Magnolia Petroleum sees potential sale of North Dakota assets to avoid bankruptcy
HOUSTON -- Magnolia Petroleum plc, the U.S. focused oil and gas E&P company, has announced that it has signed a non-binding agreement with a third party for the sale of all its wells in which it has varying interests in North Dakota, being approximately 31 wells, for a total consideration of $1.5 million. In addition, the Company announces the sale of its 100% interest in the Roger Swartz #1 well in Oklahoma for approximately $30,000.
The Proposed Disposal is in line with the Company’s debt reduction program and, subject to shareholder consent and completion, will substantially clear a large portion of the outstanding $2-million balance of the reserve-based lending facility of its wholly owned operating subsidiary, Magnolia Petroleum, Inc. As detailed in the Company’s announcement of June 7, 2018, the Company embarked on a debt reduction program in response to the Bank’s decision not to extend the Lending Facility and its requirement that the full outstanding amount be repaid or refinanced by July 9, 2018.
The Proposed Disposal is conditional on the granting of approval of the Board’s asset disposal program at the Company’s general meeting, which is to be held on June 22, 2018.
In the event that the Lending Facility is not repaid or refinanced, it is expected that either the Bank will repossess and sell assets to pay off the debt, which is likely to be at a lower value for Shareholders than the Company could achieve, or the Directors will be required to commence Chapter 11 bankruptcy proceedings with respect to Magnolia Inc. This would also likely lead to a loss of control of the debt reduction program and reduced value being achieved by the Company for its portfolio of wells. In this scenario, shareholders are unlikely to receive any value for the Company’s portfolio of wells with all proceeds of sales being used to settle creditors and the costs of the Chapter 11 proceedings.
The Company’s current portfolio comprises interests in 108 wells and further details of the interests in wells and their economics were included in the Company’s operations update on April 16, 2018, and in the circular of June 7, 2018.
