Magnum Hunter Announces 2004 Proved Reserves of 1.01 Tcfe
Magnum Hunter Resources reports its total proved reserves at December 31, 2004, as fully engineered by the Company's independent petroleum consultants, DeGolyer and MacNaughton and Cawley Gillespie & Associates, Inc. On a gas equivalent basis, total proved reserves were 1.01 trillion cubic feet equivalent ("Tcfe"), comprised of 610.1 billion cubic feet ("Bcf") of natural gas (61% of the total) and 66.1 million barrels ("MBbl's") of crude oil and natural gas liquids (39% of the total). Approximately 730.7 Bcfe (73% of the total) of the Company's year-end 2004 total proved reserves were classified as proved developed, with approximately 275.9 Bcfe (27% of the total) classified as proved undeveloped.
The Company's 2004 year-end total proved reserves of 1.01 Tcfe represents a 20% increase over the 838.4 Bcfe of total proved reserves reported by Magnum Hunter at December 31, 2003. The Company successfully added approximately 248.6 Bcfe of total proved reserves during 2004 from all sources, which replaced 309% of the approximately 80.4 Bcfe in production.
Magnum Hunter's calendar year 2004 production estimate of 80.4 Bcfe (70% natural gas) represents a 10% increase over the Company's 2003 production of 73.1 Bcfe (68% natural gas). The Company's reserves life index at year-end 2004 increased by one year to 12.5 years from 11.5 years at year-end 2003.
Full-Year 2004 Finding and Development Costs
The unaudited all sources finding and development cost for total proved reserves added by the Company during fiscal 2004, based upon total capital expenditures of approximately $523.2 million, was $2.11 per Mcfe.
Before-Tax PV-10% Calculation
Magnum Hunter's total proved reserves of 1,006.6 Bcfe at December 31, 2004 had a net present value (discounted at 10%) before federal income taxes, of approximately $2.0 billion. The unescalated year-end 2004 commodity prices used for calculating this present value were $6.19 per MMbtu for natural gas and $43.46 per Bbl for crude oil, before adjustments for pertinent pricing differentials.
2004 Drilling Results
Magnum Hunter participated in the drilling of 175 new wells during the twelve months ended December 31, 2004, of which 139 were classified as development and 36 were deemed exploratory. Of these 175 new wells drilled during fiscal-year 2004, 167 (137 development and 30 exploratory) were deemed successful and 8 (2 developmental and 6 exploratory) were plugged and abandoned, which provided for an overall success rate of 95% (99% developmental success and 83% exploratory success). Since entering the Gulf of Mexico in 1999, Magnum Hunter has successfully completed 109 wells out of 132 new wells attempted, for an overall success rate of 83%.
Recent Announcement To Be Acquired by Cimarex Energy
On January 26, 2005, Magnum Hunter and Cimarex Energy Co. (NYSE: XEC) announced that their respective boards of directors had approved an agreement and plan of merger that provides for the acquisition of Magnum Hunter by Cimarex. Closing is anticipated before the e
nd of the second quarter in 2005, subject to customary regulatory approvals. Under the terms of the proposed agreement, Magnum Hunter shareholders will receive 0.415 shares of Cimarex common stock for each share of Magnum Hunter common stock that they own. The merger is expected to be non-taxable to the shareholders of both companies. In addition to the merger consideration and prior to closing, Magnum Hunter intends to distribute its ownership interest in TEL Offshore Trust (Nasdaq: TELOZ) to its common stockholders as a special dividend.
As a result of the merger transaction and based on the 87.1 million Magnum Hunter common shares currently outstanding, Cimarex expects to issue approximately 36.1 million common shares to Magnum Hunter's common stockholders. On that basis, it is anticipated that after closing, the combined company would have approximately 78 million basic shares outstanding. Cimarex shareholders would own 53.6 percent and Magnum Hunter shareholders will own 46.4 percent of the combined entity.
Commenting on Magnum Hunter's reserve numbers and production growth for 2004, Mr. Gary C. Evans, President and Chief Executive Officer, stated, "Our Company was again successful at 'bucking the trend' throughout our industry by growing its proved reserves over 20% to an important milestone of just over one trillion cubic feet equivalent. We were able to replace over 300% of our production and grew daily oil and gas production by 10% in 2004. More important though, is how this success should continue to augment the growth profile of the new combined corporate structure of Cimarex Energy and Magnum Hunter when the merger of our two companies is completed this year."
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