LONDON (Alliance News) - Magnolia Petroleum PLC Monday said its pretax loss widened in the first half of 2015 after its US operations became unprofitable after a rise in production was not enough to offset the dramatic fall in oil prices.
However, the company pledged to keep reinvesting funds to increase production further and said it will try to take advantage of the oil price downturn by seeking further opportunities in the region.
The US gas producer reported a USD1.4 million pretax loss in the first six months of 2015, widening from a USD381,520 loss a year earlier as revenue dropped to USD1.1 million from USD1.8 million.
Its operations became unprofitable in the period, yielding a USD1.4 million gross loss compared to a USD916,596 profit a year ago.
Magnolia also booked USD379,354 in impairments compared to USD229,385 and finance costs of USD55,600 from nil a year earlier, which was partially offset by administrative costs dropping to USD518,425 from USD578,045.
Production stood at an average of 309 barrels of oil equivalent per day at August 1, rising from 281 barrels per day at the start of 2015 as the number of producing wells rose by more than a quarter to 195 from 155. However, that increase was more than offset by the fall in oil prices.
"The sharp fall in the price of oil, which has effectively halved over the last twelve months, is
responsible for the drop in revenues, both directly by lowering sale prices achieved and indirectly through operators shutting in wells to curtail production," said the company.
Magnolia said it will continue to reinvest revenues generated from its production to fund further drilling activity and has elected to participate in 28 new wells across its acreage in the US, 10 of which are currently being developed. It also said it has a strong pipeline of opportunities with over 600 potential drilling targets to take advantage of across its US acreage.
"Our operational and financial performance over the last six months ought to provide shareholders with considerable confidence in Magnolia's prospects going forward. To have maintained strong well count and production growth during a period when the prevailing oil price averaged approximately 50% below last year's level and operators are shutting in wells, clearly demonstrates our strategy to acquire and develop low cost US onshore leases works well at USD40 to USD50 oil," said Chief executive Steven Snead.
"In addition, we are looking to use low oil prices to our advantage. We continue to evaluate potential acquisition opportunities that, at the right price, have the potential to scale up our operations and in the process fast track Magnolia's development into a leading US onshore oil and gas company," he added.
Magnolia Petroleum shares were up 3.0% to 0.479 pence per share on Monday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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