Magnolia Petroleum One2One Investor Presentation - Proactive ...

Proactive Investors Presentation 

September 2012

Magnolia Petroleum Plc is an AIM 

quoted oil and gas exploration and 

production company led by a proven 

management team intent on building a 

significant oil and gas company focused on 

producing US onshore formations including the 

Bakken/Three Forks Sanish, North Dakota and 

the Mississippi Lime, Oklahoma 

2 

| MAGNOLIA PETROLEUM PLC | September 2012

Overview 

• AIM quoted revenue generative oil and gas exploration and production company 

focussed on oil and liquids rich gas 

• Strategy to acquire leases in proven US onshore hydrocarbon formations such as 

the Bakken (North Dakota) Mississippi Lime and Woodford/Hunton (Oklahoma) where 

technology has transformed recovery/flow rates 

• Holds 5,506 net acres on which there are currently 83 producing wells 

• Significant growth potential – to participate in and operate wells with larger 

working interests in the re-opening Mississippi Lime Formation (Oklahoma) 

• £10m equity financing facility in place to fund growth opportunities 

• Commercial relationships with leading oil and gas companies such as ExxonMobil, 

Marathon Oil, Devon Energy and Chesapeake Energy 

• Highly experienced management team skilled in the acquisition and development 

of oil and gas properties – leases secured at discounts to market value 

3 


Board of Directors 

Rita Whittington 

COO 

• Petroleum Landman with 32 years’ experience in the oil 

and gas industry 

• Senior member of the asset management team at 

Primary Natural Resources I and II - jointly responsible for 

company growth and the 3:1 return on equity upon 

divesting 

• Highly skilled in acquisitions, negotiations, operations 

and management of oil and gas properties 

Steven Snead 

CEO 

• Petroleum Landman with 35 years’ experience in the US 

onshore oil and gas industry 

• Owned and operated successful oil and gas operating 

and services companies 

• Founded and owns Enerlex Inc. for the purpose of 

acquiring and managing royalty interests 

• Extensive experience in oil and gas lease acquisition, 

drilling, development and operations 

John Cubitt 

Non-Executive Chairman 

• 30+ years’ commercial experience 

in the oil exploration & 

production industry 

• Registered Chartered Geologist 

experienced in asset evaluation 

and project management & 

board-level strategic and 

operational direction 

• Managing Director of Woburn 

Energy Plc (formerly Black Rock 

Oil & Gas Plc) & various private oil 

industry consultancy and 

software companies 

Gavin Burnell 

Non-Executive Director 

• 11 years’ experience of corporate 

finance, specialising in small-cap 

companies 

• Director of corporate finance at 

Northland Capital Partners 

Limited 

• Founder and/or director of 

several companies in varying 

sectors including Globo Plc 

(AIM:GBO), Hot Rocks 

Investments Plc (PLUS:HRIP), 

Hellenic Capital Plc (PLUS:HECP) 

