Magnolia Petroleum Regulatory News (MAGP)

Magnolia Petroleum Plc / Index: AIM / Epic: MAGP / Sector: Oil & Gas 10 September 2013 Magnolia Petroleum Plc (`Magnolia' or `the Company') Interim Results Magnolia Petroleum Plc, the AIM quoted US focused oil and gas exploration andproduction company, announces its interim results for the six month periodended 30 June 2013. Highlights * 223% increase in H1 2013 revenues to US$910,721 (H1 2012: US$282,208) and 27% up on the revenues for full year (FY 2012: US$709,395) * + Monthly run rate increasing - June 2013 revenues 1.5 times higher than January 2013 * US$237,552 EBITDA (after removing gain on foreign exchange) compared to loss of US$485,464 during six months to 30 June 2012 (after removing loss on foreign exchange) * Interests in 128 wells as at 30 June 2013 in proven US onshore formations such as the Bakken/Three Forks Sanish, North Dakota, and the Mississippi Lime, Woodford/Hunton, Oklahoma - 27% increase since 31 December 2012 * + 117 producing and 11 drilling/completing * 75% increase in daily production to 214 boepd as at 1 August 2013 (1 January 2013: 122.5boepd) * Reported initial production rates (`IPRs') for 25 wells including the Gustafson 31-30H well (50boepd net) and the 100% owned Roger Swartz #1 (17 bopd) * Elected to participate in 40 new wells - total investment of US$2,764,183 in drilling during the period * Invested US$1,583,193 in acquiring new leases during the period * Participating in wells with higher than average net revenue interests as per strategy: Blaser (9.375%); Great White (7.5%) * Significant increase in 2P reserves to 1.437m barrels of oil and condensate and 5,124 MMcf of natural gas (1 August 2013) compared to 68,700 barrels and 249.8 MMcf as at AIM Admission (November 2011) * 2P reserves valued at US$47million underpinning market valuation - 21 fold increase since Admission to AIM * + Only includes approximately 5,500 net acres out of a total of 13,500 in proven formations - substantial upside potential * Strong pipeline of opportunities across all formations both as participant and operator - over 600 potential drilling locations on existing acreage * £1.5 million capital raised during the period to participate in wells with leading operators such as Marathon Oil and Statoil Magnolia CEO, Steven Snead said, "The combination of a 27% increase in thenumber of wells in proven US onshore formations to 128 and a series ofexcellent initial production rates such as the Gustafson well has resulted in a75% jump in daily production to 214 boepd from 122.5 at the start of 2013 and a223% increase in half yearly revenues to US$910,721 compared to the equivalentperiod in 2012. The positive effect of drilling on the level of our proven andprobable reserves (`2P') is evident in our latest Reserves Report, which showsthe value of our 2P reserves stood at US$47m as at 1 August 2013, a 21 foldincrease since Magnolia's AIM Admission. Not only does this provide solid assetbacking to our current market capitalisation but also demonstrates thepotential of our low risk high return business model to generate significantvalue for shareholders." Chief Executive's Statement The six month period under review has seen excellent progress made towardsachieving our overall objective: to build Magnolia Petroleum into a significantoil and gas company focused on proven US onshore formations. We define asignificant oil and gas company as one that has reserves in the proven andprobable (2P) categories with a combined value running into the hundreds ofmillions of dollars. Achieving this status firstly requires holding substantialacreage in reopened liquids rich plays which Magnolia already has in place, andsecondly, drilling new wells to systematically prove up reserves which wecontinue to do, as illustrated by the 27% increase in new wells over the halfyear. Since our Admission to AIM in November 2011, we have acquired over 13,500 netmineral acres in proven US onshore formations such as the Bakken/Three ForksSanish, North Dakota and the Mississippi Lime and Woodford, Oklahoma providingus with the opportunity to participate in over 600 potential new wells,alongside established operators such as Statoil and Marathon Oil. This is ontop of the 121 producing wells we currently have an interest in. Thanks to theprime location of our acreage, we continue to receive multiple drillingproposals, as evidenced by the 40 new wells that we have elected to participatein during the review period. Being able to self-finance new drilling activity