Magnum Hunter Resources Reports Total Proved Reserves of 75.9 MMBoe
at Year-End 2013
Proved Reserves Up 23% From Year-End 2012*; Present Value
(PV-10) Up 22% From Year-End 2012 to $922 Million*
HOUSTON, TX--(Marketwired - Jan 15, 2014) - Magnum Hunter
Resources Corporation (NYSE: MHR) (NYSEMKT: MHR.PRC) (NYSEMKT:
MHR.PRD) (NYSEMKT: MHR.PRE) ("Magnum Hunter" or the "Company")
announced today a 23% increase in the quantity of the Company's
estimated total proved oil and natural gas reserves at December 31,
2013, as compared to such reserves at December 31, 2012 (as
adjusted for the Company's Eagle Ford divestiture described below).
The present value of estimated future cash flows, before income
taxes, of the Company's estimated total proved reserves as of
year-end 2013, discounted at 10% ("PV-10"), also increased 22% or
$168.7 million to $922.1 million, as compared to the PV-10 of such
reserves at year-end 2012 (as adjusted for such divestiture) (see
"Non-GAAP Financial Measures and Reconciliations" below). Please
note the Company's December 31, 2012 total proved reserves
decreased from 73.1 million barrels of oil equivalent ("MMBoe") to
61.6 MMBoe as a result of the Company's Eagle Ford divestiture that
was completed on April 24, 2013. The Company divested its ownership
interests in approximately 19,000 net acres located in Gonzales and
Lavaca Counties of South Texas in April 2013 for approximately $401
million (before purchase price adjustments).
Magnum Hunter's total proved reserves increased by 14.3 MMBoe to
75.9 MMBoe (46% crude oil and NGLs; 52% proved developed producing)
at December 31, 2013, as compared to 61.6 MMBoe (57% crude oil and
NGLs; 56% proved developed producing) at December 31, 2012. Proved
developed producing reserves increased 16% to 39.6 MMBoe as of
December 31, 2013, predominately as a result of the Company's
continued execution of its development drilling program in the
Appalachian Basin. Proved undeveloped reserves increased 23% to
27.4 MMBoe primarily due to the execution and delineation of the
Company's existing lease acreage position in the Marcellus Shale.
The Company's reserve life (R/P ratio) of its proved reserves based
on current production is approximately 11.9 years.
As of December 31, 2013, there were proved reserves attributable
to only one Utica Shale well included in the new reserve report.
The Company expects to significantly increase reserves in the Utica
Shale, where it presently owns over 97,000 net leasehold acres,
during 2014 as a result of "pad" drilling and delineation of its
lease acreage position in this region. The Appalachian Basin
accounted for 70% of Magnum Hunter's proved reserve volumes at
December 31, 2013, the Williston Basin accounted for 28% and other
legacy assets, including the Company's remaining assets in South
Texas, accounted for the remaining 2%.
The PV-10 of the Company's proved reserves at December 31, 2013
increased by $168.7 million or 22% to $922.1 million from $753.4
million at December 31, 2012 (see "Non-GAAP Financial Measures and
Reconciliations" below). Under SEC guidelines, the commodity prices
used in the December 31, 2013 and December 31, 2012 PV-10 estimates
were based on the 12-month unweighted arithmetic average of the
first day of the month prices for the period January 1, 2013
through December 31, 2013, and for the period January 1, 2012
through December 31, 2012, respectively, adjusted by lease for
transportation fees and regional price differentials. For crude oil
and NGL volumes, the average West Texas Intermediate posted price
of $96.78 per barrel used to calculate PV-10 at December 31, 2013,
was up 2% from the average price of $94.71 per barrel used to
calculate PV-10 at December 31, 2012. For natural gas volumes, the
average price of the Henry Hub spot price of $3.67 per million
British thermal units ("MMBTU") used to calculate PV-10 at December
31, 2013 was up 33% from the average price of $2.75 per MMBTU used
to calculate PV-10 at December 31, 2012. All prices were held
constant throughout the estimated economic life of the
properties.
