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Magellan Energy (OTCPK: MGLG)
Magellan Energy New (MGLG) is a publicly traded independent oil and gas company that is actively acquiring oil and gas leases, producing properties, mineral rights and surface interests in Texas, Tennessee and Oklahoma. Once acquired, the Company intends to develop each property to maximize the income from each property by re-establishing production, refurbishing and improving the existing production and operations. Currently, the Company is focused on its producing projects in Morgan County, Tennessee.
The combination of energy fuel reserves and advanced yield technologies are anticipated to generate value for MGLG and its stakeholders as the Company targets above average growth in the energy sector. Oil and gas-related activities will include acquiring additional properties with potential for increased production in addition to further development and drilling.
Financial Summary
The Company has failed to file with SEC or pinksheets.net its quarterly or annual financial statements.
Analyst Consensus
There are no consensus estimates and rating available for the company.
Investment Highlights
The Company is actively acquiring oil and gas leases, producing properties, mineral rights and surface interests in Tennessee and Oklahoma. Once acquired, MGLG intends to develop each property to maximize the income from each property by re-establishing production, refurbishing and improving the existing production and operations.
The Martin Waterflood project is located about 50 miles northwest of Knoxville, and less than 20 miles from the Tennessee-Kentucky border in Morgan County, Tennessee. Initial estimates of recoverable oil in place are in excess of 100,000 barrels of oil, with a current value of more than $6.5 million. The Martin field is currently in the final stages of primary production, producing a small amount of oil and gas from eight wells. Those initially targeted include: Thomas D. Martin #7 – Permit # 7316, Thomas D. Martin #4 – Permit #7329, Thomas D. Martin #11 – Permit #7651, Thomas D. Martin #12 – Permit #8169, Thomas D. Martin #14 – Permit # 8223 and Thomas D. Martin #15 – Permit #8224.
MGLG has recently entered in to an agreement for several existing wells on the Robert Anderson Lease, also located in Morgan County, Tennessee. Magellan Energy Ltd. will be partnered with TMD Energy Inc. on this project. This participation agreement includes five existing wells known as R.Anderson #2-permit #5534, R.Anderson #3-permit #6002, R.Anderson #3-permit #6241, R.Anderson #4-permit #6003 and R.Anderson #3-permit #6453. TMD Energy Inc. will continue as the operator of the wells and oversee any necessary work over procedures. The work on the Robert Anderson Lease has been completed and all necessary components of this project are updated, installed and currently ready for the production phase.
MGLG has entered into a participation agreement with TMD Energy for the Lankford Lease located in Morgan County, Tennessee. The lease/agreement consists of eleven wells that are currently producing natural gas from the Monteagle formation. The Company has an option on this lease to frac two shale wells in the future, which would increase the gas production per well on a daily basis. The Company expects that these two wells will be relatively easy to frac as they are located on the thin exposed part of the Chattanooga Shale in Eastern Tennessee. Reserve estimates indicate a conservative gas in place value of 3.198 bcfg/mi.2 for the area under the Cumberland Plateau. These calculations assume a gas content of 20 scf/ton of gas in the Chattanooga Shale.
The Company’s prospects are surrounded by prolific and producing projects of competing companies. The area has demonstrated a number of strong producers from within the Trenton (Sunny Brook). Any lease block in the area can potentially be viewed with equal potential. The John Henry Oil Company wells, for example, located on the McDonald lease is less than three miles away to the North West. The discovery well’s initial production was 2500 BOPD. This is one of the most prolific Sunny Brook producers in the state. To date, the feature has produced close to 100,000 bbls. and continues to produce from several wells around the feature. Another property, the Ringley-Thornton property, lies to the North West less than two miles. The newly drilled well there has been treated for production initially at 40 BOPD.
In late 2008, the federal government, through the agency FERC, mandated that any gas with a BTU count higher than 1100 was unsafe and should not be transported in interstate pipelines or sold to consumers. Gas originating from oil wells usually has a high BTU count, and this is especially true in the Burville area where the Anderson and Martin wells are located. As a result, MGLG, as well as many other area producers, had their wells shut in by Citizens Gas for a protracted period of time. To resolve the issue, Citizens Gas placed a large compressor in its Burville collection and distribution system. This system, unfortunately, has not been able to completely stabilize the high BTU issue in order to consistently meet the FERC requirements. Area producers are in the process of disconnecting their lines and reconnecting them to an alternate system, which is strictly a collection line. The gas will then be carried to a separate Citizens Gas high-pressure line where it will be blended. This will avoid having the gas distributed to residential and commercial properties prior to the collective BTU count being absolutely stabilized and maintained to acceptable levels.
MGLG believes that the possibility of further disruptions have been addressed with this new solution. The Company’s partner and operator of the projects, TMD Energy Inc., is continuing to work with Citizens Gas to rework the lines as quickly as possible. Revenues from the oil produced from the Anderson and Martin leases will continue without disruption.
A potentially huge consumer of natural gas in Tennessee has come to the forefront with Tennessee Valley Authority announcement that a natural gas-fired electric plant in Rogersville is scheduled to come online in late 2011 and will require up to 160 million cubic feet of natural gas daily. Tennessee is now producing about 16 million cubic feet of gas, but has immense potential to produce a great deal more, with the most potential coming from the Chattanooga Shale. MGLG and other area producers stand to benefit greatly from this enormous new demand source.
According to the EIA Annual Energy Outlook 2009, the U.S dependence on imported oil is expected to decline over the next 25 years — due to high prices and limited resources; and natural gas production, led by gas shales, is expected to provide the majority of growth in gas supply. As the economy improves, EIA expects to see a marked improvement in the price of natural gas and in the overall value of gas reserves properties.
Technical Analysis
Source: http://stockcharts.com/h-sc/ui
MGLG is below its 13-day moving average. This bearish sign is even more significant because the moving average is also trending lower.
MGLG has been relatively stable recently. This is evidenced by the width of its Bollinger Bands, which are tighter than normal. Additionally, MGLG is trading within its Bollinger Bands. This is a normal condition and suggests that the stock is neither overbought nor oversold relative to the recent price action.
MGLG’s MACD is currently indicating a weak bullish signal. Although the MACD is trending above the signal line, the indicator is still below 0, which suggests that the underlying moving averages are bearish.
Comparative Analysis
Small oil and gas companies are traded with significant premiums, mainly due to solid reserves estimates or expectations concerning an eventual recovery of oil prices. MGLG trading depends on management’s willingness to file financial reports with SEC and solid reserves discoveries on its properties.
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