Irving, TX-based Magnum Hunter Resources Inc. on Monday closed its $31.3 million deal to buy the Delaware Basin oil and gas reserves and related assets of Denver-based Mallon Resources Corp. The properties had proved reserves of 41.8 Bcfe on Dec. 31, 2000, and include Mallon’s interest in 23 fields with 141 producing wells and 13,741 net acres.

Magnum Hunter entered into a purchase and sale agreement with Mallon in mid-August for the acquisition of the Delaware reserves and related assets located in Eddy and Lee counties of southeast New Mexico (see NGI, Aug. 20). Of the $31.3 million purchase price, Mallon said it applied approximately $24 million of the proceeds to reduce its debt to Aquila Energy Capital Corp. by approximately 47%.

Magnum Hunter, based in Irving, TX, said its subsidiary Gruy Petroleum Management Co., will become operator of 59 of the 141 producing wells. The property package consists of approximately 73% natural gas and 27% oil properties based upon proved reserves, with a 50/50 split on oil and natural gas based upon daily production.

“The location of these producing oil and gas properties in New Mexico are adjacent to our existing properties where we have been extremely active,” said Gary C. Evans, Magnum Hunter CEO. “They provide our company a large number of new drilling opportunities in the future,” and he added that the rate of return based on dollars invested exceeded “any other onshore area of the company.” He said Magnum Hunter had already made plans to begin remedial operations to enhance the production rate on about six of the new properties.

With the sale of the properties, Mallon also revised its production outlook going forward. The company reported that its production for third quarter 2001 is expected to be between approximately 1.65 and 1.75 Bcfe, and it believes its production during the fourth quarter will be between approximately 1.25 and 1.35 Bcfe. The company’s production in the first half of 2001 was approximately 3.4 Bcfe. Mallon said it expects its total 2001 production will be between 6.3 and 6.5 Bcfe.

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