Contact Information: Contact: M. Bradley Davis Senior Vice President of Capital Markets bdavis@magnumhunterresources.com (832) 203-4545
Magnum Hunter Resources Announces Operational and Financial Results for Third Quarter 2009
| Source: Magnum Hunter Resources
HOUSTON, TX--(Marketwire - November 9, 2009) - Magnum Hunter Resources Corporation (NYSE Amex : MHR ) (the "Company") announced operational and financial results today for
the three and nine month periods ended September 30, 2009.
OPERATIONAL UPDATE
The Company's average daily production for the month ended October 31, 2009
was approximately 750 Barrels of oil per day ("Boepd"), a 28% increase in
average daily production of 586 Boepd reported in the third quarter of
2009. The Company is anticipating to exit fiscal year 2009 with an average
daily production rate in excess of 900 Boepd as a result of: (i) the
successful drilling of three horizontal wells in the Mohall Field of North
Dakota, (ii) the acquisition of an additional working interest in the East
Chalkley Field of South Louisiana, (iii) the acquisition of Sharon
Resources, and (iv) the resumption of drilling activities in the Cinco
Terry Field of West Texas. With the anticipated closing of the recent
announcement to acquire the assets of Appalachian Basin focused Triad
Energy and certain Affiliates, currently scheduled in January 2010, Magnum
Hunter should exit January 2010 with a daily production rate of
approximately 1,800 Boepd. An 1,800 Boepd daily production rate would
represent an approximate 160% increase over the Company's first nine months
2009 average daily production rate of 692 Boepd. Triad's estimated net
total production for the quarter ended September 30, 2009 was 90,481 Boe
(983 Boepd, 59% crude oil).
Magnum Hunter's actual total net production for the three months ended
September 30, 2009 decreased approximately 6% or, 3,425 Boe (37 Boepd), to
approximately 53,927 Boe (586 Boepd) from 57,353 Boe (623 Boepd) produced
during the comparable three month period of 2008. The third quarter 2009
decline in production levels can be directly attributable to extraordinary
factors including: (i) a 10 day complete shut-in of all production at the
Company's Mohall Field in North Dakota for purposes of verifying the fields
response level to secondary recovery efforts from ongoing water flood
operations, (ii) the additional shut-in of selective individual producing
wells within the Mohall Field to allow for required expansion activities to
the field's production facilities in order to accommodate new incremental
production added from three successful horizontal wells drilled in the
field during the third quarter, and (iii) the separate shut-in of certain
producing wells within the Mohall Field for various safety reasons to allow
for the above mentioned drilling activities.
The Company has drilled six wells (gross) thus far in the fourth quarter of
2009 with two drilling rigs currently running.
FINANCIAL AND OPERATIONAL RESULTS FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2009
Magnum Hunter reported a net loss of $3.1 million, or ($0.08) per basic and
fully diluted shares outstanding for the third quarter of 2009, as compared
to 2008's third quarter net loss of $535.5 thousand, or ($0.01) per basic
and fully diluted shares outstanding. The loss reported in the third
quarter of 2009 is primarily attributable to the substantial decline in the
realized price for crude oil (down 44%, from $106.33 per Bbl. to $59.53 per
Bbl.) and realized natural gas prices (down 66%, from $7.34 per Mcf to
$2.52 per Mcf) when compared to the third quarter of 2008. Total revenues
for the three months ended September 30, 2009 and September 30, 2008 were
$2.3 million and $6.0 million, respectively.
The Company reported an increase in general and administrative expenses as
compared to the third quarter of 2008 of $1.5 million. The general and
administrative expense increase for the third quarter of 2009 was due to:
(i) non-recurring transactional expenses associated with the acquisition of
Sharon Resources, Inc. and Triad, (ii) non-recurring expenses associated
with the acquisition of an additional working interest in the Company
operated East Chalkley Field, located in Cameron Parish, Louisiana, and
(iii) non-recurring expenses during the third quarter of 2009 associated
with certain changes in the senior management of the Company and the
vesting of incentive stock options due to performance. The Sharon Resources
acquisition was closed by the Company on the last day of the quarter or
September 30, 2009. Total consideration paid by Magnum Hunter for Sharon
Resources was 2.3 million of the Company's restricted common shares. Total
consideration paid by Magnum Hunter for the East Chalkley additional
working interest was approximately $1.7 million in cash. The effective date
for the East Chalkley acquisition was July 1, 2009 with the actual closing
occurring on October 15, 2009.
