21st Feb 2012 07:00
Magnolia Petroleum Plc / Index: AIM / Epic: MAGP / Sector: Oil & Gas
21 February 2012
Magnolia Petroleum Plc (`Magnolia' or `the Company') Participating with Chesapeake in Four Horizontal Wells in the Mississippi Formation, Oklahoma and Update for Hunton Well
Magnolia Petroleum Plc, the AIM quoted US focussed oil and gas exploration and production company, announces it will be participating with leading oil and gas company, Chesapeake Exploration LLC (`Chesapeake') in four horizontal wells targeting the Mississippi Formation, Oklahoma, a proven and reopening oil play. Three of the wells are being drilled within the same spacing unit as the successful Sundance well.
In addition, and further to the Company's announcement on 20 December 2011, the Company has received confirmation from the operator that drilling has now begun on the Zenyatta 2-6 well targeting the Hunton Formation, Oklahoma.
Mississipian Formation Wells
Well # 1
On 10 February 2012 the Company announced ongoing leasing activity had acquired 284 net acres in the Mississippi Formation with an average of 3.4% interest. On one of the 33 sections, Chesapeake, as operator, has now proposed the drilling of a horizontal well in which Magnolia holds a 2.3% working interest. The completed well costs are estimated at US$3,719,505 and Magnolia estimates the cost to the Company of participating in this well will be approximately US$85,548.
Wells # 2, 3, 4
Chesapeake has notified the Company that it has commenced plans to drill three horizontal increased density wells to test the Mississippi Formation within the same spacing unit as the successful Sundance well, in Woods County Oklahoma. The Sundance well resulted in payout being achieved in three months, a record for the Company. Sundance has proved 2P reserves of 431.62Mbbl of oil and 152.52MMcf in gas. Magnolia holds a 0.796% working interest and a 0.597% net revenue interest in the well. As a result the net 2P reserves attributable to Magnolia are 2.58Mbbl and 0.91MMcf. The Company is awaiting confirmation from the operator of the total completed costs associated with the wells.
Zenyatta 2-6 Well, Hunton Formation, Oklahoma
Magnolia has been informed by Avalon Oil & Gas III, LLC, the operator, that the Zenyatta 2-6 well spudded on 20 February 2012, a few weeks later than originally anticipated. The Zenyatta 2-6 is an infill well located within the same spacing unit as the producing Zenyatta 1-6. Zenyatta 2-6, in which Magnolia has a 1.057% working interest, is targeting the Upper Hunton interval.
Production from the Zenyatta 1-6 well, located in Section 6-8N-2E, Pottawatomie County, Oklahoma, was established in October 2011 and the well is currently producing an average of 79.66 barrels of oil per day and 118.18 MCF of gas per day. The well has gross proved reserves of 77.90 Mbbl.
Rita Whittington, COO of Magnolia Petroleum, said, "The four wells in which we have chosen to participate with Chesapeake highlight the rapidly growing interest among leading oil and gas companies in the Mississippi Formation. We are not alone in the industry in believing the Mississippi has the potential to become the next big oil play in the US and that it could well prove to be a reservoir of similar magnitude to the prolific Bakken in which we have both producing and non-producing interests. This belief lies behind our intention to operate our first well in the oil play later this year following our recent acquisition of 1,484 net acres with working interests of up to 100%. Along with others such as Chesapeake, Magnolia really is at the vanguard of reopening the Mississippi through the application of modern drilling techniques."
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 Wicks Limited 8800 Hugo de Salis St Brides Media and Finance Ltd +44 (0) 20 7236 1177 Lottie Brocklehurst St Brides Media and Finance Ltd +44 (0) 20 7236 1177 Frank Buhagiar St Brides Media and Finance Ltd +44 (0) 20 7236 1177 Notes
Magnolia Petroleum Plc is an AIM quoted oil and gas exploration and production company focussed on the US. Magnolia has an extensive and highly prospective portfolio of both producing and non-producing oil and gas interests, primarily located in the highly productive Bakken / Three Forks Sanish hydrocarbon formations in North Dakota as well as on the substantial and proven Woodford/ Hunton reservoirs in Oklahoma and the oil rich Mississippi located in Oklahoma. Currently, Magnolia has interests in 64 oil and/or gas producing properties.
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