SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		-OR-

o		TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-32997

MAGNUM HUNTER RESOURCES CORPORATION

(Name of registrant as specified in its charter)

Delaware		86-0879278
(State or other jurisdiction of		(IRS Employer
incorporation or organization)		Identification No.)

777 Post Oak Boulevard, Suite 650, Houston, Texas 77056
(Address of principal executive offices)

(832) 369-6986
(Issuer’s telephone number)

     Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding twelve months, and (2) has been subject to such filing requirements for the past 90 days.

     Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

     Yes þ No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Act):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     As of August 5, 2011 there were 126,357,586 shares of the registrant’s common stock ($0.01 par value) outstanding.

 

 

MAGNUM HUNTER RESOURCES CORPORATION

QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 2011

TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):			1
Condensed Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010			1
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2011 and 2010			2
Consolidated Statement of Other Comprehensive Income			3
Condensed Consolidated Statements of Shareholders’ Equity for the Six Months Ended June 30, 2011			4
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010			5
Notes to Condensed Consolidated Financial Statements			6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3. Quantitative and Qualitative Disclosures About Market Risk			37
Part II. OTHER INFORMATION			39
Item 1. Legal Proceedings			39
Item 1A. Risk Factors			39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			40
Item 6. Exhibits			40
SIGNATURES			42
EX-3.2
EX-12.1
EX-31.1
EX-31.2
EX-32.1
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

MAGNUM HUNTER RESOURCES CORPORATION

(In thousands, except shares and per-share data)

		June 30,				December 31,
		2011				2010
ASSETS
CURRENT ASSETS:
Cash and cash equivalents		$	4,750			$	554
Restricted cash			4,825				—
Accounts receivable			33,173				11,705
Prepaids and other current assets			5,986				867
Total current assets			48,734				13,126
PROPERTY AND EQUIPMENT (Net of Accumulated Depletion and Depreciation):
Oil and natural gas properties, successful efforts accounting			849,367				189,912
Gas gathering and other equipment			91,799				42,689
Total property and equipment, net			941,166				232,601
OTHER ASSETS:
Deferred financing costs, net of amortization of $133 and $1,237 respectively			2,712				2,678
Derivatives and other long-term assets			1,534				562
Total assets		$	994,146			$	248,967
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Current portion of notes payable		$	2,086			$	7,132
Accounts payable			68,071				33,319
Accrued liabilities			11,274				435
Revenue payable			9,306				2,630
Derivatives and other current liabilities			1,405				719
Total current liabilities			92,142				44,235
OTHER LIABILITIES:
Notes payable, less current portion			145,791				26,019
Asset retirement obligation			14,599				4,455
Deferred tax liability			97,199				—
Derviatives and other long term liabilities			3,515				700
Total liabilities			353,246				75,409
COMMITMENTS AND CONTINGENCIES (Note 13)
REDEEMABLE PREFERRED STOCK:
Series C Cumulative Perpetual Preferred Stock, cumulative dividend rate 10.25% per annum, 4,000,000 authorized, 4,000,000 and 2,809,456 issued & outstanding as of June 30, 2011 and December 31, 2010, respectively, with liquidation preference of $25.00 per share			100,000				70,236
SHAREHOLDERS’ EQUITY:
Preferred Stock, 10,000,000 shares authorized			—				—
Series D Cumulative Perpetual Preferred Stock, cumulative dividend rate 8.0% per annum, 5,750,000 authorized, 1,298,095 and none issued & outstanding as of June 30, 2011 and December 31, 2010, respectively, with liquidation preference of $50.00 per share			64,905				—
Common stock, $0.01 par value, 250,000,000 shares authorized, 126,813,150 and 74,863,135 shares issued and 126,346,229 and 74,863,135 outstanding as of June 30, 2011 and December 31, 2010, respectively			1,263				749
Exchangeable common stock, par value $0.01 per share, 3,895,346 and none issued & outstanding as of June 30, 2011 and December 31, 2010, respectively			39				—
Additional paid in capital			554,954				152,439
Accumulated deficit			(77,197	)			(49,402	)
Accumulated other comprehensive income			(3,214	)			—
Treasury stock at cost, 761,652 shares			(1,310	)			(1,310	)
Unearned common stock in KSOP at cost, 153,300 shares			(604	)			(604	)
Total Magnum Hunter Resources Corporation shareholders’ equity			538,836				101,872
Non-controlling interest			2,064				1,450
Total shareholders’ equity			540,900				103,322
Total liabilities and shareholders’ equity		$	994,146			$	248,967

The accompanying notes are an integral part of these unaudited consolidated financial statements

MAGNUM HUNTER RESOURCES CORPORATION

(In thousands, except shares and per-share data)

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2011				2010				2011				2010
REVENUE:
Oil and gas sales		$	26,020			$	6,941				39,981			$	13,068
Field operations and other			7,417				1,460				8,777				1,988
Total revenue			33,437				8,401				48,758				15,056
EXPENSES:
Lease operating expenses			7,393				2,941				10,390				5,228
Severance taxes and marketing			1,782				721				2,777				1,230
Exploration			423				360				738				457
Field operations			3,298				1,446				4,454				1,717
Depreciation, depletion and accretion			10,814				2,883				16,344				4,098
General and administrative			23,715				6,501				30,571				13,269
Total expenses			47,425				14,852				65,274				25,999
OPERATING LOSS			(13,988	)			(6,451	)			(16,516	)			(10,943	)
OTHER INCOME AND (EXPENSE):
Interest income			1				2				4				4
Interest expense			(3,926	)			(1,044	)			(4,716	)			(1,694	)
Gain (loss) on derivative contracts			2,668				1,277				(674	)			2,409
Other income and (expense)			92				—				92				—
Loss from continuing operations before income taxes and non-controlling interest			(15,153	)			(6,216	)			(21,810	)			(10,224	)
Income tax benefit			197				—				197				—
Net (income) loss attributable to non-controlling interest			(84	)			3				(117	)			(65	)
Net loss attributable to Magnum Hunter Resources Corporation from continuing operations			(15,040	)			(6,213	)			(21,730	)			(10,289	)
Income from discontinued operations			—				665				—				955
Net loss			(15,040	)			(5,548	)			(21,730	)			(9,334	)
Dividend on Preferred Stock			(3,457	)			(446	)			(6,065	)			(708	)
Net loss attributable to common shareholders		$	(18,497	)		$	(5,994	)		$	(27,795	)		$	(10,042	)
Weighted average number of common shares outstanding Basic and diluted			112,619,793				62,153,376				94,233,091				58,968,651
Net loss from continuing operations		$	(0.16	)		$	(0.11	)		$	(0.29	)		$	(0.19	)
Net income from discontinued operations		$	—			$	0.01			$	—			$	0.02
Net loss per common share		$	(0.16	)		$	(0.10	)		$	(0.29	)		$	(0.17	)

