Magnolia Petroleum Regulatory News (MAGP)

Magnolia Petroleum Plc / Index: AIM / Epic: MAGP / Sector: Oil & Gas 22 August 2014 Magnolia Petroleum Plc (`Magnolia' or `the Company') Reserves Report & Production Update Magnolia Petroleum Plc, the AIM quoted US onshore focused oil andgas exploration and production company, has received an independent ReservesReport covering its leases in proven formations such as the Woodford andMississippi Lime, Oklahoma, and the Bakken and Three Forks Sanish, NorthDakota, as at 1 July 2014. In addition, the Company has received anindependent production report which has demonstrated an increase in Magnolia'snet daily production to 257 boepd as at 1 July 2014, up from 150 boepd as at 1April 2014. Overview CPR Update - Net proved and developed producing reserves (`PDP') estimated at 162 Mbbl of oil and condensate and 540 MMcf gas with NPV10 of US$9.143 million - Total net proved reserves (`1P') of 719 Mbbl of oil and condensate and 2,093 MMcf gas with NPV10 of US$31.832 million - Total net proved and probable reserves (`2P') of 749 Mbbl of oil and condensate and 2,307 MMcf gas with NPV10 of US$34.693 million - Total net proved, probable and possible reserves (`3P') of 877 Mbbl of oil and condensate and 2,554 MMcf gas with NPV10 of US$35.884 million - Report reflects reclassification of large proportion of Mississippi Lime formation reserves on undrilled leases as Contingent Resources - in line with industry-wide view of the play being comprised of wedges rather than a uniform resource (see announcement of 6 May 2014 for further details) - Multiple potentially highly productive Mississippi Lime wedges identified on Magnolia's leases - future drilling expected to lead to reassignment from contingent resources to reserves - Report does not reflect the potential of the Woodford formation, which lies below the Mississippi Lime and is at an earlier stage of development - viewed by operators as the more prospective of the two formations in certain areas Production Update - Net production stood at 257 boepd as at 1 July 2014 compared to 150 boepd on 1 April 2014 due to a number of wells in which Magnolia holds larger than average NRIs commencing production Rita Whittington, COO of Magnolia, said, "At US$31.832m, the valueof our proven reserves provides Magnolia with considerable asset backing,particularly when compared to our market valuation. From current levels, ourreserves are set to grow strongly. Not only do we have interests in 79 wellsat various stages of development but we continue to receive multiple drillingproposals. A growing proportion of these are targeting the Woodford, which isincreasingly viewed as the more productive formation. Meanwhile, the improvedunderstanding of the geology of the Mississippi Lime allows us to prioritisedrilling activity alongside those operators who are consistently hittinghighly productive `wedges'. "As wells in which we have larger than average interests have comeon line, Magnolia's net production has increased to 257 boepd as at 1 July2014 from 150 boepd as at 1 April 2014. Thanks to the combination of growingrevenues from production and our US$5m credit facility, we are well placed todeliver on our objective to prove up the reserves on our leases and I lookforward to providing further updates on our progress in due course." Summary of Magnolia Reserves As of 1 July 2014, Magnolia's net reserves, future net cash flowand net present value discounted at 10% per annum (`NPV10') have beenestimated to be as follows: Grand Total as of July 1, 2014 Gross Reserves Net Reserves Net Cash Flow ReserveClass/Category Oil & Natural Oil & Natural Future Future Future Future NPV Condensate Gas Condensate Gas Net Net Net Net Disc @ (Mbbl) (MMcf) (Mbbl) (MMcf) Revenue OPEX Capital Cash 10% ($000) & ($000) Flow ($000) Taxes ($000) ($000)Proved 66,999 528,764 162 540 19,670 5,190 - 14,480 9,143DevelopedProducingProved 3,098 14,265 61 286 8,247 1,760 8.6 6,478 4,586DevelopedBehind PipeProved Shut - - - - - - - - -InProved 25,169 89,254 496 1,268 57,245 10,781 14,051 32,412 18,103UndevelopedTotal Proved 95,266 632,284 719 2,093 85,162 17,732 14,060 53,370 31,832Probable 666 1,980 4 5.5 385 70 10 305 168Behind PipeProbable 840 11,216 26 209 5,433 1,012 347 4,074 2,692UndevelopedTotal 1,506 13,195 30 214 5,817 1,082 356 4,379 2,860ProbableTotal 2P 96,772 645,479 749 2,307 90,979 18,814 14,416 57,749 34,693Possible 200 2,524 7.9 83 1,130 207 628 295 86Behind PipePossible 10,245 24,925 120 164 11,255 3,153 4,582 3,520 1,106UndevelopedTotal 10,445 27,449 128 247 12,385 3,360 5,211 3,814 1,192PossibleTotal 3P 107,217 672,928 877 2,554 103,364 22,174 19,627 61,563 35,884 The estimates shown in this report are for proved developedproducing, proved non-producing, proved shut-in, proved undeveloped, probableand possible reserve classes. This report does not include any value thatcould be attributed to interests in undeveloped acreage beyond those tractsfor which undeveloped reserves have been estimated. The future net revenue is based on the 1 July 2014 NYMEX futuresstrip prices for WTI Oil and Henry Hub Gas. The future net cash flow is thefuture net revenue, less estimated future net OPEX (well operating cost andproduction taxes) and future net capital. The total reserves are those definedas natural gas and liquid hydrocarbon reserves to Magnolia's interest afterdeducting all royalties, overriding royalties, and reversionary interestsowned by outside parties that become effective upon pay-out of specifiedmonetary balances. All reserves estimates have been prepared using standardengineering practices generally accepted by the petroleum industry and conformto the guidelines adopted by the 2007 SPE/SPEE/WPC PRMS Guidelines. The information contained in this announcement has been reviewedand approved by P. Dee Patterson on behalf of Moyes & Co. Mr. Patterson