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Magnolia Petroleum Plc (MAGP)

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Wednesday 20 June, 2018

Magnolia Petroleum Plc

Proposed Disposal of Oklahoma Assets and Issue of Equity

20 June 2018

Magnolia Petroleum Plc / Index: AIM / Epic: MAGP / Sector: Oil & Gas

Magnolia Petroleum plc (‘Magnolia’ or ‘the Company’)

Proposed Disposal of Oklahoma Assets and Issue of Equity

Magnolia Petroleum plc, the US focused oil and gas exploration and production company announces it has signed a non-binding agreement with Western Energy Development (‘WED’) for the sale of 13 wells in Oklahoma for a consideration of $500,000.

The disposal is in line with the Company’s debt reduction programme. Together with the proposed disposal of the North Dakota assets, both of which are subject to shareholder consent and completion, the board estimates that the proceeds will be sufficient to satisfy the outstanding US$2 million balance of the reserve-based lending facility (‘the Lending Facility’) of its wholly owned operating subsidiary, Magnolia Petroleum, Inc. (‘Magnolia Inc’). As detailed in the Company’s announcement of 7 June 2018, the Company embarked on a debt reduction programme 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 9 July 2018.

As previously advised, the Bank has placed restrictions on the Company’s bank account until the Lending Facility is repaid. In the meantime, the Company is carefully managing its working capital which is severely constrained. While the disposal of the North Dakota and Oklahoma assets, subject to shareholder consent, is expected to repay the lending facility in full and release the restrictions on the Company’s bank account, it is likely that the Company will continue to need to carefully manage its working capital in the short term until the costs of the disposal and related legal work have been received.  It should be noted that the sale of the North Dakota and Oklahoma assets will materially reduce the Company’s revenue and further disposals may be required to provide additional working capital.

In order to assist the Company with costs to allow for the disposal and to provide a modest amount of additional working capital, the Company has raised £26,950 by way of subscription for 7,700,000 new ordinary shares at 0.35p per share (‘Subscription Shares’).  WED has agreed to participate in the subscription for 3,500,000 new ordinary shares which will increase its interest in the Company to approximately 26.1 per cent. Murray Street Investments LLC has subscribed for 4,200,000 new ordinary shares, representing 9.86 per cent. of the enlarged issued share capital.

As WED holds more than 10 per cent. of the Company’s ordinary shares, the subscription and the disposal, subject to shareholder consent, constitute related party transactions.  The Directors consider, having consulted with its nominated adviser, Cairn Financial Advisers LLP, that the terms of the transactions are fair and reasonable insofar as its shareholders are concerned.

The Proposed Disposal is conditional on the granting of approval of the Board’s asset disposal programme at the Company’s general meeting which is to be held at 15:30 p.m. BST (09:30 a.m. local time) on 22 June 2018 at the offices of Pray Walker P.C., 100 West Fifth Street, Suite 900, Tulsa, OK 74103, USA (‘the General Meeting’).

The Company reminds shareholders that, 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 programme 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.

Issue of Equity

The Subscription Shares will rank pari passu in all respects with the Company's existing issued ordinary shares.  Application will be made for the admission of the Subscription Shares to trading on AIM and it is expected that admission will occur and that dealings will commence at 8.00 a.m. on or around 26 June 2018.

For the purposes of the Financial Conduct Authority's Disclosure and Transparency Rules, the Company announces that, following the issue of the Subscription Shares, the Company will have 42,606,992 ordinary shares in issue.

The Company has no ordinary shares held in treasury. The total number of voting rights in the Company will therefore be 42,606,992. This figure may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company under the FCA's Disclosure and Transparency Rules.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

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For further information on Magnolia Petroleum Plc visit or contact the following:

Rita Whittington Magnolia Petroleum Plc +01918449 8750
Jo Turner / James Caithie Cairn Financial Advisers LLP    +44207213 0880
Daniel Gee Cornhill Capital Limited +44207710 9610
Lottie Wadham St Brides Partners Ltd +44207236 1177
Frank Buhagiar St Brides Partners Ltd          +44207236 1177

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