Magellan has issued this Letter to Shareholders in order to address these questions and to review the success of the Company's expansion efforts through the second quarter of 2009.
Apolinar Carcasona, CEO, Magellan Energy, said: "In response to a number of questions posed by shareholders in recent weeks, I would like to take this opportunity to unequivocally state Magellan's position on a number of issues.
Our Martin and Anderson leases are once again producing gas and have brought Magellan to "revenue producing status." All of our wells have now been connected to the compressor and gas is flowing. Lines from other producers in the area are slowly being introduced and as soon as volumes have stabilized, Citizens Gas will be providing us with average volume numbers. As soon as these numbers are received, we will update shareholders. Also, to clear up further confusion and to lessen inquires internally and externally, while Magellan is not an operator itself on these properties, it is a member in good standing of TOGA (Tennessee Oil and Gas Association). Our business partner, TMD Energy, is the operator on our projects.
Magellan's business plan has always been to seek out, procure and refurbish past-producing, low volume wells that once again are economically viable due to the high price of oil. Developing shallow gas and/or oil projects in Tennessee that possess the low risk, blanket characteristics of the area, make it possible to drill and produce a well nearly every time. The continued acquisition of low-volume producing wells such as these will add to the cumulative oil and gas production numbers that will ultimately create higher revenue numbers for the Company.
There have been many inquiries about why Magellan increased its outstanding shares over the past year. For approximately seven months, up until the end of May of this year, gas production on the Morgan County wells had been virtually at a standstill because of the high BTU/shut-in situation. As a result, revenues were at a standstill, but expenses were not. Unfortunately, our share price also suffered considerably due to this forced inactivity and overall poor economic conditions. Our day-to-day operations and acquisition strategies still required funding; therefore, our outstanding share count rose as we obtained the additional funding necessary to execute our business strategy.
Due to the increasing price of oil worldwide, Magellan is focusing on projects that contain both oil and gas as they will provide more upside to the Company while maintaining the low risk it is pledged to in the area. The Company is currently performing due diligence on a lease located on the Chattanooga Shale, near our existing oil and gas producing acreage in Eastern Tennessee.
Many shareholders have been concerned about the "caveat emptor" tag for "questionable promotion" that has appeared on a popular website that supplies information on Pink Sheet listed companies. Magellan wants to make it absolutely clear that the Company did not engage in these activities. The Company was in a position where there had been no news for six months due to the high BTU/shut-in situation in Morgan County. When Magellan was able to release news that the situation had been resolved, it resulted in renewed interest in the Company and tremendous volumes and high percentage gains in the stock price were realized. There are many stock awareness newsletters that indulge in the practice of "tagging" or including mention of public companies that have realized these high volumes/percentage gains to stimulate the reading of their products. Such was the case with Magellan. When this was brought to the attention of the above-mentioned website, they chose to ignore these facts and demanded that the Company pay an exorbitant fee to have the "caveat emptor" removed. Magellan did not feel this was appropriate and refused to pay.
Magellan is in the process of updating its website to reflect these recent activities and to provide as much information to its shareholders as possible. In short, the Company is very pleased with its successes to date and is extremely optimistic about its prospects going forward. Magellan has grown from a fledgling company to an oil and gas producing company that will emerge as strong and profitable. We are making every effort to build upon the momentum of this second quarter and continue to aggressively implement our growth strategy through the rest of 2009 and beyond.
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