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Magnolia Petroleum Plc, the AIM quoted US focused oil and gas exploration and production company, has held its Annual General Meeting later today.
At the meeting, CEO Steven Snead will made the following statement:
“Magnolia Petroleum is a high growth company focused on acquiring and developing leases in proven US onshore formations such as the Bakken/Three Forks Sanish in North Dakota and the Woodford/Mississippi Lime in Oklahoma. We have now completed two full years on AIM and in each of these we have lived up to our high growth billing and reported exceptional progress in terms of our production, revenues and reserves.
“While 2012 saw us acquire 13,500 net mineral acres in liquids rich US onshore plays, 2013 saw a step up in our drilling activity alongside established operators such as Devon Energy and Statoil, as we focused on growing our production generated revenues to fund more drilling to prove up the reserves on our leases. Revenue growth is therefore a key performance indicator and for 2013 we reported a 244% jump in net revenues to US$2,443,244, which followed the previous year’s 194% increase to US$709,395.
“Revenue growth is driven by net production which has grown from 7 boepd at the time of our AIM Admission in November 2011 to 150 boepd on 1 April 2014 having been as high as 214 boepd as at 1 August 2013. Over short timeframes Magnolia’s net production will fluctuate as it is a function of several variables including decline rates; the timing and number of new wells; and the size of our interests in new drilling activity. Over the medium term however the upwards trend for Magnolia’s net production is intact thanks to our fast growing well count, a long pipeline of drilling opportunities, and a rising average interest in wells. Our well count has increased from 64 at the time of our AIM IPO to 184 by end of December 2013, and it has since grown to 227. Meanwhile over the same time frame we have upped our average net revenue interest to over 3% from 0.6%.
“Our overall objective is to prove up the reserves on our US onshore leases and here too excellent progress is being made with Magnolia’s PDP reserves now standing at US$8.4 million having been US$919,000 in October 2011. From the outset, we have looked to enter reopening US onshore plays early, such as the Mississippi Lime in Oklahoma. This allows us to acquire leases at attractive rates from which we can maximise value through development, but it does give rise to the possibility that the accepted understanding of the formation’s geology may evolve as the play matures. This is indeed what has happened and instead of viewing the Mississippi Lime as a uniform resource, the historic play is now viewed as being made up of multiple wedges or ‘sweet spots’ which if hit can result in excellent production and recovery rates. As a result, our 2P and 3P reserves are currently being rebased to a lower level by our competent person to reflect the revised industry view of the Mississippi Lime formation in Oklahoma and an updated Reserves Report will be available shortly.
“Once the Report has been completed, we are confident strong reserves growth will resume thanks to the improved geological model for the Mississippi Lime, the identification of multiple sweet spots on our acreage, and better familiarity with the practices and performance of the operators with whom we partner. Of course a maturing of plays in which Magnolia has entered early works both ways and with this in mind, the industry is increasingly regarding the Woodford, which underlies the Mississippi Lime across much of our acreage in Oklahoma, as being the more prospective and productive of the two plays. This view is supported by the performance of wells in which we have participated, most recently the Parmley well where we have a 12.187% interest. More horizontal wells need to be drilled to the Woodford before Magnolia’s reserves in the formation are upgraded but we are confident the Woodford will play a major role in Magnolia’s reserves growth going forward, and even has the potential to surpass our original expectations for our Mississippi Lime reserves.
“Our US$5 million reserves backed credit facility as well as our recently reported full year revenues of US$2.4 million show how far Magnolia has come in a short space of time. We are successfully establishing a track record of strong growth, and we are highly confident we will build on this further in the current year and beyond.”
