Magnum Enters Into a Letter of Intent for Acquisition
01 October 2009 - 4:57AM
Marketwired
Magnum Energy Inc. (the "Company") (TSX VENTURE: MEN) is pleased to
announce that it has entered into a Conditional Asset Acquisition
Agreement (the "Acquisition") to acquire 13 gross (9.24 net)
sections of land with existing production of natural gas of 415
mcf/d (70 BOE/D). As part of the Acquisition, the Company will also
acquire a 30% working interest in a gas processing facility (the
"Facility"). The Acquisition is expected to close in October, 2009
and remains subject to certain conditions and TSX approval.
The Company has also entered into an "Indicative Term Sheet"
with a major bank focusing on the energy sector in Calgary for a
Revolving Production Loan Facility of $5,000,000 (the "Loan
Facility"). This Loan Facility will be used by the Company for the
Acquisition, retirement of existing bank debt, expansion of the
processing facility, and for general corporate purposes related to
the development and production of oil and gas reserves in the
Sedalia area of Alberta. The Indicative Term Sheet contemplates the
issuance of a Commitment Letter and remains subject to certain
conditions.
In the event the Company is able to close the Acquisition and
the Loan Facility described above, the Company intends to work with
the Co-Owner of the processing facility to enhance its capacity.
This should enable the Company to begin processing natural gas from
wells which it has already drilled and/or re-entered in the Sedalia
area and which are currently behind pipe. Initially, the combined
production being purchased as part of the Acquisition together with
the Company's existing production will be approximately 1200 mcf/d
(200 BOE/D). The Company expects that after the first phase of
upgrading the processing facility in November, 2009 it will be
processing an additional 1000 mcf/d ( 165 BOE/D) from wells which
have been drilled, tested and currently are behind pipe.
The transactions described above, when closed, will add
strategic value to the Company's assets and initiatives in the
Sedalia area. Richard Nemeth, President of the Company, commented
that "By adding production, an interest in a processing facility
and the ability to enhance that processing capability adds key
assets and a large opportunity for the Company. This will enable us
to continue to develop and fully exploit our assets in the Sedalia
area."
Disclaimer: Natural gas volumes have been converted to barrels
of oil equivalent. Barrels of oil equivalent ("boe") may be
misleading, particularly if used in isolation. A boe conversion
ratio of 6 thousand cubic feet ("mcf") equals 1 barrel ("bbl") of
oil is based on an energy equivalency conversion method primarily
applicable to the burner tip and does not represent a value
equivalency at the wellhead.
The TSX Venture Exchange has neither approved or disapproved the
contents of this press release.
Contacts: Magnum Energy Inc. Richard Nemeth President & CEO
604.669.3155 604.669.3177 (FAX) rnemeth@magnumenergyinc.com
www.magnumenergyinc.com
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