Magnum Hunter reported a net loss of $7.8 million, or ($0.21) per basic and
fully diluted shares outstanding for the nine months ended September 30,
2009 as compared to a net loss of $4.1 million, or ($0.11) per basic and
fully diluted shares for the nine months ended September 30, 2008. The net
loss for the nine months ended September 30, 2009 is also attributable to
the aforementioned substantial decline in crude oil and natural gas prices,
lower production in the Mohall Field of North Dakota from the required
operational shut-in of field production as described above, and the
aforementioned non-recurring expenses.
Operating cash flow (before changes in working capital accounts) generated
by Magnum Hunter during the first nine months of 2009 was approximately
$1.0 million compared to $4.0 million generated by the Company during the
first nine months of 2008. Magnum Hunter's operating cash flow (before
changes in working capital accounts) was positively impacted during the
first nine months of 2008 from a non-recurring cash flow add back of a loss
on the extinguishment of debt in the amount of $2.8 million during fiscal
year 2008.
NEW FINANCINGS UPDATE
On October 26, 2009, Magnum Hunter announced that the Company received a
commitment for a new $150 million three-year term senior secured revolving
credit facility (the "new bank facility") provided by the Bank of Montreal
("BMO"). This new bank facility will be used for general corporate
purposes including the acquisition of crude oil and natural gas properties.
An initial borrowing base of $25 million has been established. Based on
values assigned to crude oil and natural gas properties which may be either
acquired or discovered over time, the Company's borrowing base may be
increased up to a maximum of $150 million in commitment level. The
Company's senior management team is working with a number of additional
financial institutions that will possibly participate in this new credit
facility once closed.
The Company filed a Form 8-K with the Securities and Exchange Commission
(the "SEC") on November 5, 2009 announcing that Magnum Hunter had issued
and sold, for gross proceeds of approximately $3.8 million, an aggregate of
2.3 million shares of the Company's common stock, together with one fifth
of a warrant to purchase one share of the Company's common stock for each
share of common stock purchased. Each warrant issued to a purchaser will
(i) be exercisable for one share of the Company's common stock at any time
after the shares of common stock underlying the warrant are registered with
the SEC for resale pursuant to an effective registration statement, (ii)
have a cash exercise price of $2.50 per share of the Company's common
stock, and (iii) upon notice to the holder of the warrant, be redeemable by
the Company for $0.01 per share of the Company's common stock underlying
the warrant if (a) the Registration Statement as filed with the SEC is
effective and (b) the average trading price of the Company's common stock
as traded and quoted on the NYSE Amex equals or exceeds $3.75 per share for
at least 20 days in any period of 30 consecutive days. The Company's common
stock purchased in this transaction is being issued pursuant to a
prospectus supplement filed with the SEC in connection with a takedown from
the Company's existing $100 million universal shelf registration statement
on Form S-3, which became effective on October 15, 2009. Purchasers of this
issuance of common shares by the Company included, amongst others, Magnum
Hunter's Chairman, Vice Chairman, Executive Vice President and Chief
Financial Officer, and three other members of the Company's Board of
Directors.
With a combination of cash currently on hand ($2.3 million of cash as of
September 30, 2009), the Company's anticipated cash flow from operations
through year-end 2009, net proceeds from the above described recent sale
of the Company's common shares, and an expected borrowing base
availability revision under the new $150 million senior secured credit
facility with BMO ($27 million of senior secured debt was outstanding as of
September 30, 2009), Magnum Hunter believes it has adequate cash liquidity
to meet all of the Company's existing capital expenditures and other
capital requirements through the balance of fiscal year 2009 and beginning
2010.
