Magnolia Petroleum Plc / Index: AIM / Epic: MAGP / Sector: Oil & Gas
30 January 2015
Magnolia Petroleum Plc ('Magnolia' or 'the Company')
Reserves Report & Production Update
Magnolia Petroleum Plc, the AIM quoted US onshore focused oil and gas
exploration and production company, has received an independent Reserves Report
as at 1 January 2015, which includes a significant increase in net proven
reserves on its leases in US onshore formations such as the Woodford and
Mississippi Lime, Oklahoma, and the Bakken and Three Forks Sanish, North
Dakota. In addition, the Company is pleased to report net daily production
stood at 281 boepd as at 1 January 2015, compared to 257 boepd as at 1 July
2014.
Reserves Report
* Total net proved reserves ('1P') of 985 Mbbl of oil and condensate and
2,905 MMcf gas as at 1 January 2015 - up 37% and 39% respectively compared
to 1 July 2014
+ Net proved and developed producing reserves ('PDP') estimated at 178
Mbbl of oil and condensate and 572 MMcf gas as at 1 January 2015 - up
10% and 6% respectively compared to 1 July 2014
* Total net proved and probable reserves ('2P') of 1,044 Mbbl of oil and
condensate and 3,114 MMcf gas - up 39% and 35% respectively compared to 1
July 2014
* Total net proved, probable and possible reserves ('3P') of 1,114 Mbbl of
oil and condensate and 3,290 MMcf gas - up 27% and 29% respectively
compared to 1 July 2014
* Valuations (NPV10) assigned to proven reserves categories as at 1 January
2015 reflect lower oil prices and are based on the 1 January 2015 NYMEX
futures strip prices for WTI Oil and Henry Hub Gas:
+ 1P reserves estimated at US$26.653 million compared to US$31.832
million as at 1 July 2014 - PDP reserves estimated at US$6.703 million
compared to US$9.143 million
+ 2P reserves estimated at US$28.361 million compared to US$34.693
million as at 1 July 2014
+ 3P reserves estimated at US$29.726 million compared to US$35.884
million as at 1 July 2014
* Scope for further reserves growth:
+ Multiple potentially highly productive Mississippi Lime wedges
identified by Magnolia on its leases in Oklahoma - permits secured to
drill two low cost vertical wells targeting productive wedges in 2015
+ Report does not reflect potential in the Woodford formation, Oklahoma,
which underlies the Mississippi Lime and is at an earlier stage of
development - viewed by operators as the more prospective of the two
formations in certain areas
Production Update
* Net production stood at 281 boepd as at 1 January 2015 compared to 257
boepd on 1 July 2014
Credit Facility
* US$6 million loan amount of Credit Facility remains in place - the
borrowing base limit has been adjusted to US$3,284,210 from US$4,596,944 to
reflect the effect of lower oil prices on the value of Magnolia's net
reserves - all other terms remain the same (see announcement dated 9
September 2014 for further details)
+ Funds remain available to the Company at the revised borrowing base
level
+ The next Reserves Update is due in July 2015 but the Company has the
option to request an evaluation at an earlier date
Rita Whittington, COO of Magnolia, said, "With our proven reserves up by
approximately one third across all three categories, the last six months have
seen further excellent progress made towards delivering on our objective to
prove up the reserves on Magnolia's leases, which cover over 13,500 net mineral
acres in producing US onshore formations. Even after taking into account lower
oil prices, at US$26.653 million the value of our proven reserves far outstrips
Magnolia's current market valuation, and as a result provides considerable
asset backing.
"We have permits in place to drill, as operator, two low cost vertical wells in
Oklahoma in 2015 in which we have a 76.375% net revenue interest in each.
Subject to the results, these two wells, along with our continued participation
in new drilling alongside established operators, provide scope for a
significant increase in net reserves and production in the year ahead. I look
forward to providing further updates on our progress in due course."
