Magnolia Petroleum Plc / Index: AIM / Epic: MAGP / Sector: Oil & Gas
14 May 2014
Magnolia Petroleum Plc (`Magnolia' or `the Company')
Final Results for the year to 31 December 2013
Magnolia Petroleum Plc, the AIM quoted US focused oil and gas exploration and
production company, announces its final results for the year ended 31 December
2013.
The Company will be holding a conference call for analysts and investors later
today at 15:00 BST. To participate, please dial 0808 109 5644, or +44 (0) 20
8322 2500 if calling from outside of the UK, using access code 6618011#. To
view a copy of the presentation online, please go to www.meetingzone.com/
presenter using 6618011# as the participant pin. Questions can be submitted
during the call via the computer screen. The online presenter programme is not
compatible with iPads and iPhones, those using these devices can submit
questions by email to info@sbmf.co.uk referencing `Magnolia call'. Please note,
the call and webpage will be made live at 14:50 BST.
The results below are extracted from the Company's audited accounts which are
available in full at the Company's website (www.magnoliapetroleum.com). Copies
of the Company's Annual Report and Notice of AGM will be sent to shareholders
later this week.
Highlights
* 48% increase in number of wells on Magnolia's leases in proven US onshore
formations to 149 as at 31 December 2013 (2012: 101) - 140 producing and 9
drilling/completing
* 244% increase in full year revenues to US$2,443,244
* Full year EBITDA of U$975,622 compared to loss of US$359,944 in 2012
* US$5 million three year revolving line of credit secured to help fund
multiple proposals to drill new wells on Magnolia's 13,500 net mineral
acres
* £1.5 million capital raised to acquire acreage in proven onshore US
formations such as the Bakken, North Dakota and participate in wells with
leading operators such as Marathon Oil and Statoil
Magnolia CEO, Steven Snead said, "As evidenced by the 48% year on year increase
in the number of wells to 149, 2013 saw a step up in drilling activity on our
leases in proven US onshore formations such as the Bakken and Three Forks
Sanish, North Dakota, and the Mississippi Lime and Woodford, Oklahoma. Not all
of these wells were producing by the end of the period, but we still saw a 244%
jump in full year revenues to US$2.443 million. We are delivering on our
strategy to rapidly grow production and generate higher revenues that are
recycled into new wells, and in the process systematically prove up the
reserves on our leases. 2014 has got off to a good start and we expect further
strong growth in well count, production and revenues. Already our well count
including those that are producing and under development now stands at 171, a
15% increase since the year end."
Chief Executive's Statement
By focusing on proven US onshore formations and participating alongside
established operators in multiple wells, Magnolia provides shareholders with
exposure to the high growth associated with the junior oil and gas sector,
while minimising exploration risk. The financial year ended 31 December 2013,
our second full year on AIM, clearly shows our business model is delivering
with excellent growth recorded in terms of revenues and production. In the year
to 31 December 2013, our revenues grew 244% to US$2,443,244 which, when added
to 2012's excellent performance, means that since the end of December 2011, our
revenues have risen ten-fold while our well count (including those waiting to
spud) as at year end has trebled to 184.
What makes this excellent growth all the more notable is that it is not the
result of wildcat exploration in frontier jurisdictions with poor
infrastructure and high costs. Instead we deployed our combined experience and
expertise to acquire leases in proven US onshore formations such as the Bakken
in North Dakota and the Woodford / Mississippi Lime in Oklahoma. Here the big
unknown with regards to drilling is not if hydrocarbons are found but how much.
Once leases have been secured we participate in drilling on our acreage
alongside established operators, such as Statoil, Continental, Marathon and
Devon Energy.
The strong growth we have seen to date is set to continue in the year ahead and
beyond. Even though we have increased our well count since year end to over 200
wells (including those wells waiting to spud), our 13,500 plus net mineral
acres still hold over 600 potential drilling locations, providing a long
pipeline of future drilling activity.