by re-cycling revenuesgenerated from existing production is a key milestone the Board has beenfocused on from the outset. We have gone a long way to achieving this milestonein the first half of the year with cash flow from operating activities ofUS$855,463 being invested into new wells and leases. Once self-funding statushas been attained, Magnolia will be in a virtuous circle whereby growingrevenues are continually reinvested into new drilling opportunities to prove upreserves and grow revenues further, enabling the investment/drilling cycle tobegin again. As a result of an excellent drilling success rate, which highlights thetransformational effect the application of modern techniques such as horizontaldrilling on proven liquids rich onshore US plays continues to have on recoveryrates, we have reported another major jump in revenues during the first half ofthe year. This is as a result of our continuing increase in daily productionfrom just 7 boepd in November 2011 to 122.5 boepd as at 1 January and a further75% increase in daily production to 214 boepd as at 1 August 2013. It is worthnoting that revenue to 30 June 2013 only included nine days of production onthe Gustafson well and nothing for the Helgeson and Jake wells announced afterthe period end. Based on initial production rates these wells added anaggregate 197.5 boepd to our net production which we expect to contribute toanother step up in revenues for the second half of the year. Over the course of the first six months of the year, we invested approximatelyUS$2.8m into new wells. As the cash flow statement to 30 June 2013 shows, weare increasingly funding our share of new drilling costs from existingproduction. The gap between our investment in new wells and cash flow fromoperating activities is closing fast and with revenues due in the second halffrom a number of wells that recently came into production, not to mention thestrong pipeline of drilling activity that is in place, we are highly confidentthat this gap will continue to significantly narrow in a short space of time. The recently announced reserves report provides an indication of the progressmade. In this latest report, Moyes & Co. estimates Magnolia's 2P reserves as at1 August 2013 stood at 1.437 million barrels of oil and condensate and 5,124million cubic feet (`MMcf') of natural gas and assigns a Net Present Value ofapproximately US$47.008 million after applying a 10% discount rate. Due totiming issues this latest reserves upgrade does not fully reflect the resultsof all the drilling activity announced during the half. For example only nineof the 45 new wells announced between 1 January 2013 and 1 August 2013 (thedate of the CPR) commenced production during the period. We therefore expectsubstantial growth in 2P reserves as and when the remaining 36 wells aredrilled and completed, not to mention new drilling that is likely to beannounced in the second half. Financial Review During the twelve month period, revenues of US$910,721 were generated fromcontinuing operations compared to US$282,208 in H1 2012 and US$709,395 for thewhole of 2012. As with our full year results, the monthly run rate hascontinued to improve over the six months under review with June's revenuesbeing almost 1.5 times as much as those of January. As a result of continuedinvestment in new wells and additional leases, tangible assets during the halfyear period increased to US$6,395,834 having been US$3,437,869 as at endDecember 2012. Intangible assets (new leases and wells that are drilling butnot yet completed) grew to US$6,751,024 from US$6,200,828 during the sameperiod. Net cash inflow from operating activities was US$855,463 during the six monthsto June 30 compared with a cash outflow of US$296,975 during the equivalentperiod in 2012. Cash generated is being reinvested into growing the Company'sasset base through drilling and/or acquiring additional acreage. Administrativecosts continue to be tightly managed, allowing the vast majority of additionalrevenues generated to be recycled into new wells or leases. During the period,administrative expenses (excluding depreciation) totalled US$522,976 to 30 June2013 compared with US$450,378 as at 30 June 2012, highlighting the capacity forour business model to be scaled up without increasing the cost basesignificantly. Outlook With 18 wells currently drilling or completing, a further 35 waiting to spud,and numerous well proposals being received, a number of which with larger thanaverage working interests, we are looking forward to the