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Magnolia Petroleum remained cash generative despite drop in crude

Published: 08:30 28 Jun 2016 BST

Oil wells, nodding donkeys
Production tallied at 242 boepd by the end of March 2016.

Magnolia Petroleum PLC (LON:MAGP) chief executive Steven Snead has highlighted that despite sub-US$50 per barrel oil the company remained a cashflow generative, low cost, oil and gas producer.

The oil junior, which focusses on proven US onshore operations, today released financial results for the twelve months to December 31 2015.

At US$1.9mln revenue for 2015 was down more than 50% from the prior year, as a result of lower oil prices, and it reported negative earnings of minus US$292,180 compared to US$2.6mln in 2014.

Lower oil prices, a natural decline in oil prices and a lessening of oil and gas activity were identified as factors as the value of the group’s tangible assets reduced to US$7.2mln versus US$11.3mln at the end of 2014.

Operating costs, meanwhile, were cut back by around 31% compared with the prior year. It paid off US$400,000 from a credit facility, and raised £1mln for new drilling during the financial year.

Magnolia ended 2015 with its portfolio generating some 281 barrels oil equivalent per day, a tally which had reduced to 242 boepd by the end of March 2016.

In the statement, Snead said: “Even with oil trading at sub US$50 per barrel, Magnolia Petroleum remains a cashflow generative, low cost, oil and gas producer focused on proven US onshore formations. 

“Thanks to the action we have taken over the course of the year, specifically a 31% and 25% reduction in operating costs and net debt respectively, the company’s significantly lower outgoings allow a higher proportion of our production based revenues to be reinvested into further drilling activity.  

“We are therefore confident that despite the current downturn, the year ahead will continue to see Magnolia participate with leading operators such as Continental Resources in drilling new wells where it makes commercial sense to do so.

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