Furthermore, the appetite among operators to drill in our areas of interest
continues to rise from already elevated levels. In North Dakota it has become
standard practice for operators to drill up to eight wells on individual
spacing units targeting the Bakken and Three Forks Sanish formations. Magnolia
has already participated in multiple drilling on single units in North Dakota
with Statoil for the prolific Jake wells and with Kodiak for the Skunk Creek
wells. We have long held the view that with the Woodford lying below the
Mississippi Lime formation, it was a matter of time before operators looked to
do the same in Oklahoma and post period end we were informed by an operator
(Devon Energy) that eight wells will be drilled on a single unit in Oklahoma.
If, as we expect, the trend to drill eight wells concurrently gathers pace in
Oklahoma, our drilling activity is set to increase markedly, and post period
end we have already seen our well count (including those waiting to spud) grow
from 184 to 219, thanks in part to this acceleration in infill drilling
activity.
As more and more horizontal wells are drilled in Oklahoma, our own and other
operators' understanding of the geology of both the Mississippi Lime and
Woodford has improved markedly. A more refined view of the Mississippi Lime is
that it is comprised of multiple wedges, which if encountered can be highly
productive, while the Woodford, which is a source rock, is increasingly seen as
being the more prospective of the two formations. Hitting or missing one of
these wedges explains the variance we are seeing in production rates for wells
drilled to the Mississippi Lime. As announced by Magnolia on 6 May 2014 as a
result of the increased understanding of the geology in the Mississippi Lime
and Woodford, engineers are taking a more cautious view of the valuation of the
2P and 3P reserves and we therefore believe we should anticipate a significant
downgrade in our reserves. However, certain operators are having more success
than others in using the available technology to firstly identify these
productive wedges and secondly to drill and complete the wells. Thanks to
having drilled alongside most operators in Oklahoma, we know which ones are
having the most success and we will continue to participate alongside these
consistently strong performers.
We have identified a number of these Mississippi Lime wedges on leases where we
are the operator and where we hold interests of up to 100%. As a result in the
year ahead, Magnolia plans to drill vertical wells on these leases targeting
Mississippi Lime wedges. Vertical wells are considerably cheaper to drill than
horizontals and therefore offer low cost opportunities for strong production
and reserves growth in the near term.
Both the increase in drilling and multiple new well proposals we are seeing are
very welcome as they promise to accelerate the process by which we will prove
up the reserves on our US onshore leases. To take advantage of this step-up in
activity we need to be in a position to fund our share of drilling costs. In
line with our strategy, higher revenues generated from our growing production
are increasingly funding our participation in new wells. To augment our
revenues and provide us with the flexibility to participate in drilling as and
when suitable opportunities arise, during the year we secured a US$5 million
revolving credit facility with an initial drawdown of US$1.6m which was
subsequently increased to US$2.1m after the period end. This in itself is a
major milestone for Magnolia as it represents third party recognition of the
progress we have made.
Financial Review (extracted from the Strategic Report)
During the year, net production generated revenues of US$2,443,244, a 244%
increase on last year's US$709,395. EBITDA (after removal of non cash items)
totalled US$975,622 against a loss of US$359,944 in 2012. These funds were
reinvested into drilling new wells. The loss for the year was US$281,817 (2012:
US$1,075,178).
Tangible assets as at end December 2013 stood at US$8,352,385, a 143% increase
over the year (2012: US$3,437,869) while intangible assets (new leases and
wells that are drilling but not yet completed) increased to US$6,400,258 from
US$6,200,828 in 2012. In line with our policy to invest as much of our revenues
into drilling new wells and acquiring additional leases, administrative costs
continue to be tightly managed.
During the year, US$2.3 million (equivalent to £1.5 million) was raised via a
placing to fund new wells, notably six Statoil operated wells in North Dakota.
As a result, 60,000,000 new ordinary shares in the Company were issued. In
addition the Company secured a three year US$5m revolving credit facility. An
initial borrowing base of US$1.6m was agreed which was subsequently increased
to US$2.1m after the year end. No funds were raised in 2013 using the EFF with
Darwin and post period end it was mutually agreed to cancel the facility.
Outlook
The current year has started strongly with Magnolia participating in 35 new
wells, a 19% increase on our total well count as at year end. With a long
pipeline of new wells, funding in place to cover our share of costs, an
excellent drilling success rate and growing appetite among leading operators to
maximise the recovery of reserves on individual spacing units in Oklahoma
through infill drilling, we are well placed to deliver on our objective and
prove up the reserves on our leases. Already, the value of Magnolia's proven
developed producing reserves stands at US$8.416 million. In 12 months' time, we
expect to report additional growth in production, revenue and producing
reserves.
