Magnum Hunter Resources Corporation (NYSE: MHR) (NYSE Amex:
MHR-PrC) ("Magnum Hunter" or the "Company") announced today that it
has entered into a definitive agreement to acquire Williston Basin
focused NuLoch Resources, Inc. (TSX-V: NLR)(OTCQX: NULCF)
("NuLoch") in an all common stock transaction valued at
approximately $327 million (USD). Magnum Hunter has agreed to
acquire NuLoch for $2.50 (Canadian) per share at a fixed exchange
ratio of 0.3304, which was based on the seven-day volume weighted
average price of Magnum Hunter's common stock as of January 18,
2011 of $7.63 per share. Magnum Hunter will issue approximately
42.8 million new common shares to the NuLoch shareholders,
representing approximately 32% of Magnum Hunter's current fully
diluted common shares outstanding (assumes the contemplated
purchase of NGAS Resources, Inc. ("NGAS") recently announced by the
Company on December 27, 2010). As of December 31, 2010, NuLoch had
no outstanding long-term debt. Each of NuLoch's and Magnum Hunter's
Board of Directors has given its unanimous approval of the
transaction.
Magnum Hunter has received a commitment for a new $250 million
senior credit facility with an initial borrowing base of $145
million to be provided by BMO Capital Markets ("BMO"), secured by
the Company's existing asset base, including the assets being
acquired from NuLoch and NGAS.
About NuLoch Resources, Inc.
NuLoch Resources, Inc. is a Canadian public oil and natural gas
producer with its headquarters located in Calgary, Alberta. NuLoch
is actively developing its existing property portfolio in North
Dakota and Saskatchewan, predominately in the evolving Bakken-Three
Forks Sanish formations of the mid-continental Williston Basin in
the United States and Canada. NuLoch owns various ownership
interests in approximately 67 wells with productive capacity and
has six drilling rigs currently drilling new wells in the United
States and Canada. Nuloch has assembled largely contiguous blocks
of mineral lease acres (71,600 net), with approximately 32,900 net
acres located in Divide and Burke Counties, North Dakota and
approximately 38,700 net acres located in southeast Saskatchewan.
NuLoch also owns additional producing properties in Alberta
containing approximately 50,680 net lease acres.
Nuloch is an Alberta registered corporation, therefore a Plan of
Arrangement (Canadian Plan of Merger) will be entered into in order
to complete the transaction. Such Plan requires a two-thirds
favorable vote for the transaction by the NuLoch common
shareholders and the issuance of a favorable Final Order by the
Court of Queens Bench of Alberta. Magnum Hunter has obtained
"Lock-up" Agreements from existing NuLoch shareholders, including
management, representing 37.76% of the outstanding shares, who have
agreed to vote in favor of the proposed transaction. NuLoch intends
to distribute a Proxy Statement as soon as practicable to all
NuLoch common shareholders announcing a shareholder meeting whereby
NuLoch common shareholder approval of this transaction will be
sought. Issuance of Magnum Hunter common stock will be exempt from
U.S. Securities and Exchange Commission registration requirements
due to the aforementioned Canadian court approval. The issuance of
the new shares from Magnum Hunter is subject to approval of the
Company's shareholders. The transaction is expected to close on or
before April 30, 2011.
Asset Overview
- Estimated proved reserves ("1P") of 5.9 Million Barrels of oil
equivalent (Boe) as of December 31, 2010 (85% crude oil and 35%
PDP)
- Estimated "2P" reserves of 9.2 MMBoe as of December 31,
2010.
- Long-lived reserves with an R/P ratio of 10.4 years
- Current productive capacity of approximately 1,550 Boe per day
(85% crude oil, 69% from the Williston Basin), of which 1,070 Boe
per day of productive capacity is from 13.6 net Bakken-Three Forks
Sanish wells drilled and completed
- An additional 800 Boe (IP 30 Basis) per day of potential
production exists behind pipe in standing cased and/or wells
currently drilling in the Williston Basin
- Approximately 71,600 net Williston Basin mineral lease acres
(32,900 located in Divide and Burke Counties, North Dakota)
- Approximately 50,680 net mineral lease acres located in Alberta
with estimated net daily production of 480 Boe per day (53% light
crude oil)
Transaction Highlights
- Multi-year inventory of approximately 267 net identified
Williston Basin drilling locations, representing estimated risked
reserve potential of 31.4 MMBoe's (estimated unrisked reserve
potential is 80.0 MMboe's)
- All of the 267 net identified Williston Basin drilling
locations are targeting the Bakken-Three Forks Sanish formations
via long reach horizontal drilling and multi-stage fracturing
techniques
- Estimated per well 30 day production rates ("IP-30 rate") in
the 180-450 Boe per day range with per well estimated ultimate
recoveries ("EUR's") in the 185-475 MBoe range
- With per well all-in costs in the $3.5 million to $7.0 million
range and an average crude oil price of approximately $90.00 per
barrel, the above average IP-30 rates and EUR's generate attractive
internal rates of return
BMO acted as Financial Advisor and provided a Fairness Opinion
to Magnum Hunter's Board of Directors. Fulbright & Jaworski
L.L.P acted as Legal Advisor to Magnum Hunter.
