Magellan Petroleum Corporation(ticker: MPET) is an independent oil and gas exploration and production company with assets in the US, Australia, and the UK. The Company is primarily focused on the development of a CO2-enhanced oil recovery (CO2-EOR) program at Poplar Dome in eastern Montana. The Poplar, acquired by Magellan in 2009, is the largest geologic structure in the western Williston Basin and holds multiple formations with hydrocarbon resource potential.
Magellan holds a 100% working interest in the East Poplar Unit (EPU), and technological advances in E&P have allowed the company to reevaluate the play and discover new formations. The Poplar dome’s multi-pay zone structure provides ample opportunities and current reserves are estimated at 50 MMBO with PV-10 reserves at $97 million. The company plans to prove the formations’ potential and significantly increase its proved reserves. In addition, two oil pipelines and one gas pipeline are in close proximity.
Magellan’s CO2-EOR pilot project began in 2013 after obtaining a CO2 supply contract and permits for drilling pilot wells. The drilling program began in August 2013 and is expected to be completed by early November 2013. The installation of CO2 injection facilities will begin in December 2013 and results are expected by the end of calendar year 2014. A water-shut off program was initiated at existing Poplar wells and is expected to increase oil production and reduce operating costs.
Similar CO2 injection projects in the analogous Midale and Weyburn fields were highly successful. In fact, the Weyburn, operated by EnCana Corp (ticker: ECA) is a 55-year oil field in the midst of a resurrection. ECA estimates an incremental 130 MMBO can be recovered through the method, boosting revenues by $30 million per year and extending the field life by as many as 25 years.
Magellan’s Williston position consists of 18,000 net acres in the East Poplar Unit and working interest in an additional 4,000 net acres adjacent to EPU. Substantially all of the acreage is held by production and requires no mandatory government expenditures. The company has a 100% operated working interest in the interval from the surface to the top of the Bakken/Three Forks formation and a 50% working interest in the deeper intervals.
Four different formations also hold development potential. The Amsden was discovered in January 2012 and the Greenhorn’s formation is similar to the Eagle Ford Shale. The Tyler formation has four current wells with additional potential and the Nisku produced 200 MBO from one well between 1970 and 1990. The Charles is the source for Magellan’s pilot CO2-EOR project and produces approximately 275 BOPD.
Magellan anticipates rolling out the recovery method across its assets as it gathers results from each treatment. The company’s annual shareholder meeting is scheduled for December 11, 2013.
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