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Magnolia Petroleum Plc (MAGP)

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Friday 19 May, 2017

Magnolia Petroleum Plc

Operations Update

Magnolia Petroleum Plc / Index: AIM / Epic: MAGP / Sector: Oil & Gas

19 May 2017

Magnolia Petroleum Plc (‘Magnolia’ or ‘the Company’)

Operations Update

Magnolia Petroleum Plc, the AIM quoted US focused oil and gas exploration and production company, is pleased to announce its participation in seven new wells in the prolific SCOOP and STACK plays in Oklahoma, including five increased density wells which are to be drilled on the same spacing unit as already producing wells and are therefore deemed to have been significantly de-risked.  In addition, the Company is participating in the workover of eleven existing wells, all of which are low cost and are expected to increase both the level of production and the estimated recoverable reserves for each well.

Participating in seven new wells with an aggregate net cost of US$103,695

Well Name Targeted Formation Operator Magnolia’s WI/NRI% Net Cost to Magnolia Status
Pauline 4-24/25H Woodford, Oklahoma Trinity 0.71/0.53 $31,800 Waiting on spud
Pauline 3-24/25H Woodford, Oklahoma Trinity 0.71/0.53 $31,380 Waiting on spud
Pauline 2/24/25H Woodford, Oklahoma Trinity 0.53/0.39 $20,580 Waiting on spud
Pauline 1-24/25/36H Woodford, Oklahoma Trinity 0.34/0.25 $17,680 Waiting on spud
Vergie 26-23-1H Woodford, Oklahoma Comanche Exploration 0.39/0.29 Fully carried Waiting on spud
Fazio 1706 Well Mississippi Lime, Oklahoma Oklahoma Energy Acquisitions 0.20/0.15 Fully carried Producing Gross IP: 644bopd; 1,507MCF
Celesta 2 Springer, Oklahoma Continental Resources 0.02/0.016 $2,255.00 Waiting on spud

The four Pauline wells are increased density wells targeting the Woodford Shale in Hughes County, Oklahoma. These wells will offset two previously completed Woodford Shale wells: the Trinity-operated Clara 1-13/24H and Regina 1-25/24H. Both the Clara and Regina wells have been and continue to be prolific producers:

  • The Regina well has cumulatively produced 1.3 BCF to date, currently produces at a rate of 1.7 MMCFD and has a projected estimated ultimate recovery (‘EUR’) of over 7.3BCF. 
  • The Clara well’s cumulative production to date stands at 0.800 BCF, its daily production is currently 1 MMCFD and its EUR is over 3.5BCF. 

The four Pauline wells will have a longer horizontal section in the Woodford Shale compared to the Clara and Regina wells, and therefore they have the potential to generate even larger reserves than either of the two initial wells.

Participating in the workover of the following 11 wells at an aggregate net cost of US$38,930:

Well Name Targeted Formation Operator Magnolia’s NRI% Net Cost to Magnolia Workover
Cummings 31-28-12-1H Mississippi Lime, Oklahoma Chesapeake Energy 3.34 $9,600 ESP install
Cummings 2H Mississippi Lime, Oklahoma Chesapeake Energy 3.34 $9,600 ESP install
Brandt 31-28-12 1H Mississippi Lime, Oklahoma Chesapeake Energy 3.35 $8,400 install pumping unit
Blaser 1-10H Mississippi Lime, Oklahoma Cummings 9.375 $5,100 clean and repair pump
Oakley Cash 3-27-17 1H Mississippi Lime, Oklahoma Chesapeake 0.8 $1,735 install pumping unit
Clive Pelton 34-23H Bakken, North Dakota Marathon Oil 0.40 $1,330 Subsequent refrac
Mack 10-27-17 1H Mississippi Lime, Oklahoma Chesapeake Energy 0.53 $1,165 install pumping unit
Sundance 1-4H Mississippi Lime, Oklahoma Chesapeake Energy 0.60 $500 install plunger lift
Rosemary Eckelberg Bakken, North Dakota Marathon Oil 0.35 $500 workover
Alison 16-1H Mississippi Lime, Oklahoma Chesapeake Energy 0.20 $500 install pumping unit
Jacob 16-1H Mississippi Lime, Oklahoma Chesapeake Energy 0.20 $500 install pumping unit

All the above wells are or have previously been producing.  Adding an artificial lift to each well, either by installing a pumping unit or plunger lift, is expected to lead to an uplift in production and an upgrade to reserves which will be reflected in future reserves reports. 

Magnolia CEO, Rita Whittington said, “We are encouraged by the number of new proposals we are receiving to drill alongside established operators.  In our view, this provides further evidence of a pick-up in activity and sentiment in the US onshore sector, as highlighted by a more than doubling in the latest Baker Hughes oil rig count to 712 from 318 a year ago.  It also validates our strategy to focus our lease acquisition strategy on prolific plays, such as the SCOOP and STACK in Oklahoma, where the economics of drilling are attractive in the current oil price environment. Furthermore, all seven wells are deemed to be low risk due to either being drilled on the same spacing unit as an existing producer or as a result of Magnolia’s share of the drilling costs being fully carried.

“Working over an existing well provides a low cost, low risk opportunity to increase production rates and recoverable reserves.  In a low oil price environment, this is an attractive proposition for operators and with a portfolio of 157 producing wells we expect to participate in additional workovers going forward.  Workovers have positive implications for the overall level and value of our proven developed producing (‘PDP’) reserves which were recently independently valued at US$4,300,000. At this level, the value of our PDPs already outstrips our current market capitalisation.  Workovers therefore have the potential to increase the already strong asset backing behind the Company.”

The information contained within this announcement constitutes inside information stipulated under the Market Abuse Regulation (EU) No. 596/2014.

* * 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
Colin Rowbury Cornhill Capital Limited +44207710 9610
Lottie Brocklehurst St Brides Partners Ltd +44207236 1177
Frank Buhagiar St Brides Partners Ltd            +44207236 1177 

Notes

Magnolia Petroleum Plc is an AIM quoted, US focused, oil and gas exploration and production company.  Its portfolio includes interests in 219 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 157
Being drilled / completed 13
Elected to participate / waiting to spud 49
TOTAL 219

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