Molopo Energy Announces Message to Shareholders, December

Molopo Energy Announces Message to Shareholders, December 2012
Operational Update & Corporate Changes 
CALGARY, ALBERTA -- (Marketwire) -- 01/02/13 -- Molopo Energy Limited
(ASX:MPO) today announces a message to shareholders along with the
monthly operational and corporate update on our activities and
progress achieved through December.  
Message to Shareholders  
Tim Granger, CEO and Managing Director  
Dear fellow shareholders:  
In light of recent market activity, and questions regarding Molopo's
drilling plans, I wanted to take this opportunity to share my views
and provide context for you. I am disappointed that Molopo's year end
exit rate will not meet our initial forecast, and am frustrated with
lower than anticipated initial production rates from our drilling in
Fiesta. The market's reaction mirrors this sentiment as our shares
have traded to a price that is around the value of our projected cash
balance per share, which excludes any value for our production, land
base and large resource potential. However, I firmly believe that the
true value of Molopo's high quality assets is yet to be realized.
Through prudent investment in our assets along with the resultant
production, cash flow and reserves growth, this value will be
unlocked.  
As I mentioned in my recent AGM presentation, the Wolfcamp is an
emerging play that is still in its infancy, with only 2-3 years of
exploration and development behind it. However, it is a vast
resource, and Molopo is able to offer shareholders exposure to that
resource. There is no question that our assets in Barnhart and Fiesta
have producible hydrocarbons, which mitigates one of the most
significant risks inherent in oil and gas exploration and development
- whether a company will find oil or gas.   
Despite the presence of producible hydrocarbons, there were many
unknowns at the time we set our 2012 calendar year forecasts because
valid well data from drilling on our acreage were not yet available
(referred to as 'type curves'). Our 2,100 boe/d target exit rate was
based on type curves we could obtain from other, third party
analogous wells within the Wolfcamp. In Fiesta, we adjusted the
available type curves downward to account for shallower depth and
lower pressure in that part of the reservoir. However, until we
dri
lled in Fiesta, we could not accurately predict how those wells
would produce. Ultimately, the type curves used in forecasting were
not reflective of the actual well data produced from drilling on our
land, including the rate the wells would decline from their initial
production levels. Since we did not have compatible type curves when
making our original forecasts, it was expected that wells would come
on production at higher rates, and then decline more slowly than what
was actually observed.   
Four of the six wells drilled in the second half of 2012 came on
production through the last quarter, and continued fluctuations in
volumes contributed to uncertainty about where the wells would
ultimately stabilize through year end. During November, Molopo
anticipated that production from our last two wells in the budget,
Baggett 54-1H and Barnhart 24-2H, would be on production by the end
of the year, enabling the Company to meet (or come very close to) its
forecast 2,100 boe/d exit rate.   
However, the Barnhart 24-2H well was drilled and completed too late
in 2012 to contribute production until early 2013, which immediately
reduced our exit rate by up to 600 boe/d. Further, the Baggett 54-1H
well reached a peak production level of 431 boe/d which was lower
than expected, and with declines that well contributed approximately
240 boe/d through the last week of December. The combined impact of
these two wells coupled with the lower contributions from existing
wells has resulted in Molopo's revised forecast exit wellhead
production rate of approximately 1,000 boe/d.   
We have gained significant data and learning from our drilling
through 2012 and now have valid well data and type curves from our
acreage. Although we are still determining the estimated ultimate
recovery (EUR) from our wells, given our access to this large oil
resource, we are confident that our assets in the Wolfcamp can be
developed economically with cost structure adjustments.   
The key to successful economic development depends on our ability to
grow production, reserves and cash flow, ultimately generating
positive value for the organisation. This growth is highly dependent
on costs and commodity prices. In light of the current commodity
price environment, we intend on delivering a capital program for 2013
with reduced overall program costs which can generate growth in
shareholder value. With cost reductions and a drilling program
targeting areas offering the highest potential, we believe that
positive returns can be generated for shareholders.   
In summary, we greatly appreciate the support of our shareholders and
look forward to continued communications with you as we progress with
the 2013 budget and future drilling strategy.   
Yours sincerely,  
Tim Granger  
CEO & Managing Director  
Molopo Energy Limited 
December Operational Update 


 
--  Molopo's first Bench B well drilled in Fiesta, Baggett 54-1H has
    achieved an initial 30 day production rate (IP30) of 238 boe/d,
    consisting of 59 bbl/d of oil, 79 bbl/d of natural gas liquids and 600
    mcf/d of natural gas; 
--  Completion of the last well drilled in calendar 2012, Barnhart 24-2H,
    concluded on 16 December, and flow back of the load fluid commenced 30
    December. Initial production figures for this well are expected to be
    available in mid to late January and will be reported at that time. 

