Magnolia Petroleum Plc / Index: AIM /
Epic: MAGP / Sector: Oil & Gas
15 March 2017
Magnolia Petroleum
Plc (‘Magnolia’ or ‘the Company’)
Updated
Reserve Report
Magnolia Petroleum Plc, the AIM quoted US onshore focused oil
and gas exploration and production company, is pleased to announce
the results of an independent Reserves Report. The Report,
which is part of the six-month bank debt redetermination process,
shows an increase in the Company’s net proved developed producing
reserves (‘PDP’) across its leases in US onshore formations such as
the Woodford and Mississippi Lime,
Oklahoma, and the Bakken and Three
Forks Sanish, North Dakota.
Overview:
- 112% increase in total net PDP oil and condensate reserves to
282.686 Mbbl as at 1 January 2017
(1 July 2016: 133.31 Mbbl of oil and
condensate)
- 303% increase in total net PDP gas reserves to 2,343.116 MMCF
(1 July 2016: 580.67 MMcf gas)
- Significant increase in total net PDP reserves due to a number
of new wells commencing production over the period
- Value (NPV9) of total net PDP reserves as at
1 January 2017 increased to
US$4,026,000 (1 July 2016: US$3,445,180) provides strong asset backing to
current market capitalisation
- Further headroom created as borrowing base limit of
US$6 million Credit Facility adjusted
up to US$2,214,300 from US$1,894,849 to reflect increase in total net PDP
reserves and positive effect of higher oil prices on their
value
- The Report only covers proved developed producing and proved
developed non-producing reserve classes and does not include proved
shut-in, proved undeveloped, probable and possible reserve classes
as well as Magnolia’s interests in undeveloped acreage
Rita Whittington, COO of
Magnolia, said, “At US$4million
the value assigned to our PDP reserves alone is almost double our
current market capitalisation. We are confident the true
underlying value of the Company is greater still, as this latest
Report on our leases in Oklahoma
and North Dakota did not cover
other classes of reserves, most notably in both the proved and
probable categories.
“With oil prices seemingly stabilising at the US$50 level and costs across the sector
significantly lower than those that were prevalent before the
downturn, activity among US onshore operators continues to pick up
from 2016’s lows. We are seeing this for ourselves in the
increase in the number of well proposals we are receiving to drill
wells on our leases. As the improved sentiment translates
into more drilling, we are confident that the substantial discount
the market is ascribing to our PDP reserves will narrow. In
the meantime, the resumption in PDP reserves growth is most welcome
and I look forward to providing further updates as we take
advantage of the recovery to drill alongside established operators
on our leases to prove up our reserves, and in the process generate
value for our shareholders.”
Summary Table of Magnolia’s Total Net
PDP and proved developed non-producing (‘PDNP’) Reserves as at
8 March 2017:
|
|
Net |
PV9 |
State |
Reserve
Category |
BO |
MCF |
US$M |
Oklahoma |
PDP |
124,773 |
2,207,617 |
$2,456 |
Oklahoma |
PDNP |
833 |
0 |
$3 |
North Dakota |
PDP |
157,913 |
135,499 |
$1,570 |
|
|
|
|
|
Total |
|
283,519 |
2,343,116 |
$4,029 |
NPV9 valuations are based on the bank’s price deck as
of January 2017 and take into account
the future net cash flow which is defined as future net revenue,
less estimated future net OPEX (well operating cost and production
taxes) and future net capital. The total net PDP 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 Mike Mabry on behalf of Sycamore Resources. Mr
Mabry has over 30 years of relevant experience in the oil industry
and has a B.S. in Petroleum Engineering from the University of
Tulsa. He has previously served as Chair of the SPE Improved
Oil Recovery Symposium, presiding over 700 engineers from 65
counties. Over the course of his career, Mr Mabry has held
the position of Senior Petroleum Engineer at Apache Corporation,
Petrohawk Energy and MAPCO and is currently Managing Director of
Sycamore Resources in Tulsa,
Oklahoma.
** ENDS **
Glossary
‘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.
* * ENDS * *
For further information on Magnolia Petroleum Plc visit
www.magnoliapetroleum.com or contact the following:
Steven Snead |
Magnolia Petroleum Plc |
+01918449 8750 |
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 154 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 |
14 |
Elected to participate / waiting to
spud |
46 |
TOTAL |
214 |