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Magnum Hunter Adds to West Virginia Holdings

Magnum Hunter Resources Corp. subsidiary Triad Hunter LLC is acquiring oil and gas properties and leasehold mineral interests in Wetzel and Lewis counties, WV, in the Marcellus Shale from Oklahoma City-based PostRock Energy Corp.

Triad Hunter is paying $39.75 million in a combination of $19.875 million cash and 3.2 million newly issued restricted common shares. The two-phase closing of the deal is expected to be completed by mid-January. The first closing is for the sale of the Wetzel County assets for $28 million and the second closing is for the sale of the Lewis County assets for $11.75 million.

"Since our initial investment in this region beginning with the acquisition of Triad Hunter earlier this year, we have continued to expand our company's exposure to this resource play with a primary focus in West Virginia," said CEO Gary C. Evans. "This has been accomplished via a combination of new leases, farm-ins, joint ventures and now this acquisition, which further expands our operations into two additional counties.

"We plan to be one of the most active drillers in northwest West Virginia in 2011 and have made the financial commitments in the midstream area to realize the greatest value possible from each molecule of natural gas produced. All of these new assets are either within close proximity to our existing Eureka Hunter pipeline system or adjacent to our expansion plans for next year."

The properties will be 100% operated by Triad Hunter and consist of eight proved developed producing wells, six developed non-producing wells (shut-in), two wells behind pipe, and 15 proved undeveloped locations. As of Nov. 1, the assets had total proved reserves of approximately 24.3 Bcfe (11% proved developed producing) with net production of approximately 905 Mcfe/d (100% natural gas), according to Magnum Hunter. The company's in-house reservoir engineers estimate the Marcellus Shale probable reserves of these assets total 165.4 Bcfe.

The total acreage being acquired by Triad Hunter includes 11,378 gross acres (8,652 net acres) in Wetzel (40% of gross acres and 27% of net acres) and Lewis counties. The majority of future lease expirations across the acreage being acquired can be extended through a manageable drilling program, which is planned for early 2011, Magnum Hunter said. The acquired acreage is near Triad Hunter's existing West Virginia Marcellus Shale exposure, more specifically acreage located in Tyler, Pleasants and Doddridge counties, WV.

PostRock said it will use sale proceeds to repay debt secured by the assets being sold. "This sale represents another critical step in our strategy to improve our balance sheet through the reduction of debt and to sharpen our focus on our core area of operations in the Cherokee Basin," said PostRock CEO David C. Lawler.

PostRock is active in the Cherokee Basin of Kansas and Oklahoma. It owns and operates more than 2,800 wells and nearly 2,200 miles of gas gathering lines in the basin. In addition, it owns 1,100 miles of interstate gas pipelines in Oklahoma, Kansas and Missouri.

Magnum Hunter recently announced successful well results in West Virginia (see Shale Daily, Dec. 27).

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