Magnum Hunter Acquires Acreage in Southeast New Mexico

Eddy & Lea Counties, New Mexico
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Magnum Hunter Resources has executed a Purchase and Sale Agreement to acquire $243 million of oil and gas properties located in the state of New Mexico from Tom Brown, Inc., a subsidiary of EnCana Corporation. The majority of the properties to be acquired are located in Lea and Eddy Counties of Southeast New Mexico and are in the vicinity of Magnum Hunter's successful Morrow/Atoka/Strawn drilling program.

This geographic area has been Magnum Hunter's most active and successful onshore area of focus in recent years. The company has participated in 66 successful wells out of 68 attempted (97% success rate) since program inception in 1999. The company has maintained a two-rig drilling program for the past 26 months on Magnum Hunter operated properties, in addition to participating in the drilling of new wells operated by other companies active in this region.

DeGolyer and MacNaughton, an independent reservoir engineering firm, has estimated for Magnum Hunter that the properties to be acquired represent approximately 99 Bcfe of proved reserves (77% natural gas) including 45 proved undeveloped locations. Internally, Magnum Hunter's team of geologists and engineers has identified a substantial number of additional locations, and estimate today that a range of 50 to 70 additional Morrow formation locations can be ultimately developed into proven reserves. Magnum Hunter's internal reserve estimates provide for 50 Bcfe of proved, probable and possible (3P) reserves from these additional wells. These projections are based upon similar results achieved by Magnum Hunter from the Company's earlier Burlington Resources Permian Basin acquisition in 1997 and the Mallon Resources property acquisition completed in 2001. Magnum Hunter has achieved an historical drill-bit finding & development cost in this core geographic area of $1.02 per Mcfe since inception.

In addition to the 458 producing oil and gas wells, Magnum Hunter will also be acquiring approximately 44,000 net acres of undeveloped leasehold mineral interests. Approximately $26 million of the $243 million purchase price has been allocated to this significant undeveloped mineral acreage position.

The properties to be acquired currently produce approximately 18 Mmcf per day of natural gas and 870 Bbls per day of hydrocarbon liquids, or approximately 23 Mmcf of equivalent production per day. This represents a 72% increase to Magnum Hunter's existing 32 Mmcfe per day of production from existing properties in Southeastern New Mexico. Additionally, it represents an increase of approximately 11% in the Company's current total net daily production. This acquisition will more than double Magnum Hunter's well count and mineral acreage position in Southeast New Mexico.

The acquisition is subject to customary closing conditions including preferential rights, title, and environmental inspections on all properties being acquired. Closing is anticipated on or before July 30, 2004, with an effective date of May 1, 2004.

Magnum Hunter intends to finance the acquisition through the issuance of 15,000,000 shares of common stock plus borrowings under its credit facility. Magnum Hunter has requested, and its lead commercial bank, Deutsche Bank, is recommending to its bank syndicate, a $100 million increase in the borrowing base under its credit facility. Magnum Hunter is targeting availability of $105 million under the credit facility and a debt-to-capitalization ratio of between 51% and 54% after completing financing of the acquisition.

In conjunction with this property acquisition, Magnum Hunter has entered into 20,000 Mmbtu per day of new 2005 natural gas swaps at $6.25 per Mmbtu and new 2006 natural gas cost-less collars with a floor price of $5.25 per Mmbtu and a ceiling price of $6.30 per Mmbtu. On the crude oil side, the Company has entered into approximately 1,000 Bbls per day of new 2005 crude oil swaps at $34.90 per barrel and new 2006 crude oil cost-less collars with a floor of $30.00 per barrel and a ceiling price of $35.85 per barrel.

Mr. Gary C. Evans, Chairman, President and CEO of Magnum Hunter stated, "Our management team has been chasing this group of assets for over three years. While these assets have gone through a number of different owners during this period, minimum development on the properties has occurred. Magnum Hunter's professional team of geologists and engineers has focused the Company on the Morrow, Atoka and Strawn formations in this geographic region. With the combination of recent farm-ins from major companies plus the properties being acquired in this acquisition, Magnum Hunter will become one of the largest producers and mineral acreage owners in Southeastern New Mexico."

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