May 28, 2013
/PRNewswire/ -- Magellan Petroleum Corporation (NASDAQ: MPET)
In recent months, Magellan has made significant progress towards adjusting our corporate platform and realigning our capital structure and shareholder base. While I am proud of our achievements, I believe that Magellan will only deliver true value creation for its shareholders from developing our oil and gas assets. Towards that end, we have been working very diligently, and I would like to take this opportunity to update you on our operational progress as well as to explain why our recent capital raise places us on sound footing to successfully pursue our goals.
As we expressed at our January shareholder meeting and in various investor conferences since then, Magellan remains focused on four objectives: 1) developing a CO
enhanced oil recovery (CO
-EOR) program and improving primary field production at our field at Poplar, 2) fully contracting our onshore Australian assets, 3) farming-out our offshore Australian exploration permit, and 4) realizing value from our acreage position in the United Kingdom. In spite of the relatively light news flow in recent months with respect to these efforts, we continue to make significant progress on all these fronts and expect to release the achievement of certain key operational milestones relatively soon.
Pursuing a CO
-EOR development at Poplar is the Company's top priority. Among our various assets, we believe Poplar presents the greatest chance for upside potential with the lowest geologic and technical risks. We believe that bringing this field to full-scale EOR development could result in the addition of 50 million barrels of reserves to our books and could have a significant multiplier effect on our valuation. The first step in this process is a CO
-EOR pilot program, which we plan to commence this summer with five new wells. One of these wells will be used for the injection of CO
, and we will monitor production from the other four wells to evaluate the effectiveness of CO
-EOR at Poplar. Our evaluation period will take 12 to 24 months to complete, after which we hope to move to a full-field development. Currently, we are in the final stages of permitting the pilot program, and we are close to securing a CO
supply source for the pilot.
With respect to our onshore Australian operations, our Palm Valley gas field and Dingo gas field are well positioned to provide the Company with significant stable and long-term cash flows in the relatively near term. Palm Valley is fully contracted and only awaiting a ramp-up in customer off-take volumes to achieve its maximum potential, which is expected to occur within eight to 12 months. After this ramp-up, the field will be selling gas at its full annual capacity of 1.4 Bcf. At Dingo, a field which has been idle since the 1980s, we are focused on contracting out the field's gas reserves, and we expect to sign a gas supply agreement relatively soon. Once we have a firm customer, we can complete the engineering and construction of the Dingo pipeline and related facilities and be in a position to sell gas at or near full capacity in approximately 18 months. Together, if fully contracted, the Palm Valley and Dingo fields can provide the Company with up to
of annual cash flow and in excess of
in cumulative net cash flow (undiscounted) over the life of the assets.
With respect to NT/P82, our offshore Australian exploration block in the Bonaparte Basin, we are in the final stages of processing the seismic data acquired over the permit area. We initially believed that we would receive the results of the processing in
; however, due to certain characteristics of the subsurface geology, we need to reprocess a portion of the data and thereby delay receipt of the final reprocessed results until July 2013. At that point we will promptly begin our interpretation effort. Pending completion of interpretation, we will initiate a farm-out process. Based upon recent similar deals in the Bonaparte Basin, our expectation with respect to a farm-out is to give up operatorship and a significant working interest in this permit area in exchange for carry on exploration wells over the prospective areas.
In the UK, we maintain a large acreage position in the Weald Basin, which we believe is a very promising unconventional play. In recent months, it appears that the regulatory and political climate has warmed considerably to unconventional production onshore UK. The Department of Energy and Climate Change recently lifted its moratorium on hydraulic fracturing, and the government is exploring new tax incentive proposals to encourage unconventional drilling onshore. We believe that these developments should have a favorable impact on the perceived value of our acreage. In order to substantiate this value, we, together with our partner Celtique Energie, plan to drill one or two evaluation wells at the end of 2013, through which we will gain a better understanding of the shale potential of our acreage. In the meantime, Magellan remains one of only three publicly traded companies to offer significant exposure to this emerging UK shale play.