Magnum Hunter Resources said last week that it paid $40 million to an unnamed private company for 53 Bcfe of proved reserves (59% natural gas and 69% proved undeveloped) and 100 proved undeveloped locations in the Canyon, Clearfork, Spraberry and Wolfcamp formations of the Permian Basin of West Texas from a privately held company.

“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,” said Gary C. Evans, CEO of Magnum Hunter. “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 171 producing wells that are 100% operated and currently producing 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 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 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 44% of the company’s current net daily production and 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 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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