Magnum Hunter Acquires Marcellus, Utica Acreage

Magnum Hunter Resources Corporation announced Friday that Triad Hunter, LLC, a wholly-owned subsidiary of the company, has entered into a definitive purchase agreement to acquire 100 percent of the stock of privately-held Viking International Resources Co., Inc., or Virco, for a purchase price of approximately $106.7 million.

The total consideration for this transaction will be paid 65 percent (or approximately $69.4 million) in the form of a convertible preferred stock of the Company and 35 percent (or approximately $37.3 million) in cash. The Preferred Stock consideration will be payable in the form of depositary shares representing a new eight percent Series E Cumulative Convertible Preferred Stock of the company, with each depositary share having a liquidation preference of $25.00 per share and a dividend rate of eight percent per annum (based on liquidation preference) and being convertible at the option of the holder into shares of common stock of the company at a conversion price of $8.50 per share (based on liquidation preference and subject to customary anti-dilution adjustments).

The transaction, which is subject to customary closing conditions, is expected to close on or about November 2, 2012, with an effective date of January 1, 2012.

The cash portion of the purchase price is expected to be paid from additional sales of Preferred Stock and/or availability under Magnum Hunter's existing Senior Revolving Credit Facility. The borrowing base under Magnum Hunter's Senior Revolving Credit Facility is currently being re-determined by the Company's bank group, and the Company anticipates a sizeable additional increase.

The company is acquiring approximately 51,500 net Appalachian Basin mineral acres located in West Virginia and Ohio. This acreage position includes approximately 27,000 net acres in the liquids-rich Marcellus Shale, of which 19,000 are located in Ritchie County, West Virginia and 8,000 are located in Washington and Monroe Counties, Ohio. Additionally, the acreage position in Ohio includes approximately 9,000 net liquids-rich Utica Shale acres and more than 19,000 net dry Utica Shale acres. Approximately 98 percent of the total acreage position is held by shallow existing production or HBP.

Current net production from the producing assets associated with this acquisition is approximately 475 barrels of oil equivalent per day with a very low decline rate. Total estimated proved reserves are 3.7 million barrels of oil equivalent as of January 1, 2012.

Management has identified 105 gross drilling locations on the Virco acreage which is broken down as follows:

74 Marcellus drilling locations

31 Utica drilling locations

Upon the financial closing of this transaction, the company will have over 85,500 net acres in the liquids-rich Marcellus Shale and 81,800 net acres located within the Utica Shale.

Magnum Hunter Chairman and Chief Executive Officer Gary C. Evans commented, "We have been working on this acquisition for almost one year now. Our team is excited to bring on board the existing pool of employees of Virco to our combined organization in this region. Virco's leasehold acreage position is located in the States of Ohio and West Virginia, and fits extremely well with our existing acreage owned in this region.

"Additionally, we have identified over 100 new drillable locations with both Marcellus and Utica potential on a significant portion of this new leasehold being acquired at a very attractive price per acre. This new liquids-rich gas potential will have a significant impact to our Eureka Hunter midstream division as they will have the capability to provide gathering and transportation to processing facilities in West Virginia and/or Ohio. The southern part of the wet gas window in the Utica Play in Ohio appears to be some of the most prolific in the area. Recently drilled wells in this immediate region have had the highest initial production rates in the entire Utica Play.

"Our company has planned our first Utica test in the first quarter of 2013. With the combination of the recent improvement in natural gas prices this year from $2.00/mcf to approximately $3.50/Mcf, our new midstream cryogenic gas processing capabilities beginning in late November (will add approximately $1.25/mcf to our net price), and improving overall well economics in this region, this liquids-rich area becomes highly profitable. Management anticipates that this Division of the Company will garner a significant portion of our 2013 capital expenditure budget," Evans commented.


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