SOURCE: Magnum Hunter Resources

Magnum Hunter Resources

March 31, 2010 10:08 ET

Magnum Hunter Resources Fourth Quarter and Full Year 2009 Financial and Operating Results

HOUSTON, TX--(Marketwire - March 31, 2010) - Magnum Hunter Resources Corporation (NYSE Amex: MHR) (NYSE Amex: MHR-PC) ("Magnum Hunter", or the "Company") announced today operational and financial results for the three and twelve month periods ended December 31, 2009.

OPERATIONAL RESULTS FOR THE THREE MONTHS AND FULL YEAR ENDED DECEMBER 31, 2009

The Company's fiscal year ended December 31, 2009 average daily production rate of 703 Boe's per day (70% crude oil and ngl's) represented a 23% increase over fiscal year 2008 average daily production rate of 572 Boe's per day (73% crude oil and ngl's). Magnum Hunter's fourth quarter 2009 average daily production rate of 736 Boe's (71% crude oil and ngl's) exceeded the Company's third quarter 2009 average daily production rate of 586 Boe's by 150 Boe's per day, an increase of 26%. The increase in the Company's daily production rate during the fourth quarter of 2009 is a direct result of successful drilling activities during fiscal year 2009 in the Mohall Madison field of North Dakota and achieving enhanced levels of production from secondary recovery efforts in other Magnum Hunter producing fields, also located in North Dakota.

With final closing on the acquisition of Appalachian Basin focused Triad Energy and certain of its affiliates ("Triad") having occurred on February 12, 2010, Magnum Hunter's average daily production exit rate for the month ended February 28, 2010 was approximately 1,800 Boe's per day (70% crude oil and ngl's), a 145% increase over the Company's fourth quarter of 2009's average daily production of 736 Boe's.

Magnum Hunter drilled a total of thirty-three gross wells during the fiscal year 2009, with thirty two of these wells deemed commercial and one well deemed not commercial for an overall drilling success rate of 97%. Magnum Hunter replaced its fiscal year 2009 total production by a factor of twelve times (12x's), with an all-in finding and development cost of approximately $4.50 per Boe.

OPERATIONAL UPDATE

Magnum Hunter currently has one drilling rig contracted to spud the Company's first Eagle Ford Shale crude oil prospect on or about May 1, 2010, with a second Eagle Ford Shale crude oil prospect to be immediately spudded after drilling total depth (TD) of the first well. Additionally, the Company is proceeding with expansion plans regarding the increased capacity of the Eureka Hunter pipeline system located in northwestern West Virginia such that the first of two horizontal Marcellus Shale prospects can be drilled this year. None of Magnum Hunter's currently identified drilling locations on either the Company's approximate 20,000 Eagle Ford Shale gross lease acres or the Company's approximate 50,000 gross Marcellus Shale prospective acres located in West Virginia have been previously booked as proved reserves by Magnum Hunter.

FINANCIAL RESULTS FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2009

Magnum Hunter reported a net loss of $7.3 million, or ($0.18) per basic and fully diluted shares outstanding for the fourth quarter of 2009, as compared to 2008's fourth quarter net loss of $3.6 million, or ($0.10) per basic and fully diluted shares outstanding. The loss reported in the fourth quarter of 2009 is primarily attributable to the substantial volatility in the realized price for crude oil and natural gas. Total revenues for the three months ended December 31, 2009 and December 31, 2008 were $3.5 million and $2.4 million, respectively.

The Company's fourth quarter 2009 net loss of $7.3 million, or ($0.18) per basic and fully diluted shares outstanding included the following non-recurring and non-cash charges; (i) exploration expense of $504 thousand, or ($0.01) per basic and fully diluted shares, (ii) an impairment of oil & gas properties charge of $634 thousand, or ($0.02) per basic and fully diluted shares, (iii) non-cash general and administrative charges associated with employee stock options and restricted common share grants for a total of $995 thousand, or ($0.03) per basic and fully diluted shares, (iv) amortization of deferred financing costs equaling $924 thousand, or ($0.02) per basic and fully diluted shares, and (v) a loss on derivative contracts in the amount of $1.4 million, or ($0.04) per basic and fully diluted shares. Adjusting for these non-recurring and non-cash charges, Magnum Hunter's fourth quarter 2009 net loss would have been improved by $0.12 per basic and fully diluted shares outstanding, or to ($0.06) per basic and fully diluted common share.