next updated reservesreport at year end. At this point, we expect to see a major upgrade in our 2Preserves and a further increase in net daily production, all of which willdemonstrate that we are moving ever closer to transforming Magnolia Petroleuminto a significant US onshore focused oil and gas company. Finally, I would like to thank the Board, management team and all our advisersfor their hard work and also to our shareholders for their continued supportover the period. Steven Snead Chief Executive Officer Chief Operations Officer's Report The Bakken / Three Forks Sanish Formations, North Dakota The number of wells producing from the Bakken/Three Forks Sanish in NorthDakota in which Magnolia has an interest currently stands at 30. During thehalf year under review, the following five new wells came on stream: * Nicky Kerr 14-8 well (1,501 boepd) * Curtis Kerr 24-8H well (1,496 boepd) * Gustafson 31-30H well (1,216 boepd) * BB Rice#2 well (2,060 boepd) * BB Rice#3 well (2,207 boepd) - Three Forks Sanish Post period end, the Company reported initial production rates for thefollowing wells: * Helgeson 41-30H well (1,401 boepd) * Jake 2-11#1H well (3,928 boepd) * Jake 2-11 2TFH well (2,244 boepd) - Three Forks Sanish A further four wells targeting the Bakken/ Three Forks Sanish all at variousstages of drilling/completing are listed below: * Jake 2-11-4H operated by Statoil * Jake 2-11-3TFH operated by Statoil * Jake 2-11-6H operated by Statoil * Jake 2-11-5TFH operated by Statoil The Bakken is a reservoir in North Dakota which currently produces over 700,000bopd and is estimated to hold mean undiscovered recoverable volumes of 3.65Bbbls and 1.85 Tcf (2008 US Geological Survey). The Three Forks Sanishformation in North Dakota is estimated to hold up to 2 billion barrels ofrecoverable oil according to a state study evaluating oil reserves. Magnolia holds leases in respect of 11,520 gross acres across 28 sections,equating to 421 net mineral acres within the boundaries of the Bakken/TFSformations. As the Three Forks Sanish lies beneath the Bakken, the number ofwells which can be drilled per section doubles to eight (four per formation),providing Magnolia with a total of 120 proven development locations on itsacreage, 60 on the Bakken and 60 on the Three Forks Sanish, as set out in theUpdated Reserves Report by Moyes & Co. dated 8 April 2013. In their latest report dated 1 August 2013, Moyes & Co. estimate Magnolia'sBakken 2P reserves at 140,000 barrels of oil and condensate and 60 MMcf ofnatural gas to which Moyes has assigned a value of US$2.751 million. Meanwhile,Magnolia's 2P reserves in the Three Forks Sanish formation are estimated at22,000 barrels of oil and condensate and 10 MMcf of natural gas which Moyes hasassigned a value of US$0.846 million. Mississippi Lime Formation, Oklahoma As at 30 June 2013, Magnolia had interests in 24 wells producing from thehistoric Mississippi Lime formation, an increase of 17 since the year end.Initial production rates were reported for 11 wells which are listed below: * Montecristo 6-1H (50 boepd) * Peck 1-5H (630.76 boepd) * Wolf 1H-25 (195 boepd) * Nighswonger Farms 2815 1-13H (107 boepd) * Mack 10-27-17 1H (251.85 boepd) * McClure 36-2H (90 boepd) * Roger Swartz #1 Magnolia operated vertical well (17 bopd) * Flinders 1-25H (143 boepd) * Cordray-Ritter 4-28-14H (762 boepd) * Voise 1-10H (105 boepd) * Joan 1-21 vertical well (12 bopd) Interests in a further six already producing wells were acquired as part ofMagnolia's on-going leasing activity, the details of these wells are listedbelow: * Betty 22-24-10 1H * Louis#7-1 WX * Ripley 1H-28 * Wolf 1H-21 * McSwain 1H-12 * Grant 1H-10 Since 2012, Magnolia has acquired over 4,000 net mineral acres in theMississippi Lime formation, Oklahoma. The acquired acreage includes leases withworking interests of up to 100%, 74 proven undeveloped locations and anadditional 222 increased density locations in which Magnolia could propose and/or operate. In total, there are 296 potential drilling locations on theCompany's acreage. In the updated Reserves Report dated 1 August 2013, Moyes & Co. estimated theCompany's Mississippi Lime 2P reserves at 1.25 million barrels of oil andcondensate and 4,505 MMcf with a value of US$41.956 million. The Mississippi Lime is an historic oil and gas system that has been producingat depths ranging from 4,500 to 7,000 feet from several thousand vertical wellsfor over 50 years. As with the Bakken, new technology and horizontal drillinghas reopened the oil play. Due to the