Magnolia Petroleum Plc / Index: AIM / Epic: MAGP / Sector: Oil & Gas
7 February 2014
Magnolia Petroleum Plc(`Magnolia' or `the Company')
Strong Production Growth Expected as Drilling Activity Increases on Already
Producing US Onshore Leases
Magnolia Petroleum Plc, the AIM quoted US onshore focused oil and gas
exploration and production company, is pleased to report that the Company has
received a large number of proposals from operators such as Devon Energy,
Newfield Exploration, Chesapeake Energy and Kodiak Exploration to drill
increased density or infill wells across its portfolio of producing leases in
US onshore formations, including the Bakken, North Dakota, and Mississippi
Lime, Oklahoma.
Infill wells maximise the recovery of reserves on leases that are held by
production and, as a result of the growing number of these wells in which
Magnolia is participating and the multiple proposals it is receiving, the
Directors expect the strong growth in production and reserves seen to date to
continue in the years ahead.
Highlights
* Elected to participate in nine increased density wells on leases held by
production since 1 January 2014
* Additional 12 increased density wells in which Magnolia has an interest
have been filed by the relevant operators since 1 January 2014
*
+ Magnolia has above average (3%) interests in several of these proposed
wells
* Multiple increased density wells on individual spacing units being drilled
consecutively - leads to time and cost savings
* Approximately 75% of 600+ proven development locations on Magnolia's leases
in Oklahoma and North Dakota are increased density wells, representing a
long pipeline of low risk production and reserves growth
* Participating in increased density wells is a key part of the Company's
strategy to maximise the recovery of and prove up the reserves on its
leases covering over 13,500 net mineral acres in proven US onshore
formations
Rita Whittington, COO of Magnolia, said, "With production already established
on the relevant leases, increased density wells are very much the low hanging
fruit by which US onshore operators can rapidly increase production, maximise
recovery rates on individual spacing units, and upgrade reserves to the proven
developed producing (`PDP') category. Significantly, PDP reserves are used by
lenders to determine reserves based lending such as Magnolia's US$5 million
credit facility which in turn helps fund further drilling. The combination of
the above, along with the considerably lower exploration risk associated with
increased density wells, and the time and cost savings on offer through
drilling multiple wells from the same pad or consecutively, helps explain the
surge in infill well proposals we have seen since the turn of the year.
"With the above in mind, we expect the pick-up in the number of increased
density wells to continue to grow and this bodes well for those leases in which
Magnolia has above average interests such as the Thomason well (9.375% NRI)
which is producing from the Mississippi Lime in Oklahoma. We are therefore
confident 2014 will see us build upon the excellent momentum behind the
Company, specifically in terms of the excellent production and reserves growth
seen to date, as we look to deliver on our objective and generate value for our
shareholders."
Further Information
Since 1 January 2014, Magnolia has elected to participate in nine increased
density wells. Four of these are the Skunk Creek wells targeting the Bakken and
Three Forks Sanish formations in North Dakota as announced on 20 January 2014.
In addition, the Company is participating in an increased density well
targeting the Woodford formation in Oklahoma alongside Continental Resources on
the same spacing unit as the producing Condit 1-5 well; and four increased
density wells on the same unit as the producing Kelly 1-2H well operated by
Eagle Rock Energy.
Applications to drill a further twelve increased density wells have been lodged
by the relevant operators including several in which Magnolia has higher than
average interests, specifically more than 3%. Announcements detailing increased
density wells in which Magnolia has an interest greater than 1.5% will be
provided as and when it is appropriate to do so.
Existing well update
As a result of on-going leasing activity, Magnolia's WI/ NRI in the Marion 1-23
well, operated by Devon Energy and targeting the Mississippi Lime formation,
Oklahoma, have changed to 5.41% (previously 4.687%) and 4.10% (previously
3.516%) respectively. The Company has been informed by the operator that the
Marion 1-23 has commenced drilling.
** ENDS **
Glossary
`NRI' means net revenue interest
`WI' means working interest
For further information on Magnolia Petroleum Plc visit
www.magnoliapetroleum.com or contact the following:
Steven Snead Magnolia Petroleum Plc +01 918 449 8750
Rita Whittington Magnolia Petroleum Plc +01 918 449 8750
Jo Turner / James Caithie Cairn Financial Advisers LLP +44 20 7148 7900
John Howes / Alice Lane / Northland Capital Partners +44 20 7796 8800
Luke Cairns Limited
Lottie Brocklehurst St Brides Media and Finance Ltd +44 20 7236 1177
Frank Buhagiar St Brides Media and Finance Ltd +44 20 7236 1177
Notes
Magnolia Petroleum Plc is an AIM quoted, US focused, oil and gas exploration
and production company. Its portfolio includes interests in 142 producing and
non-producing assets, primarily located in the highly productive Bakken/Three
Forks Sanish hydrocarbon formations in North Dakota as well as the oil rich
Mississippi Lime and the substantial and proven Woodford and Hunton formations
in Oklahoma.
Summary of Wells
Category Number of wells
Producing 142
Being Drilled / Completed 15
Elected to participate / waiting to 45
spud
TOTAL 202
