In total, the group has a stake in 31 wells in North Dakota, and, it has also agreed to sell the Roger Swartz #1 well in Oklahoma for US$30,000.
Cash proceeds will be earmarked to “substantially clear” a large portion of its US$2mln reserves-based lending facility.
It is part of the debt reduction programme, announced last week, which came after the group’s lender decided not to extend the facility - prompting a repayment deadline of July 9 2018.
“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,” the company said.
“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.”
Magnolia added that it has interests in 108 wells.
On Thursday, Magnolia shares were up 0.27p or 64% changing hands at 0.7p.