The accompanying notes are an integral part of these unaudited consolidated financial statements

MAGNUM HUNTER RESOURCES CORPORATION

(In thousands, except shares and per-share data)

		For the Three Months Ended June 30,								For the Six Months Ended June 30,
		2011				2010				2011				2010
Net loss		$	(15,040	)		$	(5,548	)		$	(21,730	)		$	(9,334	)
Foreign currency translation			(3,222	)			—				(3,222	)			—
Unrealized gain (loss) on available for sale investments			8				—				8				—
Total comprehensive loss		$	(18,254	)		$	(5,548	)		$	(24,944	)		$	(9,334	)

The accompanying notes are an integral part of these unaudited consolidated financial statements

     

MAGNUM HUNTER RESOURCES CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
(In thousands)

		Number				Number of Shares				Number of																Additional
		of Shares				of Exchangeable				Shares of Series D				Common				Exchangeable				Series D				Paid in				Accumulated				Accumulated Other				Treasury				Unearned Common				Noncontrolling				Total
		of Common				Common Stock				Preferred Stock				Stock				Common Stock				Stock				Capital				Deficit				Comprehensive Income				Stock				Shares in KSOP				Interest				Equity
BALANCE, January 1, 2011			74,863				—				—			$	749			$	—			$	—			$	152,439			$	(49,402	)		$	—			$	(1,310	)		$	(604	)		$	1,450			$	103,322
Restricted stock issued to employees and directors			120				—				—				1				—				—				404				—				—				—				—				—				405
Stock compensation			—				—				—				—				—				—				11,705				—				—				—				—				—				11,705
Issued shares of Series C Preferred Stock for cash			—				—				—				—				—				—				(689	)			—				—				—				—				—				(689	)
Issued shares of Common Stock for cash			1,714				—				—				17				—				—				13,875				—				—				—				—				—				13,892
Issued shares of Series D Preferred Stock for cash			—				—				1,298				—				—				64,905				(5,448	)			—				—				—				—				—				59,457
Issued shares of Common Stock upon warrant exercise			802				—				—				8				—				—				2,390				—				—				—				—				—				2,398
Issued shares of common stock upon stock option exercise			2,403				—				—				24				—				—				3,412				—				—				—				—				—				3,436
Dividends on Series C Cumulative Perpetual Preferred			—				—				—				—				—				—				—				(5,124	)			—				—				—				—				(5,124	)
Dividends on Series D Preferred Stock			—				—				—				—				—				—				—				(941	)			—				—				—				—				(941	)
Issued shares of common stock for acquisition of assets			946				—				—				9				—				—				7,533				—				—				—				—				—				7,542
Issued shares of common stock for acquisition of NGAS Resources			6,635				—				—				66				—				—				52,951				—				—				—				—				—				53,017
Issued shares of common stock to employees for change in control payments for NGAS Resources			351				—				—				4				—				—				2,798				—				—				—				—				—				2,802
Issued 138,388 warrants in replacement of NGAS Resources warrants			—				—				—				—				—				—				190				—				—				—				—				—				190
Noncontrolling interest acquired in NGAS acquisition			—				—				—				—				—				—				—				—				—				—				—				497				497
Issued shares of common stock for acquisition of NuLoch Resources			38,132				—				—				381				—				—				281,794				—				—				—				—				—				282,175
Issued exchangeable shares for acquisition of NuLoch Resources			—				4,276				—				—				43				—				31,600				—				—				—				—				—				31,643
Issued shared of common stock upon exchange of MHR Exchangeco exchangeable shares			381				(381	)			—				4				(4	)			—				—				—				—				—				—				—				—
Net loss			—				—				—				—				—				—				—				(21,730	)			—				—				—				117				(21,613	)
Other comprehensive income:																																																			—
Foreign currency translation			—				—				—				—				—				—				—				—				8				—				—				—				8
Unrealized gain on available for sale securities			—				—				—				—				—				—				—				—				(3,222	)			—				—				—				(3,222	)
BALANCE, June 30, 2011			126,347				3,895				1,298			$	1,263				39				64,905			$	554,954			$	(77,197	)			(3,214	)		$	(1,310	)		$	(604	)		$	2,064			$	540,900

The accompanying notes are an integral part of these unaudited consolidated financial statements

MAGNUM HUNTER RESOURCES CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

		Six Months Ended
		June 30,
		2011				2010
Cash flows from operating activities
Net loss		$	(21,730	)		$	(9,334	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Noncontrolling Interest			117				65
Depletion, depreciation, and accretion			16,344				4,849
Amortization of deferred financing costs included in interest expense			2,812				541
Gain on sale of assets			(1,559	)			(29	)
Share-based compensation			12,014				4,123
Unrealized loss on derivative contracts			166				679
Deferred taxes			(197	)			—
Changes in operating assets and liabilities:
Accounts receivable and accrued revenue			(7,205	)			(1,408	)
Inventory			(3,302	)			53
Prepaid expenses and other current assets			(418	)			(403	)
Accounts payable			12,923				751
Revenue payable			5,129				(63	)
Accrued Liabilities			(5,136	)			3,465
Net cash provided by operating activities			9,958				3,289
Cash flows from investing activities
Capital expenditures and advances			(131,840	)			(17,215	)
Cash paid in acquisitions, net of cash received of $2.5 million			(78,523	)			(59,500	)
Change in restricted cash and deposits			(5,450	)			(967	)
Proceeds from sales of assets			1,824				30
Net cash used in investing activities			(213,989	)			(77,652	)
Cash flows from financing activities
Net proceeds from sale of common stock and warrants			13,892				24,423
Net proceeds from sale of preferred shares			88,531				9,176
Proceeds from exercise of warrants and options			5,835				12,884
Preferred stock dividend paid			(6,065	)			(734	)
Cash paid upon conversion of Series B Preferred Stock			—				(11,250	)
Proceeds from borrowings on debt			228,044				70,433
Principal repayment of debt			(119,477	)			(25,576	)
Payment of deferred financing costs			(2,846	)			(2,630	)
Change in other long-term liabilities			310				—
Net cash provided by financing activities			208,224				76,726
Effect of exchange rate changes on cash			3				—
Net increase (decrease) in cash and cash equivalents			4,196				2,363
Cash and cash equivalents, beginning of period			554				2,282
Cash and cash equivalents, end of period		$	4,750			$	4,645
Supplemental disclosure of cash flow information
Cash paid for interest		$	1,619			$	1,230
Non-cash transactions
Series B Preferred stock issued for acquisition of Triad		$	—			$	14,982
Debt assumed in acquisition		$	71,895			$	3,412
Common stock issued for payment of services		$	—			$	165
Common stock issued in conversion of Series B stock		$	—			$	3,732
Accrued capital expenditures		$	47,597			$	—
Common stock issued for acquisition		$	345,537			$	—
Exchangeable common stock issued for acquisition of NuLoch Resources		$	31,642			$	—

