Shut-ins from Tropical Storm Isidore and property sales failed to slow down natural gas production for Magnum Hunter Resources Inc., which doubled its quarterly production from 2001. The Irving, TX-based independent reported actual production volumes of 19.8 Bcfe, averaging 215 MMcfe/d, and said its total equivalent production volumes were weighted 67% toward natural gas.

In 2001, Magnum Hunter’s third-quarter production totaled 9.2 Bcfe. This year, the third quarter gains still were 3% lower than the second quarter of this year, after Magnum Hunter accounted for losses from storm shut-ins and non-core asset sales. “If those lost volumes are added back to reported volumes, production for the quarter would have averaged approximately 224 Mcfe/d, up 1% from second-quarter production,” said the company. Still, Magnum Hunter remains on track in its capital spending, and plans to meet its original 2002 budget of $115 million. Lifting costs in the third quarter totaled $14.0 million, or 71 cents/Mcfe, down 5 cents/Mcfe from a year earlier.

Stunning success came in the quarter through the drill bit, with Magnum Hunter achieving a 97% success rate in its 34 gross wells. Through the first nine months, 86 gross wells have been drilled with a 95% success rate. Quarterly drilling rig activity averaged five onshore and eight offshore rigs (operated and non-operated), and average drilling depth year-to-date is deeper than 7,500 feet. So far this year, Magnum Hunter has performed more than 175 operating projects (recompletions, workovers, etc.), and has participated in three new offshore infrastructure facilities. Currently, Magnum Hunter has 13 active drilling rigs in operation, either as operator or non-operator, with six offshore and seven onshore.

Better-than-expected results in the quarter followed the completion of the first four wells of Magnum Hunter’s 20-well New Mexico Morrow/Atoka program. All four wells were drilled in the Carlsbad area of Eddy County, NM, and initial production rates averaged more than 3 MMcfe/d per well (gross), more than double the rate expected when the program was initiated. Another recently completed well there has tested at production rates higher than 11 MMcfe/d, which is the best rate of any well drilled in southeast New Mexico by Magnum Hunter in the last four years. The company now is in the process of completing two additional wells in the acreage and is actively drilling two other prospects. Two drilling rigs are expected to be active through most of 2003 on acreage currently owned or under contract.

Magnum Hunter also completed a 10-well drilling program in its West Panhandle Field in Gray County, TX with a 100% success rate during the third quarter. The new wells are part of its Panoma property, which covers more than 600 natural gas wells in five different counties in Texas and western Oklahoma. All of the wells are less than 2,300 feet deep, and produce gas from the Granite Wash or Brown Dolomite formations. Well completions and gas gathering pipeline tie-ins are now being completed on these wells.

Offshore, Magnum Hunter completed a well on its 100% owned-and-operated South Timbalier Block 264. The well was drilled in the third quarter, but production was delayed by Hurricane Lili until late September. A duel well, South Timbalier 264 A-4, currently is producing more than 7 MMcfe/d, net to Magnum Hunter’s ownership interest. The company also participated in a discovery with Hunt Oil Co. in Eugene Island 355, and a second confirmation well has identified pay sands below 10,000 feet. A platform and pipeline will be installed, and first sales are slated for mid-2003. Magnum Hunter owns a 33.33% working interest in both discoveries.

Magnum Hunter also participated in a discovery with operator Remington Oil and Gas in West Cameron 426 during the quarter. The well encountered productive sand in two zones, and the lower sand was completed flowing at 8.3 MMcfe/d. Production facilities are being constructed, with first production expected in early 2003. Magnum Hunter owns a 50% working interest in this discovery. And with Kerr McGee, the company conducted a deep-shelf test on Eugene Island 299, which proved to be non-productive. However, Magnum Hunter took over as operator and plans to complete the new well from productive sands at approximately 17,000 feet. The company paid 29% of the original cost to drill the test, but has recently increased its ownership interest to 100%. Completion there also is scheduled for early next year.

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