Magnum Hunter Resources Inc. has completed the acquisition of oil and natural gas assets in New Mexico from Tom Brown Inc., an EnCana Corp. subsidiary (see Daily GPI, June 22). The properties, which double Magnum Hunter’s holdings in the state, are located in Lea and Eddy counties in southeast New Mexico, in the general vicinity of its Morrow/Atoka/Strawn drilling program.

The funded acquisition price of $239 million reflects closing adjustments for production, cash flows, capital costs, preferential rights, and title adjustments from the May 1 effective date through the closing date of July 30. The acquisition was funded with a combination of common equity issued by Magnum Hunter in late June 2004 and proceeds from borrowings under the company’s recently increased $480 million senior bank credit facility. Post closing, Magnum Hunter’s unused availability under its senior bank credit facility is $257 million.

DeGolyer and MacNaughton (D&M), an independent reservoir engineering firm, recently estimated that the properties acquired represent 115 Bcfe of proved reserves (78% natural gas) including 66 proved undeveloped locations, up from 99 Bcfe of proved reserves estimated by D&M in June. Additionally, D&M has assigned another 5 Bcfe of probable reserves to these properties.

In addition to the 465 producing oil and gas wells, Magnum Hunter also acquired 44,000 net acres of undeveloped leasehold mineral interests.

In conjunction with the acquisition, Magnum Hunter entered into 20,000 MMBtu/d of new 2005 natural gas swaps at $6.25/MMBtu and new 2006 natural gas cost-less collars with a floor price of $5.25/MMBtu and a ceiling price of $6.30/MMBtu. On the crude oil side, the company entered into 1,000 bbl/d of new 2005 crude oil swaps at $34.90/bbl and new 2006 crude oil cost-less collars with a floor of $30/bbl and a ceiling price of $35.85/bbl.

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