6th May 2014 08:51
LONDON (Alliance News) - Magnolia Petroleum PLC Tuesday said it suffered a significant downgrade in its proved and producing gas reserves following a reassessment of the Mississippi Lime region geology in the US.
The US-focused onshore oil and gas production company, which takes small stakes in multiple wells in highly prospective shale plays, said assessment on April 1 of its proved and developed producing reserves resulted in a 5.7% increase in its oil and condensate reserves to 167 million barrels but a 45% fall in its gas reserves to 450 million cubic feet, compared to a previous estimate on August 1, 2013.
Despite the reduction in gas reserves, Magnolia said the new estimate represents an increase in net present value at a 10% discount to USD8.4 million from USD7.2 million in the previous estimate.
The company said the valuation was prepared by Moyes & Co and the fall in gas reserves is due to improved understanding of the geology of the Mississippi Lime formation in Oklahoma, where the company has a range of assets.
The formation is increasingly being understood as made up of multiple wedges of productive regions rather than a uniform resource and, as such, production rates are likely to vary across the site.
The company added that Moyes estimated the company's net production at 150 barrels of oil equivalent per day on April 1, a continued improvement from its 93 barrels rate in the first half 2013 and 116 barrels in the second half 2013.
Magnolia said it is confident that a number of its wells remain on highly productive regions of the Mississippi Lime formation, and it is assessing the value of a series of vertical wells through 2014 and 2015 to further test the sites.
The company said that a more detailed reserves report, including its 2P and 3P reserves, has been commissioned and that, based on the reassessment, it expects a reduction on its previous figures.
Magnolia Petroleum shares were down 24% to 1.67 pence, making it the second worst faller in the AIM All-Share in early trading Tuesday.
By Tom McIvor; [email protected]; @TomMcIvor1
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