Independent exploration and production company Magnum Hunter Resources Corporation (MHR) signed a deal with PostRock Energy Corporation (PSTR) to acquire the latter’s Marcellus Shale assets. The purchase price of the assets is valued at $39.75 million. Magnum Hunter will execute the contract through its wholly-owned subsidiary Triad Hunter LLC, who will act as an operator of the acquired properties.

The scope of the deal covers the acquisition of approximately 8,652 net acres of land with oil and gas properties and leasehold mineral interests located in Wetzel and Lewis Counties, West Virginia. The assets are estimated to have a net natural gas production of approximately 905,000 cubic feet equivalent per day. As of November 1, 2010, the assets hold a total proved reserves of about 24.3 billion cubic feet equivalent (Bcfe), with the probable reserves reaching 165.4 Bcfe. 

Triad Hunter will pay 50% of the consideration in cash (totaling $19.875 million), while the remaining amount is payable through 3.2 million newly issued restricted common shares of Magnum Hunter stock. The acquisition process will be implemented in two phases. On the initial level, the Wetzel County assets will be taken over by Triad Hunter for $28 million, followed by the purchase of the Lewis County assets for $11.75 million.

The deal, pending certain closing conditions, is expected to be sealed by mid-January 2011.

Magnum Hunter expects to incur about $18 million, or 32% of the total capital budget of 2010 for the development and expansion of the Marcellus Shale. Through October 31, 2010, the company utilized approximately $16.6 million for the region’s operating activity.

Texas based Magnum Hunter engages in the acquisition of exploratory leases and producing properties, secondary enhanced oil recovery projects, exploratory drilling, and production of oil and natural gas primarily in West Virginia, North Dakota, Texas, and Louisiana.

Magnum Hunter currently retains a Zacks #2 Rank, which translates into a short-term Buy recommendation.

 
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