Management Comments
R. Glenn Dawson, President and Chief Executive Officer of NuLoch
Resources Inc. stated, "We are very pleased with this business
combination. The transaction unlocks the "Real Value" of our
Williston Basin assets for our shareholders and provides a unique
and diversified growth platform moving forward. Magnum Hunter has a
superb management team that will guide development in three leading
North American shale plays: Marcellus, Eagle Ford, and now in the
Bakken-Three Forks Sanish. The combined entity will use advances in
horizontal drilling and completion technology to develop its
significant undeveloped land base for light oil and liquid rich
natural gas reserves which will generate high netbacks and low
finding costs."
Gary C. Evans, Chairman and Chief Executive Officer of Magnum
Hunter Resources Corporation commented, "After having evaluated a
large number of potential transactions in the greater Williston
Basin over the past eighteen months, we are pleased to announce
this morning's agreement to acquire and merge with NuLoch
Resources. This company stood out above the rest and presented the
type of growth opportunities we have been seeking. This transaction
adds significantly to our "three legged stool" business model of
having unconventional resource plays to explore for liquids rich
hydrocarbons across three regions in North America. The acquisition
of NuLoch and its oil production component is especially compelling
as we watch world crude oil prices again nearing $100 per barrel.
NuLoch's 267 net identified Williston Basin drilling locations
offer attractive rates of return in today's operating environment.
Adjunct to Magnum Hunter's recent end of the year announcements
regarding the acquisition of Appalachian Basin focused NGAS
Resources and certain bolt-on property assets coupled with our
continued drilling efforts in the Eagle Ford Shale oil leg of
Central and South Texas, the Company's vision is now sharply
focused on managing our resources and talents within these three
geographic regions. Fiscal year 2011 will see substantial growth in
Magnum Hunter's daily production rates and proved reserves bookings
as we concentrate our efforts on creating significant incremental
value for our shareholders. We are now anticipating an exit rate
exceeding 10,000 barrels of oil production per day for 2011. At
closing of the NuLoch transaction, all financial measures are
anticipated to be accretive to our shareholders. We have been most
impressed with the entire operating team Glenn Dawson has assembled
at NuLoch and are anxious to work with him and this talented group
on future growth plans for the combined enterprise."
Conference Call Information
Magnum Hunter will hold a conference call to discuss the
transaction and other related matters on Wednesday, January 19th at
10:00 AM Central Time.
Dial-In number: (866) 348-0480 (U.S. & Canada) or (706)
643-5340 (Intl./Local) Access code: 38578345
A simultaneous webcast of the call may be accessed over the
internet by visiting our website at
http://us.meeting-stream.com/magnumhunterresources_011911. The
webcast will be archived for replay on the Magnum Hunter website
for 90 days.
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 of exploratory leases and producing
properties, secondary enhanced oil recovery projects, exploratory
drilling, and production of oil and natural gas in the United
States. The Company is presently active in three of the "big five"
emerging shale plays in the United States.
For more information, please view our website at
http://www.magnumhunterresources.com/
Forward-Looking Statements
Except for historical information contained herein, the
statements in this press release are forward looking and made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 and may involve a number of risks and
uncertainties. Forward-looking statements are based on information
available to management at the time, and such forward-looking
statements involve judgments. Such forward-looking statements
include, but are not limited to, statements regarding the expected
timing of the completion of the proposed transaction; the ability
to complete the proposed transaction considering the various
closing conditions; the benefits of such transaction and its impact
on the Company's business; and any statements of assumptions
underlying any of the foregoing. In addition, if and when the
proposed transaction is consummated, there will be risks and
uncertainties related to the Company's ability to successfully
integrate the operations and employees of the Company and NuLoch.