Finally, I would like to thank the Board, management team and all our advisers
for their hard work during the year and also to our shareholders for their
continued support over the last twelve months.
Chief Operations Officer's Report
The Bakken / Three Forks Sanish Formations, North Dakota
In 2013, a total of 12 wells targeting the Bakken and Three Forks Sanish
formations in North Dakota commenced production, bringing the total number of
producing wells in these formations in which Magnolia has an interest to 34. Of
the wells reported during the year, eight are producing from the Bakken, a
reservoir which currently produces over 850,000 bopd and is estimated to hold
an estimated mean of 3.65 billion barrels of undiscovered, technically
recoverable oil (2013 US Geological Survey). Initial production rates for these
eight wells were:
* BB Rice 2-29: 2,060 boepd
* Gustafson 31-30H: 1,216 boepd
* Helgeson 41-30H: 1,401 boepd
* Curtis Kerr 24-8H: 1,496 boepd
* Nicky Kerr 14-8: 1,501 boepd
* Jake 2-11-4H: 2,543 boepd
* Jake 2-11-6H: 3,315 boepd
* Jake 2-11#1H: 3,928 boepd
Initial production rates for the four wells that commenced production from the
Three Forks Sanish formation, a separate reservoir lying directly below the
Bakken which is estimated to hold as much as 3.73 billion barrels of
recoverable oil (2013 US Geological Survey), were as follows:
* BB Rice 3-29: 2,207 boepd
* Jake 2-11-3TFH: 2,300 boepd
* Jake 2-11-5TFH: 2,430 bopd
* Jake 2-11-2TFH: 2,244 boepd
Boepd : Barrels of oil equivalent per day
Bopd: Barrels of oil per day
Magnolia holds leases in respect of 11,520 gross acres across 28 sections,
equating to 421 net mineral acres within the boundaries of the Bakken / TFS
formations. As the Three Forks Sanish lies beneath the Bakken, the number of
wells which can be drilled per section doubles to eight (four per formation),
providing Magnolia with a total of 120 proven development locations on its
acreage, 60 on the Bakken and 60 on the Three Forks Sanish, as set out in the
Updated Reserves Report by Moyes & Co. dated 8 April 2013.
Mississippi Lime Formation, Oklahoma
Since its admission to AIM in November 2011, Magnolia has acquired
approximately 5,500 net mineral acres in the Mississippi Lime. The acquired
acreage includes leases with working interests of up to 100%.
Initial production rates for 16 producing wells targeting the Mississippi Lime
were reported during 2013:
* Nighswonger Farms 2815 1-13H: 107 boepd
* Sullins 1-6H : 296 boepd
* Montecristo 6-1H: 50 boepd
* Cordray-Ritter 4-28-14 1H: 762 boepd
* Mack 10-27-17: 252 boepd
* Campbell 1-17H: 390 boepd
* Wolf 1H-25: 195 boepd
* McClure 36-2H: 90 boepd
* Peck 1-5H: 631 boepd
* Voise 1-10H: 105 boepd
* Roger Swartz (vertical): 17 bopd
* Flinders 1-25H: 143 boepd
* Great White: 455 boepd
* Joan 1-21 (vertical): 12 bopd
* JKL 1-08H: 549 bopd
* JKL 1-04 H: 40 bopd
During the year, Magnolia elected to participate in a further 15 wells
targeting the Mississippi Lime for which initial production rates have either
been reported post period end or are at various stages of development.
The Mississippi Lime is an historic oil and gas system that has been producing
at depths ranging from 4,500 to 7,000 feet from several thousand vertical wells
for over 50 years. As with the Bakken, new technology and horizontal drilling
has reopened the oil play. Due to the relatively shallow depths and less tight
rock formation, drilling costs at between US$2.4 million and US$3.5 million per
well in the Mississippi Lime and are considerably lower than those in the
Bakken, which should lead to shorter pay-out periods than with the Bakken
wells.
