Magnum Hunter's Production Soars in 2010
Magnum Hunter announced operational and financial results for the three and twelve month periods ended December 31, 2010.
- Substantial growth in reserves (+116%) and production (+133%)
- Substantially expanded lease acreage positions in the Eagle Ford and Marcellus shale plays
- Completed asset acquisition of Triad Energy for $81 million
- Agreed to acquire NGAS Resources in a stock and assumed debt transaction valued at $98 million (Appalachia)
- Agreed to acquire NuLoch Resources in a stock transaction valued at $327 million (Williston Basin)
- Divested non-core Cinco Terry asset for $21.5 million
- Issued $100 million in Perpetual Preferred Stock (non-convertible)
- Successful results in the Marcellus and Eagle Ford drilling programs
- Began trading on the NYSE
Operational Results for the Three Months and Full Year Ended December 31, 2010
Production for the fourth quarter of 2010 was approximately 152 mboe (66% crude oil and NGLs), or 1,652 boe per day, representing a 125% increase compared with production of approximately 68 mboe (71% crude oil and NGLs), or 736 boe per day, in the fourth quarter of 2009. Fourth quarter 2010 production was negatively impacted by the October 1, 2010 sale in the amount of $21.5 million of the Company's 10% non-operated working interest in the Cinco Terry field in West Texas, which accounted for approximately 470 boe per day of production at the time of the sale. However, due to the Company's successful drilling in both the oil leg of its Eagle Ford Shale play of south central Texas and the liquids rich Marcellus Shale play of northwest West Virginia, we were able to more than replace this production by year end. Magnum Hunter's average daily production rate as of December 31, 2010 was 2,732 Boe per day (55% crude oil) and the Company is currently producing in excess of 3,000 boe per day (57% crude oil). Upon closing of the announced acquisitions of NGAS Resources, Inc. (NASDAQ:NGAS - News) ("NGAS") and NuLoch Resources, Inc. (TSX:NLR - News) (OTCQY: NULCF) ("NuLoch"), Magnum Hunter expects daily production to increase to over 6,000 boe per day (56% crude oil) and anticipates an exit rate in 2011 exceeding 10,000 boe per day.
The Company's fiscal year ended December 31, 2010 production increased 133% to 597 mboe from 257 mboe for the year ended December 31, 2009. Production for 2010 was approximately 64% oil and NGLs compared to 70% oil and NGLs for 2009. The change in the percent of oil and gas produced was primarily due to the acquisition of the assets of Triad Energy, which closed in February 2010. Our average daily production on an equivalent basis was 1,636 boe per day during 2010 compared to 703 boe per day for 2009, representing an overall increase of 133%, or 933 boe per day.
We anticipate our fiscal year 2011 capital expenditure budget to be approximately $150 million for Magnum Hunter with the capital being predominantly allocated to the Company's drilling in unconventional resource plays, including the oil leg of the Eagle Ford Shale play of central and south Texas ($65 million to drill 7 net wells) and the liquids rich portion of the Marcellus Shale play in northwest West Virginia ($60 million and 12.5 net wells). The Company intends to expand its overall capital budget once the acquisition of NGAS and NuLoch are ultimately completed.
Financial Results for the Three Months Ended December 31, 2010
Magnum Hunter reported a net loss of $1.9 million, or ($0.03) per basic and diluted share outstanding, for the fourth quarter of 2010, as compared to 2009's fourth quarter net loss of $7.3 million, or ($0.16) per basic and diluted share outstanding. Adjusting for non-recurring and non-cash charges, Magnum Hunter's fourth quarter 2010 net loss was approximately $2.7 million, or ($0.04) per basic and diluted common share. The Company's fourth quarter 2010 net loss included the following non-recurring and non-cash charges: (i) non-cash general and administrative expenses associated with employee compensation for a total of $2.4 million; (ii) non-recurring general and administrative charges related to employee severance compensation of $0.3 million; (iii) non-cash exploration and impairment expense of $0.5 million; (iv) unrealized loss on derivative contracts in the amount of $1.9 million; (v) non-recurring acquisition expenses of $0.8 million; and (vi) a gain on the sale of the Cinco Terry property of $6.7 million.
Financial Results for the Twelve Months Ended December 31, 2010
Magnum Hunter reported a net loss of $16.3 million, or ($0.25) per basic and diluted share outstanding for the full fiscal year 2010, as compared to the net loss of $15.2 million for the full fiscal year 2009, or ($0.39) per basic and diluted share outstanding. Adjusting for non-recurring and non-cash charges, Magnum Hunter's fiscal year 2010 net loss was approximately $3.9 million, or ($0.06) per basic and diluted common share. The Company's fiscal year 2010 net loss included the following non-recurring and non-cash charges: (i) non-cash general and administrative expenses associated with employee compensation for a total of $11.3 million; (ii) non-recurring general and administrative charges of $0.8 million; (iii) non-cash exploration expense of $1.6 million; (iv) unrealized loss on derivative contracts in the amount of $3.0 million; (v) non-recurring acquisition expenses of $2.2 million; and (vi) a gain on the sale of the Cinco Terry property of $6.7 million.
Capital Expenditures and Liquidity
Magnum Hunter's liquidity position continues to improve through a combination of increased cash flow, expansion of our senior commercial bank facility, completion of the full funding ($100 million) of our Series C Perpetual Preferred Stock (non-convertible into common), and the sale of certain non-core assets. Following the anticipated closing of the NGAS and NuLoch transactions, we anticipate the Company's borrowing base on its senior commercial bank facility to be approximately $145 million. After funding its fiscal year 2011 capital program to date, the Company's liquidity continues to be approximately $45 million as of February 16, 2011. Magnum Hunter believes it has adequate resources to meet its planned expenditures under its capital budget for fiscal year 2011. The Company has continued to strengthen its capital structure as its net debt/capitalization ratio declined to 16% as of December 31, 2010.
Mr. Ronald D. Ormand, Executive Vice President and Chief Financial Officer of Magnum Hunter Resources Corporation, commented, "We are very pleased with the significant financial and operational progress made in 2010. Our focused strategy of targeting three of the highest rate of return unconventional shale plays in the United States has positioned the Company for sustained growth and ultimate profitability. The Company was able to substantially increase reserves and cash flow, without the full impact of our drilling program which did not begin to affect our results until the fourth quarter of 2010. However, we will have the benefit of a full year of our drilling program in 2011. Since we have built the Company to operate as a much larger entity, we have completed substantially all of our additions to general and administrative costs; thus, our increasing revenue from production growth will allow us to substantially improve operating margins and profitability as we move through 2011. The increasing scale of our operations has also led to an improved cost of capital, a much stronger balance sheet and improved liquidity. Our existing liquidity, as well as our ability to access lower cost capital, will allow us to sufficiently fund our capital expenditure program budgeted for 2011. Going forward, Magnum Hunter is well positioned to benefit from the growth foundation our management team has established over the last eighteen months. We are most anxious to begin the integration of the assets and people from both the NGAS and NuLoch acquisitions currently pending."
- As US Shale Drillers Suffer, Even The Bankrupt Keep Pumping Oil (Apr 01)
- Shale's Running Out of Survival Tricks as OPEC Ramps Up Pressure (Dec 28)
- Magnum Hunter Latest Oil Producer To Seek Bankruptcy (Dec 15)