Forward-looking statements include expressions such as "believe,"
"anticipate," "expect," "estimate," "intend," "may," "plan,"
"predict," "will," and similar terms and expressions. These
forward-looking statements are made based on expectations and
beliefs concerning future events affecting the Company and are
subject to various risks, uncertainties and other factors relating
to its operations and business environment, all of which are
difficult to predict and many of which are beyond management's
control, that could cause actual results to differ materially from
estimated results expressed in or implied by these forward-looking
statements. Such risks and uncertainties include, but are not
limited to, the risk to both companies that the proposed
transaction will not be consummated; failure to satisfy any of the
conditions to the proposed transaction, such as the inability to
obtain the requisite approvals of NuLoch's shareholders, the
Company's shareholders and the Court of Queen's Bench of Alberta
with respect to the proposed transaction; adverse effects on the
market prices of the companies' common stock and on operating
results because of a failure to complete the proposed transaction;
failure to realize the expected benefits of the proposed
transaction; negative effects of announcement or consummation of
the proposed transaction on the market price of the companies'
common stock; significant transaction costs and/or unknown
liabilities; general economic and business conditions that affect
the companies following the proposed transaction; and other
factors, all of which are described more fully in the Company's
filings with the Securities and Exchange Commission (the "SEC").
Forward-looking statements made in this press release, or
elsewhere, speak only as of the date on which the statements were
made. New risks and uncertainties arise from time to time, and it
is impossible for management to predict these events or how they
may affect the Company or anticipated results. All forward-looking
statements are qualified in their entirety by this cautionary
statement. In light of these risks and uncertainties, readers
should keep in mind that any forward-looking statement made in this
press release may not occur. The Company has no duty or obligation
to, and does not intend to, update or otherwise revise any
forward-looking statements, whether as a result of new information,
future events or other factors, except as may be required by law.
Readers are cautioned not to place undue reliance on
forward-looking statements.
Additional Information
In connection with the proposed transaction, the Company will
file a preliminary proxy statement and definitive proxy statement
with the SEC. The information contained in the preliminary filing
will not be complete and may be changed. STOCKHOLDERS ARE URGED TO READ THE DEFINITIVE PROXY
STATEMENT WHEN IT BECOMES AVAILABLE AND ANY OTHER RELEVANT
MATERIALS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY BEFORE
MAKING ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE
PROPOSED TRANSACTION BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION AND THE PARTIES
THERETO.
The definitive proxy statement will be mailed to the Company's
stockholders seeking their approval of the issuance of the MHR
Shares (including the MHR Shares issuable upon exchange of the
Exchangeable Shares) as consideration for the proposed transaction.
The Company's stockholders may also obtain a copy of the definitive
proxy statement free of charge once it is available by directing a
request to: Magnum Hunter Resources Corporation at 832-369-6986 or
777 Post Oak Boulevard, Suite 650, Houston, Texas 77056 Attention:
Investor Relations. In addition, the preliminary proxy statement,
definitive proxy statement and other relevant materials filed with
the SEC will be available free of charge at the SEC's website at
www.sec.gov or stockholders may access copies of such documentation
filed with the SEC by the Company by visiting the Investors section
of the Company's website at www.magnumhunterresources.com.
Participants in the Solicitation
The Company and its respective directors, executive officers and
other members of management and employees, under SEC rules, may be
deemed to be participants in the solicitation of proxies in
connection with the proposed transaction. Information regarding the
names, affiliations and interests of certain of the Company's
executive officers and directors in the solicitation is available
in the proxy statement for the Company's 2010 Annual Meeting of
Stockholders, which was filed with the SEC on September 3, 2010.
This document shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there by
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
The MHR Shares and Exchangeable Shares to be issued in the proposed
transaction in exchange for NuLoch Shares have not been and will
not be registered under the Securities Act of 1933, as amended (the
"Securities Act"), and may not be offered or sold in the United
States absent registration or an applicable exemption from
registration requirements. The Company intends to issue such shares
pursuant to the exemption from registration set forth in Section
3(a)(10) of the Securities Act. The Arrangement Agreement
contemplates that the issuance of the MHR Shares upon exchange of
the Exchangeable Shares will be registered under the Securities
Act.
Magnum Hunter Contact M. Bradley Davis Senior Vice
President of Capital Markets bdavis@magnumhunterresources.com (832)
203-4545
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