HOUSTON, TX — (Marketwire) — 09/06/11 — Magnum Hunter Resources Corporation (NYSE: MHR) (NYSE Amex: MHR-PrC) (NYSE Amex: MHR-PrD) (the “Company” or “Magnum Hunter”) announced today that the Company–s Board of Directors has approved a capital expenditure budget for fiscal year 2012 of $200 million. The 2012 budget includes an upstream capex budget of $150 million which will be allocated to fund the exploration and development programs within the Company–s three unconventional resource plays: (i) the Williston Basin — Bakken/Three Forks Sanish/Madison; (ii) the Appalachian Basin — liquids rich Marcellus/Utica/Huron/Weir; and, (iii) the Eagle Ford Shale oil play of Central and South Texas. In addition, the Company has allocated $50 million of capex to the midstream division, Eureka Hunter Pipeline. The 2012 capital budget does not include any expenditures for potential acquisition activities.
The 2012 upstream capex budget is equally divided across the Company–s three operating divisions, with each division being allocated approximately $50 million. The Company believes the 2012 capex budget will allow for a fourth quarter-to-quarter production growth comparison rate of 35% to 40% and an annual total production growth rate of 80% to 90% when comparing 2012 to 2011. These substantial growth rates are achievable due to the production rates being experienced in the Company–s three unconventional resources plays. The drilling opportunities in the 2012 capital program offer internal rates of return (“IRRs”) in excess of 35% to 40% on average (based upon current Nymex strip pricing). Furthermore, Magnum Hunter directly controls the operations and timing on approximately 80% of the projects identified for fiscal year 2012 anticipated capital expenditures. Therefore, the Company has the ability to adjust its capital spending program based on economics, commodity markets, capital markets or other prevailing conditions at any given time.
As a result of the Company–s announcement earlier today of “Further Expansion of Senior Bank Credit Facilities,” the Company can now fund 100% of this 2012 capex budget solely through existing commitments and internally generated cash flows. The Company reconfirms its existing plan regarding the 2011 capex program of $255 million.
Mr. Gary C. Evans, Chairman of the Board and Chief Executive Officer of Magnum Hunter Resources commented, “Magnum Hunter has evolved into a very attractive asset rich company with substantial opportunities for growth within our existing portfolio. The additional expansion of our Senior Credit Facilities allows us to continue to execute our 2011 and 2012 capital expenditure program with our own internal sources. Therefore, we are not dependent on any additional form of external capital resource in order to meet our growth objectives for the next sixteen months. Our future capital budget and production growth forecasts can now be accomplished without any form of dilution to our existing shareholders. Also, due to our low leverage, we will be able to maintain a debt ratio below our threshold target of 30%. We continue on target for a 2011 production exit rate of 10,000 barrels of oil equivalent per day and now feel confident in establishing a production exit rate for calendar year 2012 of 13,000 barrels of oil equivalent per day. With our current identified drilling inventory of approximately 1,350 net locations representing a net unrisked resource potential across all three of our unconventional resource plays approaching 500 million barrels of oil reserves equivalent (48% crude oil and natural gas liquids), Magnum Hunter can continue to achieve superior annual growth in production, proved reserves and cash flow on a per share basis that will lead industry comps through 2012 and beyond.”
Magnum Hunter Resources Corporation and subsidiaries are a Houston, Texas based independent exploration and production company engaged in the acquisition, development and production of oil and natural gas, primarily in the states of West Virginia, Kentucky, Ohio, Texas, and North Dakota and in Saskatchewan, Canada. The Company is presently active in three of the most prolific shale resource plays in North America, namely the Marcellus Shale, Eagle Ford Shale and Williston Basin/Bakken Shale.
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The statements and information contained in this press release that are not statements of historical fact, including all estimates and assumptions contained herein, are “forward looking statements” as defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward looking statements include, among others, statements, estimates and assumptions relating to our business and growth strategies, our oil and gas reserve estimates, our ability to successfully and economically explore for and develop oil and gas resources, our exploration and development prospects, future inventories, projects and programs, expectations relating to availability and costs of drilling rigs and field services, anticipated trends in our business or industry, our future results of operations, our liquidity and ability to finance our exploration and development activities, market conditions in the oil and gas industry and the impact of environmental and other governmental regulation. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may”, “will”, “could”, “should”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, “project”, “pursue”, “plan” or “continue” or the negative thereof or variations thereon or similar terminology. These forward-looking statements are subject to numerous assumptions, risks, and uncertainties. Factors that may cause our actual results, performance, or achievements to be materially different from those anticipated in forward-looking statements include, among other, the following: adverse economic conditions in the United States and globally; difficult and adverse conditions in the domestic and global capital and credit markets; changes in domestic and global demand for oil and natural gas; volatility in the prices we receive for our oil and natural gas; the effects of government regulation, permitting, and other legal requirements; future developments with respect to the quality of our properties, including, among other things, the existence of reserves in economic quantities; uncertainties about the estimates of our oil and natural gas reserves; our ability to increase our production and oil and natural gas income through exploration and development; our ability to successfully apply horizontal drilling techniques and tertiary recovery methods; the number of well locations to be drilled, the cost to drill, and the time frame within which they will be drilled; drilling and operating risks; the availability of equipment, such as drilling rigs and transportation pipelines; changes in our drilling plans and related budgets; and the adequacy of our capital resources and liquidity including, but not limited to, access to additional borrowing capacity. Because forward-looking statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such statements. Readers are cautioned not to place undue reliance on forward-looking statements, contained herein, which speak only as of the date of this document. Other unknown or unpredictable factors may cause actual results to differ materially from those projected by the forward-looking statements. Unless otherwise required by law, we undertake no obligation to publicly update or revise any forward-looking statements, including estimates, whether as a result of new information, future events, or otherwise. We urge readers to review and consider disclosures we make in our public filings made from time to time with the Securities and Exchange Commission that discuss factors germane to our business, including our Annual Report on Form 10-K, as amended for the year ended December 31, 2010 and our Quarterly Reports on Form 10-Q for the quarters ending March 31, 2011 and June 30, 2011. All forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements.
References to reserves and future net revenues in this press release have been determined in accordance with the SEC guidelines and the United States Financial Accounting Standards Board (“U.S. Rules”) and not in accordance with National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities (“NI 51-101”). The practice of preparing production and reserve quantities data under NI 51-101 differs from the U.S. Rules. The primary differences between the two reporting requirements include: (i) NI 51-101 requires disclosure of proved and probable reserves; the U.S. Rules require disclosure of only proved reserves; (ii) NI 51-101 requires the use of forecast prices in the estimation of reserves; the U.S. Rules require the use of 12-month average prices which are held constant; (iii) NI 51-101 requires disclosure of reserves on a gross (before royalties) and net (after royalties) basis; the U.S Rules require disclosure on a net (after royalties) basis; (iv) the Canadian standards require disclosure of production on a gross (before royalties) basis; the U.S. Rules require disclosure on a net (after royalties) basis; and (v) NI 51-101 requires that reserves and other data be reported on a more granular product type basis than required by the U.S. Rules.
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M. Bradley Davis
Senior Vice President of Capital Markets
(832) 203-4545