Magnum Hunter 1Q13 Update: More Drilling in Marcellus/Utica

This morning Magnum Hunter Resources, a drilling and midstream (pipeline) company issued an update for their first quarter 2013 operations. According to CEO Gary Evans, Magnum Hunter is due to close on the sale of their Eagle Ford Shale assets to Penn Virginia for $401 later this month. They plan to reinvest the proceeds in drilling in the Marcellus and Utica Shale region, along with more drilling in North Dakota’s Williston Basin (Bakken Shale play).

Here are the sections from today’s announcement dealing with the Marcellus/Utica:

Magnum Hunter Resources Corporation (the "Company") announced today an operational update on each of the Company’s upstream unconventional resource plays for the first quarter of 2013 which includes (i) the Appalachia/Marcellus/Utica Shales, (ii) the Williston Basin, and (iii) the Eagle Ford Shale (sale pending). Additionally, the Company is providing an operational update for the Company’s midstream division, Eureka Hunter Pipeline, LLC ("Eureka Hunter").

Appalachia

On April 10, 2013, the Company began drilling its first Utica Shale well on our Farley Pad (4 well pad).

During the first quarter of 2013, 2 gross (2 net) additional Marcellus wells have been drilled and cased in our Ormet Area of Monroe County, OH. Fracture stimulation will be timed to occur with planned additional capacity on the Eureka Pipeline system, completion of which is expected late in the third quarter of 2013.

During the first quarter of 2013, in the non-operated Wetzel County 50/50 joint venture with Stone Energy, 4 gross (2 net) additional Marcellus wells have been fracture stimulated and tested. Three wells on the same pad had been previously fracture stimulated and tested. All seven wells on this pad are expected to begin flowing to processing and sales in mid-April 2013. On a separate pad in this county, 4 gross (2 net) Marcellus wells have been fracture stimulated and are currently being tested. We anticipate first production from this pad around May 1, 2013. Drilling activity continues on a third pad where topholes to the kick off point have been drilled on 8 gross (4 net) additional Marcellus wells. Production from this pad is forecast to occur in the fourth quarter of 2013.

Highlights for the Appalachia Division include:

Non-Operated

Mills Wetzel #9H — the well was drilled and cased to a measured depth of 12,149 feet (horizontal lateral length of 4,276 feet), fraced with 16 stages and tested March 10, 2013. The 24 hour flowing initial production rate was 3,207 Mcfepd on an adjustable choke with 1,592 psi FTP. Magnum Hunter owns a 50% working interest and Stone Energy is the operator.

Mills Wetzel #12H — the well was drilled and cased to a measured depth of 10,690 feet (horizontal lateral length of 2,715 feet), fraced with 10 stages and tested March 7, 2013. The 24 hour flowing initial production rate was 2,579 Mcfepd on an adjustable choke with 1,920 psi FTP. Magnum Hunter owns a 50% working interest and Stone Energy is the operator.

Mills Wetzel #13H — the well was drilled and cased to a measured depth of 11,281 feet (horizontal lateral length of 3,433 feet), fraced with 13 stages and tested March 7, 2013. The 24 hour flowing initial production rate was 3,114 Mcfepd on an adjustable choke with 2,076 psi FTP. Magnum Hunter owns a 50% working interest and Stone Energy is the operator.

Mills Wetzel #15H — the well was drilled and cased to a measured depth of 11,886 feet (horizontal lateral length of 3,858 feet), fraced with 14 stages and tested March 9, 2013. The 24 hour flowing initial production rate was 3,956 Mcfepd on an adjustable choke with 1,746 psi FTP. Magnum Hunter owns a 50% working interest and Stone Energy is the operator.

The rates reflected above do not include natural gas liquids which when processed through the Markwest Mobley Plant, should add approximately 525 Boepd, assuming ethane rejection.

Mr. James Denny, President of Triad Hunter commented, "With eleven gross wells, five and a half net wells going to processing and sales in the next thirty days, we are pleased with the step change in our production profile. We are also excited about the potential impact of our first horizontal Utica test in Washington County, OH."

Eureka Hunter

During the first quarter of 2013, Eureka Hunter’s focus has been on continued expansion into Ohio, most notably acquiring right of way in Monroe County, Ohio. Eureka Hunter has acquired and cleared over 20 miles of right of way in Ohio, and anticipates pipeline construction in this region to commence during the second quarter of 2013. Current throughput on Eureka Hunter is over 75,000 Mcfpd. All gas previously shut-in associated with the flash fire reported last week is currently flowing.

TransTex Hunter, Eureka Hunter’s treating and processing division, saw increased demand for gas treating units due to the improvement of natural gas prices and the continued drilling efforts by operators in the liquids-rich resource plays, especially in the Eagle Ford Shale. TransTex Hunter has continued to see opportunities in the gas processing sector which is being driven by producers seeking to take advantage of processing uplift. Currently, TransTex Hunter is in the process of building smaller and medium size processing equipment which will allow the Company to take advantage of producers’ requirements for processing while waiting for the larger cryogenic processing facilities to be built which require much greater lead times.

Magnum Hunter Management Comments

Mr. Gary C. Evans, Chairman of the Board and Chief Executive Officer of Magnum Hunter, commented, "Companywide daily production is quickly approaching 20,000 Boe per day. We will not be lowering our production guidance for the year even after losing approximately 3,200 Boe per day later this month due to the Eagle Ford sale. With the imminent sale and closing of the Eagle Ford Division, we will be reallocating the capital budget previously earmarked for this Division to both the Appalachian and Williston Basin Divisions and maintain an overall $300 million upstream capital expenditure budget for the year. Our liquidity position will significantly improve at the end of this month with the expectation of completely paying off our existing Senior Revolving Credit Facility at that time. We are most anxious to test our first horizontal Utica well currently drilling in Northern Washington County, Ohio. Management has continued to build the Company’s lease acreage position in the Utica Shale as we approach 100,000 gross acres under lease. With our midstream division, we are in a unique position to gather and process new discoveries in this region much more expeditiously than our competition."*

    Click the link below to read the full press release from Magnum Hunter, including details for their operations outside of the northeast.

      *Magnum Hunter Resources Corporation (Apr 16, 2013) – Magnum Hunter Resources Provides First Quarter 2013 Company Wide Operational Update