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Production Update & Reserve Report
Magnolia Petroleum Plc, the AIM quoted US onshore focused oil and gas exploration and production company, has provided an update on current production and an independent Reserves Report as at 1 June 2015, on its leases in US onshore formations such as the Woodford and Mississippi Lime, Oklahoma, and the Bakken and Three Forks Sanish, North Dakota.
Production Update
– Net production stood at 309 boepd as at 1 August 2015 compared to 281 boepd on 1 January 2015
– Skunk Creek wells came online in February 2015 and added an average of 32.3 boepd net production (discounted for average decline rate)
New Producing Wells
– 4 wells have recently commenced production in which Magnolia has an average 0.68% working interest (see table below)
– Initial Production (‘IP’) rates allow Magnolia to recover well costs quickly with decline rates slowing (after year 1) to a flatter decline rate which will continue for 35-50 years
Reserves Report:
– Total net proved reserves (‘1P’) of 873 Mbbl of oil and condensate and 2,454 MMcf gas as at 1 June 2015
– Net proved and developed producing reserves (‘PDP’) estimated at 174 Mbbl of oil and condensate and 567 MMcf gas as at 1 June 2015
– Total net proved and probable reserves (‘2P’) of 930 Mbbl of oil and condensate and 2,660 MMcf gas
– Total net proved, probable and possible reserves (‘3P’) of 998 Mbbl of oil and condensate and 2,828 MMcf gas
– Valuations (NPV9) assigned to proven reserves categories as at 1 June 2015 reflect lower oil prices and are based on the 1 June 2015 NYMEX futures strip prices for WTI Oil and Henry Hub Gas:
– 1P reserves estimated at US$20.888 million compared to US$26.653 million as at 1 January 2015 – PDP reserves estimated at US$5.378 million compared to US$6.703 million
– 2P reserves estimated at US$22.323 million compared to US$28.361 million as at 1 January 2015
– 3P reserves estimated at US$23.606 million compared to US$29.726 million as at 1 January 2015
– Cost of drilling onshore US is decreasing in the current oil price environment
– Decrease in drilling costs from approximately US$3.8 million to approximately US$1.8 million in the Woodford and Mississippi Formations
Rita Whittington, COO of Magnolia, said, “Even with a reduction in oil price since our last reserve report and update, Magnolia remains cash generative and profitable. We continue to maintain a low break even oil price, with costs on producing non-operated wells, including capex averaging US$33 per barrel and as this report demonstrates, our proven reserves value at US$20.888 million remains well above our current market valuation. Wells that were listed on our past reserve reports, that were on the economic threshold may have fallen off of the current report; however, we believe once oil prices start to climb these “threshold” wells will be moved back onto the existing report and will add additional reserve value again.
“Since the start of the year the cost of drilling wells onshore US has dramatically decreased, and as a result recent well proposals we have received to drill into the Woodford and Mississippi Formations are approximately half the cost compared to eight months ago. With this in mind, we hope to spud the Roger Swartz #2 before year end at a lower cost. Additionally, in order to grow and diversify our portfolio we are taking advantage of low oil prices to increase our leasehold in future areas of development as we look to increase our reserves and production in the year ahead.”
