Magellan Petroleum Corporation Announces Second Quarter Results

Quarter Ending December 31, 2010

PORTLAND, Maine, Feb. 14, 2011 /PRNewswire/ -- Magellan Petroleum Corporation (the "Company") (Nasdaq: MPET) (ASX: MGN) reported a consolidated net loss of $2.1 million ($.04 per share) on total revenue of $4.5 million for its fiscal second quarter ended December 31, 2010, as compared to a net loss of $3.4 million ($.06 per share) on gross revenues of $3.7 million in the immediately prior quarter.  Working capital was $32.4 million at December 31, 2010, a decrease of $4.1 million from the previous quarter.

Magellan's President and Chief Executive Officer, William H. Hastings said, "Year on year results continue to reflect our business development efforts.   Operating results are challenging although oil price trends and recent expense reductions by our Amadeus Basin partner have gained momentum, and will continue to show effect in improving our near-term financial performance."

In Australia, our Assets Sale Deed, covering the purchase of a 40% working interest in Evans Shoal ("Transaction"), was amended to allow continued development planning discussion and to enable further co-owner review.  We have written financial commitment letters and agreements in place to close the Transaction and continue to work diligently to build momentum and provide assurance with regard to our plans.  Methanol market trends continue to be favorable.  Methanol prices now mirror crude oil trends and new, robust, methanol demand growth forecasts have been issued.

Further, as part of our earnest effort to close, we have transferred A$15 million, previously held in escrow, to Santos and will establish a new escrow account in the amount of A$10 million toward the closing payment on the original Transaction.  The Transaction price has not changed.  The new escrow transfer will be backed by our Strategic Partner, YEP.

At Mereenie and Palm Valley, early discussions regarding potential gas sales continue.  There is the possibility that Mereenie gas can be placed with industrial markets in Darwin.

In Montana, our focus is the generation of short-term cash through a measured in-fill well program.

Core analysis is complete on both the Bakken and Charles formations.  Results of both were encouraging.  For the Bakken, the results of the core analysis in the laboratory were positive.  For the Charles, we have taken the core data, established a Reservoir Engineering review plan, and will begin recompletion testing of the Charles formation to set baseline flow characteristics, to test the applicability of stimulation programs, and to begin early evaluation of CO2 flood performance with target results late this summer.  The latter will, based on core oil saturations, either demonstrate or challenge field-wide CO2 injection plans.

In the United Kingdom, the Company holds a 40% working interest in a new oil discovery - Markwells Wood 1.  Mobile oil was seen in cores of the Oolite formation there.  Logs show oil with reasonable water saturations throughout the Oolite segment, drilled at a 56 degree deviated angle.  Water contact and Oolite porosities are similar to the producing Horndean Oil field to our immediate west.  An extended well test program is being constructed by the well Operator for initiation later in the spring.

Magellan, with these initiatives, current production profiles, expense reduction programs, new asset development programs, and access to large underdeveloped reservoirs in North America is well-placed, and undervalued, given current and prospective commodity market trends.

Forward Looking Statements

Statements in this release which are not historical in nature are intended to be, and are hereby identified as, forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. These statements about Magellan and MPAL may relate to their businesses and prospects, revenues, expenses, operating cash flows, and other matters that involve a number of uncertainties that may cause actual results to differ materially from expectations. Among these risks and uncertainties are the ability of MPAL, with the assistance of the Company, to successfully and timely close the Evans Shoal acquisition, the likelihood and timing of the receipt of proceeds from the YEP private placement transaction due to conditions stipulated in the Securities Purchase Agreement, the ability of the Company to successfully develop a strategy for methanol development, pricing and production levels from the properties in which Magellan and MPAL have interests, the extent of the recoverable reserves at those properties, the profitable integration of acquired businesses, including Nautilus Poplar LLC, the future outcome of the negotiations for gas sales contracts for the remaining uncontracted reserves at both the Mereenie and Palm Valley gas fields in the Amadeus Basin, including the likelihood of success of other potential suppliers of gas to the current customers of Mereenie and Palm Valley production. In addition, MPAL has a large number of exploration permits and faces the risk that any wells drilled may fail to encounter hydrocarbons in commercially recoverable quantities. Any forward-looking information provided in this release should be considered with these factors in mind. Magellan assumes no obligation to update any forward-looking statements contained in this release, whether as a result of new information, future events or otherwise




                              THREE MONTHS ENDED       SIX MONTHS ENDED

                              DECEMBER 31,             DECEMBER 31,

                              2010         2009        2010         2009


Oil sales                     $2,756,212   $3,155,798  $4,926,858   $5,942,624

Gas sales                     458,420      5,551,734   867,680      10,960,680

Other production related
revenues                      1,246,372    1,008,737   2,365,647    1,691,751

Total revenues                4,461,004    9,716,269   8,160,185    18,595,055


Production costs              2,520,539    2,089,296   4,359,702    5,419,902

Exploration and dry hole
costs                         614,569      317,943     1,028,239    657,056

Salaries and employee
benefits                      1,532,736    1,006,793   2,474,412    2,750,301

Depletion, depreciation and
amortization                  260,732      1,484,130   1,250,070    2,647,136

Auditing, accounting and
legal services                520,327      392,686     758,778      777,074

Accretion expense             168,591      209,584     318,283      384,351

Shareholder communications    203,963      223,647     357,118      302,174

Gain on sale of field
equipment                     (443,035)    (1,139,465) (463,177)    (1,134,275)

Impairment loss               —          1,604,417   —          1,604,417

Other administrative expenses 2,779,687    1,660,088   5,732,751    4,022,397

Total costs and expenses      8,158,109    7,849,119   15,816,176   17,430,533

Operating (loss) income       (3,697,105)  1,867,150   (7,655,991)  1,164,522

Warrant expense               —          (986,248)   —          (2,378,719)

Investment income             221,494      1,038,394   467,810      2,534,931

(Loss) income before income
taxes                         (3,475,611)  1,919,296   (7,188,181)  1,320,734

Income tax benefit
(provision)                   1,378,316    (323,104)   1,679,652    (1,021,806)

Net (Loss) Income before
non-controlling interest      (2,097,295)  1,596,192   (5,508,529)  298,928

Less non-controlling interest
(Income) loss                 (1,838)      (3,637)     33,275       (3,637)

Net (Loss) Income
attributable to Magellan
Petroleum                     $(2,099,133) $1,592,555  $(5,475,254) $ 295,291

Average number of shares

Basic                         52,335,977   51,679,618  52,335,977   50,612,610

Dilutive                      52,335,977   52,856,331  52,335,977   51,199,170

Net (Loss) income per basic
and dilutive common shares
attributable to Magellan
Petroleum Corporation common
shareholders                  $ (0.04)     $ 0.03      $ (0.10)     $ 0.01

SOURCE Magellan Petroleum Corporation