Magnum Hunter Resources Corp., which has been on the prowl for unconventional gas and oil resources for several months, on Wednesday agreed to pay $325 million to acquire Bakken Shale producer NuLoch Resources Inc.
The C$2.50/share offer to Calgary-based NuLoch, unanimously approved by the boards of both companies, is 19% higher than its share price at market close on Tuesday.
Magnum Hunter CEO Gary Evans said the company looked at several transactions in the Williston Basin over the past 18 months before setting its sights on NuLoch.
NuLoch “stood out above the rest and presented the type of growth opportunities we have been seeking,” said Evans. “This transaction adds significantly to our ‘three-legged stool’ business model of having unconventional resource plays to explore for liquids-rich hydrocarbons across three regions in North America.”
Magnum Hunter has become a big-time shale hunter after bagging two deals late last year that built its Marcellus Shale leasehold to close to 315,000 net acres (see Shale Daily, Dec. 28, 2010). Those deals added to a bevy of unconventional resource potential, with a 45,000-net acre leasehold in the New Albany Shale and another 24,000 net acres in the Eagle Ford play.
On Tuesday Magnum Hunter reported that it grew total proved reserves in 2010 by 116%, with the value of reserves 171% ahead of year-ago numbers (see Shale Daily, Jan. 19). The latest acquisition will contribute to the company’s annual output, said Evans.
“The acquisition of NuLoch and its oil production component is especially compelling as we watch world crude oil prices again nearing $100/bbl,” he said. “NuLoch’s 267 net identified Williston Basin drilling locations offer attractive rates of return in today’s operating environment. Fiscal year 2011 will see substantial growth in Magnum Hunter’s daily production rates and proved reserves bookings as we concentrate our efforts on creating significant incremental value for our shareholders.
“We are now anticipating an exit rate exceeding 10,000 boe/d for 2011. At closing of the NuLoch transaction, all financial measures are anticipated to be accretive to our shareholders. We have been most impressed with the entire operating team Glenn Dawson has assembled at NuLoch and are anxious to work with him and this talented group on future growth plans for the combined enterprise.”
NuLoch CEO R. Glenn Dawson noted that Magnum Hunter “has a superb management team that will guide development in three leading North American shale plays: Marcellus, Eagle Ford and now in the Bakken-Three Forks Sanish.”
NuLoch’s focus is in North Dakota and Saskatchewan, predominately in the Bakken-Three Forks Sanish formations of the Williston Basin, which is in the United States and in Canada. It has stakes in about 67 wells with productive capacity and six drilling rigs currently drilling wells.
The producer has assembled around 71,000 net acres total in its Williston Basin portfolio, with close to 33,000 net acres in Divide and Burke counties, ND, and close to 38,700 net acres in southeastern Saskatchewan. In addition NuLoch owns about 50,700 net acres of producing properties in Alberta.
Because the corporation is registered in Alberta, the purchase requires a Canadian Plan of Arrangement to complete the transaction. This type of merger plan requires two-thirds vote for approval of the transaction by the NuLoch common shareholders and a favorable Final Order by the Court of Queens Bench of Alberta. Magnum Hunter said it has obtained “lock-up” agreements to vote for the transaction from existing NuLoch shareholders, including management, representing close to 38% of the outstanding shares. NuLoch soon intends to distribute a proxy statement to all common shareholders announcing a shareholder meeting to consider the transaction.
The companies expect to complete the transaction before the end of April.
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