Magellan Petroleum Corporation Announces Third Quarter Results

PORTLAND, Maine, May 11 /PRNewswire-FirstCall/ -- Magellan Petroleum
Corporation (Nasdaq: MPET) (ASX: MGN) reported consolidated net income of
$391,000 ($.01 per share) on gross revenues of $5.5 million in its third
fiscal quarter ended March 31, 2009, as compared to net income of $936,000
($.02 per share) on revenues of $9.5 million in last year's third quarter.

For the nine-month period ended March 31, 2009, the Company reported net
income of $1.4 million ($.03 per share) on $21.1 million in revenues, compared
to a net loss of $10.3 million ($.25 per share) on revenues of $29 million in
the prior period last year.

Magellan's President and Chief Executive Officer, William H. Hastings said,
"Weak energy markets coupled with production declines negatively affected
year over year performance through March 31, 2009, after taking into
consideration last year's tax settlement which is a special item. We are
facing 2009's challenges head-on; active gas sales negotiations are ongoing,
and significant expense reduction programs are being discussed for our fields,
including consolidation possibilities. We will persist with our efforts to
improve near-term performance while we target significant larger-scale growth.

Unlike most companies at this stage, we are in a unique position to capitalize
on record low asset prices, to examine acquisition of 'challenged' companies
as a result of current capital market conditions, and have access to growth
capital as evidenced by our Securities Purchase Agreement with Young Energy
Prize S.A. Other capital providers have expressed interest and we are working
diligently to add value from this combination of circumstances."

The following is a discussion of the financial results for the three and nine
months ended March 31, 2009.

Quarter Ended March 31, 2009
Oil sales decreased 62% to $1.7 million in 2009 from $4.4 million in 2008.
This reduction is due to a 29% decrease in production, a 29% decrease in the
average price per barrel and a 27% decrease in the average exchange rate. The
production in the Nockatunga fields continued to decline in this quarter as
compared to prior periods. We expect the downward production trend in the
Nockatunga fields to continue. Nockatunga is a high-cost area that does not
justify incremental investment at current oil price levels.

Gas sales decreased 26% to $3.3 million in 2009 from $4.4 million in 2008.
This is due to a 12% decrease in volume resulting from a decline in customer
requirements and a 27% decrease in the average exchange rate partially offset
by an 18% increase in the average price per mcf.

Interest income decreased 45% to $274,000 in 2009 from $500,000 in 2008 due to
a decrease in market interest rates and a 27% decrease in the average exchange
rate.

Exploration and dry hole costs increased to $1.4 million in 2009 from $335,000
in 2008. This increase is due to seismic survey costs of approximately $1.2
million related to the Nockatunga fields partially offset by the 27% decrease
in the average exchange rate.

Depletion, depreciation and amortization decreased in 2009 to $1.1 million
from $4.0 million in 2008. The decrease is due to lower depletable costs and
the 27% decrease in the average exchange rate.

Auditing, accounting and legal services increased in 2009 to $602,000 from
$215,000 in 2008 due mostly to legal fees related to the YEP transaction and
the shareholder agreement (see Other Financial Matters below) of approximately
$256,000 partially offset by the 27% decrease in the average exchange rate.

Other administrative expenses decreased to $735,000 in 2009 from $883,000 in
2008 due to costs related to director stock options that were incurred in 2008
but not in 2009 ($63,000), decrease in insurance expenses in 2009 and the 27%
decrease in the average exchange rate, partially offset by due diligence costs
related to the YEP transaction ($175,000).

The income tax provision decreased due to the decrease in income before taxes
as well as the provision of the ATO settlement in the prior fiscal period. The
Company has estimated the effective tax rate expected to be applicable for the
full fiscal year. The rate used in providing for income taxes on a current
year-to-date basis for the nine months ended March 31, 2009 is 46%. The
Company revised its estimate from the effective rate of 70% used in providing
income taxes for the six months ended December 31, 2008 due to a decrease in
U.K. exploration expenses partially offset by an increase in the estimate of
MPC loss for fiscal 2009, which do not generate a tax benefit. U.K.
exploration expenses, expected to be incurred in 2009 will occur in 2010. U.K.
exploration expenses previously expected to be incurred in 2009 will occur in
2010.

Nine Months Ended March 31, 2009
Oil sales decreased 35% to $9.2 million in 2009 from $14.1 million in 2008.
This is due to a 29% decrease in production and the 16% decrease in the
average exchange rate discussed below. We expect the downward production trend
in the Nockatunga project to continue due to the poor reinvestment economics
mentioned above.

