Magnum Hunter Resources Corp. agreed to purchase the remaining mineral rights of bankrupt aluminum producer Ormet Corp. in Monroe County, OH, and Wetzel County, WV, for $22.3 million, according to documents filed in a Delaware bankruptcy court last week.
The acquisition adds to Magnum's core assets in southeast Ohio and northern West Virginia, where it has continued to delineate its acreage (see Shale Daily, May 12). Ormet in early 2013 filed for Chapter 11 bankruptcy protection and this year said it was trying to sell its aluminum smelting plant in Monroe County, which straddles the West Virginia border.
Magnum was already drilling wells on Ormet's property and with the approval of a bankruptcy court, the acquisition would allow it access to the oil and gas rights underneath the plant, recently sold to Niagara Worldwide LLC.
Although no formal announcement has been made by the company, analysts at Topeka Capital Markets estimate that Magnum is acquiring 12-20% royalties across 1,500-2,000 net acres.
"While the details have yet to be released, we believe this is a highly attractive acquisition based on our estimates, especially considering the core of the dry gas Utica appears to be in Monroe County, Ohio and Wetzel, Marshall, Tyler counties in West Virginia," analysts said.
Magnum has increasingly leaned on the Appalachian Basin to drive up production volumes and improve cash flow, with the Marcellus/Utica shales now accounting for 70% of proved reserves (see Shale Daily, Jan. 15). In the last year or so, the company has sold $600 million of its noncore assets to acquire additional mineral rights in the basin (see Shale Daily, April 22; April 4, 2013; Dec. 12, 2013).