The estimates of Magnum Hunter's total proved reserves as of
December 31, 2013 were prepared by the Company's independent
engineering consultant, Cawley Gillespie & Associates, Inc.,
and include Marcellus, Utica and Williston Basin/Bakken/Sanish
Shales reserves.
Management Comments
Mr. Gary C. Evans, Chairman and Chief Executive Officer of
Magnum Hunter, commented, "This past year's growth in proved
reserves was primarily attributable to our success in the Marcellus
Shale Play of West Virginia and Southeastern Ohio. We were
successful at replacing over 100% of the reserves lost in 2013 due
to asset divestitures which included our Eagle Ford Division ($401
million). We had three new Marcellus wells that have been estimated
to have over 10.5 Bcfe of proved reserves per well and one of those
wells was estimated to have 11.7 Bcfe of proved reserves.
Approximately 55% of our Marcellus wells exceed the average
estimated cumulative proved reserves of 7.8 Bcfe each. Every year
since initiating operations in the Marcellus Shale Play back in
2010, we have been successful at increasing the ultimate recoveries
on new drills. This is a testimony of not only the quality of our
lease acreage position, but also management's ability to continue
improving upon our well completion methods. A significant point to
note is that none of the proved reserves announced today include
the Utica Shale Play where we hold close to 100,000 net leasehold
acres with the exception of one well that had only a partial
completion due to downhole issues. Therefore, with our greatly
expanded Appalachian drilling budget, we are confident in our
ability to continue to grow our proved reserves in both of these
two exciting resources plays in a significant way during 2014."
Non-GAAP Financial Measures and Reconciliations
This press release contains certain financial measures that are
non-GAAP measures. We have provided reconciliations within this
release of the non-GAAP financial measures to the most directly
comparable GAAP financial measures. These non-GAAP financial
measures should be considered in addition to, but not as a
substitute for, measures for financial performance prepared in
accordance with GAAP that are presented in this release.
PV-10 is the present value of the estimated future cash flows
from estimated total proved reserves after deducting estimated
production and ad valorem taxes, future capital costs and operating
expenses, but before deducting any estimates of future income
taxes. The estimated future cash flows are discounted at an annual
rate of 10% to determine their "present value." We believe PV-10 to
be an important measure for evaluating the relative significance of
our oil and gas properties and that the presentation of the
non-GAAP financial measure of PV-10 provides useful information to
investors because it is widely used by professional analysts and
investors in evaluating oil and gas companies. Because there are
many unique factors that can impact an individual company when
estimating the amount of future income taxes to be paid, we believe
the use of a pre-tax measure is valuable for evaluating the
Company. We believe that PV-10 is a financial measure routinely
used and calculated similarly by other companies in the oil and gas
industry. However, PV-10 should not be considered as an alternative
to the standardized measure as computed under GAAP.
The standardized measure of discounted future net cash flows
relating to Magnum Hunter's total proved oil and natural gas
reserves is as follows:
|
|
|
|
|
|
As of December 31, |
|
|
|
2013 |
|
Future cash inflows |
|
$ |
3,711,260 |
|
Future production costs |
|
|
(1,423,306 |
) |
Future development costs |
|
|
(421,797 |
) |
Future income tax expense |
|
|
(149,367 |
) |
Future net cash flows |
|
|
1,716,790 |
|
10% annual discount for estimated timing of cash
flows |
|
|
(872,280 |
) |
Standardized measure of discounted future net cash
flows related to proved reserves |
|
|
$ 844,510 |
|
|
|
|
|
|
Reconciliation of Non-GAAP Measure |
|
|
|
|
PV-10 |
|
$ |
922,071 |
|
Less: Income taxes |
|
|
|
|
|
Undiscounted future income taxes |
|
|
(149,367 |
) |
|
10% discount factor |
|
|
71,806 |
|
|
Future discounted income taxes |
|
|
(77,561 |
) |
|
|
|
|
|
Standardized measure of discounted future net cash
flows |
|
$ |
844,510 |
|
Certain Definitions
The SEC requires oil and natural gas companies, in filings made
with the SEC, to disclose proved reserves, which are those
quantities of oil and natural gas that by analysis of geoscience
and engineering data can be estimated with reasonable certainty to
be economically producible from a given date forward, from known
reservoirs, and under existing economic conditions, operating
methods, and government regulations.