The accompanying notes are an integral part of these unaudited consolidated financial statements

NOTE 1—BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of Magnum Hunter Resources Corporation (the “Company” or “Magnum Hunter”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s annual report on Form 10-K, as amended, for the year ended December 31, 2010. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the disclosure contained in the audited consolidated financial statements as reported in the 2010 annual report on Form 10-K, as amended, have been omitted.

Income or Loss per Share

Basic income or loss per common share is net income or loss available to common stockholders divided by the weighted average of common shares outstanding during the period. Diluted income or loss per common share is calculated in the same manner, but also considers the impact to net income and common shares outstanding for the potential dilution from in-the-money common stock options and warrants, and convertible debentures and preferred stock.

We have issued potentially dilutive instruments in the form of restricted common stock granted and not yet issued, common stock warrants, and common stock options. The total number of potentially dilutive securities at June 30, 2011 was 15,846,191. There were 11,793,934 potentially dilutive securities outstanding at June 30, 2010. We did not include the potentially dilutive securities in our calculation of diluted loss per share during either period because to include them would be anti-dilutive due to our net loss during those periods.

The following table summarizes the types of potentially dilutive securities outstanding as of June 30, 2011 and 2010 (in thousands):

		June 30,
		2011				2010
Warrants			284				2,218
Restricted Shares granted, not yet issued			25				105
Common Stock Options			15,537				9,470

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation and Presentation

The consolidated financial statements include the accounts of Magnum Hunter and our wholly-owned subsidiaries, Eagle Ford Hunter, Inc. (f/k/a Sharon Hunter Resources, Inc.) (“Sharon”), Triad Hunter, LLC, Alpha Hunter Drilling, LLC, Hunter Disposal, LLC, Eureka Hunter Pipeline, LLC, Eureka Hunter Pipeline Partners, LLC, Hunter Real Estate, LLC, NGAS Hunter, LLC (f/k/a MHR Acquisition Company I, LLC), Magnum Hunter Production, Inc., Magnum Hunter Resources GP, LLC, Magnum Hunter Resources LP, MHR Callco Corporation, MHR Exchangeco Corporation, Williston Hunter Canada, Inc., Williston Hunter, Inc., Williston Hunter N D, LLC (f/k/a MHR Acquisition II, LLC), NGAS Gathering, LLC, Sentra Corporation, Energy Hunter Securities, Inc (f/k/a NGAS Securities, Inc) and MHR Acquisition Company III, LLC. We also have consolidated our 87.5% controlling interest in PRC Williston, LLC (“PRC”) with noncontrolling interests recorded for the outside interest in PRC. All significant intercompany balances and transactions have been eliminated.

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. These estimates are based on information that is currently available to us and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from those estimates under different assumptions and conditions. Significant estimates are required for proved oil and gas reserves which may have a material impact on the carrying value of oil and gas properties.

Critical accounting policies are defined as those significant accounting policies that are most critical to an understanding of a company’s financial condition and results of operations. We consider an accounting estimate or judgment to be critical if (i) it requires assumptions to be made that were uncertain at the time the estimate was made, and (ii) changes in the estimate or different estimates that could have been selected, could have a material impact on our results of operations or financial condition.

Reclassification of Prior-Year Balances

Certain prior-year balances in the consolidated financial statements have been reclassified to correspond with current-year classifications. As a result of the sale of our Cinco Terry oil and gas properties on October 29, 2010, we reclassified the gain on sale and all prior operating income and related interest expense for this property as discontinued operations.

NOTE 3 — NEW ACCOUNTING PRONOUNCEMENTS

In May 2011, the FASB issued ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The amended guidance changes several aspects of the fair value measurement guidance in ASC 820, Fair Value Measurement, further clarifying how to measure and disclose fair value. This guidance amends the application of the “highest and best use” concept to be used only in the measurement of fair value of nonfinancial assets, clarifies that the measurement of the fair value of equity-classified financial instruments should be performed from the perspective of a market participant who holds the instrument as an asset, clarifies that an entity that manages a group of financial assets and liabilities on the basis of its net risk exposure can measure those financial instruments on the basis of its net exposure to those risks, and clarifies when premiums and discounts should be taken into account when measuring fair value. The fair value disclosure requirements also were amended. The amendment is effective for the Company at the beginning of January 2012, with early adoption prohibited. The adoption of this amendment is not expected to materially affect the Company’s financial statements.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income which amended requirements for the presentation of other comprehensive income (OCI), requiring presentation of comprehensive income in either a single, continuous statement of comprehensive income or on separate but consecutive statements, the statement of operations and the statement of OCI. The amendment is effective for the Company at the beginning of fiscal year 2013 with early adoption permitted. The adoption of this guidance will not impact the Company’s financial position, results of operations or cash flows and will only impact the presentation of OCI on the financial statements.

NOTE 4 — FAIR VALUE OF FINANCIAL INSTRUMENTS

Accounting standards define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The standards also establish a framework for measuring fair value and a valuation hierarchy based upon the transparency of inputs used in the valuation of an asset or liability. Classification within the hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The valuation hierarchy contains three levels:

	•		Level 1 — Quoted prices (unadjusted) for identical assets or liabilities in active markets
	•		Level 2 — Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs or significant value drivers are observable
	•		Level 3 — Significant inputs to the valuation model are unobservable

We used the following fair value measurements for certain of our assets and liabilities during the three months ended June 30, 2011 and 2010:

Level 1 Classification:

Available for Sale Securities

At June 30, 2011, the Company held common stock of a company publicly traded on the TSX Venture Exchange with quoted prices in active markets. Accordingly, the fair market value measurements of these securities have been classified as Level 1.

