15th Feb 2012 07:00
Magnolia Petroleum Plc / Index: AIM / Epic: MAGP / Sector: Oil & Gas
15 February 2012
Magnolia Petroleum Plc (`Magnolia' or `the Company') Agreement Signed for Acquisition of Additional Acreage in the proven Mississippi Formation, Oklahoma
Magnolia Petroleum Plc, the AIM quoted US focussed oil and gas exploration and production company, is pleased to announce that it has acquired an additional 480 gross acres with an average 83.33% working interest in the oil producing Mississippi Lime Formation, Oklahoma.
Highlights
* Acquisition via a Farm-Out Agreement of an average 83.33% working interest in 480 gross acres assigning Magnolia the right to drill in the Mississippi Lime Formation, Oklahoma - a proven commercial oil and gas system * On course to drill one well in the Mississippi Lime Formation by the end of 2012 - Magnolia as operator * This transaction has been completed at no upfront cost to the Company
Magnolia COO, Rita Whittington said, "I am delighted that we have acquired additional significant acreage with large working interests in the Mississippi Lime Formation in Oklahoma, a reopening oil play with huge potential where we already hold interests.
"The acquisition builds on our previous announcement of the acquisition of 800 net acres in the Mississippi Lime Formation, and underlines our commitment to acquiring assets in this exciting area. We are now advancing our plans to drill our first well as operator in the Mississippi Lime Formation later this year.
"At the same time, as reported in previous releases, we are currently participating in five wells in the Bakken / Three Forks Sanish formations, that are now in their completion stages, in North Dakota and I look forward to providing you with updates on our progress in due course."
Detail of the Farm-Out Agreement
The Company has acquired, for no cash cost, 480 gross acres with an average working interest of 83.33%, resulting in 400 acres net attributable to Magnolia in the Mississippi Lime Formation. These leases have been assigned to Magnolia with an 81.25% net revenue interest.
Under the terms of the Farm-Out Agreement, the Company will assign 16.25% of its working interest to the Farmor in the first well drilled in each unit, once all costs associated with drilling the first well have been recovered by the Company. Otherwise known as a "back-in after payout".
The signing of the Farm-Out Agreement follows the Company's intention to acquire material working interests as an operator and so control the timing of the drilling, proposing and producing of its oil and gas wells.
Background Information on the Mississippi Formation, Oklahoma
The Mississippian oil trend is an expansive carbonate stratigraphic trap producing at shallow depths ranging from 4,500 to 7,000 feet below the surface. The reservoirs lie at the regional Pennsylvanian/Mississippian unconformity, as a result of uplift, alteration and erosion of shallow marine Mississippian carbonates.
The uppermost Mississippian member is a widespread debris-flow deposit formed through a combination of uplift and erosion of the Mississippi Limestone, consisting of varying amounts of weathered chert, limestone and dolomite called the "Mississippi Chat". The "Mississippi Lime" underlies the chat and also exhibits good reservoir characteristics. The formation was subject to weathering and digenesis and erosion at the regional unconformity. This results in greatly varying reservoir properties both horizontally and vertically. Where the digenesis and weathering have enhanced the reservoir properties, the porosity is generally 15-20% and can be more than 100 feet thick. Where it has not been enhanced, the porosity is only 4-6% and has low permeability. This results in lateral discontinuous reservoirs that are ideally developed with horizontal drilling technology.
The horizontal wells drilled in the play have lateral lengths of between 2,500 feet and 5,000 feet and are fracture stimulated in 6-12 stages. The fracture stimulation treatments are not as large as those in the Bakken play or the other unconventional resource plays such as the Eagle Ford. Because of the shallow depths and smaller fracture stimulation treatments, the typical completed well cost ranges from $2.4-$2.9 million. Current drilling times are approximately 17-28 days from spud to total depth.
The active operators in the play have published significant information on their results and expectation on the performance of wells in the play. SandRidge currently has over 650,000 acres under lease and the company has completed over 60 wells in the play. They estimate they have over 3,000 potential drilling locations. SandRidge's published type curve for well performance is 409 Mboe with expected well recoveries ranging from 300,000 to 500,000 boe at an average drill and complete cost of $2.7 million including allocated salt water disposal well costs.
The Competent Persons Report analysed the performance of 56 Mississippi Lime horizontal wells that were completed between 2007 and early 2011. The wells had 30 day average initial rates ranging from 60 bopd to 750 bopd. The average estimated oil recovery was 366 Mbo from this sampling of wells.
** ENDS **
Glossary
`bopd' means barrels of oil per day
`boe' means barrels of oil equivalent
`boepd' means barrels of oil equivalent per day
`Mbbl' means thousand barrels
For further information on Magnolia Petroleum Plc visit www.magnoliapetroleum.com or contact the following:
Steven Snead Magnolia Petroleum Plc +01 918 449 8750 Rita Whittington Magnolia Petroleum Plc +01 918 449 8750 Antony Legge / James Thomas Daniel Stewart & Company Plc +44 (0) 20 7776 6550
John Howes / John-Henry Northland Capital Partners +44 (0) 20 7796 8800Wicks Limited Lottie Brocklehurst St Brides Media and Finance +44 (0) 20 7236 1177 Ltd Frank Buhagiar St Brides Media and Finance +44 (0) 20 7236 1177 Ltd Notes
Magnolia Petroleum Plc is an AIM quoted, US focussed, oil and gas exploration and production company. Its portfolio includes interests in 64 producing and non-producing assets, primarily located in the highly productive Bakken/Three Forks Sanish hydrocarbon formations in North Dakota as well as the substantial and proven Woodford and Hunton formations and the oil rich Mississippi formation, in Oklahoma.
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