and Woodland Capital Limited 

Ronald Harwood 

Non-Executive Director 

• Active involvement in originating 

and developing projects in oil and 

gas exploration and production 

since 1981 

• Founded Bellwood Petroleum 

Corporation in 1985, Bellwood 

Petroleum, LLC in 2007 and 

Colony Petroleum, LLC in 1990 

• Secured US and international 

investors to participate in oil and 

gas exploration and production 

ventures for Colony Petroleum 

4 


Key Data 

Share Price 2.5p 

Chief Executive Officer 

Steven Snead 

Market 

AIM 

Chief Operating Officer 


Ticker 

MAGP 

Non-executive Directors 

John Cubitt 

Market Capitalisation 

£18.23 million 

Gavin Burnell 

Ordinary Shares in Issue 729,292,749 

Ronald Harwood 

Nomad & Joint Broker 

Daniel Stewart & 

Company Plc 

Joint Broker 

Northland Capital 

Partners Limited 

Shareholders 

Steven Snead 27.4% 

Other Directors 7.50% 

Henderson Group 3.10% 

Sunvest Corp. Ltd 3.56% 

Pershing Nominees Ltd 

3.15% 

Holding as at 24 August 2012 

Other 55.29% 

5 


Two Phase Growth Strategy 

Phase 1 Phase 2 

Identify reopening oil and gas plays early – 

acreage acquired at a discount to current market rates 

Operate wells – control timing of well proposals 

and drilling 

Focus on proven oil fields – lowering exploration 

risk 

Acquire larger working interests in proven oil 

fields – offers scope for greater revenues 

Drill wells with leading industry players – 

minimising capital commitments 

Apply advanced technology to drilling – 

transforms recovery and flow rates 

Apply advanced technology to drilling – 

transforms recovery and flow rates of wells 

Target oil and liquids rich plays over pure gas – 

secure higher prices 

Favour oil and liquids rich plays over pure gas 

– securing higher margins / returns 

Generate greater revenues – recycle into wells 

and purchase additional acreage 

Recycle revenues – generated by wells to acquire 

more leases and participate in further drilling 

6 


Existing Interests 

Bakken / Three Forks Sanish 

Formations, North Dakota 

Mississippi Lime / Woodford / 

Hunton Formations, Oklahoma 

Gas wells 

Oil wells 

7 


Magnolia’s Current Producing Assets 

• 83 oil and / or gas producing properties 

• Excellent success rate: 

• Commercial return generated on all but one well 

participated in 

• Q2 revenues $190,000 - 80% increase on Q1 and 3x 

2011’s average quarterly revenues 

• 24 months average payout on wells drilled 

• 1 st well in Mississippi Lime Formation – 3 months 

• Producing assets volumetrics (as per CPR, prior to 

AIM admission): 

• 46.6MBO and 198.2MMCF proved reserves 

• 68.7MBO and 249.8MMCF proved and probable reserves (2P) 

• 975.6MBO and 1,175 MMCF proved, probable and possible 

reserves (3P) 

“delivering on phase one” 

8 


The Bakken / Three Forks Sanish Formations 

• The Bakken: 

• 3.0 - 4.3 billion boe estimated recoverable oil reserves (U.S. Geological Survey - USGS) 

• Covers 200,000 square miles of the subsurface 

• Horizontal drilling and fracture stimulation technology has reopened the play 

• Daily production estimated to exceed 700,000 bopd by 2013 and 1.2 MMbopd by 2019 

• 4,000 active wells – the majority drilled in last five years 

• Largest Bakken field produces circa 30,000 bopd from 60 wells 

• Three Forks Sanish (TFS): 

• 2 billion boe estimated recoverable oil reserves (USGS) 

• A separate reservoir beneath the Bakken 

• At early stage of development 

• Three possible shelves 

• 2,303 bopd and 1,234 bopd - initial production rates of Magnolia’s first two TFS wells, 

the highest for the Company 

9 


3-D visual of TFS & Bakken 

10 


Activity in the Bakken / Three Forks Sanish 

6 wells preparing 

to be drilled on 

Magnolia’s 

acreage – yet to 

elect to 

participate in 4 

11 


Magnolia’s Bakken / Three Forks Sanish Land Package 

• 11,520 gross acres across 18 sections – 412 net acres 

• Average working interest 1.46% – average net revenue interest 1.10% 

• Acreage acquired at $1,500 per net mineral acre – current price $7,000 

• Benefits of early mover advantage 

• 197 Proven development locations on current Bakken (92) and TFS acreage (105) as per CPR (Oct 2011) 

• Low exploration risk 

• Scope to drill 4 wells per unit in each formation due to TFS lying beneath the Bakken 

12 


Magnolia’s Current Production in Bakken / TFS 

• 20 oil and / or gas producing properties located in Bakken and TFS – 2 waiting to spud 

• Over 800 bopd – average initial production on wells drilled on this acreage in various drilling and 

completion stages 

• 7 new wells drilled plus elected to participate in 3 additional wells with Marathon & Brigham 