has 33years of relevant experience in the oil industry and is currently ManagingDirector, with Moyes & Co. in Dallas, Texas. Appointment of Vice President of Accounting The Company is pleased to announce that it has appointed DerecNorman as Vice President of Accounting. Derec has spent the last eight yearsworking in the oil and gas industry in Oklahoma City, Oklahoma. He began hiscareer with Chesapeake Energy Corporation (NYSE: CHK), a leading operator inOklahoma, where in his role as Acquisition & Divestiture Supervisor, hespecialised in oil and gas accounting, acquisitions, divestitures, and mergersmanaging deals totalling over US$10billion. Derec graduated from theUniversity of Central Oklahoma with an honours degree in finance. ** ENDS ** Glossary `1P' means Proved Reserves `2P' means Proved plus Probable Reserves `3P' means Proved plus Probable plus Possible Reserves `BOE' means barrels of oil equivalent, gas is converted at itsenergy equivalent of 6000 cubic feet per barrel of oil `BOEPD' means barrels of oil equivalent per day, `BOPD' means barrels of oil per day, Abbreviation for barrels ofoil per day, a common unit of measurement for volume of crude oil. The volumeof a barrel is equivalent to 42 US gallons `Contingent resources' means quantities of petroleum estimated asof a given date, to be potentially recoverable from known accumulations byapplication of development projects, but which are not currently consideredcommercially recoverable due to one or more contingencies `M' means Thousand `MBO' means Thousand Barrels of Oil `Mcfd' means Thousand Cubic Feet per Day `MM' means million (thousand thousand not million million), as usedin oilfield and heat content units such as MMSTB and MMBtu `MMBbl' means Million barrels `MMcfd' means Million Cubic Feet per Day `NRI' means Net Revenue Interests `Proved Reserves' means those quantities of petroleum which, byanalysis of geological and engineering data, can be estimated with reasonablecertainty to be commercially recoverable, from a given date forward, fromknown reservoirs and under current economic conditions, operating methods, andgovernment regulation - Proved reserves can be categorized as developed orundeveloped `Probable reserves' are those unproved reserves which analysis ofgeological and engineering data suggests are more likely than not to berecoverable. In this context, when probabilistic methods are used, thereshould be at least a 50% probability that the quantities actually recoveredwill equal or exceed the sum of estimated proved plus probable reserves `Possible Reserves' are those unproved reserves which analysis ofgeological and engineering data suggests are less likely to be recoverablethan probable reserves. In this context, when probabilistic methods are used,there should be at least a 10% probability that the quantities actuallyrecovered will equal or exceed the sum of estimated proved plus probable pluspossible reserves Reserve Status Categories `Unproved Reserves' are based on geologic and/or engineering datasimilar to that used in estimates of proved reserves; but technical,contractual, economic, or regulatory uncertainties preclude such reservesbeing classified as proved. Unproved reserves may be further classified asprobable reserves and possible reserves Reserve status categories define the development and producingstatus of wells and reservoirs `Developed reserves' are expected to be recovered from existingwells including reserves behind pipe. Improved recovery reserves areconsidered developed only after the necessary equipment has been installed, orwhen the costs to do so are relatively minor. Developed reserves may besubcategorised as producing or non-producing. `Producing reserves' are expected to be recovered from completionintervals which are open and producing at the time of the estimate. Improvedrecovery reserves are considered producing only after the improved recoveryproject is in operation. `Non-producing reserves' include shut-in and behind-pipe reserves.Shut-in reserves are expected to be recovered from (1) completion intervalswhich are open at the time of the estimate but which have not startedproducing, (2) wells which were shut-in for market conditions or pipelineconnections, or (3) wells not capable of production for mechanical reasons.Behind-pipe reserves are expected to be recovered from zones in existingwells, which will require additional completion work or future recompletionprior to the start of production. `Undeveloped reserves' are expected to be recovered: (1) from newwells on undrilled acreage, (2) from deepening existing wells to a differentreservoir, or (3) where a relatively large expenditure is required to (a)recomplete an existing well or (b) install production or transportationfacilities for primary or improved recovery projects. For further information on Magnolia Petroleum Plc visitwww.magnoliapetroleum.com or contact the following: Steven Snead Magnolia Petroleum Plc +01 918 449 8750Rita Whittington Magnolia Petroleum Plc +01 918 449 8750Jo Turner/James Cairn Financial Advisers LLP +44 20 7148 7900CaithieJohn Howes/Alice Northland Capital Partners +44 20 7796 8800Lane LimitedLottie Brocklehurst St Brides Media and Finance +44 20 7236 1177 LtdFrank Buhagiar St Brides Media and Finance +44 20 7236 1177 LtdNotes Magnolia Petroleum Plc is an AIM quoted, US focused, oil and gasexploration and production company. Its portfolio includes interests in 171producing and non-producing assets, primarily located in the highly productiveBakken/Three Forks Sanish hydrocarbon formations in North Dakota as well asthe oil rich Mississippi Lime and the substantial and proven Woodford andHunton formations in Oklahoma. Summary of Wells Category Number of wellsProducing 171Waiting on first sales / IP rates 19Being drilled / completed 8Elected to participate / waiting to 52spudTOTAL 250