Gilchrist Well Update, Oklahoma
Magnolia Petroleum plc, the AIM quoted US focused oil and gas exploration and production company is pleased to announce an update on the Gilchrist 2016 1-36H well (‘Gilchrist' or ‘the Well') in Oklahoma in which Magnolia has a carried working interest through its agreement with Western Energy Development LLC (‘WED'). The Gilchrist Well is currently being completed by the operator SandRidge Energy, Inc and is flowing back from the targeted Mississippi Lime formation in Oklahoma.
Based on highly encouraging results being seen from an offset well that has been drilled directly to the north of the Gilchrist Well and which is projected to produce over 250 MBO and 2.5 BCF, Magnolia and WED have elected to take their proportionate share of any interests in the lease that become available as a result of the non-participation of leaseholders in a forced pooling order. This is expected to see WED and Magnolia increase their combined 1.57% Working Interest (‘WI') in the spacing unit on which the Gilchrist Well is located and where additional increased density wells are expected to be drilled in the future. Under the terms of its agreement with WED, Magnolia is carried for 25% of the 1.57% WI in the Gilchrist Well at no cost.
As announced on 4 July 2017, Magnolia entered into an exclusive agreement with WED to invest, on behalf of WED, up to US$18,500,000 into the Oklahoma oil and gas market. In return Magnolia receives cash fees as well as a 25% carried working interest in the first well of a spacing unit. The Gilchrist Well forms part of a successful pilot programme under which Magnolia invested US$500,000 on behalf of WED into qualifying oil and gas properties in Oklahoma. To date, this pilot programme has generated a rate of return of 100%; a return on investment of 3.26 times; US$75,500 in value for Magnolia (lease bonus plus a carried interest for 25% in the first well, within each spacing unit); and US$127,982 uplift in the PV9 value of Magnolia's reserves.
WED is an affiliate of Western Energy Regional Center LLC, a United States Citizenship and Immigration Services (‘USCIS')-designated Regional Center which can accept investment in job-creating projects from foreign nationals through the Immigrant Investor Program. WED has informed the Company that it expects the first tranche of US$500,000 of capital to be available for investment under the Immigrant Investor Program in Q4 2017 following amendments to the terms of the Program.
Magnolia CEO, Rita Whittington said, “The Gilchrist Well provides a readymade example of how our agreement with WED provides Magnolia with risk free exposure to new leases in Oklahoma, which we can then look to increase if additional interests become available and if results of nearby wells drilled to the same formations are highly positive. Following the initiation of a forced pooling order by the operator and excellent production rates being achieved by a direct offset well, we are set to increase our interest in the Gilchrist Well and any subsequent wells that are to be drilled on the same spacing unit. With this in mind, we are eager to receive the IP rates for Gilchrist from SandRidge and I look forward to providing these to the market as and when they become available.”
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