Magnum Hunter Boasts 23% Financial Increase in 2009
Magnum Hunter Resources announced operational and financial results for the three and twelve month periods ended December 31, 2009.
OPERATIONAL RESULTS FOR THE THREE MONTHS AND FULL YEAR ENDED DECEMBER 31, 2009
The Company's fiscal year ended December 31, 2009 average daily production rate of 703 Boe's per day (70% crude oil and ngl's) represented a 23% increase over fiscal year 2008 average daily production rate of 572 Boe's per day (73% crude oil and ngl's). Magnum Hunter's fourth quarter 2009 average daily production rate of 736 Boe's (71% crude oil and ngl's) exceeded the Company's third quarter 2009 average daily production rate of 586 Boe's by 150 Boe's per day, an increase of 26%. The increase in the Company's daily production rate during the fourth quarter of 2009 is a direct result of successful drilling activities during fiscal year 2009 in the Mohall Madison field of North Dakota and achieving enhanced levels of production from secondary recovery efforts in other Magnum Hunter producing fields, also located in North Dakota.
With final closing on the acquisition of Appalachian Basin focused Triad Energy and certain of its affiliates ("Triad") having occurred on February 12, 2010, Magnum Hunter's average daily production exit rate for the month ended February 28, 2010 was approximately 1,800 Boe's per day (70% crude oil and ngl's), a 145% increase over the Company's fourth quarter of 2009's average daily production of 736 Boe's.
Magnum Hunter drilled a total of thirty-three gross wells during the fiscal year 2009, with thirty two of these wells deemed commercial and one well deemed not commercial for an overall drilling success rate of 97%. Magnum Hunter replaced its fiscal year 2009 total production by a factor of twelve times (12x's), with an all-in finding and development cost of approximately $4.50 per Boe.
Magnum Hunter currently has one drilling rig contracted to spud the Company's first Eagle Ford Shale crude oil prospect on or about May 1, 2010, with a second Eagle Ford Shale crude oil prospect to be immediately spudded after drilling total depth (TD) of the first well. Additionally, the Company is proceeding with expansion plans regarding the increased capacity of the Eureka Hunter pipeline system located in northwestern West Virginia such that the first of two horizontal Marcellus Shale prospects can be drilled this year. None of Magnum Hunter's currently identified drilling locations on either the Company's approximate 20,000 Eagle Ford Shale gross lease acres or the Company's approximate 50,000 gross Marcellus Shale prospective acres located in West Virginia have been previously booked as proved reserves by Magnum Hunter.
FINANCIAL RESULTS FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2009
Magnum Hunter reported a net loss of $7.3 million, or ($0.18) per basic and fully diluted shares outstanding for the fourth quarter of 2009, as compared to 2008's fourth quarter net loss of $3.6 million, or ($0.10) per basic and fully diluted shares outstanding. The loss reported in the fourth quarter of 2009 is primarily attributable to the substantial volatility in the realized price for crude oil and natural gas. Total revenues for the three months ended December 31, 2009 and December 31, 2008 were $3.5 million and $2.4 million, respectively.
The Company's fourth quarter 2009 net loss of $7.3 million, or ($0.18) per basic and fully diluted shares outstanding included the following non-recurring and non-cash charges; (i) exploration expense of $504 thousand, or ($0.01) per basic and fully diluted shares, (ii) an impairment of oil & gas properties charge of $634 thousand, or ($0.02) per basic and fully diluted shares, (iii) non-cash general and administrative charges associated with employee stock options and restricted common share grants for a total of $995 thousand, or ($0.03) per basic and fully diluted shares, (iv) amortization of deferred financing costs equaling $924 thousand, or ($0.02) per basic and fully diluted shares, and (v) a loss on derivative contracts in the amount of $1.4 million, or ($0.04) per basic and fully diluted shares. Adjusting for these non-recurring and non-cash charges, Magnum Hunter's fourth quarter 2009 net loss would have been improved by $0.12 per basic and fully diluted shares outstanding, or to ($0.06) per basic and fully diluted common share.