Gas sales decreased 20% to $10.6 million in 2009 from $13.2 million in 2008.
This is due to a 10% decrease in volume resulting from a decline in customer
requirements and a 16% decrease in the average exchange rate partially offset
by a 4% increase in the average price per mcf.

Exploration and dry hole costs decreased to $2.7 million in 2009 from $3.1
million in 2008. This decrease is due to Cooper Basin drilling costs incurred
in 2008 but not in 2009 ($1.3 million) and the 16% decrease in the average
exchange rate partially offset by seismic survey costs related to the
Nockatunga fields ($1.2 million) and the write off and impairments of U.K.
permits in 2009 ($321,000).

Depletion, depreciation and amortization decreased in 2009 to $5.7 million
from $12.8 million in 2008 due to lower depletable costs and the 16% decrease
in the average exchange rate.

Auditing, accounting and legal services increased in 2009 to $1.3 million from
$774,000 in 2008 due mostly to legal fees related to the YEP transaction and
the shareholder agreement (see Other Financial Matters below) of approximately
$505,000 partially offset by the 16% decrease in the average exchange rate.

Other administrative expenses decreased to $2.0 million in 2009 from $2.5
million in 2008 due to costs related to the ATO settlement ($597,000) and
director stock options ($63,000) that were incurred in 2008 but not in 2009,
exchange rate gains ($326,000) in 2009, decrease in insurance expenses in 2009
($127,000) and the 16% decrease in the average exchange rate, partially offset
by due diligence costs related to the YEP transaction ($393,000).

The income tax provision decreased due to the decrease in income before taxes
as well as the provision of the ATO settlement in the prior fiscal period. The
Company has estimated the effective tax rate expected to be applicable for the
full fiscal year. The rate used in providing for income taxes on a current
year-to-date basis for the nine months ended March 31, 2009 is 46%. The
Company revised its estimate from the effective rate of 70% used in providing
income taxes for the six months ended December 31, 2008 due to a decrease in
U.K. exploration expenses partially offset by an increase in the estimate of
MPC loss for fiscal 2009, which do not generate a tax benefit. U.K.
exploration expenses expected to be incurred in 2009 will occur in 2010.

Other Financial Matters

As previously disclosed on February 9, 2009, the Company entered into a
definitive securities purchase agreement with Young Energy Prize S.A. ("YEP"),
a Luxembourg corporation, providing for a $10 million equity investment in the
Company. Closing under the purchase agreement is subject to receipt of
shareholder approval of the investment and an amendment to the Company's
certification of incorporation, as well as other customary closing conditions.

Under the original terms of the securities purchase agreement, YEP will
pay $10.0 million ($1.15 per share) to acquire a total of 8,695,652 shares of
the Company's Common Stock (the "Shares") and five-year warrants entitling YEP
to purchase 4,347,826 shares through warrant exercise at a price of $1.20 per
share.

On April 3, 2009, the Company and YEP agreed to amend their securities
purchase agreement to extend the outside termination date for the closing of
YEP's equity investment from April 30, 2009 to June 30, 2009, in order to
provide sufficient time to conduct the 2008 Annual Meeting and complete the
YEP equity investment transaction. The amendment also provides that, if YEP
completes the purchase of the ANS Shares from the ANS Parties (see ANS
discussion below) then the exercise price payable by YEP for the Warrant
Shares shall be reduced from $1.20 to $1.15 per share.

On April 3, 2009, the Company and two of its shareholders, ANS Investments LLC
and its CEO, Jonah M. Meer (together, the "ANS Parties"), entered into a
settlement agreement that terminated proxy solicitation efforts of the ANS
Parties on mutually agreeable terms. Under the terms of the settlement
agreement, the ANS Parties have agreed to withdraw both the nomination of Mr.
Meer as a director candidate and their other proposals, to terminate all proxy
solicitation efforts with respect thereto, to support each of the proposals
that the Company intends to present to its shareholders at the Annual Meeting
and to vote all of their shares in favor of these proposals in accordance with
the recommendation of the Company's Board of Directors. In exchange, the
Company agreed to reimburse the ANS Parties up to $125,000 for their legal and
other expenses incurred by the ANS Parties related to their proxy solicitation
efforts.

Separately, YEP and the ANS Parties on April 3, 2009 entered into an agreement
by which YEP will, upon completion of YEP's equity investment in the Company,
purchase 568,985 shares of the Company's common stock currently owned by the
ANS Parties at a purchase price of $1.15 per share.