relatively shallow depths and less tightrock formation, drilling costs at between US$2.4 million and US$3.5 million perwell in the Mississippi Lime are considerably lower than those in the Bakken,which should lead to shorter pay-out periods than with the Bakken wells. Woodford / Hunton Formations, Oklahoma Magnolia reported initial production rates for five wells in the Woodford/Hunton formations during the period under review, bringing the overall total to19: * Beebe 24-W1H targeting the Woodford (73 boepd) * Kelly 1-2H targeting the Woodford (1,291 boepd) * Campbell 1-H targeting the Woodford (615 boepd) * Forrest 1-8H targeting the Woodford (1,272 boepd) * Condit 1-5H targeting the Woodford (1,546 boepd) Post period end, initial production for the Sympson 1-6H in the Woodfordformation was reported at 758 boepd. In the updated Reserves Report, Moyes & Co. estimated the Company's Woodford /Hunton 2P reserves at 7,000 barrels of oil and condensate and 405MMcf naturalgas with a value of US$553,000. Like the Bakken, the Woodford/Hunton formations in Oklahoma are establishedreservoirs that have been reopened following the introduction of horizontaldrilling and stimulation technology. As a result the Woodford oil play inparticular is increasingly being drilled by leading operators. Magnolia holdsleases in respect of approximately 67,200 gross mineral acres (800 net mineralacres), giving rights to participate in the drilling of wells in 87 sectionslocated in 26 counties in central Oklahoma. Montana During the period, Magnolia acquired a further 985 net mineral acres in theMontana section of the Bakken/Three Forks Sanish formation, bringing the totalacreage acquired in Daniels County and three surrounding counties to 7,866. TheCompany's acreage lies amongst, and is surrounded by, leases owned by ApacheCorporation (`Apache'), a leading international oil and gas exploration andproduction company. In 2012, Apache acquired 320,000 net acres, an indication of the growinginterest in the Bakken in Montana. Apache believe there are over 1,900potential drilling locations on its acreage and that sixteen horizontal wells,eight for the Bakken and a further eight for the Three Forks Sanish, will berequired to optimise the recovery of reserves. According to Apache, theEstimated Ultimate Recovery (`EUR') of reserves stands at 670MBo for the Bakkenand 377MBo for the Three Forks Sanish on each drilling location. There is currently no horizontal Bakken production in Daniels County, Montana,though conventional oil has historically been recovered by vertical wells fromthe Ratcliff, Madison, Mission Canyon and McGowan formations. In addition tothe Bakken/Three Forks Sanish, there is the potential for unconventional oil tobe recovered from the Mississippian aged Lodge Pole and Madison formations aswell as the deeper Devonian aged Nisku members. At 7,000-7,400ft, the Bakken in Daniels County lies at a shallower depth thanin North Dakota. As a result costs to drill horizontal wells to the Bakken inMontana are estimated at US$7.5 million compared with US$10 million in NorthDakota. Reflecting the early stage nature of the play, Moyes & Co. classified theCompany's Montana leases as prospective resources and estimated these at 5.77million barrels of oil and condensate and 2,885 MMcf of natural gas with avalue of US$12.267million. Summary Over the course of the last six months initial production rates were reportedfor 25 wells in proven US onshore formations such as the Bakken and MississippiLime. In addition the Company elected to participate in a further 40 new wellsalongside leading operators including Statoil and Marathon Oil. In line withstrategy, the level of Magnolia's interest in wells has also been steadilyrising as illustrated by the Blaser (9.375%) and Great White (7.5%), so thatthe average working interest in the Company's portfolio of 121 producing wellsand 53 wells under development has increased to approximately 3%, compared to0.6% at the time of Magnolia's IPO in November 2011. As these new wells comeinto production, another major increase in production and 2P reserves, which asat 1 August 2013 stood at 214 boepd and US$47m respectively, can be expected. Rita Whittington Chief Operations Officer Condensed Consolidated Statement of Comprehensive Income 6 months ended 30 June 2013 Note 6 months to 6 months to 30 June 2013 30 June 2012 Unaudited Unaudited US $ US $ Continuing Operations Revenue 910,721 282,208 Operating expenses (343,077) (128,514) ______ ______ Gross Profit 567,644 153,694 Administrative