Molopo Energy Limited: September 2012 Quarterly Report

Molopo Energy Limited: September 2012 Quarterly Report 
CALGARY, ALBERTA -- (Marketwire) -- 10/30/12 -- Molopo Energy Limited
(ASX:MPO) is pleased to announce its Quarterly report for the First
Quarter of the Company's fiscal year 2013, ending September 30, 2012. 
Highlights 


 
--  Oil and gas production averaged 402 boepd during the Quarter, consistent
    with the 409 boepd recorded in the prior quarter, but not yet reflecting
    production volumes anticipated to be added through calendar year end
    2012 as a result of drilling in Texas. Production during the Quarter was
    71% oil, 14% natural gas liquids (NGLs) and 15% natural gas; 
--  Initial results from Molopo's first Barnhart well, 36-2H Linthicum
    Washington, were announced August 30, 2012 and met expectations, with
    further updates announced October 25; 
--  Continued with an active drilling and completion program in Texas,
    resulting in 4 wells commencing flow back and hydrocarbon production
    through the end of the Quarter. A fifth well was drilled and commenced
    completion through the month of October; 
--  Announced the divestment of Molopo's Queensland asset for $41 million
    plus a $2.4 million adjustment for working capital, which is scheduled
    to close November 1, 2012. This sale sharpens Molopo's focus on the
    Wolfcamp, and adds to the Company's strong financial position for
    further drilling in 2013; 
--  Continued to maintain a strong balance sheet with $52.2 million in cash
    at the end of the Quarter, which will be further bolstered by proceeds
    from the closing of the Queensland sale; and 
--  Received the first onshore natural gas production right in South Africa.

 
TEXAS DRILLING RESULTS(1) - WELL BY WELL SUMMARY: 


 
                                    ----------------------------------------
                                             Peak 24 Hour Production Rate(2)
----------------------------------------------------------------------------
                                                             Natural    Load
             Target    Status as at        BOE    Oil   NGLs     Gas   Fluid
Area & Well   Bench October 30, 2012   (boe/d) (bbld) (bbld) (mcf/d) (bbl/d)
----------------------------------------------------------------------------
 
Barnhart -         On production and                                        
 Linthicum             investigating                                        
 Washington             optimization                                        
 36-2H              opportunities to                                        
                     further enhance                                        
               B          production       742    525    109     644       -
----------------------------------------------------------------------------
Barnhart -               Hydrocarbon                                        
 Linthicum            production and                                        
 Washington           still cleaning                                        
 36-1H               up; recovery of                                        
                          load fluid                                        
               B             ongoing       792    628     91     536     450
----------------------------------------------------------------------------
Fiesta -                 Hydrocarbon                                        
 Baggett           production, still                                        
 16-1H              cleaning up with                                        
                     high volumes of                                        
               A          load fluid    375(3)     63    100   1,272   1,230
----------------------------------------------------------------------------
Fiesta -             Early stages of                                        
 Baggett                 hydrocarbon                                        
 40-2H                   production,                                        
                     continued clean                                        
                        up with high                                        
                     volumes of load                                        
               A               fluid    455(3)    288     48     715   1,570
----------------------------------------------------------------------------
Fiesta -                                   Not                              
 Baggett                  Completion available                              
 54-1H         B            underway     (N/A)    N/A    N/A     N/A     N/A
----------------------------------------------------------------------------
(1)Based on wells drilled in the second half of calendar year 2012          
(2)The peak 24 hour production rate is the highest hydrocarbon rate achieved
 since the well came on production                                          
(3)As these wells are still in clean up, the peak rate may increase; further
 updates will be provided once rates stabilize                              

