27th Feb 2012 07:00
Magnolia Petroleum Plc / Index: AIM / Epic: MAGP / Sector: Oil & Gas
27 February 2012
Magnolia Petroleum Plc (`Magnolia' or `the Company') Significant Increase in Net Daily Production
Magnolia Petroleum Plc, the AIM listed US focussed oil and gas exploration and production company, is pleased to report a significant increase in net daily production, following receipt from the respective operators of initial production rates for three wells targeting the Bakken / Three Forks Sanish formations, North Dakota, one of which, at 2,303 bopd, is a record for the Company.
Two Skunk Creek wells located in the Bakken/Three Forks Sanish formations, Dunn County, North Dakota
Magnolia participated with a 0.5977% working interest and 0.4482% net revenue interest in the drilling of each well with Kodiak Exploration.
* Skunk Creek 15H targeting the Three Forks Sanish * Initial Production Rate 2,303 bopd * 10 bopd net to Magnolia * Demonstrates the benefit of multi-stage fracking * Expected to result in significant upgrade in Magnolia's Three Forks Sanish reserves * Skunk Creek 14H targeting the Bakken * + Initial Production Rate 212 bopd, within expectations + 1 bopd net to Magnolia
Stocke 1-4-9H well, located in McKenzie County, North Dakota
Magnolia participated with Hunt Oil Company with a 3.17% working interest and 2.57% net revenue interest.
* Initial Production Rate 295 bopd, within expectations * 7 bopd net to Magnolia * 21 stage frac drilling * Expecting payout after three years despite mechanical issues leading to cost overrun
At current levels, the three wells have increased net daily production attributable to Magnolia by 18 bopd. Based on previously reported production figures of 20 bopd (7 December 2011), this would increase Magnolia's production to an estimated 38 bopd. As with all producing wells, production rates are expected to decline over the life of the wells and the aggregate actual production figure may be slightly less than the estimated figure of 38 bopd.
Magnolia Petroleum COO, Rita Whittington said, "The 2,303 bopd initial production rate of the Skunk Creek 15H well is our best ever and graphically illustrates the enormous potential of this emerging play. Lying beneath the Bakken, the US government estimates Three Forks Sanish could hold up to 2bn boe in recoverable oil reserves. The record production rate is highly encouraging for the three additional Three Forks Sanish and three Bakken wells that are to be drilled within the same 1,280 acre spacing unit as Skunk Creek.
"While we are advancing our plans to operate our first well in the Mississippi later this year, we also remain committed to our proven strategy of acquiring properties in well-known oil plays such as the Bakken / Three Forks Sanish, and then participating in wells with leading oil and gas companies. As the Skunk Creek and Stocke wells show, this strategy has the potential to generate considerable returns on relatively modest capital outlays. Today's jump in net production and resultant revenues will help fund our participation in additional wells as well as pursue our ongoing leasing activity. With this in mind, I look forward to updating the market on our progress."
Detailed Information
Reports have now been received from the operator in respect of the initial production rates of the two Skunk Creek Wells, located in Dunn County, North Dakota. Magnolia participated with a 0.5977% working interest in the drilling of each of these two wells with Kodiak Exploration. The costs of drilling were in line with original expectations.
According to the operator, the Three Forks Sanish and Bakken Skunk Creek wells are currently producing at 2,303 bopd and 212 bopd respectively. The production rate for the Three Forks Sanish well is a record for the Company and significantly ahead of expectations. The production rate from the Bakken Skunk Creek well is within the expectations of the Moyes & Co Competent Persons Report ("CPR").
At the time of the CPR, Magnolia did not have any Three Forks Sanish wells on its leases and as a result Moyes attached a high risk category to the Three Forks Sanish reserves. In the CPR, Moyes & Co. singled out the successful drilling of the Skunk Creek well, being the Company's first Three Forks Sanish well, as being a trigger for a potential increase in Magnolia's reserve categories. The successful drilling and subsequent production at the Skunk Creek 15H well should lead to an upgrade in Magnolia's reserves through the reclassification of the Three Forks Sanish reserves from "possible" to "probable". The Company needs to wait at least 6 months before commissioning a new competent person's report and may wait until after the year end in order to include results from other wells being drilled in 2012.
As previously reported, application has been made to the North Dakota Industrial Commission to drill an additional three Bakken wells and three Three Forks Sanish wells within the same spacing unit. The Skunk Creek wells are in line with Magnolia's CPR which indicates that the Bakken is being infill drilled to four wells per 1,280 acres spacing and that the Three Forks Sanish is also starting to be developed in the area at four wells per 1,280 acre spacing unit. This infill drilling would allow for an additional 78 Bakken and 107 Three Forks Sanish locations for a total of 108 wells in the Bakken and 108 wells in the Three Forks Sanish. Once permission is obtained and the initial six wells are drilled, the Company expects that its overall production interests will increase substantially.
In addition, Magnolia participated with Hunt Oil Company in the drilling of the Stocke 1-4-9H well, located in McKenzie County, North Dakota with a 3.17% working interest. The Stocke well reached total depth on 2 December 2011 and received a 21 stage frac treatment. The operator has confirmed an initial production rate of 295 bopd. Due to mechanical issues, the cost of drilling the well was up to 40% higher than the original estimate. However, as a result of Stocke's current production levels, the Company still expects the well to payout after a period of three years.
* * 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
`MMcf' means million cubic feet
`2P' means proved plus probable reserves
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 Daniel Stewart & Company Plc +44 (0) 20 7776 6550 Thomas John Howes / John-Henry Northland Capital Partners +44 (0) 20 7796 8800 Wicks 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 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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