Level 2 Classification:

Derivative Instruments

At June 30, 2011 and December 31, 2010, the Company had commodity derivative financial instruments in place. The Company does not apply hedge accounting; therefore, the changes in fair value subsequent to the initial measurement are recorded as income or expense. The estimated fair value amounts of the Company’s derivative instruments have been determined at discrete points in time based on relevant market information which resulted in the Company classifying such derivatives as Level 2. Although the

Company’s derivative instruments are valued using public indexes, the instruments themselves are traded with unrelated counterparties and are not openly traded on an exchange. See Note 7 — Financial Instruments and Derivatives, for additional information.

As of June 30, 2011 and December 31, 2010, the Company’s derivative contracts were with major financial institutions, all of which are senior lenders to the Company, and have investment grade credit ratings which are believed to have a minimal credit risk. As such, the Company is exposed to credit risk to the extent of nonperformance by the counterparties in the derivative contracts discussed above; however, the Company does not anticipate such nonperformance.

The following tables present recurring financial assets and liabilities which are carried at fair value as of June 30, 2011 and December 31, 2010:

		Fair Value Measurements on a Recurring Basis
		June 30, 2011
		(In thousands)
		Level 1				Level 2				Level 3
Available for sale securities		$	258				—			$	—
Commodity derivatives		$	—			$	94			$	—
Total assets at fair value		$	258			$	94			$	—
Commodity derivatives		$	—			$	1,038			$	—
Total liabilities at fair value		$	—			$	1,038			$	—

		Fair Value Measurements on a Recurring Basis
		December 31, 2010
		(In thousands)
		Level 1				Level 2				Level 3
Commodity derivatives		$	—			$	—			$	—
Total assets as fair value		$	—			$	—			$	—
Commodity derivatives		$	—			$	778			$	—
Total liabilities at fair value		$	—			$	778			$	—

NOTE 5 — ACQUISITIONS

Triad

On February 12, 2010, the Company completed the acquisition of the assets of privately-held Triad Energy Corporation and certain of its affiliated entities (collectively, “Triad”) from bankruptcy, resulting in approximately five months of operating activity for these assets for the six months ended June 30, 2010. See our 2010 annual report on form 10-K, as amended, for details.

PostRock

On December 24, 2010, Magnum Hunter Resources Corporation and Triad Hunter, LLC entered into a Purchase and Sale Agreement with Post Rock, pursuant to which Triad Hunter, LLC agreed to acquire certain oil and gas properties and leasehold mineral interests and related assets located in Wetzel and Lewis Counties, West Virginia. The Purchase Agreement provided for the acquisition to be completed in three phases for total consideration of $49.3 million consisting of 50% common stock and 50% cash for the first two phases, and 100% cash for the third phase. Both of the two initial phases were effective as of November 1, 2010.

The first phase of the acquisition closed on December 30, 2010. See our 2010 annual report on form 10-K, as amended, for details.

On January 14, 2011, we closed the second phase of the PostRock acquisition, the Lewis County assets, for total consideration of approximately $13.3 million which consisted of 946,314 shares of the Company’s restricted common stock and a cash payment of approximately $5.8 million.

On June 16, 2011, we closed the third phase of the PostRock acquisition comprising assets located in Wetzel and Lewis Counties for a total purchase price of $4.9 million in cash before considering applicable adjustments.

Wetzel County, West Virginia Asset Acquisition

On April 7, 2011, the Company purchased oil and gas properties and related assets located in Wetzel County, West Virginia. The assets purchased included approximately 4,451 gross acres (2,225 net acres) of oil and gas leases and mineral interests and existing wells with proven reserves.

We acquired the assets for a total purchase price of $20.0 million, payable in cash and customary purchase price adjustments. Subject to the indemnification obligations set forth in the Purchase Agreement, we assumed certain customary liabilities in connection with the acquisition.

NGAS

On April 13, 2011, the Company completed the acquisition of all of the outstanding common shares of NGAS Resources, Inc, (“NGAS”) for total consideration of approximately $124.5 million consisting of $15.3 million in cash, $53.1 million in debt assumed, 6,986,104 shares of our common stock valued at approximately $55.8 million based on the closing stock price of $7.99 on April 13, 2011, and $1.2 million in warrant liability, of which $1.0 million was paid out upon exercise of the cash option, and included in the cash consideration, and 138,388 warrants are outstanding that are exercisable for common stock of the Company. Including the repayment at closing of debt assumed, total cash payments in connection with the acquisition were $62.3 million. The Company has liquidated NGAS into a wholly-owned subsidiary of the Company, NGAS Hunter, LLC, and changed the name of its subsidiary NGAS Production Co. to Magnum Hunter Production, Inc, and another subsidiary, NGAS Securities, Inc. to Energy Hunter Securities, Inc.

The fair value of the net assets acquired, based on our preliminary assessment, approximated the $124.5 million in total consideration paid.

The following table summarizes the purchase price and the preliminary estimate of the fair values of the net assets acquired of NGAS during the three months ended June 30, 2011 (in thousands) except share information:

Fair value of total purchase price:
6,635,478 shares of common stock issued on April 13, 2011 at $7.99 per share		$	53,017
Senior credit facility paid off at closing			33,282
NGAS 6% Convertible notes paid off in cash at closing			13,683
Contract payment in cash			12,929
Other long-term debt assumed			6,160
350,626 shares of common stock issued for change in control payments at $7.99 per share			2,802
Tax on change of control payments paid in cash			1,363
Common stock warrants settled in cash			1,044
Common stock warrants issued in conversion of NGAS warrants			190
Common stock options granted upon conversion of NGAS options			—
Total		$	124,470
Amounts recognized for assets acquired and liabilities assumed:
Working capital		$	(8,902	)
Oil and gas properties			132,995
Equipment and other fixed assets			9,055
Asset retirement obligation			(8,678	)
Total		$	124,470
Working capital acquired:
Cash		$	1,908
Accounts receivable			3,662
Prepaid Expenses			416
Inventory			278
Accounts payable			(7,483	)
Revenue payable			(1,547	)
Payroll tax payable			(206	)
Advances			(3,751	)
Deferred compensation			(379	)
Accrued Liabilities			(1,800	)
Total working capital acquired		$	(8,902	)

NuLoch

On May 3, 2011, the Company completed the acquisition of all of the outstanding common shares of NuLoch Resources, Inc., (“NuLoch”) for total consideration of approximately $430.5 million consisting of 38,131,848 shares of our common stock and 4,275,998 exchangeable shares of MHR Exchangeco Corporation, an indirect wholly-owned Canadian subsidiary of the Company, which are exchangeable for shares of the Company common stock, with a combined value of approximately $313.8 million based on the closing stock price of $7.40 on May 3, 2011, $18.8 million in debt assumed, and deferred tax liability of approximately $97.9 million. The company has changed the name of NuLoch to Williston Hunter Canada, Inc. and its subsidiary NuLoch America Corporation to Williston Hunter, Inc., collectively, (“Williston”).

