Note on the deal from EnerCom:
On January 19, 2011, Magnum Hunter Resources (NYSE: MHR) announced that it has entered into a definitive agreement to acquire NuLoch Resources (TSX-V: NLR) in an all common stock transaction valued at approximately $327 million (USD).
Terms of the Deal:
* Magnum Hunter has agreed to acquire NuLoch for $2.50 (Canadian) per share at a fixed exchange ratio of 0.3304, based on the seven-day volume weighted average price of MHR's common stock as of January 18, 2011 of $7.63 per share.
* MHR 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 .
In addition, Magnum Hunter announced that they have recived a commitment for a $250 million senior credit facility with an initial borrowing base of $145 million from BMO Capital Markets. The facility is secured by the company's existing asset base, including the assets being acquired from NuLoch and the previously announced NGAS acquisition.
NuLoch Assets Included in the Deal:
* Estimated proved reserves of 5.9 million barrels of oil equivalent (MMBOE).
* Estimated 2P reserves of 9.2 MMBOE.
* Long-lived reserves with an R/P ratio of 10.4 years.
* Current Williston Basin production of 1,550 BOEPD (1,070 BOEPD from 13.6 net Bakken-Three Forks Wells). Additional 800 BOEPD 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 BOEPD (53% light crude oil).
Based on the purchase price, the transaction is valued at $161,083 per flowing BOE, or $55 per proved BOE. This transaction marks the first entrance into the Williston Basin/Bakken-Three Forks for Magnum Hunter and adds significant oil and liquids growth potential for MHR using long-reach multi stage fracturing drilling techniques. MHR has been actively acquiring and developing key leasehold in the Marcellus and the Eagle Ford, while growing production and reserves. MHR is now anticipating an exit rate exceeding 10,000 BOEPD for 2011. Bolt-on acquisitions have become regular for MHR, as it enters 2011 with the recent acquisitions of NGAS, primarily gas assets, in the Marcellus and now the merger with NuLoch, adding additional oil-weighted production potential.
The acquisition of NGAS, with 78 Bcfe (74% gas weighted), will more than double MHR's proved reserves but reduce the company's percentage of total reserves weighted toward oil. The NLR deal will offset some of the added gas weighted reserves from the NGAS acquisition. On January 18, 2011 the company announced that their year-end 2010 reserves increased 116% to 13.4 million BOE (51% crude oil & NGL; 44% proved developed producing) from year end 2009. The company's PV-10 at December 31, 2010 increased by 171% to $178 million from $65.5 million at December 31, 2009.
Gary Evans, chairman and chief executive officer, and his team at Magnum Hunter have now entered the Bakken looking to develop its acquired multi-year inventory of approximately 267 net identified Williston Basin drilling locations, representing estimated risked reserve potential of 31.4 MMBOE. MHR reported estimated per well 30-day production rates between 180-450 BOEPD with per well EURs in the 185-475 MBOE range. Per well all-in costs are attractive, given reported EURs and estimated IP rates. MHR estimates per well costs at $3.5 million to $7.0 million.
MHR buys into Williston Basin
Re: MHR buys into Williston Basin
Note on the deal from Global Hunter Securities:
Magnum Hunter (MHR) Acquires NuLoch Resources (TSX-V:NLR)
Magnum Hunter (MHR; $7.19; Neutral; $6 PT; Disc 1) has agreed to acquire Canada-based NuLoch Resources (TSX-V:NLR; $2.29; Not Rated) in an all-stock transaction valued at $327MM. MHR will issue approximately 42.8MM shares of its common stock (priced at $7.63 per share) to NuLoch’s shareholders. Assigning $50,000 per flowing bbl, MHR is acquiring NuLoch for approximately $2,100 per acre.
The assets include 71,000 net acres in the Williston Basin, consisting of 39,000 net acres in Saskatchewan and 33,000 net acres in Divide and Burke County, North Dakota; approximately 85% of the acreage is undeveloped. The North Dakota assets are non-operated and have been substantially de-risked for Three Forks Sanish (TFS) production. Following encouraging results from NuLoch’s first Bakken well in Burke County, the company is working to de-risk the Bakken interval. Canadian assets are operated and are in an earlier stage of development. Proved reserves of 5.9 Mmboe are 85% crude oil and 35% PDP, and an additional 9.2 Mmboe of probable reserves have been identified.
Aggregate production from NuLoch’s Williston Basin and non-core Alberta properties is approximately 1,600 Boepd. Provided the 5 gross rig program continues through 2011, production could reach 2,300 Boepd over the next 12 months. We view this as a positive for MHR as it will change their production mix from >50% oil to approximately 70% oil, and potentially increase the company’s 2011 exit rate from our current estimate of approximately 6,200 Boepd to approximately 9,000 Boepd.
NuLoch has identified more than 260 un-risked drilling locations with an aggregate risked reserve potential of 31.4 Mmboe (80 Mmboe unrisked).
Although these assets increase the company’s reserve potential, and hence DNAV, the positive impact is muted in the near term by the increased dilution to MHR’s shareholders. This transaction will take the company’s diluted share count to approximately 131MM. That being said, the development of these assets will move the needle on liquids growth and allow the company to book a notable amount of reserves over the next 2 years.
Magnum Hunter (MHR) Acquires NuLoch Resources (TSX-V:NLR)
Magnum Hunter (MHR; $7.19; Neutral; $6 PT; Disc 1) has agreed to acquire Canada-based NuLoch Resources (TSX-V:NLR; $2.29; Not Rated) in an all-stock transaction valued at $327MM. MHR will issue approximately 42.8MM shares of its common stock (priced at $7.63 per share) to NuLoch’s shareholders. Assigning $50,000 per flowing bbl, MHR is acquiring NuLoch for approximately $2,100 per acre.
The assets include 71,000 net acres in the Williston Basin, consisting of 39,000 net acres in Saskatchewan and 33,000 net acres in Divide and Burke County, North Dakota; approximately 85% of the acreage is undeveloped. The North Dakota assets are non-operated and have been substantially de-risked for Three Forks Sanish (TFS) production. Following encouraging results from NuLoch’s first Bakken well in Burke County, the company is working to de-risk the Bakken interval. Canadian assets are operated and are in an earlier stage of development. Proved reserves of 5.9 Mmboe are 85% crude oil and 35% PDP, and an additional 9.2 Mmboe of probable reserves have been identified.
Aggregate production from NuLoch’s Williston Basin and non-core Alberta properties is approximately 1,600 Boepd. Provided the 5 gross rig program continues through 2011, production could reach 2,300 Boepd over the next 12 months. We view this as a positive for MHR as it will change their production mix from >50% oil to approximately 70% oil, and potentially increase the company’s 2011 exit rate from our current estimate of approximately 6,200 Boepd to approximately 9,000 Boepd.
NuLoch has identified more than 260 un-risked drilling locations with an aggregate risked reserve potential of 31.4 Mmboe (80 Mmboe unrisked).
Although these assets increase the company’s reserve potential, and hence DNAV, the positive impact is muted in the near term by the increased dilution to MHR’s shareholders. This transaction will take the company’s diluted share count to approximately 131MM. That being said, the development of these assets will move the needle on liquids growth and allow the company to book a notable amount of reserves over the next 2 years.