Magnolia Petreoleum announces US$5 million credit facility

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Magnolia Petroleum (LSE:MAGP),an AIM quoted US onshore focused oil and gas exploration and production company, has announced it has secured a US$5 million three year Credit Facility).

Combined with the Company’s fast growing revenues from production, which as at 1 August 2013 stood at 214 boepd, the Credit Facility will provide funding for future drilling activity alongside established operators, as well as the acquisition of additional leases in proven US onshore formations.

Credit Facility:

The Credit Facility is a three year revolving line of credit with a nominal value of US$5 million. Interest is charged on credit draw down at Wall Street Journal Prime (currently 3.25%) +1.00%. No warrants or equity are to be issued as part of the facility. Under the terms of the credit line, an initial borrowing base limit of US$1.6 million has been set which will be reassessed on a six monthly basis and adjusted in line with the level of Magnolia’s Proven Developed Producing reserves (‘PDP’). The Directors expect the strong growth seen to date in the Company’s PDP reserves will be maintained as a result of a pipeline of 50 new wells at various stages of development and the multiple well proposals being received.

Equity Financing Facility (‘EFF’):

The Company announced on 9 August 2012 that it had secured an EFF providing additional optionality when issuing shares on a non-pre-emptive basis. The Directors are very conscious of minimising the amount of new equity issued and from the outset it has been the ambition of the Company to become self-funding. Based on current trading and today’s announcement of the US$5 million Credit Facility, the Directors do not anticipate drawing down under the EFF in the foreseeable future.

Rita Whittington, COO of Magnolia, said, “Securing this US$5 million Credit Facility not only represents a third party validation of both our business model and the progress we have made to date, but also goes a long way to propelling Magnolia towards self-funding status. Combined with our strong revenue growth profile, which, in line with our strategy, is already allowing us to increasingly fund new well participations using recycled capital, we are now in a position to accelerate our drilling activity and at the same time prove up our reserves.

“In the two years since our Admission to AIM, we have proven our model can create value for shareholders having grown our 2P reserves from US$2.2 million at the time of our IPO to US$47 million as at 1 August 2013. With over 600 potential drilling locations on our acreage and having secured the Credit Facility, we are delighted that we are in a position to prove up the reserves on our acreage while retaining more of the value upside for our shareholders. I look forward to providing further updates, as we continue to grow our reserves through drilling.”

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