Summary of Magnolia Reserves
As of 1 January 2015, Magnolia's net reserves, future net cash flow and net
present value discounted at 10% per annum ('NPV10') have been estimated to be
as follows:
Grand Total as of January 1, 2015
Gross Reserves Net Reserves Net Cash Flow
Oil & Natural Oil & Natural Future Future Future Future NPV
Condensate Gas Condensate Gas Net Net Net Net Disc @
(Mbbl) (MMcf) (Mbbl) (MMcf) Revenue OPEX & Capital Cash 10%
($000) Taxes ($000) Flow ($000)
Reserve Class/ ($000) ($000)
Category
Proved Developed 15,394 103,473 178 572 15,331 4,970 - 10,362 6,703
Producing
Proved Developed 947 5,697 12.8 15 1,021 270 5 746 551
Behind
Pipe
Proved Shut In - - - - - - - - -
Proved Undeveloped 19,241 171,350 795 2,317 75,149 16,425 18,651 37,073 19,399
Total Proved 35,582 280,520 985 2,905 88,502 21,665 18,656 48,181 26,653
Probable Behind - - - - - - - - -
Pipe
Probable 818 7,577 59 209 5,778 1,476 1,342 2,959 1,708
Undeveloped
Total Probable 818 7,577 59 209 5,778 1,476 1,342 2,959 1,708
Total 2P 36,400 288,097 1,044 3,114 94,280 23,141 19,998 51,140 28,361
Possible Behind - - - - - - - - -
Pipe
Possible 3,541 22,763 70 176 6,089 1,572 1,708 2,809 1,365
Undeveloped
Total Possible 3,541 22,763 70 176 6,089 1,572 1,708 2,809 1,365
Total 3P 39,941 310,860 1,114 3,290 100,368 24,713 21,706 53,949 29,726
The estimates shown in this report are for proved developed producing, proved
non-producing, proved shut-in, proved undeveloped, probable and possible
reserve classes. This report does not include any value that could be
attributed to interests in undeveloped acreage beyond those tracts for which
undeveloped reserves have been estimated.
The future net revenue is based on the 1 January 2015 NYMEX futures strip
prices for WTI Oil and Henry Hub Gas. The future net cash flow is the future
net revenue, less estimated future net OPEX (well operating cost and production
taxes) and future net capital. The total reserves are those defined as natural
gas and liquid hydrocarbon reserves to Magnolia's interest after deducting all
royalties, overriding royalties, and reversionary interests owned by outside
parties that become effective upon pay-out of specified monetary balances. All
reserves estimates have been prepared using standard engineering practices
generally accepted by the petroleum industry and conform to the guidelines
adopted by the 2007 SPE/SPEE/WPC PRMS Guidelines.
The information contained in this announcement regarding the reserves analysis
has been reviewed and approved by P. Dee Patterson on behalf of Moyes & Co. Mr.
Patterson has 33 years of relevant experience in the oil industry and is
currently Managing Director, with Moyes & Co. in Dallas, Texas.
** ENDS **
Glossary
'1P' means Proved Reserves
'2P' means Proved plus Probable Reserves
'3P' means Proved plus Probable plus Possible Reserves
'BOE' means barrels of oil equivalent, gas is converted at its energy
equivalent of 6000 cubic feet per barrel of oil
'BOEPD' means barrels of oil equivalent per day,
'BOPD' means barrels of oil per day, Abbreviation for barrels of oil per day, a
common unit of measurement for volume of crude oil. The volume of a barrel is
equivalent to 42 US gallons
'Contingent resources' means quantities of petroleum estimated as of a given
date, to be potentially recoverable from known accumulations by application of
development projects, but which are not currently considered commercially
recoverable due to one or more contingencies
'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.
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 Cairn Financial Advisers LLP +44 20 7148 7900
John Howes/Alice Lane Northland Capital Partners +44 20 7796 8800
Limited
Lottie Brocklehurst St Brides Partners Ltd +44 20 7236 1177
Frank Buhagiar St Brides Partners 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 180 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 180
Waiting on first sales / IP rates 2
Being drilled / completed 6
Elected to participate / waiting to spud 27
TOTAL 215