Magnolia Petroleum tanks after plugging Oklahoma well

28th Jul 2015 11:20

(ShareCast News) - Shares in Magnolia Petroleum took a dive on Tuesday morning as the oil explorer plugged a well in Oklahoma due to high levels of salt water.The AIM-listed company said the Shimanek #2 vertical well encountered hydrocarbons but decided to plug well due to high costs of disposing of the saturated well.The cost of the abandoned well has therefore been limited to a total of $175,000, leaving the remaining $400,000 in the Shimanek budget for new drilling activity. "Based on the salt water and reserve levels encountered, we believe Shimanek would at best have been a marginal producing well but with high costs associated with the salt water disposal," said chief operating officer Rita Whittington.She pointed to multiple other opportunities to drill more commercial wells on Magnolia's existing leases, with the US$400,000 set aside to complete the well has been reallocated to fund new drilling activity, either on its own or alongside established operators."We will update the market in due course on the wells currently being drilled or planned to be spud. This includes the Magnolia operated Roger Swartz #2 well which we intend to spud before year end, subject to prevailing oil prices."Magnolia said the Shimanek #2 well has no effect on Magnolia's plans to drill conventional prospects identified on other leases within its portfolio.Shares in Magnolia had recovered slightly from initial falls of around 30% and were down 16.8% at 0.62p by 10:40 on Tuesday.