Magellan Banks $9.7MM for Fiscal 2Q 2009

Magellan Petroleum reported consolidated net income of $1.6 million ($.03 per share) on gross revenues of $9.7 million for its fiscal second quarter ended December 31, 2009, as compared to a net loss of $525,000 (($.01) per share) on revenues of $5.2 million in last year's second quarter. Working capital was $52.6 million at December 31, 2009, an increase of $21.2 million over the same period last year.

For the six-month period ended December 31, 2009, the Company reported net income of $295,000 ($.01 per share) on $18.6 million in revenues, compared to net income of $983,000 ($.02 per share) on revenues of $15.6 million in the prior period last year.

Magellan's President and Chief Executive Officer, William H. Hastings said, "Results for the second fiscal quarter represent an improvement over last year and last quarter. Revenues and profits were up over last year's quarter due mostly to stronger energy prices, exchange rate fluctuation, and reduced production costs. Some of the Cooper Basin asset sales were completed during the quarter. Taken as a whole, Cooper Basin asset sales will generate a gain for the year of approximately $5.9 million including the impairment loss recorded this quarter of $1.6 million. The remaining gain will be recorded next quarter.

Also during the quarter, the Company reported an $800,000 gain on the sale of stock in an Australian Stock Exchange listed Company and a non-cash charge of $986,000 related to the increase in the value of the warrants issued to Young Energy Prize S.A. (YEP). This non-cash revaluation is driven by the increase in our share price."

Mr. Hastings added, "We continue to refocus the business model with the objective of gaining operating control of substantive, high potential, assets. The first step, the acquisition of the Poplar Dome structure is complete. Other plans remain active. Our current, smaller scale, non-operated positions have been sold at value. Over time, all of this activity may mean the addition of new equity partners and/or the generation of new operating partnerships with major Companies. Magellan is drawing upon the lengthy experience of its new management in pulling together these partnerships and creating value for shareholders.

Recent activity and initiatives to-date are summarized here:

  • We completed our first private investment transaction with YEP and signed a significant Heads of Agreement and an Exclusivity Agreement with a major methanol producer that has resulted in the initiation of feasibility work and commercial negotiations which may result in the construction of material methanol operations in or around the Darwin, NT, Australia area. The methanol plans are driven by market growth in Asia where recent mandates have led to increased use of methanol as vehicle fuel and increased use of DME (Dimethyl Ether), a methanol derivative to augment supply for LPG systems already in place. Negotiations under the terms of the Methanol Heads of Agreement, toward a substantive long-term arrangement, are active now.
  • The Company acquired an 83.5% ownership position as the Operator of Montana oil fields with significant remaining oil in place. The thrust of this acquisition is to upgrade primary recovery operations and to closely review the development of a tertiary recovery plan related to the wide availability of excess CO2.
  • Negotiations with new partners for the Montana operations, toward that efficient redevelopment program and an AMI (area of mutual interest), are active now.
  • We completed the sale of assets in the Cooper Basin, Australia. The assets were sold at value and the proceeds will be redirected into current initiatives.
  • Ongoing discussions continue on developing a consolidated, single operations group for our Palm Valley and Mereenie asset position. We believe that success in these programs will result in material long-term expense reduction.
  • Gas sales discussions for near and longer term Mereenie volumes remain fluid. Mereenie volumes have flowed in the 20-25TJ/d (gross interest) range, however, increased volumes from Blacktip are entering the natural gas pipeline system. Efforts to resolve the situation on a longer-term basis continue and we expect to have more concise news over the next 3 to 6 month period as key operational performance facts on the pipeline and for the new supply become clear.
  • In the Weald Basin, United Kingdom, Magellan (40% interest) will participate in the Markwell Woods-1well. Given recent severe winter conditions in the UK, this well is expected to spud late in the first quarter or early in the second quarter of 2010. The Havant-1well is to be drilled immediately following the end of drilling operations at Markwells Wood-1."