Magellan Petroleum Corporation Announces Third Quarter Results

Quarter Ending March 31, 2011

PORTLAND, Maine, May 16, 2011 /PRNewswire/ -- Magellan Petroleum Corporation (the "Company") (NASDAQ: MPET) (ASX: MGN) reported a consolidated net loss of $84,275 ($.00 per share) on total revenue of $4.9 million for its fiscal third quarter ended March 31, 2011, as compared to a net income of $1.2 million ($.02 per share) on total revenues of $5.1 million in the prior year.  Working capital was $24.1 million at March 31, 2011, a decrease of $8.3 million from the previous quarter, which includes the additional A$10million deposit for the acquisition of a 40% interest in the Evans Shoal gas field, offshore Australia.

The net loss of $84,275 includes $0.7 million spent toward continued efforts in the quarter to complete acquisition of the share of the Evans Shoal field.

The earnings comparison reflects the phase-out of gas sales at the Company's Mereenie field, and the costs of the broader development and acquisition strategy offset by higher oil prices for continuing and new oil production.  Gas produced at the Mereenie field continues to be stripped of condensate and be reinjected to provide pressure support for ongoing oil sales.  Gas sales at Palm Valley are down 27% with the current gas sales Agreement set to expire in January of 2012 with continued interest from industrial buyers.

Very poor weather conditions this winter in Montana limited access to the field and delayed production efficiency efforts; weather conditions have improved now.

Magellan's President and Chief Executive Officer, William H. Hastings said, "The $84,275 loss for the quarter included $0.7 million of consulting, legal, and administrative costs associated with the current acquisition program.  Oil pricing and marginal oil production improvement has offset the year-on-year loss of the Mereenie gas sales contract.  Several new agreements and operational programs are planned over the next few months.  We are continuing with time-consuming but required initiatives to build the Company and gain a significant new asset base.  We are placed well in the new high oil price environment, however, there are challenging times remaining in our efforts to execute our strategy.  The Company has several near-term growth efforts: testing and completion of our UK oil discovery, settlement and finalization of our efforts to acquire a 40% interest in the Evans Shoal field, a recompletion and new drilling program in Montana, and a high value, but difficult CO2 Enhanced Oil Recovery project also in Montana.  We have cash on hand, minimal debt, and a list of high-value projects.  Execution will be the key driver in 2011."

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 on or before May 31, 2011 or negotiate an additional extension, including the receipt of requisite transaction approvals and 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 using resources from the Evans Shoal gas field, the extent of the recoverable gas reserves available to the Company from the Evans Shoal gas field upon completion of the Evans Shoal transaction, 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 outcome of the Montana drilling program, 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 potential customers of Mereenie  and Palm Valley production and the success of the U.K. drilling program. 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            NINE MONTHS ENDED

                     March 31,                     March 31,

                     2011           2010           2011           2010


  Oil sales          $ 3,135,298    $ 1,947,505    $ 8,062,157    $ 7,890,129

  Gas sales            460,787        2,024,487      1,328,467      12,985,167

  Other production
  related revenues     1,270,595      1,164,953      3,636,242      2,856,704

  Total revenues       4,866,680      5,136,945      13,026,866     23,732,000


  Production costs     2,054,567      1,823,303      6,414,270      7,243,205

  Exploration and
  dry hole costs       452,260        225,204        1,480,500      882,260

  Salaries and
  employee benefits    1,903,533      1,281,819      4,377,945      4,032,120

  depreciation and
  amortization         34,863         704,428        1,284,933      3,351,564

  accounting and
  legal services       718,588        387,260        1,477,366      1,164,334

  Accretion expense    91,117         161,828        409,400        546,179

  communications       96,516         77,951         453,634        380,125

  (Gain) on sale of
  assets               (490,883)      (5,693,784)    (954,060)      (6,828,059)

  Impairment loss      122,862        -              122,862        1,604,417

  expenses             1,173,542      1,506,932      5,090,573      4,149,338

  (gain) loss          (1,210,197)    447,027        605,523        1,827,018

  Total costs and
  expenses             4,946,768      921,968        20,762,946     18,352,501

Operating (loss)
income                 (80,088)       4,214,977      (7,736,080)    5,379,499

  Warrant expense      -              (1,897,753)    -              (4,276,472)

  Investment income    190,983        327,187        658,794        2,862,118

Income (loss)
before income taxes    110,895        2,644,411      (7,077,286)    3,965,145

Income tax
(provision) benefit    (178,042)      (1,463,723)    1,501,611      (2,485,529)

Net (loss) income      (67,147)       1,180,688      (5,575,675)    1,479,616

  Less net (income)
  loss attributable
  interest in
  subsidiary           (17,128)       (18,243)       16,147         (21,880)

Net (loss) income
attributable to
Magellan Petroleum
Corporation          $ (84,275)     $ 1,162,445    $ (5,559,528)  $ 1,457,736

Average number of
shares outstanding

  Basic                52,455,977     51,989,866     52,375,537     51,100,029

  Dilutive             52,455,977     54,464,150     52,375,537     52,442,981

Net (loss) income
per basic and
dilutive common

 attributable to
 Magellan Petroleum
 Corporation common

 shareholders        $ (0.00)       $ 0.02         $ (0.11)       $ 0.03

SOURCE Magellan Petroleum Corporation