Answering the call for increased domestic natural gas production in the light of a tight natural gas supply market, Magnum Hunter said last week that it upped its gas production from an average of 73,424 Mcf/d during the fourth quarter of 2001 to 130,655 Mcf/d for the fourth quarter ended Dec. 31, 2002, partly due to a major acquisition.
For its 2002 average, the Irving, TX-based company posted 130,639 Mcf/d, almost double its 2001 output of 68,112 Mcf/d. Magnum Hunter’s net income was $3.1 million ($0.04 per diluted share) for the fourth quarter, compared to a net loss of $8.8 million ($0.24 per diluted share) for the 2001 equivalent. However, the company noted that a non-cash commodity hedging adjustments totaling $1.2 million (pre-tax) reduced reported fourth quarter 2002 net income accordingly.
Outlining his company’s whirlwind activity over the last year, CEO Gary C. Evans, said that “starting with the Prize Energy acquisition completed last March that more than doubled the size of the company, we really haven’t slowed down. We accomplished a new listing on the New York Stock Exchange, sold over $100 million in non-core assets to pay down debt, put together a new $500 million senior bank credit facility, placed $300 million in senior unsecured 10-year notes, formed a new partnership with General Electric Capital Corp., initiated a significant share repurchase program, added new equity research coverage and significantly expanded our institutional shareholder base; all the while we were conducting an active drilling program that proved to be very successful.”
The company had total revenues for the fourth quarter of 2002 of $73.7 million, an increase of 154% from revenues of $29.0 million reported for the fourth quarter of 2001. Magnum Hunter also reported an operating profit of $19.7 million during the fourth quarter of 2002, representing an increase of $20.4 million over the operating loss of $644,000 reported in the 2001 period.
Total production volumes totaled 17.9 Bcfe or 194.1 MMcfe/d for the fourth quarter of 2002, an increase of 96% over actual volumes reported for the equivalent quarter in 2001 of 9.1 Bcfe or 98.9 MMcfe/d. An approximate 10% decline in actual equivalent production when compared to the third quarter of 2002 was primarily attributable to previously announced non-core property sales and certain producing property shut-ins in the Gulf of Mexico attributable to Tropical Storm Isadore.
Magnum Hunter realized 4Q 2002 gas prices of $3.42/Mcf, compared to $2.68/Mcf during the fourth quarter of 2001, after the effect of commodity price hedges in place during both periods. Oil prices realized were $24.46/bbl for the fourth quarter of 2002, compared to the $21.27/bbl realized during the fourth quarter of 2001, after the effect of commodity price hedges in place during both periods.
For full year 2002, net income was $15.5 million ($0.25 per diluted share) as compared to net income of $13.5 million ($0.36 per diluted share) for the fiscal year 2001. Total revenues during 2002 were $265.9 million compared to $152.8 million during the 2001 period, a 74% increase. The company posted an operating profit of $68.9 million during 2002, representing an increase of $20.8 million or 43% over the 2001 period.
Oil and natural gas production increased 113% to 70.9 Bcfe during the fiscal year 2002 compared to 33.3 Bcfe for the fiscal year 2001. Natural gas production was 47.7 Bcf during 2002 compared to 24.9 Bcf for 2001.
“Magnum Hunter achieved an overall finding and development cost of $0.93 per Mcfe in 2002 and replaced 890% of our 2002 production,” Evans added. “As we enter 2003, your company has the most attractive asset portfolio, the largest drilling inventory both onshore and offshore, and the strongest financial position we’ve ever had in our history. We are primed for internal growth through a combination of exploration and exploitation projects that are currently ongoing and we believe the industry outlook today is the best it has been in decades.”
Last Monday, the E&P company updated some of its Gulf of Mexico activity (see Daily GPI, March 25). The company reported that new production has commenced from its West Cameron Block 426 located on the Outer Continental Shelf. In addition, Magnum Hunter anticipates the start of new production from West Cameron Block 416 later this week, Ship Shoal 28 next month and West Cameron Block 428 within ten weeks.
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