• On course for significant step change in annualised daily production attributable to Magnolia by end 

of 2012 

• Working interests up to 3.12% – net revenue interests 2.35% 

• Majority of acreage in fairway of Marathon Oil’s Bakken Shale development 

• Marathon operator of majority of wells 


In March 2012 North Dakota became 

the number 2 oil producing state after 

Texas 

13 


Woodford / Hunton Formations 

Oklahoma 

Magnolia Project Area – Canadian, Pottawatomie, Grady, Cleveland, Seminole and Stephens Counties 

14 


The Woodford / Hunton Formations 

• The Woodford contains 1,281 producing wells after only 4 years of active drilling – 

majority in the dry gas window 

• Horizontal drilling and fracture stimulation technology have reopened these 

reservoirs 

• Activity in the Woodford Oil window play increasing – Continental Resources and 

Newfield, two leading independent oil and gas companies, among the most active 

• Magnolia elected to participate in two wells with Cimarex, a leading independent oil and 

gas exploration and production company focussed on the US 

• Ability to drill multiple wells in each formation per unit 

“These plays fit our criteria of good investment returns and solid long-term growth 

potential.” 

Thomas Jorden, CEO of Cimarex Energy Co. (Source: Tulsa World) 

15 


Magnolia’s Woodford / Hunton Land Package & Production 

• 67,200 gross acres across 105 sections – average working interests up to 2.65% – 

average net revenue interest 2.36% 

• 12 oil and/ or gas producing properties located in Woodford/ Hunton covering 

Oklahoma, Texas 

• 7 new wells now producing in the play 

• Formations not exploited to the same extent as the Bakken 

• 105 well proposals received on current acreage 

• Likely to be drilled over the next two to three years 

• Magnolia to focus on participating in wells targeting the oil play 

• Estimated Ultimate Recoverable Reserves (EUR) per well reported in excess of 

400,000 boe 

• Initial production on well drilled on this acreage was over 300 bopd 


16 


Magnolia’s Woodford/Hunton Acreage 

● Magnolia’s Acreage 

Zenyatta 2-6 Well, operated by Avalon, targets the 

Hunton Formation. Magnolia has a 1.057% working 

interest 

17 


Phase Two: “The next play” – The Mississippi Lime Formation 

• An oil and gas bearing, liquids rich formation in 

central Oklahoma 

• Identified by management as the next big play 

in onshore US 

• Field has been producing from several thousand 

vertical wells for more than 50 years 

• Horizontal drilling and fracture stimulation 

technologies have reopened these fields 

• Short-term payouts with long-term reserve 

potential 

• Average payout less than 24 months 

• Participated in a horizontal well with 

Chesapeake Energy – 3 month payout 

• Initial production on wells drilled on this 

acreage reported up to 750 bopd 

• Brady 17-27-12H – 702.5 boepd 

18 


3-D map of Mississippi Lime Formation 

19 


The Mississippi Lime Formation 

• Exhibits good reservoir characteristics ideally suited to horizontal drilling 

• Horizontal wells and modern fracture stimulation treatments unlocks the 

commercial viability of identified prospects 

• Relatively low drill costs between $2.4-$3.5 million: 

• Horizontal wells have relatively short lateral lengths of between 2,500ft and 5,000ft 

• Fracture stimulated in 6-12 stages – less than those in the Bakken play 

• Relatively shallow depths – 4,500ft to 7,000ft below surface 

• Current drilling times approximately 17-28 days from spud to total depth 

• Magnolia’s operatorship allows control of drilling and production of its wells in 

Oklahoma 

• Expect to drill first well as operator in Oklahoma later this ear 

20 


Magnolia’s Mississippi Formation Interests 

• 3,967 net acres with larger 

average working interests 

• Minimum 3 vertical wells to be 

drilled in the near term 

• 5 wells producing 

• 6 wells drilling and/or completing 

• 4 wells waiting to be spud 

TIER 1 TIER 2 TIER 3 

Gross acres 10,880 15,360 27,520 

Net acres 2,200 380 167 

No. of wells 17 24 43 

No. of increased density wells 51 72 129 

Average working interest 20% 2.47% 1.0% 

21 


Magnolia’s Mississippi Acreage 

● Magnolia’s Acreage 

22 


Larger Working Interests in Mississippi Lime Wells 

• Mississippi Wells with materially larger working interests (WI) 