During the nine month period ended March 31, 2009, the Company issued
3.1 million stock options. These options have been issued under a new stock
option plan which is subject to shareholder approval at the next annual
shareholders meeting which will be held on May 27, 2009. As this approval is
pending, there is no grant date for accounting purposes and, consequently,
there was no financial statement impact during this period. If approved, the
accounting impact of these options will be material to the Company's financial
statements.

Gas Contracts
MPAL's major customer, Gasgo Pty. Ltd., a subsidiary of Power and Water
Corporation ("PWC") of the Northern Territory has contracted with Eni
Australia for the supply of PWC's Northern Territory gas demand requirement
for twenty five years. Eni Australia, initially expected to commence sales in
January 2009, is to supply the gas from its Blacktip field offshore of the
Northern Territory. The Blacktip development has encountered significant
development difficulty and delay. One Blacktip well was plugged and abandoned
in March 2009 as non-commercial. MPAL and Santos ("Mereenie Producers") will
continue to supply PWC's gas demand to augment Blacktip gas. There is a
possibility that all Amadeus Basin gas deliverability could be combined with
the distressed Blacktip flow to achieve efficiencies and savings for all
Parties (producers and buyers) in the Darwin supply grid. There are
significant unknowns with regard to Blacktip capability, efficiency, and
natural gas deliverability. MPAL may, or may not, be able to contract for the
sale of our remaining uncontracted reserves. Negotiations on this premise are
active with ENI Australia, PWC, and with Darwin LNG Operator, ConocoPhillips.
Unless MPAL is able to obtain additional contracts for its remaining gas
reserves or be successful in its current exploration program, its revenues
will be materially reduced beginning with 2010. Mereenie gas sales were
approximately $15.5 million (net of royalties) or 85% of total gas sales for
the year ended June 30, 2008 and $8.8 million (net of royalties) or 84% of
total gas sales for the nine months ended March 31, 2009.

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 Magellan Petroleum Australia Limited ("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 likelihood and timing of the closing of the YEP investment
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 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.

Comparative, consolidated results for the three and nine month periods are
shown in the following condensed consolidated statements of operations:

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
--------- ---------
2009 2008 2009 2008
---- ---- ---- ----
REVENUES:
Oil sales $ 1,707,287 $ 4,442,241 $ 9,184,879 $ 14,062,782
Gas sales 3,291,615 4,433,188 10,600,544 13,195,352
Other production
related revenues 523,611 660,634 1,348,058 1,973,843
--------- --------- ---------- ----------
Total revenues 5,522,513 9,536,063 21,133,481 29,231,977
--------- --------- ---------- ----------
COSTS AND EXPENSES:
Production costs 1,951,335 1,801,975 6,218,141 6,425,232
Exploration and dry
hole costs 1,385,552 334,651 2,652,929 3,072,242
Salaries and employee
benefits 386,450 395,685 1,200,435 1,216,034
Depletion, depreciation
and amortization 1,130,134 3,989,223 5,691,415 12,763,443
Auditing, accounting
and legal services 602,058 215,394 1,291,857 773,497
Accretion expense 118,206 180,461 396,482 526,849
Shareholder
communications 179,674 98,762 392,846 300,050
Loss (gain) on sale of
field equipment 211 3,209 12,072 (23,748)
Other administrative
expenses 735,018 883,221 2,028,268 2,524,866
------- ------- --------- ---------
Total costs and
expenses 6,488,638 7,902,581 19,884,445 27,578,465
--------- --------- ---------- ----------
Operating (loss) income (966,125) 1,633,482 1,249,036 1,653,512
Interest income 273,641 500,121 1,362,185 1,559,200
--------- --------- --------- ---------
(Loss) income before
income taxes (692,484) 2,133,603 2,611,221 3,212,712
Income tax benefit
(provision) 1,083,101 (1,197,664) (1,237,487) (13,531,328)
--------- ----------- ----------- ------------
NET INCOME (LOSS) $ 390,617 $ 935,939 $ 1,373,734 $(10,318,616)
=========== ======== ========== ============
Average number of
shares outstanding
Basic 41,500,325 41,500,325 41,500,325 41,500,325
========== ========== ========== ==========
Diluted 41,500,325 41,500,325 41,500,325 41,500,325
========== ========== ========== ==========
NET INCOME (LOSS) PER
SHARE (BASIC AND
DILUTED) $ 0.01 $ 0.02 $ 0.03 $ (0.25)
=========== =========== =========== =============

SOURCE Magellan Petroleum Corporation

William H. Hastings, President and CEO of Magellan, +1-207-776-5616, or Daniel
J. Samela, Chief Financial Officer of Magellan, +1-860-293-2006