstone Energy |
First well approved and waiting to
spud |
Pickard Unit |
0.13%/0.10% |
0.0325%/0.0251% |
Newfield Exploration |
First well approved and waiting to
spud |
Old Crab Unit |
0.312%/0.234% |
0.0781%/0.0586% |
Oklahoma Energy Acquisitions |
1506 1-24MH well already producing
- Six increased density wells approved and waiting to
spud* |
*Six increased density wells: Old Crab 1506 2-24MH; 3-24MH;
5-25MH; 6-24MH; 7-24MH; and 9-24MH
Under the WED Agreement, Magnolia receives a cash fee of
US$5,000 per each US$500,000 tranche of capital invested;
US$500 per each acre secured; a
carried 25% working interest of WED’s interest in the first well
drilled in each unit; and a sliding scale for overheads incurred.
As a result, Magnolia will not be required to fund its share of
costs of drilling the first wells on each of the three above
units. Magnolia will be required to fund its share of costs
for any subsequent wells drilled on the units.
Magnolia CEO, Rita Whittington
said, “Today’s new units are the tip of the iceberg in terms of
the number of new leases and wells that we expect to acquire via
the investment of the first US$500,000 tranche of WED funds. In all our
US$500,000 pilot programme resulted
in a total of 27 new drilling opportunities, most of which were in
the prolific and highly active SCOOP and STACK plays in
Oklahoma. In addition, the pilot
programme demonstrated the potential to earn impressive returns at
the portfolio level, despite holding relatively small interests in
individual wells. Based on the fees and equity in new wells
and leases, the successful test generated US$200,000 in value for Magnolia.
“Extrapolate the results of the pilot programme and the
potential for our ground-breaking US$18.5
million agreement with WED to move the needle and generate
significant value for our shareholders is clear. As new
leases in qualifying counties are acquired, new wells drilled, and
additional funds transferred under the WED Agreement, the next few
months are expected to see a step-up in activity, as we focus on
scaling up Magnolia’s net reserves across our portfolio of
interests in proven US onshore formations. With this in mind, I
look forward to providing further updates on our progress.”
Further Information
Bartenbach Unit
Operated by Tappstone Energy the proposed well will be the first
Mississippian horizontal well test in the established two-section,
1,280 acre pooled unit. The well is located close to recent
1-section, 640 acre Mississippian completions that have reported
substantial initial production rates ranging up to 1,558 BO and
5,618 MCFD (Tappstone: Howard 5-19-17). Two miles east of the
proposed well is a one section Mississippi horizontal well, the Pruitt: Krows
19-19-17, this well had a production rate in January 2017 of 392 BO and 4,747 MCFD. Through
July of 2017 the well has produced over 63,000 BO and 0.585 BCFG
and is currently producing 186 BOPD and 4339 MCFD. The proposed
Bartenbach Unit well, which will have a lateral section longer than
these offsets, is conservatively expected to have reserves of 260
MBO and 2.9 BCFG.
Pickard Unit
Operated by Newfield Exploration, the proposed well will be a
2-unit, 1,280 acre Woodford Shale
horizontal well. This area of the SCOOP play has several very good
Woodford Shale completions such as
the Continental Resources operated McEvoy, a 2014 Woodford Shale
completion which has produced 180 MBO and 0.496 BCF, is currently
producing 85 BOPD and 235 MCFD and has a projected Estimated
Ultimate Recovery of over 500 MBO and 1.6 BCFG. Newfield has made a
more recent 2-section Woodford completion just west of the proposed
Pickard well: the Newfield Deskins 1H-7X, which commenced
production in January 2017 and has to
date produced 40 MBO and 0.085 BCF and is currently producing 380
BOPD and 1,076 MCFD.
Old Crab Unit
Operated by Oklahoma Energy Acquisitions (OEA) the Old Crab 1506
5-24MH well has been drilled and is awaiting completion. A second
well, the OEA Old Crab 1506-3-24MH was spud on 1 February 2017. Both wells are 640 acre
horizontal Mississippi tests.
There are three additional permitted wells for the section. The
Mississippi has been proven
economically viable in the immediate area with the recent
completions of the following wells: OES Three Wood 4-17MH, 12/2016
which had an initial production rate of 39 MBO and 0.146 BCF and is
currently producing 266 BOPD and 500 MCFD; the OES Dixson 3-16MH,
10/2016 completion, which has made 50 MBO and 0.207 BCF and is
currently producing 255 BOPD and 1082 MCFD. The proposed Old Crab
wells are expected to recover 330 MBO and 1.4 BCFG per
well.
WED Agreement
WED is an affiliate of Western Energy Regional Center LLC, a
United States Citizenship and Immigration Services
(‘USCIS’)-designated Regional Center which can accept investment in
job-creating projects from foreign nationals through the Immigrant
Investor Program.
As announced on 4 July 2017,
Magnolia entered into an exclusive agreement with WED to invest, on
behalf of WED, up to US$18.5 million
into the Oklahoma oil and gas
market. In return Magnolia receives cash fees as well as a 25%
carried working interest in the first well in each spacing unit. A
pilot programme in which Magnolia invested US$500,000 on behalf of WED into qualifying oil
and gas properties in Oklahoma,
generated US$75,500 in value for
Magnolia in terms of lease bonus and the carried interest for 25%
in the first well within each spacing unit; plus an additional
US$127,982 uplift in the PV9 value of
Magnolia’s reserves. To date, the pilot programme has
generated a rate of return of 100% and a return on investment of
3.26 times.
The information contained within this announcement constitutes
inside information stipulated under the Market Abuse Regulation
(EU) No. 596/2014.
Glossary
‘BOPD’ means Barrels of oil per day
‘BOEPD’ means Barrels of oil equivalent per day
‘BCF’ means Billion Cubic Feet
‘M’ means Thousand
‘MBO’ means Thousand Barrels of Oil
‘Mcfd’ means Thousand Cubic Feet per Day
‘MM’ means million (thousand thousand not
million million), as used in oilfield and heat content units such
as MMSTB and MMBtu
‘MMBbl’ means Million barrels
‘MMcfd’ means Million Cubic Feet per Day
* * ENDS * *
For further information on Magnolia Petroleum Plc visit
www.magnoliapetroleum.com or contact the following:
Rita Whittington |
Magnolia Petroleum Plc |
+01918449 8750 |
Jo Turner / Liam
Murray |
Cairn Financial Advisers
LLP |
+44207213 0880 |
Nick Bealer |
Cornhill Capital Limited |
++4402037002500 |
Lottie Wadham |
St Brides Partners Ltd |
+44207236 1177 |
Frank Buhagiar |
St Brides Partners
Ltd |
+44207236
1177 |