About Magnum Hunter Resources Corporation
Magnum Hunter Resources Corporation and subsidiaries are a
Houston, Texas-based independent exploration and production company
engaged in the acquisition, development and production of crude
oil, natural gas and natural gas liquids, primarily in the States
of West Virginia, Ohio, Kentucky, and North Dakota. The Company is
presently active in three of the most prolific unconventional shale
resource plays in North America, namely the Marcellus Shale, Utica
Shale, and Williston Basin/Bakken Shale.
Availability of Information on the Company's Website
Magnum Hunter is providing a reminder that it makes available on
its website (at www.magnumhunterresources.com) a variety of
information for investors, analysts and the media, including the
following:
- annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and any amendments to those reports as
soon as reasonably practicable after the material is electronically
filed with or furnished to the Securities and Exchange
Commission;
- the most recent version of the Company's Investor Presentation
slide deck;
- announcements of conference calls, webcasts, investor
conferences, speeches and other events at which Company executives
may discuss the Company and its business and archives or
transcripts of such events;
- press releases regarding annual and quarterly earnings,
operational developments, legal developments and other matters;
and
- corporate governance information, including the Company's
corporate governance guidelines, committee charters, code of
conduct and other governance-related matters.
Magnum Hunter's goal is to maintain its website as the
authoritative portal through which visitors can easily access
current information about the Company. Over time, the Company
intends for its website to become a primary channel for public
dissemination of important information about the Company.
Investors, analysts, media and other interested persons are
encouraged to visit the Company's website frequently.
Certain information included on the Company's website
constitutes forward-looking statements and is subject to the
qualifications under the heading "Forward-Looking Statements" below
and in the Company's Investor Presentation slide deck.
Forward-Looking Statements
This press release includes "forward-looking statements." All
statements other than statements of historical facts included or
incorporated herein may constitute forward-looking statements.
Actual results could vary significantly from those expressed or
implied in such statements and are subject to a number of risks and
uncertainties. Although Magnum Hunter believes that the
expectations reflected in the forward-looking statements are
reasonable, Magnum Hunter can give no assurance that such
expectations will prove to be correct. The forward-looking
statements involve risks and uncertainties that affect operations,
financial performance, and other factors as discussed in filings
made by Magnum Hunter with the Securities and Exchange Commission
(SEC). Among the factors that could cause results to differ
materially are those risks discussed in the periodic reports filed
by Magnum Hunter with the SEC, including Magnum Hunter's Annual
Report on Form 10-K for the fiscal year ended December 31, 2012 and
its Quarterly Reports on Form 10-Q for the fiscal quarters ended
after such fiscal year. You are urged to carefully review and
consider the cautionary statements and other disclosures made in
those filings, specifically those under the heading "Risk Factors."
Forward-looking statements speak only as of the date of the
document in which they are contained, and Magnum Hunter does not
undertake any duty to update any forward-looking statements except
as may be required by law.
* Year-end 2012 proved reserves and associated PV-10 adjusted
for the Company's Eagle Ford divestiture. Also, see "Non-GAAP
Financial Measures and Reconciliations."
Contact: Cham King AVP, Investor Relations
ir@magnumhunterresources.com (832) 203-4560
Chris Benton VP, Finance and Capital Markets (832) 203-4539