The fair value of the net assets acquired, based upon our preliminary estimate, approximated the $430.5 million in consideration paid.

The following table summarizes the purchase price and the preliminary estimate of the fair values of the net assets of NuLoch acquired during the three months ended June 30, 2011 (in thousands except per share data):

Fair value of total purchase price:
38,131,846 shares of common stock issued on May 3, 2011 at $7.40 per share		$	282,176
4,275,998 exchangeable shares at $7.40 per share			31,642
Debt assumed			18,770
Net deferred tax liability			97,912
Total		$	430,500
Amounts recognized for assets acquired and liabilities assumed:
Working capital		$	(20,711	)
Oil and gas properties			447,540
Equipment and other fixed assets			5,167
Asset retirement obligation			(1,496	)
Total		$	430,500
Working capital acquired:
Cash		$	640
Accounts receivable			5,951
Prepaid expenses			359
Accounts payable			(27,661	)
Total working capital acquired		$	(20,711	)

The consolidated statement of operations includes Triad’s revenue of $5.7 million and $9.6 million, respectively for the three and six months ended June 30, 2010 and Triad’s operating loss of $211,000 and operating income of $1.4 million for the three and six months ended June 30, 2010. The consolidated statement of operations includes PostRock’s revenue of $1.3 million for the six months ended June 30, 2011 and PostRock’s operating income of $797,000 for the six months ended June 30, 2011. The consolidated statement of operations includes NGAS’s revenue of $6.4 million for the six months ended June 30, 2011 and NGAS’s operating loss of $999,000  for the six months ended June 30, 2011. The consolidated statement of operations includes NuLoch’s revenue of $2.1 million for the six months ended June 30, 2011 and NuLoch’s operating loss of $452,000 for the six months ended June 30, 2011.

The following summary, prepared on a pro forma basis, presents the results of operations for the three and six months ended June 30, 2011 and 2010, as if the acquisition of Triad, the PostRock assets, NGAS, and NuLoch, along with transactions necessary to finance the acquisitions, had occurred as of the beginning of the respective periods. This unaudited pro forma information includes the effects of adjustments for interest expense, depreciation and depletion expense, and dividend expense. The pro forma results are not necessarily indicative of what actually would have occurred if the acquisition had been completed as of the beginning of the period presented, nor are they necessarily indicative of future consolidated results.

		Three Months Ended				Three Months Ended				Six Months Ended				Six Months Ended
		June 30,				June 30,				June 30,				June 30,
		2011				2010				2011				2010
		(in thousands, except per-share data)
Total operating revenue		$	35,149			$	26,370			$	65,195			$	49,686
Total operating costs and expenses			60,820				38,839				95,113				72,475
Operating loss			(25,671	)			(12,469	)			(29,918	)			(22,789	)
Interest expense and other			(1,123	)			181				(5,843	)			(1,233	)
Net loss attributable to Magnum Hunter Resources Corporation			(26,794	)			(12,288	)			(35,761	)			(24,022	)
Dividends on preferred stock			(3,457	)			(446	)			(6,065	)			(905	)
Net loss attributable to common stock holders		$	(30,251	)		$	(12,734	)		$	(41,826	)		$	(24,927	)
Loss per common share, basic and diluted		$	(0.17	)		$	(0.08	)		$	(0.33	)		$	(0.22	)

NOTE 6 — DISCONTINUED OPERATIONS

On October 29, 2010, we entered into a definitive purchase and sale agreement for the sale of our 10.0% non-operated working interest in the Cinco Terry oil and gas property located in Crockett County, Texas, which closed on October 29, 2010. See our 2010

annual report on form 10-K, as amended, for details. The operating results of the Cinco Terry property for the three and six months ended June 30, 2010 have been reclassified as discontinued operations in the consolidated statements of operations as detailed in the table below:

		Three months ended				Six months ended
		June 30, 2010				June 30, 2010
		(in thousands)				(in thousands)
Oil and Gas Sales and other revenues		$	1,402			$	2,570
Operating expenses			(624	)			(1,389	)
Other income (expense)			(113	)			(226	)
Income from discontinued operations		$	665			$	955

NOTE 7 — FINANCIAL INSTRUMENTS AND DERIVATIVES

We enter into certain commodity derivative instruments which are effective in mitigating commodity price risk associated with a portion of our future monthly natural gas and crude oil production and related cash flows. Our oil and gas operating revenues and cash flows are directly impacted by changes in commodity product prices, which are volatile and cannot be accurately predicted. Our objective for holding these commodity derivatives is to protect the operating revenues and cash flows related to a portion of our future crude oil and natural gas sales from the risk of significant declines in commodity prices, which helps insure our ability to fund our capital budget. We have not designated any of our commodity derivatives as hedges under the applicable accounting standards.

As of June 30, 2011, we had the following derivative instruments in place:

Natural Gas		Period				MMBTU/day				Price per MMBTU
Collars		Jul 2011 - Dec 2011					2,143			$	5.37 - $7.43
		Jan 2012 - Dec 2012					1,910			$	5.00 - $8.65
Swaps		Jul 2011 - Dec 2011					113			$	5.98
		Jan 2012 - Dec 2012					100			$	6.15

Crude Oil		Period				Bbls/day				Price per Bbl
Collars		Jul 2011 - Dec 2011					997			$	71.44 - $100.74
		Jan 2012 - Dec 2012					312			$	85.21 - $108.69
Swaps		Jul 2011 - Dec 2011					43			$	85.09
Floors sold (put)		Jul 2011 - Dec 2011					147			$	60.00
		Jan 2012 - Dec 2012					50			$	55.00
Floors purchased (put)		July 2011 - Sep 2011					935			$	84.14
		Oct 2011 - Dec 2011					1260			$	84.37
		Jan 2012 - Dec 2012					153			$	80.00