expenses (734,704) (475,932) Impairment of mineral leases (67,070) (204,973) Profit on disposal of mineral 208,705 -leases Gain/(loss) on foreign exchange 669,999 (10,324) ______ ______ Operating Profit/(Loss) 644,574 (537,535) Finance income - - Finance costs - - ______ ______ Profit/(Loss) from ordinary 644,574 (537,535)activities before tax Taxation - - ______ ______ Profit/(Loss) for the period 644,574 (537,535)attributable to the equityholders of the Company ______ ______ Other comprehensive income: Items that may be reclassified (696,713) (18,282)subsequently to profit or loss Exchange differences ontranslating foreign operations ______ ______ Total comprehensive income for (52,139) (555,817)the period attributable to theequity holders of the Company ______ ______ Earnings per share attributable 5 0.074 (0.14)to the equity holders of theCompany (expressed in cents per 0.072 -share) - basic - diluted Condensed Consolidated Balance Sheet As at 30 June 2013 ASSETS Notes 30 June 31 December 2013 2012 Unaudited Audited US $ US $ Non-Current Assets Property, plant and equipment 5 6,395,834 3,437,869 Intangible assets 6 6,751,024 6,200,828 ________ ________ Total Non Current Assets 13,146,858 9,638,697 Current Assets Trade and other receivables 477,932 208,936 Cash and cash equivalents 1,641,488 2,293,151 ________ ________ Total Current Assets 2,119,420 2,502,087 ________ ________ Total Assets 15,266,278 12,140,784 ________ ________ EQUITY & LIABILITIES Equity Called up share capital 1,481,396 1,390,244 Share premium account 13,954,026 11,888,717 Warrants and options reserve 66,603 66,603 Merger reserve 1,975,950 1,975,950 Reverse acquisition reserve (2,250,672) (2,250,672) Translation reserve (649,413) 47,300 Retained losses (933,322) (1,577,896) ________ ________ Total Equity - Capital and 13,644,568 11,540,246Reserves ________ ________ Current Liabilities Trade and other payables 1,621,710 600,538 _______ _______ Total Current Liabilities 1,621,710 600,538 _______ _______ Total Equity and Liabilities 15,266,278 12,140,784 _______ _______ Condensed Consolidated Statement of Changes in Equity Share Share Merger Warrants Reverse Translation Retained and Acquisition Options Capital Premium Reserve Reserve Reserve Reserve Earnings Total US $ US $ US $ US $ US $ US $ US $ US $ As at 1 January 926,128 2,218,877 1,975,950 66,603 (2,250,672) (126,624) (502,718) 2,307,5442012 Comprehensiveincome Loss for the - - - - - - (537,535) (537,535)period Othercomprehensiveincome Currency - - - - - (18,282) - (18,282)translationdifferences ________ ________ ________ ______ ________ _______ _______ ________ Total - - - - - (18,282) (537,535) (555,817)comprehensiveincome for theperiod ________ ________ ________ ______ ________ _______ _______ ________ Transactionswith Owners Proceeds from 174,272 1,980,507 - - - - - 2,154,779share issue Share issue - (184,155) - - - - - (184,155)costs ________ ________ ________ ______ ________ _______ _______ ________ Total 174,272 1,796,352 - - - - - 1,970,624contributions byanddistributions toowners of theparent,recogniseddirectly inequity ________ ________ ________ ______ ________ _______ _______ ________ As at 30 June 1,100,400 4,015,229 1,975,950 66,603 (2,250,672) (144,906) (1,040,253) 3,722,3512012 ________ ________ ________ ______ ________ _______ _______ ________ As at 1 January 1,390,244 11,888,717 1,975,950 66,603 (2,250,672) 47,300 (1,577,896) 11,540,2462013 Comprehensiveincome Profit for the - - - - - - 644,574 644,574period Othercomprehensiveincome Currency - - - - - (696,713) - (696,713)translationdifferences ________ ________ ________ ______ ________ _______ _______ ________ Total - - - - - (696,713) 644,574 (52,298)comprehensiveincome for theperiod ________ ________ ________ ______ ________ _______ _______ ________ Transactionswith Owners Proceeds from 91,152 2,187,648 - - - - - 2,278,800share issue Share issue - (122,339) - - - - - (122,339)costs ________ ________ ________ ______ ________ _______ _______ ________ Total 91,152 2,065,309 - - - - - 2,156,461contributionsby anddistributionsto owners ofthe parent,recogniseddirectly inequity ________ ________ ________ ______ ________ _______ _______ ________ As at 30 June 1,481,396 13,954,026 1,975,950 66,603 (2,250,672) (649,413) (933,322) 13,644,5682013 ________ ________ ________ ______ ________ _______ _______ ________ Condensed Consolidated Cash Flow Statement 6 months ended 30 June 2013 6 months to 6 months to 30 June 30 June 2013 2012 Unaudited Unaudited US $ US $ Cash inflow/(outflow) from