LONDON (Alliance News) - Magnolia Petroleum PLC Chief Executive Steven Snead said the company remains on course and continues to be a cash generative, asset-backed oil and gas company ahead of the company's annual general meeting to be held later Thursday.
"Our proven strategy involves acquiring both non-operated and operated leases in historic US onshore formations where geological risk is low, and then proving up the reserves through drilling, either by participating alongside established oil and gas companies or operating our own wells with 50% plus interests," he said.
Magnolia currently has interests in 193 producing wells on leases that cover an area of around 13,500 net mineral acres.
Snead said, at the beginning of 2015, Magnolia's net production stood at 281 barrels of oil equivalent per day while its proven reserves were independently estimated at 985 million barrels of oil and 2.90 billion cubic feet of gas, with a combined value of USD26.7 million.
Magnolia received 83 offers from other companies to participate in other leases in 2014, of which 48 matched the company's investment criteria. It chose to participate in those 48 offers, or 48 wells, at an average cost of around USD65,000 per well, it said.
"Lower oil prices have inevitably impacted drilling activity, which has had a knock on effect on the number of proposals for new wells on our leases in the first quarter of 2015, compared to the same period last year. However, we continue to receive a sufficient level of proposals to grow the
business," said Snead.
The drilling of Magnolia's first well this year, Shimanek2, is due to commence within the next few months and is located in an "established" field in Oklahoma. The Shimanek2 well "can be drilled at a relatively low cost" of approximately USD550,000.
"With a long pipeline of drilling targets on our operated leases, we are therefore well placed to scale up our revenue and reserves growth profile, as we look to deliver on our objective and prove up the value of our reserves," said Snead. "We remain on course to generate substantial value for all our shareholders, and we look forward to providing further updates on our progress."
Magnolia shares were up 0.2% to 0.671 pence per share on Thursday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
Copyright 2015 Alliance News Limited. All Rights Reserved.