A day after Magnum Hunter Resources Inc. closed a deal that doubles its oil and gas assets in New Mexico, the producer reported a 457% increase in second quarter net income — $23.2 million (33 cents/share), compared with $4.2 million (6 cents) in 2Q2003.

Along with the profit gains, the Irving, TX-based independent, which focuses its exploration in North America, recorded a 3% increase in daily oil and gas production. Adjusted for property sales, Magnum Hunter produced 18.7 Bcfe, or 205.8 MMcfe/d in the quarter, compared with 203.5 MMcfe/d a year earlier. Daily natural gas production also was up to 141,135 Mcf/d from 137,602 Mcfe/d.

Gas production volumes averaged 69% of total production. The company’s average realized gas price, net of hedges, was $5.21/Mcf compared with $3.37 in 2Q2003. The company said volumes were negatively impacted by 5.3 MMcfe/d because of delays in new platform and pipeline construction, offline production during the quarter due to mechanical and weather-related issues and restricted production due to pipeline limitations.

CEO Gary Evans called the quarter a “very busy and exciting period” for Magnum Hunter. “We have now completed our largest single property acquisition and equity offering in our company’s history,” he said, referring to the New Mexico acquisition (see Daily GPI, Aug. 3). “These two events will position Magnum Hunter in a manner that will enable us to more quickly grow our most profitable onshore core region and to do so with an improved capital structure.”

Evans said the equity offering gave Magnum Hunter the opportunity to redeem one-third of its outstanding 9.6% high-yield debt to further reduce its overall interest costs.

“Our interest expense per Mcfe produced dropped to $0.52 this quarter and is anticipated to decline to the mid 40-cent range in the third quarter. We came very close to reporting as much net income during this quarter [as] we made during the entire 12 months of last year. Based upon current commodity prices, Magnum Hunter is well positioned to report to its shareholders this fiscal year net income in the $100 million range on a revenue base of $450 million.”

©Copyright 2004 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.