LONDON (Alliance News) - The chief executive of Magnolia Petroleum PLC said the company is continuing to realign itself to ensure it "does not just tread water" during the current downturn in the market by divesting from unprofitable wells, lowering costs and looking for new lease areas.
Speaking ahead of Magnolia's annual general meeting later Friday, Chief Executive Steven Snead said the restructuring of its asset portfolio has not materially affected its production but improved the overall economics by divesting from wells with little or no value.
At the end of March, Magnolia's production stood at 242 barrels of oil equivalent per day, being sourced through its interests held in wells onshore the US.
"Over the last 12 months Magnolia's capital expenditure, operating costs and interest payments associated with our reserve-based debt facility have all been materially reduced. In addition, we have freed up our internal resources by divesting a total of 67 wells which had little or no economic value, leaving a portfolio of 146 producing wells which are commercial at current oil prices", said Snead.
The fall in oil prices has hit the global oil sector, and the US has been particularly hit. Activity has dwindled as companies cease drilling new wells. However, that also creates the opportunity for businesses to snap up additional leases at lower prices.
"Furthermore leases can be acquired at little or no premium compared to just a few years earlier. Against such a backdrop and with four decades of experience and expertise in leasing US onshore acreage, Magnolia's management is well placed to pick up leases in areas of interest," said Snead.
"The last eighteen months have been a challenging period for all oil and gas companies, including Magnolia, but having cut operating costs by 31% and divested 67 non-economic wells, we are confident Magnolia can not only weather a prolonged period of lower oil prices, but can also thrive," he added.
Magnolia shares were trading down 1.8% to 0.167 pence per share on Friday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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