Woodford / Hunton Formations, Oklahoma
In 2013, Magnolia reported initial production rates for 9 wells during the
period under review:
* JoAnn1H-18 targeting the Woodford: 1,170 boepd
* Beebe 24-W1H targeting the Woodford: 73 boepd
* Kelly 1-2H targeting the Woodford: 1,291 boepd
* Campbell 1-H targeting the Woodford: 615 boepd
* Forrest 1-8H targeting the Woodford: 1,272 boepd
* Omega 1-33H targeting the Hunton: 692 mcf
* Condit 1-5H targeting the Woodford: 1,546 boepd
* Robison 4-1MWH targeting the Woodford: 777 boepd
* Sympson 1-6H targeting the Woodford: 758 boepd
During the year, Magnolia elected to participate in a further 15 wells
targeting the Woodford/Hunton formations for which initial production rates
have either been reported post period end or are at various stages of
development.
Like the Bakken, the Woodford / Hunton formations in Oklahoma are established
reservoirs that have been reopened following the introduction of horizontal
drilling and stimulation technology. As a result the Woodford oil play in
particular is increasingly being drilled by leading operators.
Summary
During the year initial production rates were reported for 43 new wells in
proven US onshore formations such as the Bakken and Three Forks Sanish, North
Dakota and Mississippi Lime and Woodford, Oklahoma. A number of these new wells
achieved the best initial production rates for wells in which Magnolia has an
interest, notably the Statoil operated Jake wells in the Bakken and Three Forks
Sanish formations in North Dakota. This highlights how operators' increased
knowledge of the geology of US plays and further advances in equipment and
technology are allowing more of the reserves to be recovered, which has
contributed to the USGS doubling its estimate of mean undiscovered and
technically recoverable oil from the Bakken and TFS to 7.38 billion barrels. As
the growth reported in 2013 and the progress made in 2014 to date shows, this
is an exciting time for oil and gas companies operating in US onshore plays,
and as a result further strong growth in Magnolia's production and reserves is
expected in the year ahead.
MAGNOLIA PETROLEUM PLC consolidated Statement of Comprehensive Income
Year ended 31 December 2013
Note
Year ended Year ended
31 December 31 December
2013 2012
(restated)
$ $
Continuing Operations
Revenue 2,443,244 709,395
Operating expenses (640,823) (200,255)
Depreciation (605,686) (219,183)
Gross Profit 1,196,735 289,957
Impairment of property, plant and - (9,333)
equipment
Impairment of mineral leases (67,070) (218,525)
Profit on disposal of mineral leases 244,373 -
Differences due to foreign exchange (417,520) (263,774)
Administrative expenses 4 (1,218,019) (871,934)
Operating Loss (261,501) (1,073,609)
Finance income 283 -
Finance costs (20,599) (1,569)
Loss before Tax (281,817) (1,075,178)
Taxation - -
Loss for the year attributable to the (281,817) (1,075,178)
owners of the parent
Other Comprehensive Income:
Items that may be reclassified
subsequently to profit or loss
Currency translation differences 468,089 173,924
Other Comprehensive Income for the Year, 468,089 173,924
Net of Tax
Total Comprehensive Income for the Year 186,272 (901,254)
attributable to the owners of the parent
Earnings per share for loss attributable
to the owners of the parent during the
year
Basic and diluted (cents per share) 5 (0.03) (0.16)
The loss for the Parent Company for the year was $482,319 (2012: $334,035).
