🕐06.05.14 - 08:27 Uhr

MAGNOLIA PETROLEUM ISSUES RESERVES AND PRODUCTION UPDATE AS AT 1 APRIL 2014



Magnolia Petroleum Plc / Index: AIM / Epic: MAGP / Sector: Oil & Gas 6 May 2014 Magnolia Petroleum Plc (Magnolia or the Company) Reserves & Production Update Magnolia Petroleum Plc, the AIM quoted onshore US focused oil and gas exploration and production Company, reports an update on its reserves and production. Overview * Assessment of net attributable proved and developed producing reserves (PDP) estimated at 167 Mbbl of oil and condensate and 450 MMcf gas with an NPV10 of US$8.416 million * Moyes estimates net production was 150 boepd as at 1 April 2014 * A detailed Reserves Report including 2P and 3P reserves has been commissioned and, given a reassessment of the Mississippi Lime geology in the US, is expected to show a significant downgrade in 2P and 3P reserves * Improved understanding of the following: o Landing of the laterals within the Mississippi wedges o The Woodford formation, being the source rock for the Mississippi Lime Proved Developed Producing Reserves The Companys net attributable proved and developed producing reserves (PDP) have been estimated at 167 Mbbl of oil and condensate and 450 MMcf of natural gas as at 1 April 2014 with an NPV10 of US$8.416 million.

This compares to the 158 Mbbl and 814 MMcf as at 1 August 2013 and NPV10 of US$7.243 million.

The valuation was prepared by Moyes & Co.

(Moyes) and satisfies a condition of the Credit Facility as announced on 22 October 2013 for a six month reassessment of Magnolias PDP reserves, upon which the borrowing base limit of the facility, currently US$2.1 million, is adjusted. Reserves Report A more detailed Reserves Report including the Companys 2P and 3P reserves has been commissioned.

The Directors expect the Report will show a reduction on the figures announced on 9 September 2013 due to a downgrade throughout the industry in net reserves assigned to the Mississippi Lime formation, Oklahoma.

This is attributable to an improved understanding of the geology of the play among operators, including Magnolia.

As more horizontal wells are drilled on the formation and more production rates are reported, the Mississippi Lime is increasingly being regarded as comprised of multiple wedges rather than a uniform resource.

Production rates therefore vary markedly depending on whether or not a well encounters a very productive wedge.

This industry wide re-evaluation of the Mississippi Lime will have a rebasing effect on the level of Magnolias 2P and 3P reserves. Operators understanding of the geology of the Woodford formation in Oklahoma is also improving as the play matures and more horizontal wells are drilled.

The Woodford, which lies below and is the source rock to the Mississippi Lime, is increasingly viewed by operators as the more prospective of the two formations in certain areas.

This matches the Companys own experience of receiving more proposals to drill Woodford wells on its leases in recent months.

As the Woodford is at an earlier stage of development compared to the Mississippi Lime, the Reserves Report will not fully reflect the potential of the formation.

This is expected to change as more wells are drilled to the Woodford. Strategy The Directors are confident that a number of Mississippi Lime wedges, which can produce at prolific rates, are present on leases in which Magnolia has interests of up to 100%.

The Company is therefore assessing the potential for it to drill, as operator, a series of vertical wells targeting identified locations through 2014 - 2015.

At an estimated cost of US$750,000 per well, vertical wells are considerably cheaper than horizontals and have the potential to recover costs quickly. Through its participation in multiple wells, Magnolia has identified those operators who have had the greatest success in maximising production from both the Mississippi Lime and Woodford formations.

A number of these are now looking to drill horizontal wells with up to five lateral legs each to ensure the correct wedge of the Mississippi Lime is encountered.

Going forward, the Directors will participate in wells drilled by those operators whose techniques and geological knowledge have consistently achieved the best results. Production Moyes estimates the Companys net production at 1 April 2014 was 150 boepd.

This compares to average actual daily production in H1 2013 of 93 boe and H2 2013 of 116 boe.

In addition the mix of oil and gas has moved from 47% oil and 53% gas in H1 2013 to 67% oil and 33% gas in H2 2013 and remains as such in the latest estimate from Moyes. Moyes had previously estimated that Magnolias net production as at 1 August 2013 was 214 boepd.

This was based on initial production rates of new wells that had just come online and subsequently have declined to a steadier rate of production.

Whilst the estimated boepd number from Moyes has fallen, actual monthly production and therefore revenue has increased since August 2013. Magnolia COO, Rita Whittington said, "We are highly confident that once Magnolias 2P and 3P reserves are rebased, they will soon resume their upwards trajectory as a result of further Woodford and Mississippi Lime wells being drilled on our acreage.

We plan to continue to participate alongside operators who consistently achieve strong production rates.

Armed with a better understanding of the geology, we are excited by our upcoming vertical well programme, targeting the Mississippi Lime.