 
Note: All values referenced herein are Australian dollars (A$) unless
otherwise stated. 
OPERATIONS UPDATE FOR QUARTER ENDED SEPTEMBER 30 AND OCTOBER 2012
MONTHLY UPDATE 
TEXAS SHALE OIL - WOLFCAMP  
Molopo's two key areas in the Permian Basin in Texas are Barnhart and
Fiesta, where the Company is targeting development of the Wolfcamp
oil shale resource play. Barnhart is the Company's smaller but more
developmental land base with approximately 1,400 acres. At 24,600
acres, Fiesta is larger and represents the more significant land
base. This area is situated further south in the play, and is
therefore more exploratory in nature.  
Through the Quarter, Molopo invested $13.5 million in its Texas
assets, and drilled and completed 4 wells between Barnhart and
Fiesta. Three of those wells commenced flow back during the Quarter
yet only 1 of the 4 wells contributed to production during the
period. In Texas, Molopo has licensed one additional well in
Barnhart, targeting Bench B, and an additional well in Fiesta, also
targeting Bench B. Licenses pertaining to the 2013 capital program
are well underway and details regarding the year's program will be
communicated in late November.  
Following is a discussion about Molopo's progress and status of
development in Texas both through the Company's first financial
Quarter, as well as for the month of October, 2012. Overall, the team
is very pleased with the results of the drilling program, and
encouraged by the performance of the wells thus far. As the wells
continue to produce and additional well performance data is obtained,
additional drilling targets and locations will be selected, including
the drilling of another location in the Barnhart area before the end
of 2012.  
Fiesta Project 
Through July and August, Molopo concluded the drilling and completion
of the Baggett 16-1H well targeting Bench A, which is the first long
lateral horizontal (1.5 miles) in the Fiesta block. The well was
fracture stimulated with approximately 34 stages using a slickwater
fluid, and was put on gas lift on September 7, 2012. Through
September and the month of October, Baggett 16-1H continued to flow
back large volumes of fraccing fluid, averaging approximately 1,500
bbl/d, and to date has produced approximately 34% of the total load
fluid. The high sustained rates accompanied by the high volumes of
load fluid recovered are very intriguing, but until the well
stabi
lizes, the ultimate productive capacity of the well remains
undetermined. Recovering significant amounts of load fluid should
result in a cleaner well bore, meaning fewer impediments to the
hydrocarbon flow over the longer term.  
On September 30, 2012 the Baggett 16-1H well commenced oil shows, and
as at October 29, 2012, the well was continuing to clean up. Since
commencing production, the peak 24 hour hydrocarbon rate was 375
boe/d, comprising approximately 63 bbl/d of crude oil, 100 bbl/d of
NGL's and 1,272 mcf/d of natural gas, plus 1,230 bbl/d of load fluid.
Molopo will continue to provide updates on this well as information
becomes available. 
Molopo drilled a second well in Fiesta in September, Baggett 40-2H,
for an approximate lateral length of 8,000 feet, also targeting Bench
A. Completion of this well commenced on September 24, and was put on
gas lift in mid-October. On October 24, 2012 (North America) the well
produced measurable oil rates, and Molopo is pleased to report that
the peak 24 hour hydrocarbon production rate for the well thus far
was 455 boe/d, comprising approximately 288 bbl/d of crude oil, 48
bbl/d of NGL's and 715 mcf/d of natural gas plus approximately 1,570
bbl/d of load fluid. The well continues to clean up with
approximately 20% of load fluid recovered to date, and further rates
will be announced as obtained.  
A third well was drilled in Fiesta toward the end of the Quarter,
Baggett 54-1H, for an approximate lateral length of 7,490 feet, which
is significant because it is the first Fiesta well to target Bench B.
This well commenced completion on October 24, 2012 and immediately
following completion, the well will be put on gas lift. Results from
that well will be provided as flow back and hydrocarbon production
commence.  
As a result of extensive core work and analysis done on prior drills
in Fiesta, Molopo confirmed that all three Benches in the Wolfcamp
appear prospective. Bench A and Bench B appear to have the best
characteristics and are therefore initial targets. As a result of
drilling into both Benches in Fiesta, Molopo will have data and well
performance indicators from both Bench A and Bench B. This will
facilitate a broader understanding of the reservoir, provide
indications of well performance characteristics, and help to plan the
optimal future drilling targets.  
Barnhart Project 
In addition to its Fiesta acreage, Molopo also holds 1,400 acres to
the north, near the town of Barnhart, Texas, which is referred to as
the Barnhart Project. This acreage is surrounded by land held by
other active operators, and is more developmental than the Fiesta
acreage.  
Through May and June of 2012, the first Barnhart well,
Linthicum-Washington 36-2H, was drilled and in July was completed
with a 34-stage slickwater frac. Initial results from that well were
released August 30, 2012, and an update provided on October 25, 2012,
which indicated that the maximum 24 hour initial production (IP) rate
was 742 boe/d, comprising approximately 525 bbl/d of crude oil, 109
bbl/d of natural gas liquids (NGL) and 644 mcf/d of natural gas. The
IP30 rate for this well was approximately 400 boe/d.  
However, production from the Linthicum Washington 36-2H well was
intermittent during September due to the well being taken off line
following operational disruptions by a third party which impacted the