The following table summarizes the fair value of our derivative contracts as of the dates indicated:

						Gross Derivative Assets								Gross Derivative Liabilities
						(in thousands)								(in thousands)
Derivatives not designated as hedging		Balance Sheet								December 31,								December 31,
instruments		Classification				June 30, 2011				2010				June 30, 2011				2010
Commodity
		Derivative assets - long term				$	201			$	—			$	(107	)		$	—
		Derivative liability					2,012				1,743				(2,847	)			(2,461	)
		Derivative liability - long term					483				500				(687	)			(559	)
Total Commodity						$	2,696			$	2,243			$	(3,641	)		$	(3,020	)

The following table summarizes the net gain (loss) on derivative contracts for the three and six months ended June 30, 2011:

		Six Months Ended				Three Months Ended
		June 30, 2011				June 30, 2011
		(in thousands)				(in thousands)
Realized (loss)			(508	)			(517	)
Unrealized gain (loss)			(166	)			3,184
Net gain (loss)			(674	)			2,667

		Six Months Ended				Three Months Ended
		June 30, 2010				June 30, 2010
		(in thousands)				(in thousands)
Realized gain			3,088				601
Unrealized gain (loss)			(679	)			676
Net gain			2,409				1,277

NOTE 8 — ASSET RETIREMENT OBLIGATIONS

The Company records a liability for the fair value of an asset’s retirement obligation in the period in which it is incurred and the corresponding cost is capitalized by increasing the carrying amount of the related long-lived asset. The liability is accreted to its then present value each period, and the capitalized cost is depreciated over the estimated useful life of the related asset. We have included estimated future costs of abandonment and dismantlement in our successful efforts amortization base and amortize these costs as a component of our depreciation, depletion, and accretion expense in the accompanying consolidated financial statements.

The following table summarizes the Company’s asset retirement obligation transactions during the six month period ended June 30, 2011:

		(in thousands)
Asset retirement obligation at beginning of period		$	4,455
Assumed in NGAS acquisition			8,678
Assumed in NuLoch acquisition			1,496
Liabilities incurred			10
Liabilities settled			—
Accretion expense			354
Revisions in estimated liabilities			(25	)
Asset retirement obligation at end of period			14,968
Less: current portion			(369	)
Asset retirement obligation at end of period		$	14,599

NOTE 9 — NOTES PAYABLE

Notes payable at June 30, 2011 consisted of the following:

		June 30, 2011
		(in thousands)
Various equipment notes payable with maturity dates April 2012 - August 2021, interest rates of 0.00% - 6.34%		$	8,877
Senior revolving credit facility Interest rate of 4.5%, due April 13, 2016			139,000
		$	147,877
Less: current portion			(2,086	)
Total Long-Term Debt		$	145,791

The following table presents the approximate annual maturities of debt:

		(in thousands)
2011		$	787
2012			2,312
2013			861
2014			868
Thereafter			143,049
Total		$	147,877

Notes Payable

On April 13, 2011 the Company assumed various notes payable for equipment and a building upon the closing of the acquisition of NGAS. The promissory notes have maturity dates ranging from September 2012 to April 2021 and bear interest rates of 0.00% to 5.875%. As of June 30, 2011, there was $6.1 million outstanding on these promissory notes.

Second Amended and Restated Credit Facility

On April 13, 2011, the Company entered into a Second Amended and Restated Credit Agreement, (the “Senior Credit Facility” or “revolving credit facility”). The Senior Credit Facility amended and restated, in its entirety, that certain Amended and Restated Credit Agreement dated February 12, 2010.

The Senior Credit Facility provides for an asset-based, senior secured revolving credit facility maturing April 13, 2016, with a new borrowing base of $145 million. The initial borrowing base was set at $120 million upon the completion of the Company’s acquisition of NGAS. The borrowing base was subsequently increased to $145 million upon the completion of the Company’s acquisition of NuLoch, which closed on May 3, 2011. The Senior Credit Facility is governed by a semi-annual borrowing base redetermination derived from the Company’s proved crude oil and natural gas reserves, and based on such redeterminations, the borrowing base may be decreased or may be increased up to a maximum commitment level of $250 million. The borrowing base is subject to such periodic redeterminations commencing November 1, 2011.

The facility may be used for loans and, subject to a $10,000,000 sublimit, letters of credit. The facility provides for a commitment fee of 0.5% based on the unused portion of the borrowing base under the facility.

Borrowings under the facility will, at the Company’s election, bear interest at either: (i) an alternate base rate (“ABR”) equal to the higher of (A) the Prime Rate, (B) the Federal Funds Effective Rate plus 0.5% per annum and (C) the LIBO Rate for a one month interest period on such day plus 1.0%; or (ii) the adjusted LIBO Rate, which is the rate stated on Reuters BBA Libor Rates LIBOR01 market for one, two, three, six or twelve months, as adjusted for statutory reserve requirements for eurocurrency liabilities, plus, in each of the cases described in clauses (i) and (ii) above, an applicable margin ranging from 1.25% to 2.25% for ABR loans and from 2.25% to 3.25% for adjusted LIBO Rate loans.

If an event of default occurs and is continuing, the lenders may increase the interest rate then in effect by an additional 2% per annum plus the rate applicable to ABR loans.

The Senior Credit Facility contains negative covenants that, among other things, restrict the ability of the Company to, with certain exceptions: (1) incur indebtedness; (2) grant liens; (3) make certain payments; (4) change the nature of its business; (5) dispose of all or substantially all of its assets or enter into mergers, consolidations or similar transactions; (6) make investments, loans or advances; (7)

pay cash dividends, unless certain conditions are met, and subject to a “basket” of $20,000,000 per year available for payment of dividends on preferred stock; and (8) enter into transactions with affiliates. The Senior Credit Facility also requires the Company to satisfy certain financial covenants, including maintaining (1) a ratio of consolidated current assets to consolidated current liabilities of not less than 1.0 to 1.0; (2) a ratio of EBITDAX to interest of not less than 2.5 to 1.0; and (3) a ratio of total debt to EBITDAX of not more than (a) 4.5 to 1.0 for the fiscal quarters ending June 30, 2011 and September 30, 2011 and (b) 4.0 to 1.0 for each fiscal quarter ending thereafter. The Company is also required to enter into certain commodity hedging agreements pursuant to the terms of the facility.

