Magnum Hunter Resources Announces Definitive Agreement to Acquire Williston Basin Properties for $30 Million
Magnum Hunter to Become Operator in Bakken
HOUSTON, TX -- (Marketwire) -- 11/26/12 -- Magnum Hunter Resources Corporation (NYSE:MHR) (NYSE MKT: MHR.PRC) (NYSE MKT: MHR.PRD) ("Magnum Hunter" or the "Company") announced today that its wholly-owned subsidiary, Bakken Hunter, LLC, has entered into a definitive purchase agreement to acquire existing wells and approximately 20,000 net Williston Basin lease acres located in Divide County, North Dakota, from Samson Resources Company for $30 million in cash. The transaction, which is subject to customary closing conditions, is expected to close on or about December 20, 2012, with an effective date of August 1, 2012. The purchase price is subject to customary adjustments, to take into account the effective date of the transaction.
Magnum Hunter currently owns an approximate 47.5% working interest in the properties being acquired, and upon closing, the Company will have varied working ownership interests in the properties up to approximately 100%. The Company will become operator of that portion of the acquired properties which is currently being operated by Samson Resources Company. In addition to the acreage being acquired, the Company is also acquiring approximately 310,000 barrels of oil equivalent of proved developed producing reserves and approximately 192 net barrels of oil equivalent production per day.
Upon closing of this acquisition, the Company will own approximately 180,000 net acres in the Williston Basin.
Mr. Glenn Dawson, President of Williston Hunter, Inc., commented, "The acquisition of these central Divide County assets will result in Williston Hunter becoming a Three Forks Sanish/Bakken operator in North Dakota along the border of Canada, which has been a primary goal. We anticipate our initial drilling operations in this area will commence in the first quarter of 2013 utilizing one-mile horizontal lateral drilling and completion technology similar to our successful cost-effective strategy deployed in the Tableland Field in Saskatchewan this past year. In the Tableland Field, our drilling and completion costs have averaged $3.4 million for laterals completed with 25 to 30 frac stages with cemented liners and pressure-pumped down coil tubing. Recent flowbacks have generated initial IP rates of 500 - 750 Bopd range and IP-30 rates in the 250 - 300 Bopd range. Due to the low cost of these wells, our economic returns are outstanding. When the casing head gas from these properties currently being flared is eventually tied into a new gas gathering system in 2013, our ultimate economics will further improve."
$3.4 cost is interesting. I seem to recall that other operators are in the $6-$10 range.
They are only drilling 1 mile laterals, which makes sense in Canada due to royalty structure. It sounds like they believe the 1 mile laterals make more sense in this part of the play, even in North Dakota, compare to further south, exactly why they think that is true, i don't know.
This deal also tells me the land Continental bought was in the southern part of the holdings, where MHR only has a small working interest in general. I wonder if they are going to try to sell the small working interest acres, although they probably could learn alot from watching what Continental does to develope that land