TRIAD ACQUISITION
Magnum Hunter announced on October 29, 2009 that the Company had entered
into a definitive agreement with an Appalachian Basin energy company,
privately-held Triad Energy Corporation and certain Affiliates
(collectively "Triad"), to purchase substantially all of Triad's oil and
gas exploration and production operating assets. The $81 million total
purchase price consists of (i) the assumption and refinancing of
approximately $58 million of Triad senior debt owed to secured lenders,
(ii) the issuance of $15 million of the Company's Redeemable Convertible
Preferred Stock with a 2.75% fixed coupon payable quarterly and (iii) the
payment of up to $8 million in cash. The Triad transaction is currently
expected to close in January 2010.
MANAGEMENT COMMENTS
Mr. Gary C. Evans, Chairman of the Company, commented, "The third quarter
of 2009 was really a transitional period for Magnum Hunter. We completed
several small acquisitions, drilled or participated in 3 gross new wells,
all of which were successful, and positioned the company for strong growth
in 2010. With the Company's new management team executing on its strategic
plan, we would anticipate our future financial and operational results to
be reflective of our ongoing efforts to create incremental value for our
shareholders. Our vision for Magnum Hunter remains firm on committing the
Company's resources to focusing on operations and strategic property
acquisitions in known geologic regions while increasing our exposure to
certain shale resource plays in the United States. Our recent Sharon
acquisition with its approximately 7,400 net acres in the oil-leg of the
rapidly expanding Eagle Ford Shale play and our pending Triad acquisition
with its approximate 47,000 net acre exposure to the emerging Marcellus
Shale play in the Appalachian Basin, are two new resource plays that should
have significant impact on our Company beginning in 2010. We continue to
see a tremendous amount of deal flow from the mergers and acquisitions
market, particularly in the distressed asset arena. Our primary focus in
the short term will be on closing the Triad acquisition and integrating
their asset base into our expanding production profile."
MAGNUM HUNTER RESOURCES CORPORATE PROFILE
Magnum Hunter Resources Corporation and subsidiaries are a Houston, Texas
based independent exploration and production company engaged in the
acquisition of exploratory leases and producing properties, secondary
enhanced oil recovery projects, exploratory drilling, and production of oil
and natural gas in the United States.
For more information, please view our website at
www.magnumhunterresources.com
FORWARD-LOOKING STATEMENTS
The statements contained in this press release that are not historical are
"forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
including statements, without limitation, regarding the Company's
expectations, beliefs, intentions or strategies regarding the future. Such
forward-looking statements may relate to, among other things: (1) the
Company's proposed exploration and drilling operations on its and Triad's
various properties, (2) the expected production and revenue from its and
Triad's various properties, (3) the Company's proposed redirection as an
operator of certain properties and (4) estimates regarding the reserve
potential of its and Triad's various properties. These statements are
qualified by important factors that could cause the Company's actual
results to differ materially from those reflected by the forward-looking
statements. Such factors include but are not limited to: (1) the
Company's ability to finance the continued exploration, drilling and
operation of its and Triad's various properties, (2) positive confirmation
of the reserves, production and operating expenses associated with its and
Triad's various properties; and (3) the general risks associated with oil
and gas exploration, development and operation, including those risks and
factors described from time to time in the Company's reports and
registration statements filed with the Securities and Exchange Commission,
including but not limited to the Company's Annual Report on Form 10-K, Form
10-K/A and Form10-K/A for the year ended December 31, 2008 filed with the
Securities and Exchange Commission on March 31, 2009, April 29, 2009 and
September 11, 2009, respectively, and the Company's Quarterly Reports on
Form 10-Q for the quarters ending March 31, 2009 and June 30, 2009, filed
on May 11, 2009 and August 14, 2009, respectively. The Company cautions
readers not to place undue reliance on any forward-looking statements. The
Company does not undertake, and specifically disclaims any obligation, to
update or revise such statements to reflect new circumstances or
unanticipated events as they occur.