operatingactivities Profit/(Loss) before tax 644,574 (537,535) Profit on disposal of mineral leases (208,705) - Depreciation and amortisation 262,977 41,747 Exchange difference (664,106) (24,208) Impairment of mineral leases 67,070 204,973 (Increase)/decrease in trade and (270,214) (47,873)other receivables Increase in trade and other payables 1,023,867 65,921 _______ _______ Net cash inflow/(outflow) from 855,463 (296,975)operating activities _______ _______ Cash flows from investing activities Purchases of intangible assets (1,863,181) (1,415,471) Purchases of property, plant and (2,488,000) (941,279)equipment Proceeds from disposal of property, 698,602 -plant and equipment _______ _______ Net cash used in investing activities (3,652,579) (2,356,750) _______ _______ Cash flows from financing activities Proceeds from issue of ordinary 2,278,800 2,154,779shares Issue costs (122,339) (184,155) Repayment of borrowings - (35,000) _______ _______ Net cash from financing activities 2,156,461 1,935,624 _______ _______ Net decrease in cash and cash (640,655) (718,101)equivalents Cash and cash equivalents at the 2,293,153 874,037beginning of the period Exchange (loss)/gain on cash and cash (11,010) 3,640equivalents _______ _______ Cash and cash equivalents at the end 1,641,488 159,576of the period _______ _______ Notes to the unaudited financial statements 1. General information The principal activity of the Group is the acquisition, exploration anddevelopment of oil and gas properties primarily located onshore in the UnitedStates. The address of its registered office is The Fitzpatrick Building, 188 -194 YorkWay, London N7 9AS. 2. Basis of preparation These condensed consolidated interim financial statements have been prepared inaccordance with the requirements of the AIM Rules for Issuers. As permitted,the Company has chosen not to adopt IAS 34 "Interim Financial Statements" inpreparing this interim financial information. The condensed interim financialstatements should be read in conjunction with the annual financial statementsfor the year ended 31 December 2012, which have been prepared in accordancewith International Financial Reporting Standards (IFRS) as adopted by theEuropean Union. The interim financial information set out above does not constitute statutoryaccounts within the meaning of the Companies Act 2006. It has been prepared ona going concern basis in accordance with the recognition and measurementcriteria of International Financial Reporting Standards (IFRS) as adopted bythe European Union. Statutory financial statements for the year ended 31December 2012 were approved by the Board of Directors on 10 May 2013 anddelivered to the Registrar of Companies. The report of the auditors on thosefinancial statements was unqualified. The preparation of consolidated interim financial statements requiresmanagement to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent assets and liabilitiesat the end of the reporting period. Significant items subject to such estimatesare set out in the Group's 2012 Annual Report and Financial Statements. Thenature and amounts of such estimates have not changed significantly during theinterim period. 3. Accounting policies The same accounting policies, presentation and methods of computation arefollowed in this condensed consolidated financial information as were appliedin the preparation of the Company's annual audited financial statements for theyear ended 31 December 2012, except for the impact of the adoption of theStandards and Interpretations described below. The presentational currency of the Group is US dollars. New and amended standards adopted by the Group: IAS 1 (Amended), "Presentation of Items of Other Comprehensive Income" becameeffective during the period. Items in the consolidated statement ofcomprehensive income that may be reclassified to profit or loss in subsequentperiods are now presented separately from items that will not be reclassifiedto profit or loss in subsequent periods. IFRS 13, "Fair value measurement" became effective during the period. Thestandard requires specific disclosures on fair values, some of which replaceexisting disclosure requirements in IFRS 7, "Financial instruments:Disclosures". The fair values of cash and cash equivalents, trade and otherreceivables and trade and other payables approximate to their book values dueto the short maturity periods of these financial instruments. 