Magnum Hunter Resources Corp. is acquiring Appalachian Basin-focused NGAS Resources Inc. for about $98 million in common stock and assumed liabilities. The deal represents a 41% premium to NGAS shareholders.

Lexington, KY-based NGAS is to become a wholly owned subsidiary of Magnum Hunter. The transaction will combine NGAS acreage and expertise in the southern Appalachian Basin with Houston-based Magnum Hunter's stronger financial resources, NGAS said. The deal is expected to close by March 31.

Assets being acquired include:

"We have been studying the possibility of a business combination with NGAS for most of 2010," said Magnum Hunter CEO Gary C. Evans. "This transaction enables our combined enterprise to own high-quality, long-lived proved developed producing assets with significant development upside covering approximately 300,000 acres. We believe the combination provides tremendous value for both companies' shareholders."

Magnum Hunter said the deal gives it:

Each common share of NGAS will be transferred to Magnum Hunter for the right to receive 0.0846 of a share of Magnum Hunter common stock. The ratio, which is not subject to changes in market prices, was established based on an intraday price of $6.50 for Magnum Hunter stock, representing a value to NGAS shareholders of 55 cents/share, a 41% premium to the NGAS closing price on Dec. 23. Enterprise value of the deal is estimated to be $98 million. NGAS is a British Columbia corporation, and the transaction will be implemented as an arrangement under British Columbia law.

Magnum Hunter said it will issue 6.6 million shares, representing 8% of Magnum Hunter's fully diluted shares outstanding. The assumed liabilities will be refinanced under a new senior credit facility with an initial borrowing base of $120 million, to be provided by BMO Capital Markets Corp.

"At Closing, all financial measures are accretive to our shareholder base," Evans said. "Additionally, Magnum Hunter's upside exposure in one of our three existing core areas, the Appalachian Basin, is substantially increased with the addition of NGAS to our portfolio. Significant cost savings from duplicative business operations and anticipated synergies will create substantial value accretion for the combined entity. The Company's acquisition of NGAS essentially creates a long-dated call option in natural gas while we continue to develop some of our other high-return resource plays. We have been impressed with the operating team at NGAS including the land, geology, and engineering professionals and see this group assisting our future growth plans for the combined enterprise."

Also on Monday it was announced that Magnum 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.

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.

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