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Magnum Hunter to Construct Gas Processor in West Virginia

Magnum Hunter Resources Corp. said Friday it plans to fund construction of a 200 MMcf/d capacity cryogenic natural gas processing plant to serve shale gas producers in the West Virginia portion of the Marcellus Shale.

The plant, which is to be built in the northwestern part of the state, would treat and process natural gas liquids transported on Magnum Hunter's Eureka Hunter Pipeline System.

"With our first phase of the Eureka Hunter pipeline system going operational in a few days, the purchase of this plant fulfills our goal of becoming a fully integrated producer, gas gatherer and processor in this region," said CEO Gary C. Evans. "Natural gas to be produced from our 50,000 net acres in the Marcellus Shale natural gas resource play of northwestern West Virginia and Ohio is highly liquids-rich, in the 1,200 Btu to 1,400 Btu range."

Under the terms of the contract, installation and hookup of the facility would begin once the new cryogenic processing plant is delivered, which is anticipated in October.

"New development in this region of the Marcellus Shale is accelerating rapidly," said Evans. "Magnum Hunter intends to drill a minimum of 12 horizontal Marcellus Shale wells in fiscal year 2011.

"This new plant allows for our wholly owned subsidiary, Eureka Hunter Pipeline, to not only transport and process Magnum Hunter's equity natural gas, but also become an outlet for existing shut-in or curtailed gas owned by other producers in the area seeking alternative marketing opportunities."

The Houston-based producer plans to fund the plant's purchase using cash on hand and debt. Magnum Hunter's available liquidity was about $55 million as of Dec. 15.

In September a unit of Magnum Hunter and DCP Midstream Partner LP said they would serve gas producers in West Virginia and eastern Ohio through a gas gathering joint venture (see Daily GPI, Sept. 20).

The initial capacity of the planned gathering system, which was to be completed by the end of this year, was estimated at about 200 MMcf/d. The first phase of the system allows Magnum Hunter to flow gas discovered in both its Weese Hunter No. 1001 and No. 1002 wells to sales via a tap to Dominion Field Services. It also provides services to third-party producers in the area.

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