Vertical wells are low cost, hold leases by production and, thanks to our higher interests and subject to the results, can lead to a material increase in net production and PDP reserves." As previously guided, the Company will report revenues in line with market expectations and EBITDA ahead of prior guidance in its upcoming 2013 results which are expected to be released in the next two weeks. Summary of Magnolia PDP Reserves As of 1 April 2014, Magnolias net Proved Developed Producing reserves, future net cash flow and net present worth discounted at 10% per annum (NPV) have been estimated to be as follows: Grand Total as of April 1, 2014
Reserve Class/Category Gross Reserves Net Reserves Net Cash Flow Oil & Condensate (Mbbl) Natural Gas (MMcf) Oil & Condensate (Mbbl) Natural Gas (MMcf) Future Net Revenue ($000) Future Net OPEX & Taxes ($000) Future Net Capital ($000) Future Net Cash Flow ($000) NPV Disc @ 10% ($000) Proved Developed Producing 59,124 256,516 167 450 19,057 5,196 - 13,861 8,416
The future net revenue is based on the 1 April 2014 NYMEX futures strip prices for WTI Oil and Henry Hub Gas.

The future net cash flow is the future net revenue, less estimated future net OPEX (well operating cost and production taxes) and future net capital.

The total reserves are those defined as natural gas and liquid hydrocarbon reserves to Magnolias interest after deducting all royalties, overriding royalties, and reversionary interests owned by outside parties that become effective upon pay-out of specified monetary balances.

All reserves estimates have been prepared using standard engineering practices generally accepted by the petroleum industry and conform to the guidelines adopted by the 2007 SPE/SPEE/WPC PRMS Guidelines. The information contained in this announcement has been reviewed and approved by P.

Dee Patterson on behalf of Moyes & Co.

Mr.

Patterson has 32 years of relevant experience in the oil industry and is currently Managing Director, with Moyes & Co.

in Dallas, Texas. 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 its energy 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 of oil per day, a common unit of measurement for volume of crude oil.

The volume of a barrel is equivalent to 42 US gallons Contingent resources means quantities of petroleum estimated as of a given date, to be potentially recoverable from known accumulations by application of development projects, but which are not currently considered commercially 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 used in oilfield and heat content units such as MMSTB and MMBtu MMBbl means Million barrels MMcfd means Million Cubic Feet per Day Proved Reserves means those quantities of petroleum which, by analysis of geological and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under current economic conditions, operating methods, and government regulation - Proved reserves can be categorized as developed or undeveloped Probable reserves are those unproved reserves which analysis of geological and engineering data suggests are more likely than not to be recoverable.

In this context, when probabilistic methods are used, there should be at least a 50% probability that the quantities actually recovered will equal or exceed the sum of estimated proved plus probable reserves Possible Reserves are those unproved reserves which analysis of geological and engineering data suggests are less likely to be recoverable than probable reserves.

In this context, when probabilistic methods are used, there should be at least a 10% probability that the quantities actually recovered will equal or exceed the sum of estimated proved plus probable plus possible reserves Reserve Status Categories Unproved Reserves are based on geologic and/or engineering data similar to that used in estimates of proved reserves; but technical, contractual, economic, or regulatory uncertainties preclude such reserves being classified as proved.

Unproved reserves may be further classified as probable reserves and possible reserves Reserve status categories define the development and producing status of wells and reservoirs Developed reserves are expected to be recovered from existing wells including reserves behind pipe.

Improved recovery reserves are considered developed only after the necessary equipment has been installed, or when the costs to do so are relatively minor.

Developed reserves may be subcategorised as producing or non-producing. Producing reserves are expected to be recovered from completion intervals which are open and producing at the time of the estimate.

Improved recovery reserves are considered producing only after the improved recovery project is in operation. Non-producing reserves include shut-in and behind-pipe reserves.

Shut-in reserves are expected to be recovered from (1) completion intervals which are open at the time of the estimate but which have not started producing, (2) wells which were shut-in for market conditions or pipeline connections, or (3) wells not capable of production for mechanical reasons.

Behind-pipe reserves are expected to be recovered from zones in existing wells, which will require additional completion work or future recompletion prior to the start of production. Undeveloped reserves are expected to be recovered: (1) from new wells on undrilled acreage, (2) from deepening existing wells to a different reservoir, or (3) where a relatively large expenditure is required to (a) recomplete an existing well or (b) install production or transportation facilities for primary or improved recovery projects. * * ENDS * * For further information on Magnolia Petroleum Plc visit www.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 Limited +44 20 7382 1100 Lottie Brocklehurst St Brides Media and Finance Ltd +44 20 7236 1177 Frank Buhagiar St Brides Media and Finance Ltd +44 20 7236 1177 Notes Magnolia Petroleum Plc is an AIM quoted, US focused, oil and gas exploration and production company.

Its portfolio includes interests in 154 producing and non-producing assets, primarily located in the highly productive Bakken/Three Forks Sanish hydrocarbon formations in North Dakota as well as the oil rich Mississippi Lime and the substantial and proven Woodford and Hunton formations in Oklahoma. Summary of Wells Category Number of wells Producing 154 Being Drilled / Completed 17 Elected to participate / waiting to spud 48 TOTAL 219
[cid:image002.png@01CECBDD.61F8A860] Frank Buhagiar St Brides Media & Finance Ltd 3 St Michaels Alley, London, EC3V 9DS www.stbridesmedia.co.uk Tel: 0207 236 1177 | Mob: 07788410221 | Twitter: @StBrides1



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