 
Production 


 
--  Production in November 2012 was consistent with the prior month, and
    totaled 938 boe/d, with 88% coming from Texas (825 boe/d), and 12%
    coming from Saskatchewan (113 bbl/d). The breakdown in November by
    product was 42% light, sweet crude oil; 22% natural gas liquids; and 36%
    natural gas.  

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


 
                                     ---------------------------------------
                                        Peak 24 Hour        IP30 Rate(3)    
                                           Rate(2)                          
----------------------------------------------------------------------------
               Target   Status as at    BOE    Product     BOE      Product 
                Bench  Dec. 31, 2012  (boe/d)   Split    (boe/d)     Split  
----------------------------------------------------------------------------
Barnhart                                                                    
----------------------------------------------------------------------------
Linthicum             On production;                                        
 Washington           investigating             Oil &                Oil &  
 36-2H                optimization            Liquids:             Liquids: 
                  B   opportunities     742      86%       403        71%   
                      to further              Nat. Gas:            Nat. Gas:
                      enhance                    14%                  29%   
                      production                                            
----------------------------------------------------------------------------
Linthicum             On production;                                        
 Washington           investigating             Oil &                Oil &  
 36-1H    
            optimization            Liquids:             Liquids: 
                  B   opportunities     792      89%       460        70%   
                      to further              Nat. Gas:            Nat. Gas:
                      enhance                    11%                  30%   
                      production                                            
----------------------------------------------------------------------------
Linthicum             On flow back;                                         
 Washington       B   1.8% of load      n/a      n/a       n/a        n/a   
 24-2H                fluid recovered                                       
----------------------------------------------------------------------------
Fiesta                                                                      
----------------------------------------------------------------------------
Baggett 16-1H         On production;                                        
                      investigating             Oil &                Oil &  
                      optimization            Liquids:             Liquids: 
                  A   opportunities     375      43%       244        60%   
                      to further              Nat. Gas:            Nat. Gas:
                      enhance                    57%                  40%   
                      production                                            
----------------------------------------------------------------------------
Baggett 40-2H         On production;                                        
                      investigating             Oil &                Oil &  
                      optimization            Liquids:             Liquids: 
                  A   opportunities     455      74%       250        76%   
                      to further              Nat. Gas:            Nat. Gas:
                      enhance                    26%                  24%   
                      production                                            
----------------------------------------------------------------------------
Baggett 54-1H         On production;                                        
                      investigating             Oil &                Oil &  
                      optimization            Liquids:             Liquids: 
                  B   opportunities     431      61%       238        58%   
                      to further              Nat. Gas:            Nat. Gas:
                      enhance                    39%                  42%   
                      production                                            
----------------------------------------------------------------------------
(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) The IP30 rate is the average rate the wells produced at after 30        
 consecutive days of production, excluding down time                        

 
2013 Capital Budget 


 
--  Molopo continues to develop its 2013 capital budget and forecasts. Based
    on the drilling and technical analysis done in Barnhart and Fiesta
    during the 2012 calendar year, we have assembled valuable data regarding
    reservoir characteristics and deliverability across our acreage that
    will drive economics going forward. We are finalising our development
    strategy using well performance and type curves reflecting the actual
    production in each area. This will enable us to prioritise the
    development of our asset base in light of current commodity prices, and
    focus on growing production and reserves while prudently investing
    capital. Our 2013 capital program will feature reduced overall program
    costs that will drive improved well economics. We anticipate releasing
    details of this budget in late January / early February upon approval by
    the Board.  

 
Corporate Update 


 
--  Effective 21 January 2013, Molopo will change our share registry agents
    from Link Market Services to Computershare Investor Services Pty
    Limited. Following that date, shareholders will be able to access
    details of their shareholding via the Investor Centre on Computershare's
    website, at www.computershare.com.au. Contact information for
    Computershare will be available on Molopo's website under the Investor
    Relations section and is listed at the end of this announcement.  
--  As previously announced Molopo has changed its financial year end to 31
    December and its presentational currency to US dollars. Consequently,
    the Company's next results announcement will be for a stub financial
    year, being the six month period ending 31 December 2012. The current
    financial year will be for 12 months ending 31 December 2013. 
 
Contact Information for Computershare Investor Services Pty Limited         
Yarra Falls                                                                 
452 Johnston Street                                                         
Abbotsford Vic 3067                                                         
                                                                            
Domestic Phone: 1300 850 505                                                
Overseas callers: +61 3 9415 4000                                           
Facsimile: +61 3 9473 2500                                                  

 
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 materially 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  / + 61 3 9618 8704 (Australia local)
investorrelations@molopo.com.au
 
 
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