• 25% WI in Prucha – completing 

• 12.5% WI in Thomason 

• 441 boepd - initial production rate 

• 6.7704% WI in Montecristo – completing 

• 4.1937% WI in Brandt – completing 

• 4.212805% WI in Otis – completing 

• 3.75% WI in Joan – drilling 

• 2.485015% WI in Lois Rust 

• 353.75 boepd - initial production rate 

23 


Mississippi Lime Wells 

Prucha 1-23MH 

Lois Rust 7-27-12 1H 

Otis 2-27-121H 

Montecristo 6-1H 

24 


Milestones to date 

Completed Milestones 

Quoted on AIM market, raised £3.0 million to date 

Daily production and revenues significantly increased – latest quarterly revenues 

US$190,000 compared to US$60,000 at time of listing in October 2011 

Acquired licence to operate wells in Oklahoma 

Acquired 4,011 net acres with larger working interests mainly in the Mississippi Lime 

£10m Equity Financing Facility secured to fund future growth opportunities 

Commissioned CPR October 2011 

Number of interests in producing properties increased to 83 

Participating in wells with larger working interests/net revenue interests – 25%/18.75% in 

Prucha largest to date 

Operating wells for first time 

 

 

 

 

 

 

 

 

 

25 


Future Milestones 

Near-Term Targeted Milestones 

Significant increase in net bopd and revenues expected this year 

Increase number of participating wells to 100 by year end 

To drill first well as operator in Oklahoma by year end 

Acquire further acreage in proven formations US onshore with larger working interests 

Increase average working interests in wells 

Updated CPR expected to lead to reserve upgrade 

26 


Value Drivers 

Low exploration risk 

Low execution risk 

Low entry costs to (re)opening plays 

Exceptional drilling success rate 

Broad spread of interests 

Focus on oil and liquids rich plays 

Near term step up in growth 

Current valuation underpinned by 

reserves 

High calibre management team 

Focus on proven hydrocarbon formations 

Participates with leading oil and gas cos. 

Early mover advantage 

Already generating cash flow that covers 

corporate overheads 

Diversifies risk 

Higher margins than gas 

To drill and operate first well with larger 

working interest 

Updated CPR due in Q1 2013 expected to 

lead to reserve upgrade 

Proven track record in creating shareholder 

value 

27 


Summary 

• Low risk / high return business model focused on proven onshore US oil plays with 

low overheads 

• US predicted to become “the world’s largest producer of hydrocarbon liquids by 2020” 

(Citi Global Perspective & Solutions, April 2012) 

• Already producing and generating revenues 

• 83 producing wells – 9 further wells in drilling / completion – 11 waiting to spud 

• Established commercial relationships with leading oil and gas companies including 

ExxonMobil, Marathon Oil and Chesapeake Energy 

• To drill first well as operator in 2012 with larger working interest 

• High impact newsflow expected – drilling results; ongoing leasing activity 

• £10 million Equity Financing Facility in place 

• Highly experienced management team with proven track record 

28 


Contact 

For further information please contact: 


Chief Operating Officer 

Magnolia Petroleum PLC 

18452 E 111th St 

Broken Arrow, OK 74011 

T: +01 918 449 8750 

F: +01 918 449 0180 

www.magnoliapetroleum.com 

Frank Buhagiar/Lottie Brocklehurst 

St Brides Media & Finance Ltd 

Telephone +44 20 7236 1177 

29 


Appendix 

30 


Financial Results 

Highlights: 

31.12.11 – 30.06.12 

31 


Operational Highlights 

• Excellent progress made towards building a significant oil and gas company 

focused on the proven Bakken and Three Forks Sanish plays in North Dakota, and 

the Mississippi Lime, Woodford / Hunton formations in Oklahoma 

• 80 producing wells at the period end – 25% increase 

• Leases over 4,000 net mineral acres acquired in the period, predominantly in the 

