MAGNOLIA PETROLEUM PLC: Acquisition of 6,700 Net Acres in Bakken Formation

MAGNOLIA PETROLEUM PLC: Acquisition of 6,700 Net Acres in Bakken Formation
Magnolia Petroleum Plc / Index: AIM / Epic: MAGP / Sector: Oil & Gas       
2 November 2012 
         Magnolia Petroleum Plc (`Magnolia' or `the Company')               

          Acquisition of 6,700 Net Acres in Bakken Formation, Montana          

Magnolia Petroleum Plc, the AIM quoted US onshore focused oil and gas
exploration and production company, is pleased to announce that it has agreed
to acquire 6,700 net mineral acres in Montana for a cash consideration of US$4


  * 6,700 net mineral acres acquired in the Montana section of the Bakken/Three
    Forks Sanish formation
      * Total cost of the acquisition is US$4 million - US$2 million to be funded
    from existing cash balances with the balance to be drawn from the Equity
    Finance Facility (`EFF') with Darwin Strategic Limited (`Darwin')
      * Majority of acreage located in Daniels County amongst and surrounded by the
    leases totalling 320,000 net acres acquired earlier this year by Apache
    Corporation (`Apache'), a leading international oil and gas exploration and
    production company
      * Apache has already drilled two horizontal wells that are awaiting fracture
    stimulation, is planning to drill two more and has attained permission to
    drill a further four

Magnolia COO, Rita Whittington said, "We believe that this acreage in Daniels
County, Montana, has the potential to become a significant extension for
production from the Bakken/Three Forks Sanish formations. Today's acquisition
matches our investment criteria, namely early, affordable access to liquids
rich onshore US formations, where the application of modern techniques such as
horizontal drilling may dramatically improve recovery rates and, in the
process, substantially increase net production and reserves. The Directors
believe that with lower drilling costs and multiple payzones, the economics of
drilling to the Bakken/ Three Forks Sanish formations in Montana are very
"The level of investment being made by Apache in the area reflects their
recognition of the scale of the opportunity to generate substantial value for
shareholders. Apache believe their 320,000 net acres holds over 1,900 potential
drilling locations and that, on each of these, up to 16 horizontal wells may be
required to recover reserves, estimated by Apache at 1 billion barrels of oil." 
Further information 
The 6,700 acres acquired by Magnolia represent an opportunity for the Company
to build a position in an area where the Directors believe there is strong
prospectivity and increasing interest. The acreage lies amongst and is
surrounded by Apache's leases. They are located in Daniels County and three
surrounding counties in Montana. 
The cost of acquiring the acreage is US$4 million, of which US$2 million is to
be funded from existing cash balances within the next seven days, and the
remainder to be drawn down from the EFF signed with Darwin and settled by 16
November 2012. A further announcement regarding this draw down will be made in
due course. 
In recent years, activity in the Montana section of the Bakken has been
increasing. According to oil services company Baker Hughes, as of April 2012,
there were 18 rigs active in eastern Montana, compared to 10 the previous year
and zero in July 2009. The number of rigs has since risen to 20 following
Apache's two horizontal wells. While there is much further to go to catch North
Dakota where there were 196 rigs targeting the Bakken/Three Forks in April
2012, Apache's acquisition of 320,000 net acres is representative of the
growing interest in the Bakken in Montana. In addition, the Montana Board of
Oil and Gas issued 228 oil permits in June 2012, more than the total number
issued in 2011. 
Apache believe there are over 1,900 potential drilling locations on its 320,000
net mineral acres and that sixteen horizontal wells, eight for the Bakken and a
further eight for the Three Forks Sanish, will be required to optimise the
recovery of reserves. According to Apache, the Estimated Ultimate Recovery
(`EUR') of reserves stands at 670MBo for the Bakken and 377MBo for the Three
Forks Sanish on each drilling location. 
Oil production in Montana peaked in 2006 at approximately 100,000 bopd, a
similar level to North Dakota during that year. The figure in Montana has since
dropped and there is currently no horizontal Bakken production in Daniels
County, Montana, though conventional oil has historically been recovered by
vertical wells from the Ratcliff, Madison, Mission Canyon and McGowan
formations. In addition to the Bakken/Three Forks Sanish, there is the
potential for unconventional oil to be recovered from the Mississippian aged
Lodge Pole and Madison formations as well as the deeper Devonian aged Nisku
members. Apache has drilled two horizontal wells in Daniels County that are
currently waiting to be fracture stimulated. These are the first horizontal
wells in the County and initial production rates are expected by the end of the
At 7,000-7,400ft, the Bakken in Daniels County lies at a shallower depth than
in North Dakota. As a result costs to drill horizontal wells to the Bakken in
Montana are estimated at US$7.5 million compared with US$10 million in North
                              ** ENDS **                                    
For further information on Magnolia Petroleum Plc visit or contact the following: 
Steven Snead                Magnolia Petroleum Plc         +01 918 449 8750     
Rita Whittington            Magnolia Petroleum Plc         +01 918 449 8750     
Antony Legge/James Thomas   Daniel Stewart & Company Plc   +44 (0) 20 7776 6550 
John Howes/John-Henry Wicks Northland Capital Partners     +44 (0) 20 7796 8800 
Lottie Brocklehurst         St Brides Media and Finance    +44 (0) 20 7236 1177 
Frank Buhagiar              St Brides Media and Finance    +44 (0) 20 7236 1177 
Magnolia Petroleum Plc is an AIM quoted, US focussed, oil and gas exploration
and production company. Its portfolio includes interests in 84 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                                                                  84 
Being Drilled / Completed                                                  13 
Elected to participate / waiting to spud                                   15 
TOTAL                                                                     112 
This summary excludes four out of six wells acquired as part of the acquisition
of 800 gross acres with a 100% working interest in Osage County, Oklahoma, as
announced on 10 February 2012. These four wells are currently `shut in' and
will require a workover programme at some point in the future to bring back
into production. 
-0- Nov/02/2012 07:00 GMT
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