MAGNOLIA PETROLEUM PLC CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2013
Note As at As at
31 December 31 December
2013 2012
$ $
ASSETS
Non-Current Assets
Property, plant and equipment 6 8,352,385 3,437,869
Intangible assets 7 6,400,258 6,200,828
Total Non-Current Assets 14,752,643 9,638,697
Current Assets
Trade and other receivables 1,268,823 208,936
Cash and cash equivalents 128,002 2,293,151
Total Current Assets 1,369,825 2,502,087
TOTAL ASSETS 16,149,468 12,140,784
EQUITY AND LIABILITIES
Equity attributable to Owners of Parent
Share capital 1,481,396 1,390,244
Share premium 13,954,026 11,888,717
Merger reserve 1,975,950 1,975,950
Share option and warrants reserve 209,042 66,603
Reverse acquisition reserve (2,250,672) (2,250,672)
Translation reserve 515,389 47,300
Retained losses (1,859,713) (1,577,896)
Total Equity 14,025,418 11,540,246
Non-Current Liabilities
Borrowings 900,000 -
Total Non-Current Liabilities 900,000 -
Current Liabilities
Trade and other payables 1,224,050 600,538
Total Current Liabilities 1,224,050 600,538
TOTAL EQUITY AND LIABILITIES 16,149,468 12,140,784
MAGNOLIA PETROLEUM PLC CONSOLIDATED Statement of Changes in Equity
Year ended 31 December 2013
Attributable to the owners of the parent
Group ($) Share Share Merger Share Reverse Translation Retained Total
capital Premium reserve option acquisition reserve losses equity
and reserve
warrants
reserve
Balance at 926,128 2,218,877 1,975,950 66,603 (2,250,672) (126,624) (502,718) 2,307,544
1 January 2012
Loss for the - - - - - - (1,075,178) (1,075,178)
year
Other
Comprehensive
Income
Currency - - - - - 173,924 - 173,924
translation
differences
Total - - - - - 173,924 (1,075,178) (901,254)
Comprehensive
Income for the
Year
Proceeds from 464,116 10,664,377 - - - - - 11,128,493
share issues
Share issue - (994,537) - - - - - (994,537)
costs
Transactions 464,116 9,669,840 - - - - - 10,133,956
with owners,
recognised
directly in
equity
Balance at 1,390,244 11,888,717 1,975,950 66,603 (2,250,672) 47,300 (1,577,896) 11,540,246
31 December 2012
Balance at 1,390,244 11,888,717 1,975,950 66,603 (2,250,672) 47,300 (1,577,896) 11,540,246
1 January 2013
Loss for the - - - - - - (281,817) (281,817)
year
Other
Comprehensive
Income
Currency - - - - - 468,089 - 468,089
translation
differences
Total C - - - - - 468,089 (281,817) 186,272
omprehensive I
ncome for the Y
ear
Proceeds from 91,152 2,187,648 - - - - - 2,278,800
share
issue
Share issue - (122,339) - - - - - (122,339)
costs
Issue of share - - - 142,439 - - - 142,439
options and
warrants
Transaction with 91,152 2,065,309 - 142,439 - - - 2,298,900
owners,
recognised
directly in
equity
Balance at 1,481,396 13,954,026 1,975,950 209,042 (2,250,672) 515,389 (1,859,713) 14,025,418
31 December 2013
MAGNOLIA PETROLEUM PLC CONSOLIDATED Statement of Cash Flows
Year ended 31 December 2013
Year ended Year ended
31 December 31 December
2013 2012
$ $
Cash Flows from Operating Activities
Loss before tax (281,817) (1,075,178)
Impairment of mineral leases 67,070 227,858
Depreciation 610,134 222,033
Foreign exchange 456,897 158,351
Issue of share options and warrants 142,439 -
Finance income (283) -
Finance costs 20,559 1,569
1,014,999 (465,367)
Changes to working capital
Increase in trade and other receivables (1,059,430) (136,925)
Increase/(decrease) in trade and other 101,267 (19,388)
payables
Cash generated from/(used in) operations 56,836 (621,680)
Interest paid (20,559) (1,569)
Net Cash generated from/(used in) 36,277 (623,249)
Operating Activities
Cash Flows from Investing Activities
Purchases of intangible assets (1,605,763) (5,691,408)
Purchases of property, plant and (4,165,785) (2,407,158)
equipment
Disposal of intangible assets 405,100 -
Disposal of property, plant and 105,578 -
equipment
Interest received 283 -
Net Cash used in Investing Activities (5,260,587) (8,098,566)
Cash Flows from Financing Activities
Proceeds from issue of ordinary shares 2,278,800 11,128,493
Issue costs (122,339) (994,537)
Proceeds from borrowings 900,000 -
Net Cash generated from Financing 3,056,461 10,133,956
Activities
Net (Decrease)/Increase in Cash and Cash (2,167,849) 1,412,141
Equivalents
Movement in Cash and Cash Equivalents
Cash and cash equivalents at the 2,293,151 874,037
beginning of the year
Exchange gain on cash and cash 2,700 6,973
equivalents
Net (decrease)/increase in cash and cash (2,167,849) 1,412,141
equivalents
Cash and Cash Equivalents at the End of 128,002 2,293,151
the Year
MAGNOLIA PETROLEUM PLC NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2013
* GENERAL INFORMATION
The Consolidated Financial Statements of Magnolia Petroleum plc ("the Company")
consists of the following companies; Magnolia Petroleum plc and Magnolia
Petroleum Inc. (together "the Group").