4. Earnings per share - basic and diluted The calculation of earnings per share is based on a profit of $644,574 for the6 months ended 30 June 2013 (6 months ended 30 June 2012: loss $537,535) andthe weighted average number of shares in issue in the period to 30 June 2013 of865,258,486 (30 June 2012: 379,439,522). Diluted earnings per share in the period ended 30 June 2013 assumes thatoptions and warrants outstanding at 30 June 2013 were exercised at 1 January2013 for options and warrants where the exercise price was less than theaverage price of the ordinary shares during the period. A calculation is doneto determine the number of shares that could have been acquired at fair valuebased on the monetary value of subscription rights to outstanding share optionsand warrants. The number of shares calculated above is compared with the numberof shares that would have been issued assuming the exercise of the options andwarrants. On this basis, the calculation of diluted earnings per share is basedon the profit attributable to ordinary shareholders divided by 890,051,915shares. 5. Property, plant and equipment Drilling Motor Producing properties costs and Vehicles Total equipment $ $ $ $ Cost At 1 January 2013 883,767 2,964,086 15,254 3,863,107 Additions 141,506 2,342,689 3,805 2,488,000 Transferred from intangible 119,272 711,467 - 830,739assets Disposals - (97,797) - (97,797) At 30 June 2013 1,144,545 5,920,445 19,059 7,084,049 Depreciation At 1 January 2013 133,208 289,180 2,850 425,238 Charge for the period 51,249 209,663 2,065 262,977 At 30 June 2013 184,457 498,843 4,915 688,215 Net Book Amount at 31 December 750,559 2,674,906 12,404 3,437,8692012 Net Book Amount at 30 June 2013 960,088 5,421,602 14,144 6,395,834 6. intangible assets Cost Goodwill Drilling Mineral Total costs leases $ $ $ $ At 1 January 2013 372,629 710,727 5,117,472 6,200,828 Additions - 421,494 1,441,687 1,863,181 Transferred to property, plant and - (711,467) (119,272) (830,739)equipment Exchange movements (23,076) - - (23,076) Impairment - - (67,070) (67,070) Disposals - (392,100) (392,100) As at 30 June 2013 349,553 420,754 5,980,717 6,751,024 Amortisation At 1 January 2013 and - - - - At 30 June 2013 Net Book Amount at 31 December 2012 372,629 710,727 5,117,472 6,200,828 Net Book Amount at 30 June 2013 349,553 420,754 5,980,717 6,751,024 Impairment review Drilling costs and mineral leases represent acquired intangible assets with anindefinite useful life and are tested annually for impairment. As disclosedwithin Accounting Policies, expenditure incurred on the acquisition of mineralleases is capitalised within intangible assets until such time as theexploration phase is complete or commercial reserves have been discovered.Exploration expenditure including drilling costs are capitalised on a well bywell basis if the results indicate the existence of a commercially viable levelof reserves. The directors have undertaken a review to assess whether circumstances existwhich could indicate the existence of impairment as follows: * The Group no longer has title to the mineral lease. * A decision has been taken by the Board to discontinue exploration due to the absence of a commercial level of reserves. * Sufficient data exists to indicate that the costs incurred will not be fully recovered from future development and participation. Following their assessment the directors recognised an impairment charge to thecost of mineral leases of $67,070 (2012 - $204,973) in respect of expiredmineral leases. The Directors believe that no impairment is necessary on the carrying value ofgoodwill. * * ENDS * * For further information on Magnolia Petroleum Plc visitwww.magnoliapetroleum.com or contact the following: Steven Snead Magnolia Petroleum Plc +01 918 449 8750 Rita Whittington Magnolia Petroleum Plc +01 918 449 8750 Jo Turner / James Caithie Cairn Financial Advisers LLP +44 20 7148 7900 John Howes / Alice Lane / Northland Capital Partners +44 20 7796 8800Luke Cairns Limited Lottie Brocklehurst St Brides Media and Finance +44 20 7236 1177 Ltd Frank Buhagiar St Brides Media and Finance +44 20 7236 1177 Ltd Notes Magnolia Petroleum Plc is an AIM quoted, US focused, oil and gas explorationand production company. Its portfolio includes interests in 121 producing andnon-producing assets, primarily located in the highly productive Bakken/ThreeForks Sanish hydrocarbon formations in North Dakota as well as the oil richMississippi Lime and the substantial and proven Woodford and Hunton formationsin Oklahoma. Summary of Wells Category Number of wells Producing 121 Being Drilled / Completed 18 Elected to participate / waiting to 35spud TOTAL 174