The obligations of the Company under the facility may be accelerated upon the occurrence of an event of default. Events of default include customary events for a financing agreement of this type, including, without limitation, payment defaults, defaults in the performance of affirmative or negative covenants, the inaccuracy of representations or warranties, bankruptcy or related defaults, defaults relating to judgments and the occurrence of a change in control.

Subject to certain permitted liens, the Company’s obligations under the facility have been secured by the grant of a first priority lien on no less than 80% of the value of the proved oil and gas properties of the Company and its subsidiaries, which liens include those properties acquired through the acquisition of NGAS, and additional liens were granted on the properties acquired upon the closing of the NuLoch acquisition.

In connection with the facility, the Company and certain of its subsidiaries also entered into certain customary ancillary agreements and arrangements, which, among other things, provide that the indebtedness, obligations and liabilities of the Company arising under or in connection with the facility are unconditionally guaranteed by such unrestricted subsidiaries.

At June 30, 2011, the Company had loans outstanding under the facility of $139 million.

NOTE 10 —SHARE BASED COMPENSATION

We recognized share-based compensation expense of $10.7 million and $12.0 million for the three and six months ended June 30, 2011, and we recognized $2.8 million and $4.1 million for the three and six months ended June 30, 2010.

A summary of common stock option and stock appreciation rights activity for the six months ended June 30, 2011 is presented below:

						Weighted-
						Average
		Shares				Exercise Price
Outstanding at beginning of period			12,779,282			$	2.65
Granted			5,417,792			$	7.84
Exercised			(2,402,500	)		$	1.43
Cancelled			(257,825	)		$	2.73
Outstanding at end of period			15,536,749			$	4.65
Exercisable at end of period			7,494,992			$	2.51

A summary of the Company’s non-vested common stock options as of June 30, 2011 is presented below.

Non-vested Common Stock Options		Shares
Non-vested at beginning of period			5,215,532
Granted			5,417,792
Vested			(2,335,242	)
Cancelled			(256,325	)
Non-vested at end of period			8,041,757

Total unrecognized compensation cost related to the non-vested common stock options was $21.8 million and $2.5 million as of June 30, 2011 and 2010, respectively. The cost at June 30, 2011, is expected to be recognized over a weighted-average period of 1.41 years. At June 30, 2011, the aggregate intrinsic value for common stock options was $38.7 million; and the weighted average remaining contract life was 6.05 years.

The assumptions used in the fair value method calculation for the six months ended June 30, 2011 are disclosed in the following table:

		Six Months Ended
		June 30, 2011 (1)
Weighted average value per common stock option granted during the period (2)		$	4.37
Assumptions (3) :
Weighted average stock price volatility			64.72	%
Weighted average risk free rate of return			2.08	%
Weighted average expected term		6.47 years

In addition, the Company has issued restricted stock to certain employees and directors. A summary of the Company’s non-vested restricted shares as of June 30, 2011 is presented below:

						Weighted Average
Non-vested Shares		Shares				Price Per Share
Non-vested at December 31, 2010			300,074			$	4.43
Granted			13,624				7.49
Vested			(93,624	)			2.40
Forfeited			—				—
Non-vested at June 30, 2011			220,074			$	5.48

Total unrecognized compensation cost related to the above non-vested, restricted shares amounted to $973,000 and $87,000 as of June 30, 2011 and 2010, respectively. The cost at June 30, 2011, is expected to be recognized over a weighted-average period of 2.39 years.

NOTE 11 — SHAREHOLDERS’ EQUITY

On April 29, 2011, at the annual shareholders’ meeting, our shareholders approved an amendment to the Company’s Certificate of Incorporation that increased the Company’s authorized number of shares of Common Stock to 250,000,000 and approved an amendment to the Company’s amended and restated 2006 Stock Incentive Plan to increase the aggregate number of shares of common stock to be issued under the plan to 20,000,000.

Common Stock

During the six months ended June 30, 2011, the Company issued 120,100 shares of the Company’s common stock in connection with share-based compensation which had fully vested to senior management and officers of the Company. This includes 12,792 shares which had previously vested as of December 31, 2010.

During the six months ended June 30, 2011, the Company issued 1,713,598 shares of common stock in open market transactions at an average price of $8.27 per share pursuant to an “At the Market” sales agreement (ATM) we have with our sales agent for total net proceeds of approximately $13.9 million. Sales of shares of our common stock by our sales agent have been made in privately negotiated transactions or in any method permitted by law deemed to be an “At The Market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, at negotiated prices, at prices prevailing at the time of sale or at prices related to such prevailing market prices, including sales made directly on the NYSE or sales made through a market maker other than on an exchange. Our sales agent has made all sales using commercially reasonable efforts consistent with its normal sales and trading practices on mutually agreed upon terms between our sales agent and us.

On January 14, 2011, the Company issued 946,314 shares of common stock valued at approximately $7.5 million based on a closing stock price of $7.97 as consideration on the closing of the second phase of the PostRock acquisition.

On April 13, 2011, the Company issued 6,635,478 shares of common stock valued at approximately $53 million based on a closing stock price of $7.99 as consideration on the closing of the acquisition of NGAS. In connection with the acquisition, the Company issued 350,626 shares of common stock valued at approximately $2.8 million to NGAS employees as change in control payments.

On May 3, 2011, the Company issued 38,131,846 shares of common stock valued at approximately $282.2 million based on a closing stock price of $7.40 as consideration on the closing of the acquisition of NuLoch.

During the six months ended June 30, 2011, the Company issued 801,980 shares of the Company’s common stock upon the exercise of warrants for total proceeds of approximately $2.4 million.

During the six months ended June 30, 2011, the Company issued 2,402,500 common shares upon the exercise of fully vested common stock options for proceeds of approximately $3.4 million.

During the six months ended June 30, 2011, the Company issued 380,652 common shares upon the exchange of exchangeable shares of MHR Exchangeco Corporation, an indirect wholly-owned Canadian subsidiary of the Company.

Exchangeable Common Stock

On May 3, 2011, in connection with the acquisition of NuLoch, the Company issued 4,275,998 exchangeable shares of MHR Exchangeco Corporation, which are exchangeable for shares of the Company at a one for one ratio. The shares of MHR Exchangeco were valued at approximately $31.6 million. Each exchangeable share is exchangeable for one share of our common stock at any time after issuance at the option of the holder and will be redeemable at the option of the Company, through Exchangeco, after one year or upon the earlier of certain specified events. During the six months ended June 30, 2011, 380,652 of the exchangeable shares have been exchanged for common shares of the Company. As of June 30, 2011, 3,895,346 exchangeable shares were outstanding.

