Magnum Hunter, Stone Energy Unite On West Virginia Marcellus Prospect

Transaction Type
Sellers
Buyers
Announce Date
Post Date
Estimated Price
MM
Description

Will jointly develop contract area on approximately 1,925 acres in Wetzel County, WV with objective of drilling 19 horizontal wells in Marcellus shale.

Magnum Hunter Resources Corp., Houston, (NYSE: MHR) has entered a joint development and joint operating agreement with Stone Energy Corp., Lafayette, La., (NYSE: SGY) to focus on an existing mineral leasehold position currently owned by both companies in Wetzel County, West Virginia.

Triad Hunter LLC, a subsidiary of Magnum Hunter, and Stone Energy will jointly develop the contract area on an equal and joint basis on approximately 1,925 acres with the objective of drilling 19 new horizontal wells in the Marcellus shale during the next two years.

Earlier this year, Stone Energy and Triad Hunter drilled and completed two horizontal Marcellus wells, with 50% ownership interest each, on a portion of this existing mineral leasehold. It is anticipated that the additional joint effort will drill and complete the first 11 wells during 2012 at an estimated capital cost of $47 million. It is estimated that the total combined capital costs associated with the contract area for the joint agreements will exceed $100 million.

Stone Energy will be designated as operator and each company will own a 50% working interest. In a separate agreement, Stone Energy agreed to commit its share of production from the contract area to the Eureka Hunter Pipeline System operated by Magnum Hunter’s subsidiary, Eureka Hunter Pipeline LLC.

The additional 1,925 acre contract area is part of an existing 5,288-acre leasehold in which Triad Hunter will retain 100% interest in 2,979 acres. During 2011 and unrelated to the additional contract area, Triad Hunter drilled and completed three horizontal Marcellus wells with a 100% ownership interest. Triad Hunter anticipates drilling an additional nine wells with a 100% ownership interest on the 2,979 acres.

Triad Hunter president James W. Denny III says, “Both companies realized that by combining our resources, we could each obtain a much greater value and improve efficiency in our respective leasehold positions by drilling a greater number of wells with longer lateral sections. We anticipate establishing new significant production volumes in this region during 2012.”