well's gas lift system. The well has been put back on gas lift, but
wells of this nature will often take additional time to stabilize
after such interruptions. The performance of this well will be
monitored as production continues, and Molopo is also investigating
some optimization opportunities to further enhance the production
from this well.  
Molopo's second Barnhart well, Linthicum-Washington 36-1H, is also
targeting Bench B and has been on gas lift for 29 days. The well
continues to flow back high levels of fraccing fluid and as of
October 25, 2012 was producing approximately 450 bbl/d of load fluid.
The peak 24 hour rate since the well came on production was 792
boe/d, comprising approximately 628 bbl/d of crude oil, 91 bbl/d of
NGLs and 536 mcf/d of natural gas. An IP30 rate will be provided once
the well has been on production for 30 consecutive days.  
SASKATCHEWAN - MIDALE POTENTIAL 
Molopo holds approximately 47,000 acres in South Eastern Saskatchewan
with some interesting potential from the Midale formation. Molopo's
production from Saskatchewan comes primarily from non-operated wells
in the Taylorton pool in the Bakken, and during the quarter averaged
177 bbl/d of light, sweet crude oil.  
In light of the smaller impact of Saskatchewan relative to Molopo's
overall reserves and production potential, the Company has elected to
shift capital from Saskatchewan to Texas, and has only drilled 1 of
the 4 wells budgeted in calendar year 2012. An optimal future
development strategy for Saskatchewan is currently being evaluated by
Molopo's technical team.  
QUEBEC SHALE GAS  
Molopo holds approximately 1.4 million net acres of exploration
acreage targeting the Utica shale in the province of Quebec, Canada
which is currently subject to a provincially imposed moratorium.
Molopo has no current capital investment plans for this asset, but
during the moratorium, both the tenure clock and leasehold payments
are 'frozen'. This asset represents a future 'option' on natural gas
for Molopo shareholders. 
QUEENSLAND, AUSTRALIA 
On October 18, 2012, Molopo received confirmation that all regulatory
approvals were received and the final condition for the sale of its
Queensland asset had been satisfied. As a result, closing of the
transaction and receipt of proceeds ($41 million plus a capital
adjustment) is expected on November 1, 2012.  
SOUTH AFRICA - BIOGENIC GAS 
Molopo has gas assets in the Virginia area in the Free State province
and the Evander area southeast of Johannesburg.  
On September 21, 2012 Molopo was pleased to receive the first onshore
natural gas production right in South Africa. The initial phase of
development of this project will be the tie-in of 4 of the 11 pilot
production wells where gas flow of approximately 1.2 mmcf/d
continues. The capital investment outlined in the production right is
approximately $2.4 million in the first year, $3.9 million in the
second year, and $8.6 million in the third year; totalling $14.9
million over the three year period. 
CORPORATE  
Corporate Governance 
Following the announcement of Molopo's year end 2012 financial
accounts in September, restrictions on Directors participating in the
market for Molopo securities was lifted. In mid-September, all
members of Molopo's Board of Directors and numerous members of
management acquired Molopo shares in the open market, further
aligning with shareholders through increased ownership positions.  
Cash and Debt 
At the end of the Quarter, Molopo had approximately $52.2 million
cash and no debt, compared with $65 million at the beginning of the
Quarter. Following closing of the Queensland sale slated for November
1, 2012 the cash balance will increase by $41 million.  
Legal Claim  
The legal claim by a former joint venture partner is continuing in
the ordinary course. No Court date has yet been set.  
Annual General Meeting (AGM) 
The Annual General Meeting of Molopo Energy Limited will be held on
Thursday, November 22, 2012 at 10:00am 
at the Westin Hotel Melbourne.
Details of the items of business to be voted on by shareholders is
available in the Notice of Meeting document lodged on the ASX
Announcements page of Molopo's website, and a webcast of the AGM will
also be available live and archived, and can be accessed on the
'Webcasts' page of Molopo's website. Visit www.molopoenergy.com.au
for further information.  
OCTOBER OPERATIONAL UPDATE 
As discussed previously in this release, drilling and completion
operations in Texas progressed well during the month of October, and
Molopo continued to execute on the Company's capital program as
outlined above.  
Production for the month of September was 460 boepd, weighted
approximately 82% to crude oil & and liquids, and 18% to natural gas.
This production was comprised of 283 boe/d from the wells in Texas
and 177 bbl/d of light, sweet crude oil from Saskatchewan. As
previously reported on October 25, 2012, Molopo's aggregate
productive capacity ranges between approximately 1,100 and 1,300
boe/d.  
With the anticipated contribution from the 5 wells drilled to date in
Texas, new production additions are coming on-line at staggered
intervals through the balance of the year. As previously indicated,
capital in calendar year 2012 was reduced in Saskatchewan relative to
budget, and will result in approximately 200 bbl/d less production
being contributed from that area. Molopo's exit rate reflects this
revision and is anticipated to be approximately 2,100 boepd at year
end 2012. Molopo forecasts its year end 2012 cash balances to be
approximately $72 million, reflecting capital not invested in
Saskatchewan and reduced annualized cash flow as a result of
developmental delays in bringing production on line.  


