Magnum Hunter Resources said Monday that it has entered into an agreement to acquire approximately $40 million of oil and natural gas properties located in the Permian Basin of West Texas from a privately-held company. Magnum Hunter noted that all of the properties being acquired in this transaction are in close proximity to areas of existing company operations.

According to independent reservoir engineering firm DeGolyer and MacNaughton (D&M), the properties to be acquired represent approximately 53 Bcfe of proved reserves (59% natural gas and 69% proved undeveloped) and include approximately 100 proved undeveloped locations in the Canyon, Clearfork, Spraberry and Wolfcamp formations. In addition, Magnum Hunter’s team of geologists and engineers said they have identified additional upside potential on these properties in a new planned vapor recovery unit as well as a proposed Clearfork formation waterflood.

“Our acquisition strategy remains centered around properties that are located within our core areas of operations where our technical expertise is superior,” said Gary C. Evans, CEO of Magnum Hunter. “In today’s commodity price environment, when record purchase prices are being paid for proved oil and gas properties at more than twice the price paid here, we believe this add-on property acquisition was extremely well negotiated at a purchase price of $0.76 per Mcfe on proved reserves only. Magnum Hunter’s company-wide production should be in the 250 MMcfe/d range upon closing this latest transaction.”

Under the agreement, Magnum Hunter will be acquiring approximately 171 producing wells that are 100% operated and currently producing approximately 3.4 MMcfe per day (59% natural gas). With the addition of these properties to Magnum Hunter’s existing proved reserve base, the company said its total proved reserves will grow to approximately 1 Tcfe.

The properties to be acquired are located predominately in Reagan and Irion Counties of West Texas. Additional properties are also located in Glasscock, Mitchell and Gaines Counties, TX. Magnum Hunter will have operational control over the entire 26,000 net mineral acres being acquired.

This Permian Basin has been a core area of geographic focus for Magnum Hunter for the last 15 years. At year-end 2003, the Permian Basin represented approximately 52% of Magnum Hunter’s proved reserves (38% natural gas). On a pro forma basis, including the effects of the recently completed acquisition of properties from Tom Brown Inc., a subsidiary of EnCana Corp., the Permian Basin represents approximately 44% of our current net daily production and approximately 37% of our current net daily natural gas production.

Magnum Hunter said it intends to finance the acquisition through borrowings under its recently increased $480 million senior bank credit facility. In conjunction with this property acquisition, the company has entered into approximately 1,000 b/d of new 2005 crude oil cost-less collars with a floor of $35/bbl and a ceiling price of $55/bbl.

Subject to customary closing conditions, the closing of the acquisition is anticipated on or before Oct. 15, with an effective date of Sept. 1.

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