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Ohio Utica Shale

Triad Hunter acquires 51,000 acres in Ohio, West Virginia

By Bob Downing Published: October 29, 2012


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2012 News
Magnum Hunter Resources Announces Definitive Agreement to Acquire Appalachian Basin Properties for $106.7 Million

HOUSTON, TX -- (Marketwire) -- 10/25/12 -- Magnum Hunter Resources Corporation (NYSE: MHR) (NYSE MKT: MHR.PRC) (NYSE MKT: MHR.PRD) ("Magnum Hunter" or the "Company") announced today that Triad Hunter, LLC, a wholly-owned subsidiary of the Company, has entered into a definitive purchase agreement to acquire 100% of the stock of privately-held Viking International Resources Co., Inc., or Virco, for a purchase price of approximately $106.7 million.

The total consideration for this transaction will be paid 65% (or approximately $69.4 million) in the form of a convertible preferred stock (the "Preferred Stock") of the Company and 35% (or approximately $37.3 million) in cash. The Preferred Stock consideration will be payable in the form of depositary shares representing a new 8% Series E Cumulative Convertible Preferred Stock of the Company, with each depositary share having a liquidation preference of $25.00 per share and a dividend rate of 8.0% per annum (based on liquidation preference) and being convertible at the option of the holder into shares of common stock of the Company at a conversion price of $8.50 per share (based on liquidation preference and subject to customary anti-dilution adjustments). The transaction, which is subject to customary closing conditions, is expected to close on or about November 2, 2012, with an effective date of January 1, 2012. The cash portion of the purchase price is expected to be paid from additional sales of Preferred Stock and/or availability under Magnum Hunter's existing Senior Revolving Credit Facility. The borrowing base under Magnum Hunter's Senior Revolving Credit Facility is currently being re-determined by the Company's bank group, and the Company anticipates a sizeable additional increase.

The Company is acquiring approximately 51,500 net Appalachian Basin mineral acres located in West Virginia and Ohio. This acreage position includes approximately 27,000 net acres in the liquids-rich Marcellus Shale, of which 19,000 are located in Ritchie County, West Virginia and 8,000 are located in Washington and Monroe Counties, Ohio. Additionally, the acreage position in Ohio includes approximately 9,000 net liquids-rich Utica Shale acres and more than 19,000 net dry Utica Shale acres. Approximately 98% of the total acreage position is held by shallow existing production or "HBP."

Current net production from the producing assets associated with this acquisition is approximately 475 barrels of oil equivalent per day with a very low decline rate. Total estimated proved reserves are 3.7 million barrels of oil equivalent as of January 1, 2012.

Management has identified 105 gross drilling locations on the Virco acreage which is broken down as follows:

  • 74 Marcellus drilling locations
  • 31 Utica drilling locations

Upon the financial closing of this transaction, the Company will have over 85,500 net acres in the liquids-rich Marcellus Shale and 81,800 net acres located within the Utica Shale.

Magnum HunterManagement Comments

Mr. Gary C. Evans, Chairman and Chief Executive Officer, commented, "We have been working on this acquisition for almost one year now. Our team is excited to bring on board the existing pool of employees of Virco to our combined organization in this region. Virco's leasehold acreage position is located in the States of Ohio and West Virginia, and fits extremely well with our existing acreage owned in this region. Additionally, we have identified over 100 new drillable locations with both Marcellus and Utica potential on a significant portion of this new leasehold being acquired at a very attractive price per acre. This new liquids-rich gas potential will have a significant impact to our Eureka Hunter midstream division as they will have the capability to provide gathering and transportation to processing facilities in West Virginia and/or Ohio. The southern part of the wet gas window in the Utica Play in Ohio appears to be some of the most prolific in the area. Recently drilled wells in this immediate region have had the highest initial production rates in the entire Utica Play. Our Company has planned our first Utica test in the first quarter of 2013. With the combination of the recent improvement in natural gas prices this year from $2.00/mcf to approximately $3.50/mcf, our new midstream cryogenic gas processing capabilities beginning in late November (will add approximately $1.25/mcf to our net price), and improving overall well economics in this region, this liquids-rich area becomes highly profitable. Management anticipates that this Division of the Company will garner a significant portion of our 2013 capital expenditure budget."







Oct 25, 2012



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Utica and Marcellus shale web sites

Ohio Department of Natural Resources' Division of Oil and Gas Resources Management State agency Web site.

ODNR Division of Oil and Gas Resources Management. State drilling permits. List is updated weekly.

ODNR Division of Geological Survey.

Ohio Environmental Protection Agency.

Ohio State University Extension.

Ohio Farm Bureau.

Ohio Oil and Gas Association, a Granville-based group that represents 1,500 Ohio energy-related companies.

Ohio Oil & Gas Energy Education Program.

Energy In Depth, a trade group.

Marcellus and Utica Shale Resource Center by Ohio law firm Bricker & Eckler.

Utica Shale, a compilation of Utica shale activities.

Landman Report Card, a site that looks at companies involved in gas and oil leases.FracFocus, a compilation of chemicals used in fracking individual wells as reported voluntarily by some drillers.

Chesapeake Energy Corp,the Oklahoma-based firm is the No. 1 driller in Ohio.

Rig Count Interactive Map by Baker Hughes, an energy services company.

Shale Sheet Fracking, a Youngstown Vindicator blog.

National Geographic's The Great Shale Rush.

The Ohio Environmental Council, a statewide eco-group based in Columbus.

Buckeye Forest Council.

Earthjustice, a national eco-group.

Stop Fracking Ohio.

People's Oil and Gas Collaborative-Ohio, a grass-roots group in Northeast Ohio.

Concerned Citizens of Medina County, a grass-roots group.

No Frack Ohio, a Columbus-based grass-roots group.

Fracking: Gas Drilling's Environmental Threat by ProPublica, an online journalism site.

Penn State Marcellus Center.

Pipeline, blog from Pittsburgh Post-Gazette on Marcellus shale drilling.

Allegheny Front, environmental public radio for Western Pennsylvania.