The funded acquisition price of approximately $239 million reflects closing adjustments for production, cash flows, capital costs, preferential rights, and title adjustments from the May 1, 2004 effective date through the closing date of July 30, 2004. The acquisition was funded with a combination of common equity issued by Magnum Hunter in late June 2004 and proceeds from borrowings under the Company's recently increased $480 million senior bank credit facility. Post closing, Magnum Hunter's unused availability under its senior bank credit facility is $257 million.
DeGolyer and MacNaughton ("D&M"), an independent reservoir engineering firm, has recently estimated that the properties acquired represent approximately 115 Bcfe of proved reserves (78% natural gas) including 66 proved undeveloped locations, up from 99 Bcfe of proved reserves estimated by D&M in June. Additionally, D&M has assigned another 5 Bcfe of probable reserves to these properties, which reflects 120 Bcfe of 2P reserves that equate to a present value (discounted at 10%) of $233 million.
In addition to the 465 producing oil and gas wells, Magnum Hunter has also acquired approximately 44,000 net acres of undeveloped leasehold mineral interests. Approximately $26 million of the $239 million purchase price has been allocated to this significant undeveloped mineral acreage position. Since the May 1, 2004 effective date, EnCana has drilled two operated wells and participated in two non-operated wells on the acquired properties.
Internally, Magnum Hunter's team of geologists and engineers has identified a substantial number of potential drilling locations, and estimate today a range of 50 to 70 additional Morrow formation locations that can be ultimately developed into proven reserves. Magnum Hunter has achieved an historical drill-bit finding and development cost in this core geographic area of $1.02 per Mcfe since inception of its 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 78 successful wells out of 80 attempted (98% success rate) since program inception in 1999. The Company has maintained a two-rig drilling program for the past 28 months on Magnum Hunter operated properties, in addition to participating in the drilling of new wells operated by other companies active in this region.
In conjunction with this property acquisition, Magnum Hunter 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.
Commenting on the closing, Mr. Gary C. Evans, Chairman, President and CEO of Magnum Hunter stated, "We continue to be impressed with the quality of this mineral acreage position as evidence by the additional proved reserves already booked by our engineering consultants. Our net purchase price per Mcfe, after assigning $26 million to undeveloped mineral lease acreage, has dropped to $1.85 per Mcfe. We anticipate this number will decline further to the $1.50 per Mcfe range by year-end. Magnum Hunter will increase to a third drilling rig in this area during late August to early September 2004 and will then add a fourth drilling rig to the program in January of next year."
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