Magnolia Petroleum Plc Updated Reserve Report

 
TIDMMAGP 
 
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             BO         MCF       US$M 
              Category 
 
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     [phone] 
                           LLP 
 
Colin Rowbury              Cornhill Capital Limited     [phone] 
 
Lottie Brocklehurst        St Brides Partners Ltd       [phone] 
 
Frank Buhagiar             St Brides Partners           [phone] 
                           Ltd 
 
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                                  46 
spud 
 
TOTAL                                                               214 
 
 
 
END 
 

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March 15, 2017 03:00 ET (07:00 GMT)