Mississippi Lime formation, bringing total to 5,506 net mineral acres 

• Strong pipeline of opportunities across all formations both as participant and 

operator – over 600 potential drilling locations on existing acreage 

• Fulfilling strategy of increasing size of average working and net revenue interests – 

Thomason well 12.5% / 9.375% and Prucha well 25% / 18.75% (post period 

end) 

• Now participating in 83 producing wells and a further 20 either being drilled or 

waiting to spud alongside leading operators such as Marathon Oil and Devon 

Energy 

32 


Financial Highlights 

Highlight 30 June 2012 (US$) 30 June 2011 (US$) 

Revenue 282,208 123,238 

Gross profit 153,694 47,300 

Operating Loss (537,535) (140,388) 

Highlight 30 June 2012 (US$) 31 December 2011 (US$) 

Non Current Assets 4,087,348 1,973,609 

Cash & cash equiv. 159,576 874,037 

Net Debt - - 

33 


Financial Highlights 

• Revenues for H1 2012 of US$282,208 

• 129% increase on the same period last year ($123,238) 

• 17% increase on the revenues for the whole of 2011 ($241,038) 

• Loss per share increased to US$0.14, compared to US$0.04 for H1 2011 and 

US$0.09 for the year to December 2011 

• Reflecting impact of the costs of increased activity during the period and the expenses 

associated with being an AIM quoted company 

• Total investment of US$2.4m partially funded by US$2.15m of share issues 

• Approximately US$1m on drilling 

• Approximately US$1.4m on acquiring leasehold acreage 

• Cash outflow of US$718,101 for the period 

• 107% increase in non current assets to US$4,087,348 

• Derived from capitalisation of investment 

• Secured £10 million equity financing facility post period end 

• Drawn down £761,000, and raised a further £565,000 in a placing 

34 


Summary of Magnolia Reserves 

As of October 1, 2011 

Net Reserves 

Net Cash Flow 

Oil & 

Natural 

Future 

Future Net 

Future Net 

Future Net Cash 

NPV Disc @ 

Condensate 

Gas 

Net 

OPEX 

Capital 

Flow 

10% 

Revenue 

Reserve Class/Category (Mbbl) (MMcf) ($000) ($000) ($000) ($000) ($000) 

Proved Developed Producing 24.2 146.5 2,963 959 - 2,004 919 

Proved Developed Non- 

Producing 

14.4 31.0 1,446 427 103 917 408 

Proved Undeveloped 8.0 20.7 818 200 187 431 205 

Total Proved 46.6 198.2 5,226 1,585 289 3,352 1,531 

Probable Reserves 22.1 51.6 2,229 465 441 1,323 651 

Total 2P 68.7 249.8 7,455 2,050 731 4,674 2,182 

Possible Reserves 15.9 34.2 1,592 356 314 922 431 

Bakken Increased Density 404 404 41,300 7,900 4,900 28,500 7,500 

Three Forks Sanish 487 487 51,200 10,000 6,900 34,300 7,900 

Total 3P 975.6 1,175.0 101,547 20,305 12,845 68,396 18,013 

35 


Extracts from Competent Person’s Report 

October 2011 

“A well diversified portfolio of producing properties that provide a stable long 

life cash flow to underpin the company. It has a small, but well positioned 

presence in two of the most active unconventional resource plays in North 

America.” 

“A state study evaluating oil reserves in the Three Forks Formation in western 

North Dakota concluded that there could be as much as 2 billion barrels of 

recoverable oil… based on more than 200 well measurement logs and 85 sets 

of testimony from technical experts.” 

“The development of the horizontal drilling technology and the multistage 

fracture stimulation… have transformed once known, but marginal plays into 

highly profitable plays.” 

“The North Dakota leasehold position has the potential… to double the 

expected recovery of hydrocarbons from the existing asset base providing 

significant upside to Magnolia.” 

