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Magellan Petroleum Corporation Provides Operations Update

Stocks in this article: MGN MPET

PORTLAND, Maine, May 16, 2011 /PRNewswire/ -- Magellan Petroleum Corporation (the "Company")  (NASDAQ: MPET) (ASX: MGN) provided updates to its current operations and commercial transactions.

Amadeus Basin Fields

Production volumes, net of royalties, were 0.172 BCF of gas and 13,084 Bbls of oil for the quarter ended March 31, 2011 in Australia.   Following the termination of the Mereenie Gas Sales Agreement last year, and in anticipation of the end of the Palm Valley Gas Sales Agreement, a large component of the Company's natural gas deliverability remains available but unsold.   On its own, and in conjunction with the Mereenie Operator, the Company is in the midst of natural gas sales negotiation and project feasibility work being undertaken to sell these available volumes in the short-term.

The Mereenie Owners are in negotiations to secure new gas supply agreements with large mining companies that are actively considering expansions in the Northern Territory. This is a competitive process with other suppliers in the area.

Magellan has begun feasibility work with Mustang Engineering, subsidiary of Wood Group, to determine economic viability of their "small scale" Liquefied Natural Gas (LNG) technology at the port of Darwin, Northern Territory.  If Mustang's work is successful, as early screening suggests, we will then evaluate a portfolio of assets with excess deliverability in the area as feed volumes in consultation with respective Operators, including volumes at Mereenie, Palm Valley, Dingo, new shale gas play owners, and offshore Bonaparte producers.

NT Gas, operator of the Amadeus Gas Pipeline, has proposed a new open-access arrangement to the Australian Energy Regulator for natural gas transportation including from the Amadeus Basin to all point on their system, including Darwin, for the five years commencing July 2011. The transportation tariff expected to be approved by the Regulator in July will be substantially lower that the current tariff.  

Evans Shoal Transaction

Due to field partner activity, the terms of our entry into the Evans Shoal license remain under discussion as we continue to work in earnest.  Meetings over the next two weeks will add clarity toward final solutions.  Magellan, YEP, and Santos remain committed to closing the transaction.   We intend to provide updates as material milestones have been achieved.

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