Magnolia Petroleum Plc / Index: AIM /
Epic: MAGP / Sector: Oil & Gas
16 April 2018
Magnolia Petroleum
Plc (‘Magnolia’ or ‘the Company’)
Q1 2018 Operations
Update
Magnolia Petroleum Plc, the AIM quoted US focused oil and gas
exploration and production company, is pleased to announce a
quarterly update for Q1 2018 (‘the Quarter’) on its operations
across proven and producing US onshore hydrocarbon formations,
including the Bakken/Three Forks Sanish in North Dakota, and the Woodford, Mississippi Lime and the Hunton in
Oklahoma.
Q1 Highlights to 31 March 2018
- 119 producing wells in the Company’s portfolio as at end of Q1
2018
- 11 new wells proposed – 8 wells currently at various stages of
development including in the prolific SCOOP and STACK plays in
Oklahoma
- Investment of first US$500,000 of
US$18.5 million capital management
agreement with Western Energy Development LLC (‘WED’) into
Oklahoma leases that qualify under
the US Immigrant Investor Programme
- Generates fees and equity in new wells for Magnolia
- Updated Reserves Report (‘Reserves Report’) as at 1 January 2018 as part of six monthly
redetermination of borrowing base limit of the Company’s
US$6 million credit facility
- Total net proved developed producing reserves (‘PDP’) of
274.475 Mbbl oil and condensate and 1,692.497 MMCF of gas
(1 January 2017: 282.686 Mbbl of oil
and condensate and 2,343.116 MMcf gas)
- US$4,002,000 value
(NPV9) of total net PDP reserves (1 January 2017: US$4,026,000) provides strong asset backing
- Change in total net PDP reserves due to the divestment of
interests in 13 wells which were included in the January 2017 report
- Reserves Report does not include proved shut-in, proved
undeveloped, probable and possible reserve classes as well as
Magnolia’s interests in undeveloped acreage
- Company is in the process of renegotiating its bank loan.
The Company has previously announced that a request for an
extension to its loan facility was being processed by the bank.
Since the last extension, the Company’s bank has been sold and
negotiations are slower than previously experienced.
- Debt reduction programme ongoing and the Company is considering
further non-core disposals.
- Working capital continues to be managed carefully in light of
future planned participation in wells. Following the rise in
the price of oil, the Company is producing positive cash flow from
its existing operations and this is expected to increase further
since revenues lag oil prices by a number of months.
Outlook
- Acquire additional leases via the ongoing investment of the
first tranche of WED funds
- Based on successful pilot programme, each US$500,000 tranche is expected to generate
approximately 27 new drilling opportunities as well as fees net to
Magnolia
- US$500,000 pilot programme
generated in excess of US$200,000
value net to Magnolia in terms of fees, equity in new wells, and
uplift in reserves
- Receipt of additional US$500,000
tranches from WED agreement which has the potential to fast-track
the roll-out of Magnolia’s strategy to acquire leases and prove up
the reserves via drilling
Magnolia CEO, Rita Whittington
said, “Activity during the quarter has been centred on
investing the first US$500,000 of our
exclusive US$18.5 million agreement
with WED into qualifying leases in Oklahoma. As demonstrated by our successful
pilot programme with WED, as well as fees, every US$500,000 invested has the potential to generate
27 new drilling opportunities for Magnolia. Together with the
pick-up in activity we are seeing in our core areas of focus,
specifically the low cost and prolific SCOOP and STACK plays in
Oklahoma, we are putting in place
a pipeline of new wells which, once drilled and subject to the
results, will enable us to add to our proven reserves and build
value.”
Well Developments
The full list of well developments occurring are still ongoing
and a list will be provided in due course. A number of these
include wells in which Magnolia has small interests and is being
carried as part of the WED deal. This is in line with
management’s strategy to minimise exploration risk, which includes
the evaluation of drilling data gained through its participation in
wells in which it has very small interests.
The information contained within this announcement constitutes
inside information stipulated under the Market Abuse Regulation
(EU) No. 596/2014.
Glossary
‘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
‘NRI’ means Net Revenue Interests
‘Proved Reserves’ means those quantities of petroleum which, by
analysis of geological and engineering data, can be estimated with
reasonable certainty to be commercially recoverable, from a given
date forward, from known reservoirs and under current economic
conditions, operating methods, and government regulation - Proved
reserves can be categorized as developed or undeveloped
‘Probable reserves’ are those unproved reserves which analysis
of geological and engineering data suggests are more likely than
not to be recoverable. In this context, when probabilistic methods
are used, there should be at least a 50% probability that the
quantities actually recovered will equal or exceed the sum of
estimated proved plus probable reserves
‘Possible Reserves’ are those unproved reserves which analysis
of geological and engineering data suggests are less likely to be
recoverable than probable reserves. In this context, when
probabilistic methods are used, there should be at least a 10%
probability that the quantities actually recovered will equal or
exceed the sum of estimated proved plus probable plus possible
reserves
Reserve Status Categories
‘Unproved Reserves’ are based on geologic and/or engineering
data similar to that used in estimates of proved reserves; but
technical, contractual, economic, or regulatory uncertainties
preclude such reserves being classified as proved. Unproved
reserves may be further classified as probable reserves and
possible reserves
Reserve status categories define the development and producing
status of wells and reservoirs
‘Developed reserves’ are expected to be recovered from existing
wells including reserves behind pipe. Improved recovery reserves
are considered developed only after the necessary equipment has
been installed, or when the costs to do so are relatively minor.
Developed reserves may be subcategorised as producing or
non-producing.
‘Producing reserves’ are expected to be recovered from
completion intervals which are open and producing at the time of
the estimate. Improved recovery reserves are considered producing
only after the improved recovery project is in operation.
‘Non-producing reserves’ include shut-in and behind-pipe
reserves. Shut-in reserves are expected to be recovered from (1)
completion intervals which are open at the time of the estimate but
which have not started producing, (2) wells which were shut-in for
market conditions or pipeline connections, or (3) wells not capable
of production for mechanical reasons. Behind-pipe reserves are
expected to be recovered from zones in existing wells, which will
require additional completion work or future recompletion prior to
the start of production.
‘Undeveloped reserves’ are expected to be recovered: (1) from
new wells on undrilled acreage, (2) from deepening existing wells
to a different reservoir, or (3) where a relatively large
expenditure is required to (a) recomplete an existing well or (b)
install production or transportation facilities for primary or
improved recovery projects.
* * 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 / James
Caithie |
Cairn Financial Advisers
LLP |
+44207213 0880 |
Nick Bealer |
Cornhill Capital Limited |
+4402037002500 |
Lottie Brocklehurst |
St Brides Partners Ltd |
+44207236 1177 |
Frank Buhagiar |
St Brides Partners
Ltd |
+44207236
1177 |