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Quarterly Operations Update for the Period Ended 31 March 2015
Magnolia Petroleum Plc, the AIM quoted US focused oil and gas exploration and production company, has announced a quarterly update on its operations across proven and producing US onshore hydrocarbon formations, including the Bakken/Three Forks Sanish in North Dakota and Montana, and the Woodford, Mississippi Lime and the Hunton in Oklahoma.
Quarter Highlights:
* Eight new wells commenced production bringing the total to 184 producing
wells as at end of Q1 2015 – a further 33 at various stages of development
* Elected to participate in 12 new wells in low cost formations including the
Mississippi Lime and Woodford formations in Oklahoma
* Updated Reserves Report demonstrates strong reserves growth between 1 July
2014 and 1 January 2015:
+ 37% and 39% increase in total net proved reserves to 985 Mbbl of
oil and condensate and 2,905 MMcf gas respectively
+ US$26.653 million value assigned to P1 reserves as at 1 January 2015
+ 10% and 6% increase in net proved and developed producing reserves
to 178 Mbbl of oil and condensate and 572 MMcf gas respectively
+ 39% and 35% increase in total net proved and probable reserves
to 1,044 Mbbl of oil and condensate and 3,114 MMcf gas respectively 27%
and 29% increase in total net proved, probable and possible reserves
to 1,114 Mbbl of oil and condensate and 3,290 MMcf gas
respectively
* 30% reduction in corporate overheads and operating costs achieved as part
of management’s focus on realigning the business in the lower oil price
environment
* Taking advantage of low oil prices by increasing leasehold in future areas
of development
* Funding continued growth from Company’s own cash-flow where possible,
despite volatile oil price environment – participated in new wells
totalling US$1.4 million since close of Bank Loan in August 2014
* Increased production – net production stood at 281 boepd as at 1 January
2015 compared to 257 boepd on 1 July 2014
Outlook:
* New wells due to come into production in Q2 2015
* Planning underway to operate and drill one vertical well in Oklahoma, with
a second well possible depending on product and service prices: Both wells,
the Roger Swartz #2 and the Shimanek #2 targeting multiple conventional
payzones, including the Mississippi Lime/Chat, Redfork Sand and the Lower
Skinner Sand
* Additional participations with leading operators in new wells and infill
drilling which require low breakeven oil prices
* On-going lease acquisition and management activity in line with strategy to
grow and diversify portfolio
Magnolia COO, Rita Whittington said, “To ensure Magnolia is well placed for continued reserves growth in the current volatile oil markets while maintaining the Company’s financial stability, we have set ourselves three objectives for 2015: reduce our cost base; focus on areas with low economic risk; and participate in profitable drilling. With this in mind, Q1 has seen much progress made and we are proud to have delivered on our objectives from cash-flows. We have reduced our costs by 30% and elected to participate in 12 wells on our leases in proven US onshore formations where the economic case is robust at today’s prices.
“We are planning to drill at least one well as operator by year end, with a second well possible depending on product and service costs. Both wells have low breakeven oil prices and the potential to materially add to our existing production and reserves. With the US rig count close to a three year low, we are taking advantage of current market conditions to secure significant savings in drilling and service costs, which will enhance each well’s already attractive payback credentials. Thanks to the steps we have taken and the asset backing provided by the US$26.6 million value assigned to our P1 reserves in January 2015, not only will Magnolia ride out the oil price storm, but will also continue to deliver on its objective to prove up the reserves on its US onshore leases and generate value for shareholders.”