Magnum Hunter reported a net loss of $15.1 million, or ($0.39) per basic and fully diluted shares outstanding for the twelve months ended December 31, 2009 as compared to a net loss of $7.6 million, or ($0.21) per basic and fully diluted shares for the twelve months ended December 31, 2008. The net loss for the twelve months ended December 31, 2009 is also attributable to the aforementioned substantial decline in crude oil and natural gas prices during fiscal year 2009 versus fiscal year 2008, plus the following non-recurring and non-cash charges; (i) exploration expense of $896 thousand, or ($0.02) per basic and fully diluted shares, (ii) an impairment of oil & gas properties charge of $634 thousand, or ($0.02) per basic and fully diluted shares, (iii) a total of $2.8 million, or ($0.07) per basic and fully diluted shares for non-cash general and administrative charges associated with employee stock options and restricted common share grants, (iv) amortization of deferred financing costs equaling $1.2 million, or ($0.03) per basic and fully diluted shares, and (v) an unrealized loss on derivative contracts in the amount of $2.4 million, or ($0.06) per basic and fully diluted shares. Adjusting for these non-recurring and non-cash charges, Magnum Hunter's full year 2009 net loss would have been improved by $0.20 per basic and fully diluted shares outstanding, or to ($0.19) per basic and fully diluted common share.
Operating cash flow (before changes in working capital accounts) generated by Magnum Hunter during the twelve months ended December 31, 2009 was approximately $2.6 million compared to $4.1 million generated by the Company during the twelve months ended December 31, 2008.
Mr. Gary C. Evans, Chairman and CEO of the Company, commented, "We are well on our way to building a premier independent oil and gas company. As of this writing, our market capitalization is approaching $200 million, up from $10 million in May of last year. Our share price has increased more than 800% and MHR has been the best performing stock in the sector since May 2009. Your management team has completed three acquisitions that have assisted in fueling this growth. They are as follows:
- July 2009 - East Chalkley Acquisition - $1.7 million
- September 2009 - Sharon Resources - $2.35 million
- February 2010 - Triad Energy Corporation - $81 million
We were successful late in the year in refinancing all of our Company's existing senior indebtedness from CIT to a much larger and more traditional senior bank credit facility of up to $150 million with BMO (Bank of Montreal) and Capital One. In addition, we have raised approximately $50 million of total equity over the last ten months including (i) $25 million of common stock, (ii) $15 million of Series B Convertible Preferred Stock issues to the prior lenders of Triad, and (iii) $10 million of Series C Perpetual Preferred Stock (MHR-PC) which is non-dilutive because it does not convert into our common stock. The Company had notable success in further developing certain existing oil and gas properties located in North Dakota, Louisiana and Texas. A total of 33 gross wells were drilled in 2009 with a 97% success rate. These wells had a direct correlation to the 99% increase in our year-end proved reserves to 6.2 million barrels of oil equivalent. Additionally, we have transformed the company in the field to a predominately operated entity versus non-operated. At last count, we operated 2,079 wells as compared to only two operated wells at the beginning of 2009. Our primary focus in 2010 will be in three unconventional resources plays which are:
- Appalachia - Marcellus Shale/Huron
- South Texas - Eagle Ford Shale
- North Dakota - Williston/Bakken/Three Forks
New drilling is about to commence on two unbooked locations on our approximate 20,000 gross mineral acreage position in the oil leg of the Eagle Ford Shale. Additionally, the completion and expansion of take-away capacity on our Eureka Hunter pipeline system in West Virginia is on track to allow Magnum Hunter to spud our first two Marcellus Shale horizontal wells this year. The addition of approximately 1,000 Boe's to the Company's daily production rate with the recent closing of the Triad acquisition in February exposes the Company to a new unconventional resource play located in the Appalachia region. Magnum Hunter's production profile today, after adding the Triad acquisition, is approximately 70% crude oil. Our position in the Eagle Ford Shale and the Williston/Bakken/Three Forks resources plays are predominately oriented for crude oil and our leasehold position in the Williston Basin of North Dakota and the Marcellus Shale of West Virginia are predominately HBP ("held by production"). This means we have no financial pressure to drill any new wells in order to meet mineral lease expiration periods on primary terms. Many of our competitors are not in this unique position, which is especially critical as we enter an uncertain commodity price environment with very low North American natural gas prices. We continue to see a tremendous amount of deal flow from the mergers and acquisitions market, however, our primary focus in the short term will be successfully proving our unconventional resource plays. Should an attractive and accretive acquisition opportunity present itself, we will certainly analyze the assets being offered. However, we will also be mindful of the tremendous value creating opportunities that remain in our existing portfolio and would be hesitant to pursue any opportunity which would either dilute or discount Magnum Hunter's increasing recognition as an up and coming North American unconventional resource company."
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