The Company is a public limited company which is listed on the AIM market of
the London Stock Exchange and incorporated and domiciled in England and Wales.
Its registered office address is Suite 321, 19-21 Crawford Street, London, W1H
1PJ.
* Summary of significant accounting policieS
The principal accounting policies applied in the preparation of these
consolidated Financial Statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
1. Basis of preparation of Financial Statements
The consolidated Financial Statements have been prepared in accordance with
International Financial Reporting Standards as adopted by the European Union
(IFRSs as adopted by the EU) to companies reporting under IFRS, and IFRIC
interpretations and the parts of the Companies Act 2006 applicable to companies
reporting under IFRS.
The Financial Statements have been prepared under the historical cost
convention.
The preparation of Financial Statements in conformity with IFRS requires the
use of certain critical accounting estimates. It also requires management to
exercise its judgement in the process of applying the Group's accounting
policies. The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the consolidated
Financial Statements, are disclosed in Note 4 of the 2013 Financial Statements.
The 2013 Financial Statements have been restated to better reflect the
operations of the Group. The change has resulted in depreciation on Producing
Properties being removed from operating expenses within cost of sales and
depreciation on drilling costs and equipment being removed from administrative
expenses. These depreciation charges have been aggregated into a new line on
the Income Statement within cost of sales.
2. Basis of consolidation
The consolidated Financial Statements consolidate the Financial Statements of
Magnolia Petroleum plc and the audited Financial Statements of its subsidiary
undertaking made up to 31 December 2013.
Subsidiaries are entities over which the Group has control. Control is the
power to govern the financial and operating policies of an entity so as to
obtain benefits from its activities. The Group obtains and exercises control
through voting rights. The existence and effect of potential voting rights that
are currently exercisable or convertible are considered when assessing whether
the Group controls another entity. Subsidiaries are fully consolidated from the
date on which control is transferred to the Group. They are de-consolidated
from the date that control ceases.
The Company acquired Magnolia Petroleum Inc. on 23 October 2009 through a share
exchange. As the shareholders of Magnolia Petroleum Inc. have control of the
legal parent, Magnolia Petroleum plc, the transaction was accounted for as a
reverse acquisition in accordance with IFRS 3 "Business Combinations". The
following accounting treatment has been applied in respect of the reverse
acquisition:
* the assets and liabilities of the legal subsidiary Magnolia Petroleum Inc.
are recognised and measured in the Consolidated Financial Statements at
their pre-combination carrying amounts, without restatement to fair value;
and
* the equity structure appearing in the Consolidated Financial Statements
reflects the equity structure of the legal parent, Magnolia Petroleum plc,
including the equity instruments issued to effect the business combination.
The cost of acquisition was measured as the fair value of the assets acquired,
equity instruments issued and liabilities incurred or assumed at the date of
exchange, plus certain costs directly attributable to the acquisition.
In accounting for the acquisition of Magnolia Petroleum Inc., the Company has
taken advantage of Section 612 of the Companies Act 2006 and accounted for the
transaction using merger relief.
Investments in subsidiaries are accounted for at cost less impairment. Where
necessary, adjustments are made to the financial statements of subsidiaries to
bring the accounting policies used into line with those used by other members
of the Group. All inter-company transactions and balances between Group
entities are eliminated on consolidation.
1. Going concern
The Group's business activities, together with the factors likely to affect its
future development and performance are set out in the Chief Executive Officer's
Statement. In addition, notes 3 and 19 to the 2013 Financial Statements
disclose the Group's and Company's objectives, policies and processes for
managing financial risks and capital.
The Company raised $2.28 million before expenses via a placing during the year.
In addition, the Group secured a three year $5 million revolving credit
facility during the year, with a current borrowing base limit of $2,100,000.