36 


Disclaimer 

This presentation is being made by or on behalf of Magnolia Petroleum Plc (“Company”). This presentation has not been approved for issue as a financial promotion for the 

purposes of section 21 of the Financial Services and Markets Act 2000 (“FSMA”) and is being supplied in the United Kingdom only to (i) persons who have professional 

experience in matters relating to investments (being "investment professionals" within the meaning of Article 19 of the Financial Services and Markets Act 2000 (Financial 

Promotion) Order 2005 (the "FPO")) or (ii) persons falling within Article 49(2) ("high net worth companies, unincorporated associations etc") of the FPO or (iii) persons who 

are otherwise permitted by law to receive it. The information contained in the presentation is not intended to be viewed by, passed on or distributed (directly or indirectly) 

to, any other category of persons . Daniel Stewart & Company plc (“DS”) is authorised and regulated by the Financial Services Authority and will be acting as nominated 

adviser and broker to the Company in connection with the proposed placing of ordinary shares in the capital of the Company and admission of those ordinary shares to 

trading on the AIM market of London Stock Exchange plc. 

Neither the presentation, nor any part of it, nor anything contained or referred to in it, nor the fact of its distribution, should form the basis of or be relied on in any 

connection with or act as an inducement in relation to a decision to purchase or subscribe for or enter into any contract or make any other commitment whatsoever in 

relation to any such securities. Recipients of this presentation who decide to subscribe for the new ordinary shares in the Company are reminded that any application to so 

subscribe may only be made on the basis set out in the formal placing letters and not on the information contained in this presentation. In the particular, details included in 

this presentation are subject to updating, revision, verification and amendment and refer to events as having occurred which have not occurred at the date of this 

presentation but which are expected to happen in the future. This presentation does not constitute a recommendation regarding the securities of the Company. 

No reliance may be placed for any purpose whatsoever on the information contained in this presentation or on its completeness. No representation or warranty, express or 

implied, is given by the Company or DS or their respective directors, officers, employees, agents or advisers as to the accuracy, fairness, sufficiency or completeness of the 

information, opinions or beliefs contained in this presentation and, save in the case of fraud, no responsibility or liability is accepted by any of them for any loss, cost or 

damage suffered or incurred as a result of the reliance on such information, opinions or beliefs. In particular, no representation or warranty is given as to the achievement or 

reasonableness of, and no reliance should be placed on, any projections, targets, estimates or forecasts and nothing in this presentation is or should be relied on as a 

promise or representation as to the future. Offers may only be made , and applications accepted, for new ordinary shares in the Company on the basis of formal placing 

letters. 

DS is acting exclusively for the Company in relation to matters described in this presentation and will not be responsible in respect of such matters to any other person for 

providing the protections afforded to customers of DS or for providing advice in relation to those matters. 

This presentation is confidential. Neither this presentation nor any other material relating to the proposal described herein may be copied, reproduced, shown, distributed 

or issued to any other person at any time without the prior written consent of DS nor may the information contained herein be discussed with any other person without the 

prior written consent of DS. 

This presentation does not constitute a prospectus or admission document and does not constitute, or form part of, an offer for sale or an invitation to subscribe for, or the 

solicitation of an offer to buy or subscribe for, securities in any jurisdiction where such an offer or solicitation is unlawful and is not for distribution in or into the United 

States of America or Canada or their respective territories and possessions, the Republic of Ireland, the Republic of South Africa, Japan or Australia. The securities of the 

Company have not been, and will not be, registered under the United States Securities Act of 1933 (as amended) or under the applicable securities law of the Republic of 

Ireland, the Republic of South Africa, Japan or Australia and, subject to certain exceptions, may not be offered for sale or subscription, or sold or subscribed directly or 

indirectly, within the United States, Canada, the Republic of Ireland, the Republic of South Africa, Japan or Australia or to or by any national, resident or citizen of such 

countries. 

By receiving and/or attending this presentation, you agree to be bound by the restrictions in this disclaimer. 

If you are in any doubt about the investment to which this presentation relates, you should consult a person authorised under FSMA who specialises in advising on the 

acquisition of shares and other securities. 

37 


38

Magnolia Petroleum One2One Investor Presentation - Proactive ...

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?