Magnolia Petroleum Plc will be participating with leading oil and gas company, Chesapeake Exploration LLC (Chesapeake) in four horizontal wells targeting the Mississippi Formation, Oklahoma, a proven and reopening oil play. Three of the wells are being drilled within the same spacing unit as the successful Sundance well.
In addition, and further to the Company's announcement on December 20, 2011, the Company has received confirmation from the operator that drilling has now begun on the Zenyatta 2-6 well targeting the Hunton Formation, Oklahoma.
Mississipian Formation Wells
Well # 1
On February 10, 2012 the Company announced ongoing leasing activity had acquired 284 net acres in the Mississippi Formation with an average of 3.4 percent interest. On one of the 33 sections, Chesapeake, as operator, has now proposed the drilling of a horizontal well in which Magnolia holds a 2.3 percent working interest. The completed well costs are estimated at $3,719,505 and Magnolia estimates the cost to the Company of participating in this well will be approximately $85,548.
Wells # 2, 3, 4
Chesapeake has notified the Company that it has commenced plans to drill three horizontal increased density wells to test the Mississippi Formation within the same spacing unit as the successful Sundance well, in Woods County Oklahoma. The Sundance well resulted in payout being achieved in three months, a record for the Company. Sundance has proved 2P reserves of 431.62Mbbl of oil and 152.52MMcf in gas. Magnolia holds a 0.796 percent working interest and a 0.597 percent net revenue interest in the well. As a result the net 2P reserves attributable to Magnolia are 2.58Mbbl and 0.91MMcf. The Company is awaiting confirmation from the operator of the total completed costs associated with the wells.
Zenyatta 2-6 Well, Hunton Formation, Oklahoma
Magnolia has been informed by Avalon Oil & Gas III, LLC, the operator, that the Zenyatta 2-6 well spudded on February 20, 2012, a few weeks later than originally anticipated. The Zenyatta 2-6 is an infill well located within the same spacing unit as the producing Zenyatta 1-6. Zenyatta 2-6, in which Magnolia has a 1.057 percent working interest, is targeting the Upper Hunton interval.
Production from the Zenyatta 1-6 well, located in Section 6-8N-2E, Pottawatomie County, Oklahoma, was established in October 2011 and the well is currently producing an average of 79.66 barrels of oil per day and 118.18 MCF of gas per day. The well has gross proved reserves of 77.90 Mbbl.
Rita Whittington, COO of Magnolia Petroleum, said, "The four wells in which we have chosen to participate with Chesapeake highlight the rapidly growing interest among leading oil and gas companies in the Mississippi Formation. We are not alone in the industry in believing the Mississippi has the potential to become the next big oil play in the US and that it could well prove to be a reservoir of similar magnitude to the prolific Bakken in which we have both producing and non-producing interests. This belief lies behind our intention to operate our first well in the oil play later this year following our recent acquisition of 1,484 net acres with working interests of up to 100 percent. Along with others such as Chesapeake, Magnolia really is at the vanguard of reopening the Mississippi through the application of modern drilling techniques."
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