All loan covenants were met during the year and subsequent to the year end. The
Group's cash flow forecasts and projections prepared up to 31 December 2016
show that the Group has sufficient funds and facilities to fund its ongoing
operating costs. The Directors have a reasonable expectation that the Company
and Group has adequate resources to continue in operational existence for the
foreseeable future. For this reason, the Directors continue to adopt the going
concern basis of accounting in preparing the Financial Statements.
* segmental information
The Group operates in two geographical areas, the United Kingdom and the United
States of America. Activities in the UK are mainly administrative in nature
whilst the activities in the USA relate to exploration and production from oil
and gas wells. The reports reviewed by the Board of Directors that are used to
make strategic decisions are based on these geographical segments.
Year ended 31 December 2013
USA UK Intra-segment Total
balances
$ $ $ $
Revenue from external 2,443,244 - - 2,443,244
customers
Gross profit 1,196,735 - - 1,196,735
Operating profit/(loss) 220,818 (482,319) - (261,501)
Impairment - property, plant - - - -
and
equipment
Impairment - expired leases 67,070 - - 67,070
Depreciation 610,134 - - 610,134
Capital expenditure 6,292,723 - - 6,292,723
Total assets 15,590,776 17,057,866 (16,880,907) 15,767,735
Total liabilities 15,091,394 38,631 (13,005,975) 2,124,050
Year ended 31 December 2012 (restated)
USA UK Intra-segment Total
balances
$ $ $ $
Revenue from external 709,375 - - 709,395
customers
Gross profit 289,957 - - 289,957
Operating loss (739,574) (334,035) - (1,073,609)
Impairment - property, plant 9,333 - - 9,333
and
equipment
Impairment - expired leases 218,525 - - 218,525
Depreciation 222,033 - - 222,033
Capital expenditure 8,098,566 - - 8,098,566
Total assets 11,646,146 14,696,234 (14,574,225) 11,768,155
Total liabilities 11,347,265 44,975 (10,791,700) 600,538
A reconciliation of the operating loss to loss before taxation is provided as
follows:
Year ended Year ended
31 December 31 December
2013 2012
$ $
Operating loss for reportable segments (261,501) (1,073,609)
Finance income 283 -
Finance costs (20,599) (1,569)
Loss before tax (281,817) (1,075,178)
The amounts provided to the Board of Directors with respect to total assets are
measured in a manner consistent with that of the Financial Statements. These
assets are allocated based on the operations of the segment and physical
location of the asset. Goodwill recognised by the Group is managed centrally
and is not considered to be a segmental asset.
Reportable segments' assets are reconciled to total assets as follows:
Year ended Year ended
31 December 31 December
2013 2012
$ $
Segmental assets for reportable segments 15,767,735 11,768,155
Unallocated: goodwill 381,733 372,629
Total assets per Statement of Financial Position 16,149,468 12,140,784
* EXPENSES BY NATURE
Group 2013 2012
(restated)
$ $
Directors' fees 322,422 331,492
Consulting fees 295,171 292,418
Legal, professional and compliance costs 118,225 127,431
Depreciation 4,448 2,850
Issue of share options and warrants 142,439 -
Other costs 335,314 117,743
_______ _______
Total administrative expenses 1,218,019 871,934
_______ _______
* EARNINGS per Share
The calculation of the basic loss per share of 0.03 cents per share (31
December 2012 loss per share: 0.16 cents) is calculated by dividing the loss
attributable to ordinary shareholders of $281,817 (31 December 2012 loss:
$1,075,178) by the weighted average number of ordinary shares of 888,152,303
(31 December 2012: 691,240,908) in issue during the period.
In accordance with IAS 33, there is no difference between the basic and diluted
loss per share as the effect on the exercise of options and warrants would be
to decrease the earnings per share.
