London-based oil and gas exploration and production company Magnolia Petroleum plc (AIM: MAGP), has spud its first operated well in the Mississippi Lime in Oklahoma. The Roger Swartz #1, a vertical well targeting the producing Mississippi Lime formation, commenced drilling on November 19. Drilling is expected to last between 8-10 days at an estimated cost of US$729,148 and has a targeted total depth of 5,500ft.
The well is located in Noble County, Oklahoma, and forms part of the acquisition of 800 gross acres as previously announced by the company on February 10, 2012. The directors believe that a further seven potential well sites could exist on this acreage.
Under the terms of the original farm in deal, Magnolia acquired a 100% working interest in the leases at no initial cost to the company. The farmors have a 16.25% back-in to the Well once pay-out has been achieved i.e. drilling costs have been recovered. Upon pay-out Magnolia's working interest/ net revenue interest in the Well will therefore be 83.75% and 68.05% respectively.
Rita Whittington, COO of Magnolia, said, “The Roger Swartz is the first well we have drilled as operator in Oklahoma and we are delighted to have reached our previously announced target of drilling our first well as operator before the end of this year. Becoming an operator marks another development of our growth strategy. Other opportunities also exist in the same acreage, which we will look to exploit as appropriate going forward and could significantly add to net production due to Magnolia having larger working interests. In addition, leases in which there is an operating well are reclassified as ‘held by production’, meaning they will not expire. Depending on the production rates, we would expect to see a further increase in our proven reserves, which will be part of the reserve report to be produced next year.