There has been a pick-up in activity in US onshore oil, reckons Magnolia Petroleum (LON:MAGP) as it revealed its involvement in several new wells and workovers.
The group is taking part in seven new wells in two prolific plays in Oklahoma at a cost of US$103,695.
Six are waiting for a spud and one is already generating 644bopd (barrels of oil per day).
It is also participating in the workover of eleven existing wells in Oklahoma and Dakota, all of which are low cost and are expected to increase both production and estimated recoverable reserves.
Participating in these 11 wells is put at a net cost of US$38,930 to the firm, and the majority just require an artificial lift , either by installing a pumping unit or plunger lift.
Thee net royalty interest to Magnolia ranges from 0.8% up to over 8% on these wells.
Rita Wittington, chief executive of Magnolia, said: “We are encouraged by the number of new proposals we are receiving to drill alongside established operators.
In our view, this provides further evidence of a pick-up in activity and sentiment in the US onshore sector, as highlighted by a more than doubling in the latest Baker Hughes oil rig count to 712 from 318 a year ago.
She noted all seven new wells were deemed to be low risk due to either being drilled on the same spacing unit as an existing producer or as a result of Magnolia’s share of the drilling costs being fully carried.
Meanwhile, she said working over an existing well is a low cost, low risk opportunity to increase production rates and recoverable reserves.
"In a low oil price environment, this is an attractive proposition for operators and with a portfolio of 157 producing wells we expect to participate in additional workovers going forward.
"Workovers have positive implications for the overall level and value of our proven developed producing (‘PDP’) reserves which were recently independently valued at US$4,300,000.
"At this level, the value of our PDPs already outstrips our current market capitalisation. Workovers therefore have the potential to increase the already strong asset backing behind the company."