Magnum Hunter Production Acquires Domestic Oil and Gas Properties for $4.5 Million

Magnum Hunter Production, Inc., a subsidiary of Magnum Petroleum, Inc., has completed the acquisition of domestic producing oil and gas properties from a Corpus Christi, Texas-based independent for $4.5 million. The purchase price was comprised of cash and a note secured by restricted common stock of the Company. The acquired properties have proven reserves estimated at over 550,000 barrels of oil and 2.9 billion cubic feet of natural gas, which are expected to generate future net revenues of $10.4 million and approximately $125,000 net cash flow per month.

Key Takeaways:

• The acquisition had an effective date of August 1, 1995, and was funded by Magnum's existing bank line of credit.
• The properties acquired have proven reserves estimated by independent petroleum engineers to be in excess of 550,000 barrels of oil and 2.9 billion cubic feet of natural gas.
• The estimated future net revenues from the properties are $10.4 million, and the properties are expected to generate approximately $125,000 net cash flow per month.
• Magnum has acquired 38 wells through the deal, which are concentrated in two counties in Texas.
• Additionally, the company has identified 22 horizontal re-entry candidates for development and acquired additional acreage for future development.
• In the past four months, Magnum has completed five acquisitions, resulting in a combined monthly cash flow of approximately $400,000, a 300% increase.
• Magnum has also increased its revolving credit facility with First Interstate Bank of Texas, N.A. from $10 million to $20 million.
• The company continues to pursue additional acquisitions of gas gathering systems and producing oil and gas properties, with potential deals ranging in size up to $20 million.

Statistics:

• $4.5 million: purchase price of the domestic oil and gas properties
• 550,000 barrels of oil: estimated proved reserves of oil
• 2.9 billion cubic feet of natural gas: estimated proved reserves of natural gas
• $10.4 million: estimated future net revenues from the properties
• $125,000: net cash flow per month generated by the properties
• 38: number of wells acquired through the deal
• 22: number of horizontal re-entry candidates identified for development
• 5: number of acquisitions completed in the past four months
• $400,000: combined monthly cash flow generated by the five acquisitions
• 300%: increase in monthly cash flow compared to previous periods
• $20 million: maximum potential size of upcoming acquisitions
• 1995: year in which the acquisition took place
• August 1, 1995: effective date of the acquisition

Sources:

• Magnum Hunter Production, Inc. press release, November 10, 1995
• Magnum Petroleum, Inc. investor relations
• First Interstate Bank of Texas, N.A. press release, date not specified