Magnum Hunter reported a net loss of $15.1 million, or ($0.39) per basic and fully diluted shares outstanding for the twelve months ended December 31, 2009 as compared to a net loss of $7.6 million, or ($0.21) per basic and fully diluted shares for the twelve months ended December 31, 2008. The net loss for the twelve months ended December 31, 2009 is also attributable to the aforementioned substantial decline in crude oil and natural gas prices during fiscal year 2009 versus fiscal year 2008, plus the following non-recurring and non-cash charges; (i) exploration expense of $896 thousand, or ($0.02) per basic and fully diluted shares, (ii) an impairment of oil & gas properties charge of $634 thousand, or ($0.02) per basic and fully diluted shares, (iii) a total of $2.8 million, or ($0.07) per basic and fully diluted shares for non-cash general and administrative charges associated with employee stock options and restricted common share grants, (iv) amortization of deferred financing costs equaling $1.2 million, or ($0.03) per basic and fully diluted shares, and (v) an unrealized loss on derivative contracts in the amount of $2.4 million, or ($0.06) per basic and fully diluted shares. Adjusting for these non-recurring and non-cash charges, Magnum Hunter's full year 2009 net loss would have been improved by $0.20 per basic and fully diluted shares outstanding, or to ($0.19) per basic and fully diluted common share.

Operating cash flow (before changes in working capital accounts) generated by Magnum Hunter during the twelve months ended December 31, 2009 was approximately $2.6 million compared to $4.1 million generated by the Company during the twelve months ended December 31, 2008.

MANAGEMENT COMMENTS

Mr. Gary C. Evans, Chairman and CEO of the Company, commented, "We are well on our way to building a premier independent oil and gas company. As of this writing, our market capitalization is approaching $200 million, up from $10 million in May of last year. Our share price has increased more than 800% and MHR has been the best performing stock in the sector since May 2009. Your management team has completed three acquisitions that have assisted in fueling this growth. They are as follows:

--  July 2009 - East Chalkley Acquisition  - $1.7 million

--  September 2009 - Sharon Resources  - $2.35 million

--  February 2010 - Triad Energy Corporation - $81 million

We were successful late in the year in refinancing all of our Company's existing senior indebtedness from CIT to a much larger and more traditional senior bank credit facility of up to $150 million with BMO (Bank of Montreal) and Capital One. In addition, we have raised approximately $50 million of total equity over the last ten months including (i) $25 million of common stock, (ii) $15 million of Series B Convertible Preferred Stock issues to the prior lenders of Triad, and (iii) $10 million of Series C Perpetual Preferred Stock (MHR-PC) which is non-dilutive because it does not convert into our common stock. The Company had notable success in further developing certain existing oil and gas properties located in North Dakota, Louisiana and Texas. A total of 33 gross wells were drilled in 2009 with a 97% success rate. These wells had a direct correlation to the 99% increase in our year-end proved reserves to 6.2 million barrels of oil equivalent. Additionally, we have transformed the company in the field to a predominately operated entity versus non-operated. At last count, we operated 2,079 wells as compared to only two operated wells at the beginning of 2009. Our primary focus in 2010 will be in three unconventional resources plays which are:

--  Appalachia - Marcellus Shale/Huron

--  South Texas - Eagle Ford Shale

--  North Dakota - Williston/Bakken/Three Forks

New drilling is about to commence on two unbooked locations on our approximate 20,000 gross mineral acreage position in the oil leg of the Eagle Ford Shale. Additionally, the completion and expansion of take-away capacity on our Eureka Hunter pipeline system in West Virginia is on track to allow Magnum Hunter to spud our first two Marcellus Shale horizontal wells this year. The addition of approximately 1,000 Boe's to the Company's daily production rate with the recent closing of the Triad acquisition in February exposes the Company to a new unconventional resource play located in the Appalachia region. Magnum Hunter's production profile today, after adding the Triad acquisition, is approximately 70% crude oil. Our position in the Eagle Ford Shale and the Williston/Bakken/Three Forks resources plays are predominately oriented for crude oil and our leasehold position in the Williston Basin of North Dakota and the Marcellus Shale of West Virginia are predominately HBP ("held by production"). This means we have no financial pressure to drill any new wells in order to meet mineral lease expiration periods on primary terms. Many of our competitors are not in this unique position, which is especially critical as we enter an uncertain commodity price environment with very low North American natural gas prices. We continue to see a tremendous amount of deal flow from the mergers and acquisitions market, however, our primary focus in the short term will be successfully proving our unconventional resource plays. Should an attractive and accretive acquisition opportunity present itself, we will certainly analyze the assets being offered. However, we will also be mindful of the tremendous value creating opportunities that remain in our existing portfolio and would be hesitant to pursue any opportunity which would either dilute or discount Magnum Hunter's increasing recognition as an up and coming North American unconventional resource company."

