Magnolia keen to participate in Marathon North Dakota drilling

US-focussed oil and gas exploration and production company Magnolia Petroleum announced on Tuesday that it received proposals to participate alongside Marathon Oil in the drilling of six low risk, high impact wells to the Bakken and Three Forks Sanish formations in North Dakota.

The AIM-traded firm said the new wells represented a step up in the level of opportunities the company had been seeing recently, primarily due to their location on the same spacing unit as its best performing well, the Lazy DE 24-7H, and also the size of Magnolia’s potential interest.

All six wells carried low exploration risk, the board claimed, due to their to being located on or close to prolific producing units

The new Marathon wells, which include two to be drilled to the Bakken and four to the Three Forks Sanish, will be drilled on the same spacing unit as two highly productive Bakken completions in Dunn County, North Dakota in which Magnolia has an interest in - Lazy DE 24-7H and Lazy DE 34-7H.

Additionally, the new Three Forks Sanish wells would be the first to be drilled in the unit, however other Three Forks Sanish wells in the area had been “highly productive” according to the board, achieving initial production rates of over 1,700 BOPD and 700 MCFD.

Drilling costs had come down from more than $10m per well prior to the downturn to approximately $6.5m per well today, Magnolia said, with the continued availability of suitable rigs and qualified labour and a faster drilling time of approximately 14 days per well compared to 30 days previously.

The highly controversial proposed Keystone XL Pipeline, which will run through North Dakota when completed, was also expected to “significantly reduce” transportation costs.

“These six wells tick all the boxes - low risk due to being increased density wells, high impact as they are being drilled on leases which have already produced significant volumes of oil and gas, excellent address thanks to being located in the prolific Bakken and Three Forks Sanish formations, and highly attractive commercial returns as a result of having a low breakeven oil price of approximately $40,” explained Magnolia CEO Rita Whittington.

“Furthermore, the read across from an approximate halving in drilling costs in recent years is effectively a doubling of the potential return on investment.

“These wells therefore represent an excellent de-risked opportunity to rapidly scale up production and reserves, and we are looking to capitalise on this by either taking up our full participation rights or farming out a portion of our entitlement to interested parties.”