 
----------------------------------------------------------------------------
                                                   First    Fourth          
                                                 Quarter   Quarter          
Figures are Molopo net                            Fiscal    Fiscal  Change  
(accruals basis)         CANADA     USA  OTHER  Year '13  Year '12       %  
----------------------------------------------------------------------------
Exploration &                                                               
 development                                                                
 expenditure                                                                
 incurred(1)($'000)       1,364  13,481    471    15,315    22,668     (32%)
----------------------------------------------------------------------------
Sales Volume (Boe)       16,284  20,611      -    36,895    37,264      (1%)
----------------------------------------------------------------------------
Sales                                                                       
 Proceeds(1)($'000)       1,051     944    190     2,185     2,361      (7%)
----------------------------------------------------------------------------
                                                                            
(1) Sales proceeds is the gross amount from production before royalties and 
operating costs.  As Molopo's operations are still considered to be in the  
exploration phase, generally accepted accounting principles requires net    
production revenue (i.e. sales proceeds less royalties & operating costs) to
be capitalised. Exploration and development expenditures incurred are shown 
before any adjustment for net production revenue.                           

 
To access the Appendix 5B, please visit the ASX Announcements page of
Molopo's website at www.molopo.com.au  


 
----------------------------------------------------------------------------
----------------------------------------------------------------------------
About Molopo Energy Limited                   Molopo Energy Snapshot        
                                                                            
Molopo Energy Limited is an oil and gas       ASX Code: MPO                 
exploration and production company listed on  Share Price(1): $0.55         
ASX under code 'MPO', with management based   Market Cap(1): $135MM         
in Calgary, Alberta, Canada. With a strong    Net Cash(2): $52.2MM          
balance sheet, the Company is predominantly                                 
focused on the development of its Wolfcamp    1. Market figures as at 30    
shale oil resource play in the Permian        October 2012                  
Basin, Texas, USA. In addition, Molopo also   2. Balance sheet amounts as at
has oil assets in Saskatchewan, Canada;       30 September 2012             
shale gas assets in Quebec, Canada; and                                     
onshore gas projects in South Africa.                                       
----------------------------------------------------------------------------
----------------------------------------------------------------------------

 
This press release contains certain forward-looking statements. These
statements relate to future events or future performance of the
Company. When used in this press release, the words "may", "would",
"could", "will", "intend", "plan", "anticipate", "believe",
"estimate", "predict", "seek", "propose", "expect", "potential",
"continue", and similar expressions, are intended to identify
forward-looking statements. These statements involve known and
unknown risks, uncertainties, and other factors that may cause actual
results or events to differ materially from those anticipated in such
forward-looking statements. Such statements reflect the Company's
current views with respect to certain events, and are subject to a
number of risks, uncertainties and assumptions. Many factors could
cause Molopo's actual results, performance, or achievements to
materially differ from those described in this press release. Should
one or more of these risks or uncertainties materialize, or should
assumptions underlying forward-looking statements prove incorrect,
actual results may vary materi
ally from those described in other
public disclosures made by the Company or this press release as
intended, planned, anticipated, believed, estimated, or expected.
Furthermore, statements relating to "reserves" or "resources" are
deemed to be forward-looking statements, as they involve the implied
assessment, based on certain estimates and assumptions that the
resources and reserves described can be produced profitably in the
future. The forward-looking statements contained in this press
release are expressly qualified in their entirety by this cautionary
declaration. These statements speak only as of the date of this press
release. The Company does not intend and does not assume any
obligation, to update these forward-looking statements to reflect new
information, subsequent events or otherwise, except as required by
law.
Contacts:
Molopo Energy Limited
Cindy Gray
VP Capital Markets
+1.403.648.8026 or + 61 3 9618 8704 (Australia local)
investorrelations@molopo.com.au
www.molopo.com.au
 
 
Press spacebar to pause and continue. Press esc to stop.