ABOUT MAGNUM HUNTER RESOURCES CORPORATION

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. The Company is presently active in three of the "big four" emerging unconventional shale plays in the United States.

For more information, please view our website at http://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, June 30, 2009 and September 30, 2009, filed on May 11, 2009, August 14, 2009 and November 16, 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.


                MAGNUM HUNTER RESOURCES CORPORATION
              (FORMERLY PETRO RESOURCES CORPORATION)
               CONSOLIDATED STATEMENTS OF OPERATIONS



                        Three Months Ended              Year Ended
                           December 31,                December 31,
                    --------------------------  --------------------------
                                                                Revised
                        2009          2008          2009          2008
                    ------------  ------------  ------------  ------------
REVENUE:
Oil and gas sales   $  3,468,592  $  2,277,102  $ 10,035,033  $ 14,486,478
Other income              22,668       100,000       222,668       200,000
Gain on sale of
 property                 14,000        15,000        14,000     1,196,963
                    ------------  ------------  ------------  ------------
  Total revenue        3,505,260     2,392,102    10,271,701    15,883,441
                    ------------  ------------  ------------  ------------

EXPENSES:
Lease operating
 expenses                413,728     1,106,753     4,220,345     4,252,835
Severance taxes and
 marketing             1,057,818       210,969     1,057,818     1,126,156
Exploration              503,972     4,559,226       896,337     7,348,778
Impairment of oil &
 gas properties          633,953     1,973,015       633,953     1,973,015
Depreciation,
 depletion and
 accretion             1,399,369     5,826,587     4,499,611     7,682,293
General and
 administrative        3,969,288       959,081     8,490,364     3,964,664
                    ------------  ------------  ------------  ------------
   Total expenses      7,978,128    14,635,631    19,798,428    26,347,741
                    ------------  ------------  ------------  ------------

LOSS FROM
 OPERATIONS           (4,472,868)  (12,243,529)   (9,526,727)  (10,464,300)

OTHER INCOME
 (EXPENSE):
Interest income               35         9,289           959       188,932
Interest expense      (1,469,691)     (599,601)   (3,336,346)   (2,771,858)
Loss on debt
 extinguishment                0             0             0    (2,790,829)
Gain (loss) on
 derivative
 contracts            (1,297,784)    8,297,500    (2,325,251)    7,311,255
                    ------------  ------------  ------------  ------------

Net loss              (7,240,308)   (4,536,341)  (15,187,365)   (8,526,800)

Less: Net loss
 attributable to
 non-controlling
 interest                (66,820)      968,170        63,156     1,640,466
                    ------------  ------------  ------------  ------------

Net loss
 attributable to
 Magnum Hunter
 Resources Corp.      (7,307,128)   (3,568,171)  (15,124,209)   (6,886,334)

Dividend on Series
 A Convertible
 Preferred                     0             0             0      (734,406)
Dividend on Series
 C Preferred             (25,654)            0       (25,654)            0
                    ------------  ------------  ------------  ------------

Net loss to
 attributable to
 common
 shareholders         (7,332,782)   (3,568,171)  (15,149,863)   (7,620,740)

Weighted avg.
 number of common
 shares outstanding,
 basic and diluted    40,983,945    36,727,343    38,953,834    36,714,489
Net loss per common
 share, basic and
 diluted            ($      0.18) ($      0.10) ($      0.39) ($      0.21)




                    MAGNUM HUNTER RESOURCES CORPORATION
                  (FORMERLY PETRO RESOURCES CORPORATION)
                        SELECTED BALANCE SHEET DATA


                                                        December 31,
                                               ----------------------------
                                                   2009           2008
                                               -------------  -------------

Cash and cash equivalents                      $   2,281,568  $   6,120,402
Total current assets                               6,873,258     10,179,778
Total property and equipment                      57,538,632     45,938,221
Total assets                                      66,584,051     61,664,868
Total current liabilities                          6,219,375      2,856,713
Total long-term liabilities                       13,000,000     21,500,000
Total shareholders' equity                        39,317,915     35,078,263

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