Production Update
Magnolia Petroleum yesterday announced extremely positive results from three wells on its Bakken Shale / Three Forks Sanish acreage.
The Skunk Creek 15H well targeted the Three Forks Sanish and achieved highly favourable initial production of a reported 2,303 bopd. This is positive news for Magnolia as not only does it enhance the company`s production by a net 10 bopd, but the positive results are also likely to spur drilling activity in the formation, offering Magnolia more opportunities for participation in wells. Furthermore, the production rate indicates that payback will be achieved swiftly on this well.
Skunk Creek 14H targeted the Bakken Shale and initial production has been recorded at 212 bopd (1 bopd net to Magnolia). The Stocke 1-4-9H well showed initial production of 295 bopd (7 bopd net to Magnolia).
On the back of these positive results, we re-iterate our ‘Buy` recommendation for Magnolia Petroleum and our 3.6p 12-month target price. The additional production will enhance Magnolia`s revenue stream, strengthening the company`s ability to participate in an increasing number of wells, and move it towards a step-change in attributable production.
The rate of production exhibited by the Three Forks Sanish well hints at potential upside as regards reserves attributable to Magnolia`s drilling locations within this formation.
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