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New US$6 million Credit Facility Secured
Magnolia Petroleum Plc, the AIM quoted US onshore focused oil and gas exploration and production company, has secured a new US$6 million two year Credit Facility with improved terms. This replaces the Company’s existing US$5 million facility, the details of which were announced on 22 October 2013. Combined with Magnolia’s fast growing revenues from production, which stood at 257 boepd as at 1 July 2014, the new Credit Facility will help fund future drilling activity alongside established operators, as well as the acquisition of additional leases in proven US onshore formations.
Credit Facility:
The Credit Facility is a two year revolving line of credit with a nominal value of US$6 million. Interest is charged on credit drawn down at Wall Street Journal Prime (currently 3.25%) +0.75%. No warrants or equity are to be issued as part of the facility. Under the terms of the credit line, an initial borrowing base limit of US$4,596,944 has been set which will be reassessed on a six month basis and adjusted in line with the level of Magnolia’s proven developed producing reserves. As announced on 22 August 2014, Magnolia’s PDPs have been estimated at 162 Mbbl of oil and condensate and 540 MMcf gas reserves with NPV10 of US$9.143 million. In agreeing to the improved terms of the facility, the bank took into account the potential of Magnolia’s behind pipe and proven undeveloped reserves.
Rita Whittington, COO of Magnolia, said, “This new and improved credit facility demonstrates how US banks not only recognize the reserve values placed on our producing wells, but also the relatively low risk attached to upgrading behind pipe and proven undeveloped reserves to PDPs via drilling, as we have successfully done over the past six months. With two thirds of our proven reserves of US$31.832 million categorised as behind pipes and PUDs, the potential to add to our US$9 million of PDPs is clear.
“In addition, we have 74 new wells at various stages of development and we continue to receive multiple proposals to participate in drilling alongside leading operators such as Devon Energy. Combined with our fast growing revenues and our new credit facility, were highly confident that the strong growth seen to date in the Company’s proven reserves will continue.”
