Magnolia Petroleum's oil and gas production rate has grown ahead of expectations, the company said in an operational update Tuesday.

The AIM listed US business reported increased activity in onshore formations including the Bakken/Three Forks Sanish in North Dakota and the Mississippi Lime and Woodford/Hunton formations in Oklahoma.

Initial production at the Bowen 2-29 and Bowen 3-29 vertical wells in the Wilcox formation in Oklahoma also exceeded outlooks.

A gross initial production rate of 65 barrels of oil equivalent per day (boepd) was achieved at Bowen 2-29 while the Bowen 3-29 extracted 30 boepd.

The wells are expected to recover drilling costs of $13,612 each in less than 12 months, the company said.

The Bowen wells are two direct offsets to the Henry 2-29 vertical well that is producing from the Wilcox formation in Oklahoma.

Following the success of the Henry well, the Bowen wells were drilled to optimise the recovery of all the reserves.

The gross initial production rate for the Paul Gillham & Co operated SPS 6-26 vertical well in the Hunton formation in Oklahoma surpassed targets at 108 boepd. The SPS well recovered costs in less than five months as a result.

The company is working on a further six wells, with a share of aggregate drill costs totalling $183,000.

"The initial production rates reported for the two vertical Bowen wells, combined with the quick payout achieved by the SPS vertical well provide ready-made examples of the attractive economics behind drilling the proven reservoirs in Oklahoma," Chief Operating Officer Rita Whittington said.

"Magnolia's interests in the Bakken, Three Forks Sanish, Mississippi Lime and Hunton formations continue to provide attractive opportunities, as demonstrated by the participation in six new wells mentioned today."

Shares fell 0.72% to 3.45p at 11:15 Tuesday despite a positive production update.

RD

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