Magnolia Petroleum issues operations update

Magnolia Petroleum said it was encouraged by the number of new proposals it was receiving to drill alongside established operators.

"In our view, this provides further evidence of a pick-up in activity and sentiment in the US onshore sector, as highlighted by a more than doubling in the latest Baker Hughes oil rig count to 712 from 318 a year ago," said CEO Rita Whittington.

"It also validates our strategy to focus our lease acquisition strategy on prolific plays, such as the SCOOP and STACK in Oklahoma, where the economics of drilling are attractive in the current oil price environment.

"Furthermore, all seven wells are deemed to be low risk due to either being drilled on the same spacing unit as an existing producer or as a result of Magnolia's share of the drilling costs being fully carried."

She said that working over an existing well provided a low cost, low risk opportunity to increase production rates and recoverable reserves.

"In a low oil price environment, this is an attractive proposition for operators and with a portfolio of 157 producing wells we expect to participate in additional workovers going forward.

"Workovers have positive implications for the overall level and value of our proven developed producing (PDP) reserves which were recently independently valued at US$4,300,000.

"At this level, the value of our PDPs already outstrips our current market capitalisation. Workovers therefore have the potential to increase the already strong asset backing behind the Company."