Houston, Texas-based Magnum Hunter Resources Corporation (MHR) announced the acquisition of Kentucky-based independent exploration and production company NGAS Resources (NGAS) for approximately $98 millionin stock and debt. The deal will be executed as per the British Columbia law since NGAS Resources is a British Columbia corporation.
Although the transaction has been approved by the boards of directors of both Magnum Hunter and NGAS Resources, it is pending consent of NGAS shareholders and the Supreme Court of British Columbia. The acquisition is expected to be sealed within the first three months of 2011 or at the earliest after the specified timeframe.
Per the terms of the agreement, Magnum Hunter will acquire the NGAS stock for a price of 55 cents per share. The exchange ratio is fixed at 0.0846 and is based on an intra-day price of $6.50 per share for Magnum Hunter stock. The total purchase price of the transaction is based on NGAS Resources’ approximately 78.4 million fully diluted shares and total debts estimated to be outstanding at closing.
With the completion of this acquisition, Magnum Hunter will procure access to NGAS Resources’ property of approximately 300,000 acres in the Appalachian Basin along with positions in the llinois and Arkoma Basins. As of December 31, 2009, NGAS had total proved reserves of 78.4 billion cubic feet equivalent.
Post-acquisition, NGAS Resources will act as a wholly owned subsidiary of Magnum Hunter. Management at Magnum Hunter remains optimistic about this deal, as it expands the company’s exposure to the prolific oil plays of the U.S.
Magnum Hunter currently retains a Zacks #2 Rank, which translates into a short-term Buy recommendation.
MAGNUM HUNTER (MHR): Free Stock Analysis Report
NGAS RESOURCES (NGAS): Free Stock Analysis Report
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