* Property, plant and equipment
Group
Producing Drilling Motor Total
properties costs and vehicles
(Mineral equipment and office
Leases) equipment
$ $ $ $
Cost
At 1 January 2012 457,648 612,199 - 1,069,847
Additions 405,015 1,968,889 15,254 2,407,158
Transferred from intangible 35,104 364,998 - 400,102
assets
Impairment (14,000) - - (14,000)
At 31 December 2012 883,767 2,964,086 15,254 3,863,107
Additions 147,049 4,535,200 3,805 4,686,054
Disposals (7,781) (97,797) - (105,578)
Transferred from intangible 232,708 711,466 - 944,174
assets
At 31 December 2013 1,255,743 8,112,955 19,059 9,387,757
Accumulated Depreciation and
Impairment
At 1 January 2012 97,958 109,914 - 207,872
Charge for the period 39,917 179,266 2,850 222,033
Impairment (4,667) - - (4,667)
At 31 December 2012 133,208 289,180 2,850 425,238
Charge for the period 57,633 548,053 4,448 610,134
At 31 December 2013 190,841 837,233 7,298 1,035,372
Net Book Amount
At 31 December 2012 750,559 2,674,906 12,404 3,437,869
At 31 December 2013 1,064,902 7,275,722 11,761 8,352,385
Transfers from intangible assets represent licence areas where production has
commenced together with drilling costs associated with these licences.
Producing properties and drilling costs depreciation expense of $605,686 (2012:
$219,183) has been charged in cost of sales.
Motor vehicles and office equipment depreciation expense of $4,448 (2012:
$2,850) has been charged in administrative expenses.
* intangible assets
Group
Cost Goodwill Drilling Mineral Total
costs leases
$ $ $ $
At 1 January 2012 356,216 364,998 390,420 1,111,634
Additions - 710,727 4,980,681 5,691,408
Transferred to property, plant and - (364,998) (35,104) (400,102)
equipment
Exchange movements 16,413 - - 16,413
Impairment - - (218,525) (218,525)
At 31 December 2012 372,629 710,727 5,117,472 6,200,828
Additions - 4,733 1,601,937 1,606,670
Transferred to property, plant and - (711,465) (232,709) (944,174)
equipment
Disposals - - (405,100) (405,100)
Exchange movements 9,104 - - 9,104
Impairment - - (67,070) (67,070)
As at 31 December 2013 381,733 3,995 6,014,530 6,400,258
Amortisation
At 1 January 2012, 31 December 2012 - - - -
and 31 December 2013
Net Book Amount
At 31 December 2012 372,629 710,727 5,117,472 6,200,828
At 31 December 2013 381,733 3,995 6,014,530 6,400,258
Impairment review
Drilling costs and mineral leases represent acquired intangible assets with an
indefinite useful life and are tested annually for impairment. As disclosed
within Accounting Policies, expenditure incurred on the acquisition of mineral
leases is capitalised within intangible assets until such time as the
exploration phase is complete or commercial reserves have been discovered.
Exploration expenditure including drilling costs are capitalised on a well by
well basis if the results indicate the existence of a commercially viable level
of reserves.
The Directors have undertaken a review to assess whether circumstances exist
which could indicate the existence of impairment as follows:
* The Group no longer has title to the mineral lease.
* A decision has been taken by the Board to discontinue exploration due to
the absence of a commercial level of reserves.
* Sufficient data exists to indicate that the costs incurred will not be
fully recovered from future development and participation.
* The lease has expired.
Following their assessment the Directors recognised an impairment charge to the
cost of mineral leases of $67,070 (2012 - $218,525) in respect of expired
mineral leases.
The Directors believe that no impairment is necessary on the carrying value of
goodwill. Goodwill arose on the reverse acquisition of Magnolia Petroleum Plc.
The goodwill represents the value of the parent company being an AIM listed
entity to Magnolia Petroleum Inc.
Annual Report & Accounts and Notice of AGM
The 2013 Annual Report & Accounts together with the Notice of AGM will be
posted to Shareholders later this week and are available on the Company's
website (www.magnoliapetroleum.com).
The Company also announces that the Annual General Meeting of Magnolia will be
held at 18452 E 111th, Broken Arrow, Oklahoma, OK74011, USA on Tuesday 10 June
2014 at 10.00am Central Daylight Time.
CHANGE OF UK REGISTERED OFFICE
The Company also announces that it has changed its Registered Office to Suite
321, 19-21 Crawford Street, London, W1H 1PJ.
* * ENDS * *
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 Limited +44 20 7796 8800
Luke Cairns
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 151 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 154
Being Drilled / Completed 17
Elected to participate / waiting to 48
spud
TOTAL 219