Series C Cumulative Perpetual Preferred Stock

During the six months ended June 30, 2011, the Company sold 1,190,544 shares of our 10.25% Series C Cumulative Perpetual Preferred Stock, under our ATM sales agreement for net proceeds of $29.1 million. The sales during the six months ended June 30, 2011 have fully subscribed the authorized 4,000,000 shares of Series C Cumulative Perpetual Preferred Stock. During the six months ended June 30, 2011, the Company paid dividends of $5.1 million to holders of our Series C Cumulative Perpetual Preferred Stock. The Series C Preferred Stock cannot be converted into common stock of the Company but may be redeemed by the Company, at the Company’s option, on or after December 14, 2011. The Series C Preferred Stock is recorded as temporary equity because a forced redemption by the holder(s), upon certain circumstances as a result of a change in control, is outside the Company’s control.

Series D Cumulative Preferred Stock

During the six months ended June 30, 2011, the Company sold 1,298,095 shares of our 8.0% Series D Cumulative Perpetual Preferred Stock with a liquidation preference of $50.00 per share, of which 400,000 were sold in an underwritten offering and 898,095 were sold under the ATM sales agreement, for net proceeds of $59.5 million. The Series D Preferred Stock cannot be converted into common stock of the Company but may be redeemed by the Company, at the Company’s option, on or after March 14, 2014 for par value or $50.00 per share or in certain circumstances prior to such date as a result of a change in control. The Company pays cumulative dividends on the Series D Preferred Stock at a fixed rate of 8.0% per annum of the $50.00 per share liquidation preference. During the six months ended June 30, 2011, the Company paid dividends of $941,000 to holders of our Series D Cumulative Preferred Stock.

Common Stock Warrants

During the six months ended June 30, 2011, 771,812 of our $3.00 common stock warrants and 30,168 of our $2.50 common stock warrants were exercised for total combined proceeds of approximately $2.4 million and 15,000 of our $3.00 common stock warrants expired.

On April 13, 2011, at the time of the NGAS acquisition, NGAS had 4,609,038 warrants outstanding which were converted, based on the exchange ratio of 0.0846, to 389,924 warrants exercisable for Magnum common stock. The warrants had a cash out option, which remained available to the holder for 30 days from the date of the acquisition, based on fair market value of the warrants at April 13, 2011. The Company paid cash of $1.0 million upon exercise of the cash out option on the warrants exercisable for 251,536 shares of the Company’s common stock. At June 30, 2011, common stock warrants exercisable for 138,388 shares of the Company’s common stock, valued at approximately $190,000 were outstanding. The warrants consisted of 97,780 warrants with an exercise price of $15.13 and $40,608 warrants with an exercise price of $19.04.

NOTE 12 — RELATED PARTY TRANSACTIONS

We rented an airplane for business use at various times from Pilatus Hunter, LLC, an entity 100% owned by Mr. Evans, our Chairman and CEO. Airplane rental expenses totaled $105,000 and $228,000, for the three and six months ended June 30, 2011, respectively and $64,000 and $188,000 for the three and six months period ended June 30 2010, respectively.

We obtained accounting services and use of office space from GreenHunter Energy, Inc., an entity for which Mr. Evans is an officer and major shareholder and for which Mr. Ormand is also a director. Professional services expenses totaled $28,000 and $46,000, for the three and six months ended June 30, 2011, respectively, and $30,000 and $60,000 for the three and six months ended June 30, 2010, respectively.

We entered into a one year lease for a corporate apartment from an executive of the Company for monthly rent of $4,500 for use by several executives of the Company employee. During the six months ended June 30, 2011 the Company paid rent of $9,000 pertaining to the lease.

As of June 30, 2011, our net accounts payable to Pilatus Hunter, LLC was $16,000 and our net accounts payable to GreenHunter Energy, Inc. was $10,000.

NOTE 13 — COMMITMENTS AND CONTINGENCIES

On June 24, 2011, the Company entered into a three year drilling contract for our Eagleford operating activities from October 31, 2011, through October 31, 2014. Our remaining maximum liability under the drilling contract, which would apply if we terminated the contract before the end of its term, is approximately $19.5 million as of June 30, 2011.

On June 29, 2011, the Company entered into a twelve month drilling contract for our Eagleford operating activities. Our remaining maximum liability under the drilling contract, which would apply if we terminated the contract before the end of its term, is approximately $3.0 million as of June 30, 2011.

NOTE 14 — CONDENSED CONSOLIDATING GUARANTOR FINANCIAL STATEMENTS

The Company and certain of its wholly-owned subsidiaries including Eagle Ford Hunter, Triad Hunter, Hunter Disposal, NGAS Hunter, Williston Hunter ND LLC (collectively “Guarantor Subsidiaries”), may fully and unconditionally guarantee the obligations of the Company under any debt securities that it may issue pursuant to a universal shelf registration statement, on a joint and several basis, on Form S-3. Condensed consolidating financial information for Magnum Hunter Resources Corporation and subsidiaries as of June 30, 2011 and December 31, 2010, and for the three and six months ended June 30, 2011 and 2010, was as follows:

Magnum Hunter Resources Corporation and Subsidiaries Condensed Consolidating Balance Sheets
(in thousands)

		As of June 30, 2011
																		Magnum Hunter
		Magnum Hunter																Resources
		Resources				Guarantor				Non Guarantor								Corporation
		Corporation				Subsidiaries				Subsidiaries				Eliminations				Consolidated
ASSETS
Current assets		$	12,825			$	27,882			$	8,027			$	—			$	48,734
Intercompany accounts receivable			569,706				—				—				(569,706	)			—
Property and equipment (using successful efforts accounting)			12,150				379,738				549,278				—				941,166
Investment in subsidiaries			199,191				—				124,281				(323,472	)			—
Other assets			2,856				770				620				—				4,246
Total Assets		$	796,728			$	408,390			$	682,206			$	(893,178	)		$	994,146
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities		$	14,320			$	49,213			$	28,609			$	—			$	92,142
Intercompany accounts payable			—				128,167				435,941				(564,108	)			—
Long-term liabilities			140,092				18,798				102,214				—				261,104
Redeemable preferred stock			100,000				—				—				—				100,000
Shareholders’ equity			542,316				212,212				115,442				(329,070	)			540,900
Total Liabilities and Stockholders’ Equity		$	796,728			$	408,390			$	682,206			$	(893,178	)		$	994,146