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Magnum Hunter, Stone Partner in West Virginia

Magnum Hunter Resources Corp and Stone Energy Corp. said Monday they plan to jointly develop Marcellus Shale acreage in West Virginia. Separately Stone agreed to commit its share of output from the contract area to a Magnum Hunter pipeline subsidiary.

The contract area covers an existing mineral leasehold jointly held by the companies in Wetzel County. Financial terms were not disclosed.

Magnum Hunter subsidiary Triad Hunter LLC and Stone jointly would develop 1,925 acres and plan to drill 19 horizontal wells over the next two years. Earlier this year Stone and Triad drilled and completed two horizontal wells on a portion of the existing leasehold.

Stone also agreed to commit its share of production from the contract area to Eureka Hunter Pipeline System, which is operated by Magnum Hunter subsidiary Eureka Hunter Pipeline LLC.

"We are confident that this strategic alliance with Stone Energy will ensure our ability to more fully develop this area in a more efficient and prudent manner," said Triad President James W. Denny III. "Both companies realized that by combining our resources, we could each obtain a much greater value and improve efficiency in our respective leasehold positions by drilling a greater number of wells with longer lateral sections...

"This joint venture will benefit greatly due to the take-away capacity, processing and multiple market capabilities associated with our Eureka Hunter Pipeline system where 100% of these new anticipated gas volumes have now been dedicated."

The first 11 wells are expected to be completed by the partners in 2012 at an estimated capital cost of $47 million; the total combined capital costs associated with the contract area to be developed is estimated at more than $100 million.

Stone would act as the operator within the contract area and each company would own a half-stake in the project.

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